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Notes to Accounts of Wintac Ltd.

Mar 31, 2018

1 BACKGROUND:

Wintac Limited ("the Company") was incorporated on the August 23, 1990.The Company carries on the business of development and manufacturing of sterile pharmaceuticals formulations. The Company''s shares are listed at Bombay Stock Exchange. The financial statements of the Company is approved by the Board of Directors on May 23 , 2018.

(a) Land:

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

ii) The Company has received a Notice from the Office of the Special Land Acquisition Officer, National Highway Authority of India, Bangalore for the acquisition of455 Sq.Mtrs of Land atSy.No.54/1 (Front portion near the entry gate of the Factory Premises) for the purpose of expansion/widening of the National Highway No.48 at a proposed compensation of Rs.86.54 lakhs.

iii) In respect of factory land at Boodihal Village, two suits have been filed disputing the sale to the Company of 6.5 Acres of land original cost ^19,46,174/-, effected in the year 1995-96. The Company does not expect any adverse impact from the above two suits.

iv) 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.

(b) Vehicle gross block includes motor car original cost of Rs.13,28,372/~ standing in the name of the Director.

(a) The Assessment of deferred tax asset is provisional and is subject to adjustments on Company filig its income tax return, assessment of returned income, outcome of appeals, etc.

(b) 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.

(a) Statement of Account and confirmation of balance have not been received in respect of two accounts with book balance of Rs.34,919/- (Rs.34,381/-) which is non-operative and subject to reconciliation and confirmation.

Terms/ rights attached to equity shares

i) The Company has only one class of equity shares having a par value of Rs.10 per share. Each holder of equity is entitled to one vote per share. The Company declares and pays dividend in Indian Rupees.

In event of liquidation of the Company, the holders of equity shares would be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.\

Additional Information:

(a) Details of security:

i) Loan from a bank is secured against hypothecation of Plant and Machinery of the Company

ii) Vehicle loan from a company is secured against vehicles purchased.

(b) Term of Repayment:

i) Loan from a bank is repaid 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.

ii) Vehicle Loan is repayable in 59 equated monthly installments of Rs. 78,158/- per month

(c) Rate of Interest:

i) Loan from bank carries a interest of 11.75% p.a. in the first year, 16.50% p.a. in the second year and 10.20% p.a. from third year onwards.

ii) Vehicle loan from a company carries interest rate of 8.90% p.a.

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

(e) Loan from bank is guaranteed by Mr. S Jayaprakash Mady, Director of the Company.

(a) Amounts due to be credited to the Investor Education and Protection Fund as on 31-03-2018 Rs. Nil (Nil)

(b) Towards reimbursement of cost of materials, equipment and services procured through these parties against production of bills of original vender/ service provider.

(c) Others include employee dues and accrued liabilities.

(a) Sales includes Rs.41,73,983/- (Previous Year Rs.3,37,67,862/-)unbilled revenue from manufacture of goods against an export order from the one of the related party enterprises of holding company awaiting instructions for shipment.

2 EARNINGS PER SHARE

Basic Earnings per share (EPS) amounts are calculated by dividing the profit for the year attributable to equity holders of the Company by the weighted average number of equity shares outstanding during the year.

Diluted EPS amounts are calculated by dividing the profit attributable to equity holders by the weighted average number of equity shares outstanding during the year plus the weighted average number of equity shares that would be issued on conversion of all the dilutive potential equity shares into equity shares.

3 DEFINED BENEFIT PLAN - GRATUITY

The Company operates defined gratuity plan for its employees. Under the plan, every employee who has completed atleast five years of service gets a gratuity on departure at 15 days of last drawn salary for each completed year of service.

The scheme is funded with an insurance company in the form of qualifying insurance policy.

The following tables summarise the components of net benefit expenses recognised in the statement of profit and loss and the funded status and amount recognised in the balance sheet.

4 SHARE BASED PAYMENT:

During the year, the shareholders of the Company at the Annual General Meeting held on August 10, 2017 have approved an Employee Stock Option Scheme.However, the Company has not issued any options as at March 31, 2018 and accordingly, recognition of expense in this respect and requisite disclosures are not applicable.

5 SEGMENT REPORTING:

i) Managing Director of the Company has been identified as the Chief Operating Decision Maker ("CODM") as defined in Ind As 108, Operating Segments. The Company is engaged in the business of manufacturing of goods and all its other activities revolve around this business. The CODM reviews the performance of the Company as one entity. Accordingly, the Company has not identified any different segments. The Company has earned Rs.44,79,70,156 (Previous year Rs.34,89,81,131)from the business of development and manufacturing of pharmaceuticals formulations.

ii) The Company operates only in India, hence no geographical segments has been disclosed.

iii) The Company earns its 83.97% (Previous Year 70.66% from two customers) of revenue from operations has been earned from single customer.

6 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES:

The entity''s principal financial liabilities comprise loans and borrowings, trade and other payables. The main purpose of these financial liabilities is to finance the entity''s operations to support its operations. The entity''s principal financial assets include investments, trade and other receivables, and cash and cash equivalents that derive directly from its operations.

The entity is exposed to market risk and credit risk. The entity''s senior management oversees the management of these risks. The entity''s senior management is supported by a financial risk committee that advises on financial risks and the appropriate financial risk governance framework for the entity. The financial risk committee provides assurance to the entity''s senior management that the entity''s financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the entity''s policies and risk objectives. All derivative activities for risk management purposes are carried out by specialist teams that have the appropriate skills, experience and supervision. It is the entity''s policy that no trading in derivatives for speculative purposes may be undertaken. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised below."

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk and other price risk, such as equity price risk, currency risk and commodity risk. Financial instruments affected by market risk include loans and borrowings. The sensitivity analyses in the following sections relate to the position as at 31 March 2018 and 31 March 2017. The sensitivity analyses have been prepared on the basis that the amount of net debt, the ratio of fixed to floating interest rates of the debt and derivatives and the proportion of financial instruments in foreign currencies. The analyses exclude the impact of movement in market variables on: the carrying values of gratuity and other post-retirement obligations; provisions; and the non-financial assets and liabilities.

The assumption made in calculating the sensitivity analyses relate to the sensitivity of the relevant profit or loss item is the effect of the assumed changes in respective market risks. This is based on the financial assets and financial liabilities held at 31 March 2018 and 31 March 2017.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in Interest rate. The entity''s exposure to the risk of changes in Interest rates relates primarily to the entity''s operating activities (when receivables or payables are subject to different interest rates) and the entity''s net receivables or payables.

Credit risk

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The entity is exposed to credit risk from its operating activities (primarily trade receivables).

Sales includes Rs.44,35,230/- (Rs. 3,37,67,862/-) unbilled revenue from manufacture of goods against an export order awaiting instruction for shipment and is reduced from advances received.

* Purchase of goods/equipments and services 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.

7 FIRST TIME ADOPTION OF IND AS:

These financial statements, for the year ended 31 March 2018, are the first the Company has prepared in accordance with Ind AS. For periods up to and including the year ended 31 March 2017, the Company prepared its financial statements in accordance with accounting standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP).

Accordingly, the Company has prepared financial statements which comply with Ind AS applicable for periods ending on 31 March 2018, together with the comparative period data as at and for the year ended 31 March 2017, as described in the summary of significant accounting policies. In preparing these financial statements, the Company''s opening balance sheet was prepared as at 1 April 2016, the Company''s date of transition to Ind AS. This note explains the principal adjustments made by the Company in restating its Indian GAAP financial statements, including the balance sheet as at 1 April 2016 and the financial statements as at and for the year ended 31 March 2017.

i. Exemptions availed:

(a) Ind AS 101 permits a first-time adopter to elect to continue with the carrying value for all of its property, plant and equipment as recognised in the financial statements as at the date of transition to Ind AS, measured as per the previous GAAP and use that as its deemed cost as at the date of transition after making necessary adjustments for de-commissioning liabilities. This exemption can also be used for intangible assets covered by Ind AS 38 Intangible Assets and investment property covered by Ind AS 40 Investment Properties.

Accordingly, the Company has elected to measure all of its property, plant and equipment, intangible assets and investment property at their previous GAAP carrying value.

(b) Ind AS 27 requires investments in subsidiaries to be recorded at cost or in accordance with Ind AS 109 in its separate financial statements. However, Ind AS 101 provides an option to measure that investment at one of the following amounts in case the Company decides to measure such investment at cost:

i. Cost as per Ind AS 27 or

ii. Deemed cost, which is:

a. fair value at the entity''s date of transition to Ind AS

b. previous GAAP carrying amount at that date

The Company has elected to measure its investments in subsidiaries using deemed cost at the previous GAAP carrying amount at the date of transition to Ind AS.

(c) Ind AS 101 provides an option to not apply Ind AS 102 to liabilities arising from share-based payment transactions that were settled before the date of transition to Ind AS. The Company has elected to avail this exemption and apply the requirements of Ind AS 102 to all such grants under the ESOP plan, which are not settled as at the date of transition to Ind AS.

ii. Exceptions applied:

(a) Ind AS 101 requires an entity''s estimates in accordance with Ind ASs at the date of transition to Ind AS to be consistent with estimates made for the same date in accordance with previous GAAP (after adjustments to reflect any difference in accounting policies), unless there is objective evidence that those estimates were in error.

The Company''s estimates as at 1 April 2016 are consistent with the estimates as at the same date made in conformity with previous GAAP. The Company made estimates for following items in accordance with Ind AS at the date of transition as these were not required under previous GAAP:

Impairment of financial assets based on expected credit loss model.

(b) Ind AS 101 requires a first-time adopter to apply the de-recognition provisions of Ind AS 109 prospectively for transactions occurring on or after the date of transition to Ind AS. The Company has applied the de-recognition provisions of Ind AS 109 prospectively from the date of transition to Ind AS.

8. FIRST TIME ADOPTION OF IND AS:

Reconciliation of equity as at April 1, 2016 (date of transition to Ind AS)

Notes:

1 Excise duty on sales has been shown separately

2 In the previous year the Company had reported unclaimed credit balances as Exceptional item which has now regrouped to other Income and trade receivables and advances written off to other expenses

3 Processing fees and fair valuation of interest free deposit has been accounted based on effective interest rate method and accordingly adjusted under finance cost and corresponding adjustment of deferred tax.

9 FIRST TIME ADOPTION OF IND AS:

Notes: 1 Security Deposit

"Interest free lease deposits is measured at amortised costs using Effective Interest method. The difference between actual amount of lease deposit and fair value of lease is adjusted against the surplus i.e. statement of profit & loss and same is taken to revenue/ expenditure over the tenure of the lease. On the date of transition the Company has recognised net interest expense of Rs.4,83,720 and deferred tax of Rs.1,49,470/-"

2 Processing Fees

"Interest free lease deposits is measured at amortised costs using Effective Interest method The difference between actual interest expense as per fair valuation is adjusted against the outstanding balance of loan and same is adjusted to interest expenses over the tenure of the loan. On the date of transition the Company has recognised net interest expense of Rs.6,13,604 and deferred tax of Rs.1,89,604/-"

3 Defined Benefit Obligations

Under Ind AS, actuarial gains or losses, return on plan assets/liabilities (excluding interest on net asset/liability) and any change in effect of asset/liabilities ceiling is to be recognised in other comprehensive income. Thus the employee benefit cost is reduced by Rs.7,79,044/- for the FY 16-17 and remeasurement gains/ losses on defined benefit plans has been recognized in the OCI net of tax.

4 Deferred Tax

Indian GAAP requires deferred tax accounting using the income statement approach, which focuses on differences between taxable profits and accounting profits for the period. Ind AS 12 requires entities to account for deferred taxes using the balance sheet approach, which focuses on temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base. The application of Ind AS 12 approach has resulted in recognition of deferred tax on new temporary differences which was not required under Indian GAAP.

In addition, the various transitional adjustments lead to temporary differences. According to the accounting policies, the Company has to account for such differences. Deferred tax adjustments are recognised in correlation to the underlying transaction either in retained earnings or a separate component of equity.

5 Provisions:

The Company was accounting leave encashment on actual basis instead of acturial basis. The Company has got valued as per Ind AS - 19 and provided an amount of Rs.37,22,931 for the financial year 2016 - 17.

6 Cash flow Statements:

The transition from Indian GAAP to Ind AS has not had a material impact on the statement of cash flows.

10 Recent Accounting Pronouncements:

On March 28, 2018, Ministry of Corporate Affairs ("MCA") has notified the Ind AS 115, Revenue from Contract with Customers. The core principle of the new standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Further the new standard requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity''s contracts with customers. In addition, limited amendments have been made to some other Ind AS standards (Ind AS''s 2, 12, 21, 28 and 40).

The Company is in the process of assessing the impact of the introduction of Ind AS 115-Revenue from Contracts with Customers and the limited amendments to the other Ind AS Standards. The impact, if any, will be disclosed in the financial statements for the quarter ended June 30, 2018.

11 The Income Tax Act, 1961 contains provisions for determination of arm''s length price for international transactions between the Company and its associated enterprises. The regulations envisage taxation of transactions which are not in consonance with the arms length price so determined, maintenance of prescribed documents and information including furnishing of a report from an accountant before the due date for filing the return of income. For the year ended March 31, 2018, the Company is in the process of complying with the said regulations. Management believes that such transactions have been concluded on an arm''s length basis and there would be no additional tax liability for the financial year under consideration as a result of such transactions.

12 In view of the advances/ support received from the major customers, the management doesn''t expect any constraints in cash flow which might affect companies ability to meet its liabilities. Accordingly, despite of the Company''s net worth has substantially eroded, the management doesn''t find any material uncertainty which may cast significant doubt on the Company''s ability to continue as going concern.

13 Events occurring after balance sheet date:

i) The Board of Directors of the Company have received a proposal from the Promoters i.e, Veego Pharma LLC, for voluntary delisting of equity shares of the Company from BSE Limited in accordance with the SEBI (Delisting of equity shares) Regulations, 2009. The Board has taken on record of the same at their meeting held on 26.04.2018 and has appointed Arihant Capital Markets Ltd., as merchant bankers for carrying out the due diligence as required in terms of Regulations 8(1)(A)(ii) of SEBI Delisting Regulations.

ii) The Board of Directors at their meeting held on 26.04.2018, have approved the proposal to effect slump sale of the pharmaceutical business undertaking of the Company to PAR formulations Pvt. Ltd., Chennai subject to all required approvals, specially shareholders approval and also subject to successful delisting equity shares of the Company from stock exchange and as per terms and conditions of the Business Transfer Agreement.

14 Previous year figures have been regrouped wherever necessary to conform with current year presentation.


Mar 31, 2017

1. Overview of Employees Benefits

2. The compensation to employees for services rendered are as follows:

3. 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.

4. Bonus as per the Bonus Act, 2015.

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

6. 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.

7. Other employee benefits such as leave travel allowance.

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

8. Recognition and Measurement

9. 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.

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

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

12. 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.

13. 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.

14. 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 have been 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.

15. 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 Rs.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. Balance heald as on 31.03.2017 is Rs.3,29,480/-.

16. With the commencement of production after the shut-down and successful USFDA inspection, comfortable order book position and approval of new ANDAs, the company has turned around the operations during the last quarter of the financial year. Further in view of the advances / support received from major Customers, the Management does not expect any constraints in cash flow which might affect Companies ability to meet its liabilities. Accordingly, despite the cumulative results of the current financial year wiping out the opening balance of Reserves, the management does not find any material uncertainly which may cast significant doubt on the company’s ability to continue as a going concern. During April 2017, the Company successfully completed the USFDA Inspection of the manufacturing facility with Nil observations.

17. 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.

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

19. Figures in brackets pertain to the previous year.

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


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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