Y inancials. i-flex solutions b.v. Financial statements for the year ended. March 31, 2003.

Transcription

1 Y inancials i-flex solutions b.v. Financial statements for the year ended March 31, 2003.

2 Directors report (Thousands of Euros) Corporate profile i-flex solutions b.v. is a wholly owned subsidiary of i-flex solutions ltd. a provider of solutions to the global financial services industry. The Company maintains a balanced portfolio of products and services, offering a wide range of integrated software solutions for retail, corporate, Internet and investment banking, as well as online brokerage and mutual funds. i-flex solutions b.v. is headquartered in Amsterdam, The Netherlands with Branch offices in London and Frankfurt and is mandated with sales and marketing of the company s products and services to the European market as well as supporting its customers in the region. Business model Right from inception, in early 2000, i-flex solutions b.v. has adopted a strong product focused revenue model thereby effectively leveraging emerging business opportunities. The impressive services portfolio also fuelled growth contributing 13% of total revenues in spite of the general recessionary trend in the market and increased competitive pressures. The Company has further consolidated its umbrella brand FLEXCUBE and grew substantially with the addition of several new customers including, Hebros Bank in Bulgaria, ACC Bank in Ireland, and IC Bank in Hungary. Today i-flex solutions b.v. has continued with plans to expand its sales in the central parts of the continent including France, Germany, Poland, CIS and Southern Europe. The Frankfurt office is now operational in addition to the existing offices at Amsterdam and London. These expansion plans would provide both the width and the depth required to further penetrate the European market and help it in becoming the foremost name in the European banking and financial services industry for its products and services. The Management remains confident about its long-term prospects for success. Banking products Product revenues comprise license fees, charges for enhancements and customization, implementation fees and product maintenance charges. Product license fees are recognized on delivery and subsequent milestone schedules as per the terms of the contract. Product maintenance revenues are spread over the period of the maintenance contract. The Company s products comprise the FLEXCUBE suite of products, which address the needs of corporate, retail and investment banking as well as treasury. The offering for Business Intelligence and Data warehousing was launched at SIBOS 02 at Geneva. IT Solutions and consulting services IT solutions and consulting services comprise offshore and onsite software development as well as business and technology consulting services for the financial services industry. Our services portfolio includes solutions for business intelligence, customer relationship management, brokerage, securities, payment systems, e-commerce, Internet services and IT and Business consulting. Results from operations The Company achieved total revenues of EUR 12,318 for the financial year ended March 31, 2003 an increase of 49% over the year ending March 31, The net loss for the year ended March 31, 2003 stood at EUR 699 as against EUR 1,553 for the year ended March 31, Cost of revenues comprises salaries and employee benefit costs, project-related travel costs, application software costs and professional fees. Operating revenues The Company s operating revenues are derived from banking software products, IT solutions and consulting services. In the year under review, significant sales of the FLEXCUBE suite of products fueled the growth of the company. During the year under review Products contributed 87% of revenues (March 31, %) while the service portfolio rose to 13% of the revenues (March 31, %). i-flex annual report

3 The Company s commitment to delivering quality solutions has contributed to customer confidence. The Company explored new market opportunities in the Ireland, Germany, Austria, Spain, France, Turkey, Bulgaria, Hungary which further consolidated the company s operations in these economies. With past success of the products in the market and demand for back office systems, the management is fairly confident of turning around a higher growth in the operating revenues for the company. current year from EUR 2,279 during the year ended March 31, Expenses primarily constituted employee costs, traveling costs, infrastructure costs, sales and administrative expenses. Employee costs constituted 7% and 6% of the total revenue for the years ended March 31, 2003 and March 31, 2002 respectively. Expenses The Company s operating expenses increased to EUR 2,724 in the London May 14, 2003 V. Senthil Kumar Statutory Director

4 Auditors report Introduction We have audited the financial statements of i-flex solutions b.v., Amsterdam for the year ended March 31, These financial statements are the responsibility of the company s management. Our responsibility is to express an opinion on these financial statements based on our audit. Scope We conducted our audit in accordance with auditing standards generally accepted in The Netherlands. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. Opinion In our opinion, the financial statements give a true and fair view of the financial position of the company as at March 31, 2003 and of the result for the year then ended, in accordance with accounting principles generally accepted in The Netherlands and comply with the financial reporting requirements included in Part 9, Book 2 of The Netherlands Civil Code. Amsterdam May 14, 2003 Ernst & Young Accountants i-flex annual report

5 Balance sheet at March 31 (Before allocation of net loss) (Thousands of EUR) Assets Fixed assets Tangible fixed assets Current assets Receivables Accounts receivable 3,016 2,562 Prepaid expenses and other receivables ,619 2,948 Cash and cash equivalents 1, Total assets 5,435 3,586 Shareholder s equity and liabilities Issued share capital Accumulated deficit (2,171) (618) Net loss for the period (699) (1,553) Total equity (2,351) (2,152) Long term loans 74 Current liabilities Accounts payable Inter-company Payable 6,953 4,243 Accrued expenses Advance billing Deferred revenue Taxes and social securities Total current liabilities 7,786 5,664 Total equity and liabilities 5,435 3,586 Ernst & Young Accountants V. Senthil Kumar Statutory Director Amsterdam London May 14, 2003 May 14, 2003

6 Statement of income for the year ended March 31 (Thousands of EUR) Sales 12,318 8,297 Cost of sales 10,956 7,565 Gross Profit on sales 1, Cost of revenues Salaries, wages and employee benefits Social securities Pension Cost Depreciation expenses Rental expenses Marketing expenses General and administrative expenses 1, Total operating expenses 2,724 2,279 Operating income/(loss) (1,362) (1,547) Interest income/(expenses) (4) (5) Currency exchange result 667 Total 663 (5) Income/(loss) before taxes (699) (1,552) Income taxes Net Loss (699) (1,552) Ernst & Young Accountants V. Senthil Kumar Statutory Director Amsterdam London May 14, 2003 May 14, 2003 i-flex annual report

7 Notes to financial statements as at March 31, 2003 (Thousands of EUR) 1 General a) General i-flex solutions b.v. ( the company ), having its legal seat in Amsterdam, The Netherlands, is a leading software provider of solutions and services to the financial services industry across Europe. The company has been incorporated on May 19, The company is a wholly owned subsidiary of i-flex solutions ltd. ( the parent company ), which has its registered office in Mumbai, India. b) Related party transactions All products and (consulting) services sold by the company to third parties are purchased from the parent company. For the year ended March 31, 2003 the company has purchased for an amount of 10,956 (March 31, ,565) of the above-mentioned services from the parent company. 2 Going Concern The Company has a negative working capital and a negative equity per March 31, The parent company has confirmed that it is aware of the current financial position of the company and that the parent company is committed to provide the necessary level of operational and financial support to ensure that the company meets all its liabilities as they fall due, and continues as a going concern at least for a period up to September The parent company believes that it has the required financial resources to fulfill that commitment. 3 Accounting Principles a) General The accounting principles of the company are summarized below. These accounting principles have all been applied consistently throughout the year and the preceding period from April 1, 2001 to March 31, The financial statements have been prepared under the historical cost convention and in conformity with the requirements of the Netherlands Civil Code. Assets and liabilities are stated at face value unless indicated otherwise. Assets and liabilities denominated in foreign currencies are translated into euros at the rates of exchange prevailing at yearend. Transactions in foreign currencies are translated at the rates of exchange prevailing at the date of the transaction. The exchange results are recorded under financial income and expense in the statement of income. b) Tangible fixed assets Tangible fixed assets are stated at the acquisition cost, less written down value depreciation. During the year the company changed the method of depreciation from Straight-line method to Written down method to bring it in line with the group policy. This resulted in additional depreciation of EUR 19. The depreciation is calculated using the written down value method and is charged to income over the estimated useful life of the assets. The estimated useful lives are: Improvement to lease hold premises 7 years Furniture and fixtures 7 years Computers equipment 3 years Electrical & office equipment 7 years Tangible fixed assets are revalued in case of any permanent impairment. c) Accounts receivable Accounts receivable are stated at face value, less an allowance for possible uncollectable accounts. d) Unearned revenue Unearned revenue relates primarily to advance payments for postimplementation technical support, which will be recognized as income ratably over the support period. Also included are advanced payments for licenses for which the acceptance period has not yet expired or for which the related shipment has not taken place yet. Advance payments for services not rendered yet have also been included. Furthermore, the company allocates a portion of its software revenues to post-contract support activities provided free of charge to customer for a specified period as included under the licensing arrangement. Amounts allocated are based upon standard prices charged for those services or products. e) Other assets and liabilities All other assets and liabilities are stated at the amounts at which they were acquired or incurred. f) Income taxes and deferred taxes The income taxes are calculated based upon the result for the year. Deferred taxes are recognized when considered recoverable. g) Pension The pensions of the employees of the company are based on a defined contribution scheme. The contributions for these pensions are directly charged to the income statement.

8 h) Recognition of income Software revenues consist of license fees, customization fees, implementation fees and maintenance fees and are recognized as follows: (ii) Customization and implementation fees Revenues for implementation and customization are recognized upon the completion of these services (milestones) and customer s acceptance; (i) License fees Software license fee revenues are recognized when persuasive evidence of an arrangement exists, delivery has occurred, the license fee is fixed and determinable and the collection of the fee is probable. Further, the recognition of these revenues depends on certain milestone schedules as per the terms of each contract, such as delivery of software and user acceptance; (iii) Maintenance fees Revenues from maintenance contracts relate to postimplementation support and are recognized ratably over the term of the contract on a straight-line basis. Other revenues and expenses are recorded in the period in which they originate. i-flex annual report

9 4 Tangible fixed assets Purchase value Depreciation Net bookvalue Particulars As at Additions Disposals As at As at For the Disposals As at As at As at period Improvement to leasehold premises Computer equipment Electrical and office equipment Furniture and fixtures Total

10 5 Accounts receivable Accounts receivable as presented under current assets mature within one year and are substantially denominated in USD. A provision for bad debt of EUR 199 is included as of March 31, 2003 (March 31, 2002: EUR 199). 6 Shareholder s equity The movement in shareholder s equity is as follows: Balance March 31, 2002 (2,152) Additional capital contribution 500 Net loss for the year (699) Balance March 31, 2003 (2,351) The authorized share capital consists of 20,000 authorized common shares of which 5,185 shares are issued and outstanding at March 31, The shares have a par value of EUR 0.1 each. 7 Liabilities Liabilities with a remaining period up to 1 year, including the shortterm portion of long-term liabilities, are presented under shortterm liabilities and are substantially denominated in USD. The long-term inter-company loan of EUR 74 has been repaid to the parent during the year. 8 Income taxes No income taxes have been recorded as the company is in a net loss position. The Company has a loss carry-forward of EUR 2,870, which is available to reduce future tax liabilities. 9 Credit facilities The Company has no credit facilities apart from the facilities granted by the parent company. 10 Net sales Net sales for the year ended March 31, 2003 amount to EUR 12,318 (March 31, 2002 EUR 8,297). 11 Commitments and contingencies Total commitments in connection with rental obligations and operational lease agreements amount to approximately EUR 149. The short-term portion of these commitments amounts to approximately 116. The amount due between 1 to 5 years is EUR 33. The portion that is due after 5 years amounts to Nil. The Dutch authorities have alleged violation of immigration and taxation rules by i-flex b.v. in the Netherlands. i-flex b.v. has not received any written communication from the authorities yet. If such communication is received, the Company shall defend itself vigorously. The determination of the liability, if any, is not possible at this point. 12 Personnel The number of personnel for the year ended March 31, 2003 was 16 (March 31, 2002 was 5), employed in the following functional areas: Sales 10 4 Technical 3 Administration Remuneration of statutory directors In accordance with Article 383, Book 2 of the Dutch Civil Code, the remuneration of the only statutory Director is not presented. The Company has no supervisory Directors. May 14, 2003 London V. Senthil Kumar Statutory Director i-flex annual report

11 Other information 1 Appropriation of income The Articles of Association of the company provide that the appropriation of the net result for the year is decided upon at the Annual General Meeting of Shareholders. Awaiting the decision by the shareholder, the net loss for the year ended March 31, 2003 is separately included in the shareholder s equity as net loss for the period.