Infinite Convergence Solutions Inc. Company Auditors Report and Financial Statements for the period ended 31st March
SURESH & CO., CHARTERED ACCOUNTANTS #43/61, Srinidhi I Floor, Ph: 26609214,26623610/11 Surveyors Street, Basavanagudi Fax: 26609560 Bangalore - 560 004 E-mail: vivek@sureshandco.info AUDITORS REPORT TO THE BOARD OF DIRECTORS OF INFINITE CONVERGENCE SOLUTIONS INC We have audited the attached Balance Sheet of Infinite Convergence Solutions Inc, as at 31 st March,, the Profit and Loss Account and the Cash Flow Statement of the Company for the year ended on that date annexed thereto. 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. We have conducted our audit in accordance with the auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes consideration and evaluation of internal controls over financial reporting as a basis for designing and conducting audit procedures that are appropriate in the circumstances and examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion. On the basis of such checks of the extracts of the books and vouchers made available and as we considered appropriate and also on the basis of information and explanations given to us, during the course of our audit, we state that, in our opinion, such financial statements present fairly, in all material respects, the financial position of Infinite Convergence Solutions Inc as at March 31 st,, the results of its operations for the period ended March 31 st, in conformity with accounting principles generally accepted in India. For Suresh & Co., Chartered Accountants, FRNo. 004255S (D S Vivek) Partner Membership No. 206122 Place: Bangalore. Date: 6 th May,
INFINITE CONVERGENCE SOLUTIONS, INC BALANCE SHEET SCH USD INR (in '000) I. SOURCES OF FUNDS 1. Shareholders' Funds (a) Share Capital 1 5,000,000 225,700 (b) Reserves and Surplus 2 668,129 30,159 5,668,129 255,859 2. Loan Funds (a) Unsecured Loans 3 6,905,573 311,718 3. Deferred Tax Liability 420,449 18,979 TOTAL 12,994,151 586,556 II. APPLICATION OF FUNDS 1. Fixed Assets 4 (a) Gross Block 7,520,317 339,467 (b) Less : Depreciation (203,174) (9,171) (c) Net Block 7,317,143 330,296 (d) Product Development Cost 2,549,918 918 115,103 103 2. Current Assets, Loans & Advances (a) Sundry Debtors 5 123,112 5,557 (b) Cash & Bank Balances 6 2,541,861 114,740 (c) Other Current Assets 7 1,886,907 85,175 (d) Loans & Advances 8 155,431 7,016 Total (A) 4,707,312 212,488 Less : Current Liabilities & Provisions (a) Current Liabilities 9 1,580,221 71,331 Total (B) 1,580,221 71,331 Net Current Assets [(A) - (B)] 3,127,090 141,157 TOTAL 12,994,151 586,556 0 Schedules referred to above and Notes to the accounts form a significant part of this Balance Sheet. 16 This is the balance sheet referred to our report of even date. For Suresh and Co. Chartered Accountants (FRN. 0042555) For Infinite Convergence Solutions Inc. (D.S. Vivek) Partner M.No. 206122 Sanjay Govil Director
INFINITE CONVERGENCE SOLUTIONS, INC PROFIT AND LOSS ACCOUNT Particulars SCH for Period ended MAR 31, for Period ended MAR 31, USD INR (in '000) I INCOME Consulting and Project Revenue - 2,638,226 125,105 Other Income 10 174 8 Total Income 2,638,399 125,113 II EXPENDITURE Employees Remuneration & Benefits 11 754,764 35,791 Administrative & Other Expenses 12 549,916 26,078 Interest & Financial Charges 13 41,968 1,990 Depreciation 4 203,174 9,171 Translation Adjustment - 2,945 Total Expenditure 1,549,821 75,975 PROFIT BEFORE TAX 1,088,578 49,138 Less: Provision for Taxation Current Tax - - Deferred Tax 420,449 18,979 420,449 18,979 NET PROFIT AFTER TAX 668,129 30,159 Balance carried to Balance Sheet 668,129 30,159 Schedules referred to above and Notes to the accounts form a significant part of this Profit and Loss Account. 16 This is the Profit and Loss Account referred to our report of even date. For Suresh and Co. Chartered Accountants (FRN. 0042555) For Infinite Convergence Solutions Inc. (D.S. Vivek) Partner M.No. 206122 Sanjay Govil Director
INFINITE CONVERGENCE SOLUTIONS, INC. STATEMENT OF CASH FLOWS PARTICULARS A] CASH FLOWS FROM OPERATING ACTIVITIES for Period ended MAR 31, USD for Period ended MAR 31, INR (in '000) Net Income before Taxation and Extraordinary items 1,088,578 49,138 Add/(Less) : Adjustments for :- Depreciation and amortization 203,174 9,171 Interest 41,918 41,918 Interest on Deposits (173) (8) OPERATING PROFIT BEFORE WORKING CAPITAL CHANGES 1,333,497 100,219 Add/(Less) : Movements in working capital (Increase)/Decrease in Sundry Debtors (123,112) (5,557) (Increase)/Decrease in Loans & Advances (155,431) (7,016) (Increase)/Decrease in other Current assets (1,886,907) (85,175) Increase/(Decrease) in Current liabilities and provisions 1,580,221 71,331 Cash generated from operations 748,268 73,802 Less : Income Tax (paid)/refund - - NET CASH PROVIDED FROM / (USED IN) OPERATING ACTIVITIES A) 748,268 73,802 B] CASH FLOW FROM / (USED IN) INVESTING ACTIVITIES Purchase of property, plant and equipment (7,520,317) (339,467) Interest on Deposits 173 8 Investment in Product Development (2,549,918) (115,103) NET CASH PROVIDED FROM / (USED IN ) INVESTING ACTIVITIES B) (10,070,062) (454,562) C] CASH FLOW FROM / (USED IN) FINANCING ACTIVITIES Secured Loans from Motorola 6,905,573 311,718 Interest (41,918) (41,918) Investment from Holding Co. 5,000,000 225,700 NET CASH PROVIDED FROM / (USED IN) FINANCING ACTIVITIES C) 11,863,655 495,500 D] NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS A] +B] +C] 2,541,861 114,740 Cash and Cash Equivalents at beginning of period - - Cash and Cash Equivalents at end of year/ period 2,541,861 114,740 5361249 5361249 For Suresh and Co. For Infinite Convergence Solutions Inc. Chartered Accountants (FRN. 0042555) (D.S. Vivek) Partner M.No. 206122 Sanjay Govil Director Place : Bangalore Place : New Delhi Date : May 6th Date : May 6th
INFINITE CONVERGENCE SOLUTIONS, INC. SCHEDULES FORMING PART OF THE ACCOUNTS PARTICULARS USD INR (in '000) SCHEDULE 1 : SHARE CAPITAL Authorised 5,000,000 Equity shares at USD 1.00 each. 5,000,000 225,700 Issued, Subscribed and Paid up 5,000,000 Equity shares of USD 1.00 each fully paid. 5,000,000 225,700 5,000,000 225,700 The above 5,000,000 Equity shares of USD 1.00 each fully paid up are held by M/s.Infinite Computer Solutions (India) Ltd., the holding Company. TOTAL 5,000,000 225,700 SCHEDULE 2 : RESERVES & SURPLUS Profit & Loss Account 668,129 30,159 TOTAL 668,129 30,159 SCHEDULE 3 : UNSECURED LOANS Equipment Lease Finance with Motorola, Inc 6,905,573 311,718 [During the year, company has acquired networking infrastructure equipment from Motorola on finance lease which is capitalized in books (as per AS 19). Term of the lease expires on Dec 31,2014 at which time title of the equipment will be transferred to company for USD 1.] TOTAL 6,905,573 311,718 SCHEDULE 5 : SUNDRY DEBTORS - Debts outstanding for a period exceeding six months - - - Other debts 123,112 5,557 TOTAL 123,112 5,557
INFINITE CONVERGENCE SOLUTIONS, INC. SCHEDULES FORMING PART OF THE ACCOUNTS PARTICULARS USD INR (in '000) SCHEDULE 6 : CASH & BANK BALANCES Bank Balances - Others United Bank In Money Market A/c 2,500,158 112,857 (maximum amount standing to the credit at any time during the period USD 3.50 Million) In Free Business Checking A/c 41,704 1,883 (maximum amount standing to the credit at any time during the period USD 4.99 Million) TOTAL 2,541,861 114,740 SCHEDULE 7 : OTHER CURRENT ASSETS Other Receivables 1,886,907 85,175 TOTAL 1,886,907 85,175 SCHEDULE 8 : LOANS & ADVANCES (Unsecured, considered good unless otherwise stated) Advances recoverable in cash or in kind or for value to be received or pending adjustments 155,431 7,016 TOTAL 155,431 7,016 SCHEDULE 9 : CURRENT LIABILITIES Other Liabilities 1,580,221 71,331 TOTAL 1,580,221 71,331
INFINITE CONVERGENCE SOLUTIONS, INC. SCHEDULES FORMING PART OF THE ACCOUNTS PARTICULARS USD INR (in '000) SCHEDULE 10 : OTHER INCOME Interest 173 8 Miscellaneous receipts 1 - TOTAL 174 8 SCHEDULE 11 : EMPLOYEES REMUNERATION & BENEFITS Salaries, Wages and Bonus 619,809 29,391 Employee Welfare Expenses 134,954 6,400 TOTAL 754,764 35,791 SCHEDULE 12 : ADMINISTRATIVE & OTHER EXPENSES Payroll Expenses 1,434 68 Rent and Hire Charges 83,082 3,940 Insurance 26,557 1,259 Communication Expenses 42,950 2,037 Legal and Professional Charges 236,713 11,225 Contractual Services / Manpower Outside Services 156,106 7,403 Auditors' Remuneration 1,334 63 Travelling & Conveyance 1,065 51 Printing & Stationery 320 15 Rates & Taxes 355 17 TOTAL 549,916 26,078 SCHEDULE 13 : INTEREST & FINANCE CHARGES Bank Charges/ Other charges 50 2 Interest 41,918 1,988 TOTAL 41,968 1,990
INFINITE CONVERGENCE SOLUTIONS, INC. SCHEDULE 4 : FIXED ASSETS GROSS BLOCK DEPRECIATION NET BLOCK Sl. No. Particulars Rate of Depreciation Additions during the period Total As at March 31st, Current period Total As at March 31st, As at March 31st, 1 IT Infrastructure 16.21% 7,520,317 7,520,317 203,174 203,174 7,317,143 TOTAL (Amount in USD) 7,520,317 7,520,317 203,174 203,174 7,317,143 TOTAL (Amount in INR '000) 339,467 339,467 9,171 9,171 330,296
Schedule 16 to Financial Statements - March 31 st,. Significant Accounting Polices and Notes on Accounts Company Overview Infinite Convergence Solutions, Inc. was incorporated on December 4 th, 2009 to develop & support, messaging platform that offers high performance, scalable implementation for short message service (SMS) and multimedia service (MMS) for telecom operators. The company is a subsidiary of Infinite Computer Solutions (India) Ltd. 16.1. Significant Accounting Policies 16.1.1. Basis of Preparation The financial statements have been prepared under the historical cost convention in accordance with generally accepted accounting principles in India, as adopted consistently by the company. The Company follows the mercantile system of accounting and recognizes items of income and expenditure on accrual basis. 16.1.2. Use of Estimates The preparation of financial statements in conformity with GAAP requires the management to make estimates and assumptions that affect the reported balances of assets and liabilities as at the date of the financial statements and reported amounts of income and expenses during the quarter. Examples of such estimates include provision for employee benefits, provision for income taxes and useful lives of fixed assets. Accounting estimates could change from period to period. Actual results could differ from those estimates. Appropriate changes in estimates are made as the Management becomes aware of changes in circumstances surrounding the estimates. 16.1.3. Revenue Recognition Where the company provides software development and support services for products, the company is compensated with a share of the revenue from the sale of these products and related services by its customers. The Company recognizes revenue based on contractual terms. 16.1.4. Fixed Assets Fixed Assets are stated at cost, less accumulated depreciation. Costs include all expenses incurred to bring the assets to its present location and condition. 16.1.5. Depreciation Depreciation on fixed assets is provided on the straight line method over the estimated useful life of the assets estimated by the Management. Depreciation for assets purchased / sold during a period is proportionately charged. The rates of depreciation applied are as below: (i) Equipments - 16.21% (iii) Furniture - 6.33% (ii) Software - 16.21% (iv) Vehicles - 9.50%
16.1.6. Employee Benefits 16.1.6.a. Provident Funds 401 (k) Plan All employees, 18 years of age or older, are eligible to participate in the plan on very first day of their employment. The plan allows for discretionary profit sharing contributions, and there are no matching contribution requirements. For the quarter ended March 31 st,, there were no Company contributions. 16.1.6.b. Compensated Absences The employees of the Company are entitled to paid leave as per their eligibility under the company s PTO leave policy. The expected liability cost of accumulating paid time off is measured based on the additional amount expected to be paid as a result of unused entitlement that has accumulated at the Balance Sheet date. 16.1.7. Taxation Income taxes are accrued in the same period that the related revenue and expenses arise. The income tax provision for the interim period is made based on the best estimate of taxes payable. Deferred Tax Expense or Benefit is recognized on timing differences being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred Tax assets and liabilities are measured using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognized only to the extent that there is reasonable certainty that sufficient future taxable income will be available to realize the assets. Deferred tax provision for the interim period is provided on an estimated basis. 16.1.8. Foreign Currency Transactions Foreign currency denominated monetary assets and liabilities are translated at exchange rates in effect at the Balance Sheet date. The gains or losses resulting from such translations are included in the profit and loss account. Non-monetary assets and non-monetary liabilities denominated in foreign currency and measured at historical cost are translated at the exchange rate prevalent at the date of transaction. Revenue, expense and cash flow items denominated in foreign currencies are translated using the exchange rate in effect on the date of the transaction. Transaction gains or losses realized upon settlement of foreign currency transactions are included in determining net profit for the period in which the transaction is settled. 16.1.9. Earnings per share Basic earnings per share are computed by dividing the net profit after tax by the weighted average number of equity shares outstanding during the period. Diluted Earnings per share is not determined as there are no dilutive potential equity shares. 16.1.10. Cash and Cash Equivalents Cash and cash equivalents comprise of cash and cash on deposit with banks
16.1.11. Cash Flow Statement Cash flows are reported using the indirect method, whereby net profit before tax is adjusted for the effects of transaction of a non-cash nature, any deferrals or accruals of past or future operating cash receipts and payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Company are segregated. 16.1.12. Intangible Assets Intangible assets are stated at cost related to development of the intangible asset less accumulated amortization. 16.1.13. Leased Assets Operating Leases: Rentals are expensed with reference to the lease terms and other considerations. Finance Leases: The lower of the fair value of the assets and the present value of the minimum lease rentals is capitalized as fixed assets with corresponding amount shown as lease liability. The principal component in the lease rental is adjusted against the lease liability and the interest component is charged to profit and loss account. 16.1.14. Provision, Contingent Liabilities and Contingent Assets Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources. Contingent liabilities are not recognized but are disclosed in the notes. Contingent assets are neither recognized not disclosed in the financial statements. 16.2. Notes on Accounts Amounts in the financial statements are presented in USD, except as otherwise stated. This is the first year of company s operations and hence previous year s data is not provided. 16.2.1. Income in Foreign Currency The Company has not earned any income in foreign currency. 16.2.2. Expenditure in Foreign Currency The Company has not made any payment in Foreign Currency. All Payments are made in USD. 16.2.3. Earnings Per Share The Earnings Per Share is calculated by dividing the net profit or loss for the period, attributable to Equity share holders by the weighted average number of equity shares outstanding during the period. Earnings Per Share during the period ended 31 st March is USD.13 per share [INR 6.03 per share]. The outstanding shares considered for computing EPS for the period ended March 31 st, is 5,000,000 equity shares.
16.2.4. Income Tax a) Current Tax - The income tax provision for the period ending March 31 st, is USD NIL as per the estimate of the Management. b) Deferred Tax-The Company has recorded net deferred tax liability of USD 420,449 [INR 18,979] as per the estimate of the management. Particulars Deferred Tax Asset / (liability) Amounts in USD Deferred Tax Asset / (liability) Amounts in INR ( in 000) NOL 437,929 19,768 Vacation 151,146 6,823 Depreciation ( 25,261) (1,140) Bad Debts NIL NIL Audit Fees 515 23 R &D- Expensed for Tax ( 984,778) (44,453) Purposes Net Deferred Tax (420,449) (18,979) 16.2.5 Contingencies There are no contingent liabilities or commitments. 16.2.6.Employee Benefits Defined contribution plans: Contribution to defined contribution plans, recognized as expense for the period is as under: Employer s Contribution to Social Security USD 56,892.30/-. [INR 2,698] Defined Benefit Plans: The obligation for paid time off is recognized based on the number of hours of accrued leave as at the date of financial statement of the respective employee at prevailing salary. 16.2.7. Auditor s Remuneration Statutory Audit Fees USD 1334 [INR 60] 16.2.8.Managerial Remuneration Remuneration to Directors Nil 16.2.9.Finance Lease In respect of fixed assets acquired on finance lease, the minimum lease rentals outstanding as on 31 st March are as follows:
Particulars Minimum Lease Payments Outstanding Future Interest on Outstanding Lease Payments Present Value of Minimum Lease Payments Minimum Lease Payments Outstanding Future Interest on Outstanding Lease Payments Present Value of Minimum Lease Payments Amounts in USD Amounts in INR (in 000) Within One 3,473,068 178,075 3,294,994 156,774 8,038 148,736 year > 1 year 3,773,056 162,939 3,610,117 and < 5 170,316 7,355 162,961 Years > 5 Years NIL NIL NIL NIL NIL NIL Total 7,246,124 341,013 6,905,110 327,090 15,393 311,697 16.2.10.Operating Lease The minimum lease rentals outstanding as on 31 st March, are as follows: Minimum Lease Payments Outstanding USD INR (in 000) Within One year 209,868 9,473 > 1 year and < 5 Years - - > 5 Years - - Lease payments recognized in P&L A/c. 81,882 3,696 16.2.11. Related Party Disclosures The Company does not have any transactions with related parties during the period. 16.2.12.Product Development Cost - Intangible Assets: The details of amount spent on development and / or up gradation of products are given below: Particulars Op. Bal Incurred during the period Amortised during the period Cl. Bal Op. Bal Incurred during the period Amortised during the period Cl. Bal Amount in USD Amount in INR (in 000) Enhancement/ Development of Messaging Products NIL 2,549,918 NIL 2,549,918 NIL 115,103 NIL 115,103 Total NIL 2,549,918 NIL 2,549,918 NIL 115,103 NIL 115,103
The expenses are amortised over a period of 5 years from the commencement of commercial exploitation of the product. Foreign currency conversion Average foreign currency exchange rates are applied for the Profit & Loss transactions and exchange rate as on 31.03. for Balance Sheet transaction. Amounts expressed in INR are INR in Thousands except for Earnings Per Share. For and on behalf of the Board Sanjay Govil Director Place : New Delhi Date : May 6 th, For Suresh and Co. Chartered Accountants FRN 004255S D.S.Vivek Partner M.No. 2061222 Place : Bnagalore Date : May 6 th,