1 Dear Fellow Shareholders, Danlaw has emerged from Fiscal 2005 a new company, stable, sound and positioned for growth. During fiscal 2004-05 your company has seen an increase of 160% in gross profit. Danlaw Technologies Inc., our WOS has shown significant improvements with an increase of 47% in gross revenues. Overall, I am encouraged by the strong turnaround in our financial performance. Today, we are investing for growth and market leadership. Our company has a technology vision built on a distinctive view of the market place. We have launched a differentiating technology plan that not only addresses the current market dynamics, but is designed to help Danlaw and our clients stay ahead of the curve. Danlaw is building this vision on a foundation of operational excellence that drives business impact now. Danlaw’s ESAP cm Product has been successfully installed in several school districts in Colorado. It has received rave reviews from all the users. The product has been adopted to meet specific requirements for the state of Illinois. Our ESAP sp enables us to enter into another opportunity in the recovery process for Medicaid revenue. Aggressive marketing plans to accelerate the deployment of these solutions in other states have been devised. Danlaw’s continued commitment to Research and Development has enabled us to provide products along with high-end solutions. This commitment has also prepared us to participate in the new and exciting technical and business opportunities that have been launched by our efforts. From the Chairman’s desk Satellite Radio’s popularity in the past two years has led nearly every major radio manufacturer to offer a Satellite Radio enabled solution to its existing AM and FM turner frequencies. This is like a radio station that can broadcast its signal from more than 22,000 miles (35,000 km) away and then come through on your car radio or home radio with complete clarity. Danlaw is excited to be part of this business opportunity. The ability to communicate from mobile devices like cell phones or PDAs, to a home security system, or to your vehicle, opens up a vast array of new business opportunities. Danlaw’s existing products in the automotive electronics area along with expertise in WiFi and Bluetooth will position Danlaw as a market leader in this area in the coming years. Market forces are placing new demands on businesses and governments. Clients need more business value from their technology investments. We understand this need, and we are investing to help clients and Danlaw meet those demands and leapfrog the competition. Among the many market forces in play, we believe: Global commerce is here to stay. The ability to do business globally is imperative – whether a company operates in more than one region or country – or its supply chain passes through Asia, Europe and South America. The explosion of technology is pushing demands on business to the “edge”. The growing number of “always- on” devices – such as mobile phones, PDAs, toll tags, and radio frequency Identification (RFID) chips – is increasing the need for scale, speed and flexibility.
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1
Dear Fellow Shareholders,
Danlaw has emerged from Fiscal 2005 a new company,
stable, sound and positioned for growth.
During fiscal 2004-05 your company has seen an increase
of 160% in gross profit. Danlaw Technologies Inc., our WOS
has shown significant improvements with an increase of
47% in gross revenues. Overall, I am encouraged by the
strong turnaround in our financial performance.
Today, we are investing for growth and market leadership.
Our company has a technology vision built on a distinctive
view of the market place. We have launched a
differentiating technology plan that not only addresses the
current market dynamics, but is designed to help Danlaw
and our clients stay ahead of the curve. Danlaw is building
this vision on a foundation of operational excellence that
drives business impact now.
Danlaw’s ESAPcm
Product has been successfully installed
in several school districts in Colorado. It has received rave
reviews from all the users. The product has been adopted
to meet specific requirements for the state of Illinois. Our
ESAPsp enables us to enter into another opportunity in the
recovery process for Medicaid revenue.
Aggressive marketing plans to accelerate the deployment
of these solutions in other states have been devised.
Danlaw’s continued commitment to Research and
Development has enabled us to provide products along
with high-end solutions. This commitment has also
prepared us to participate in the new and exciting technical
and business opportunities that have been launched by
our efforts.
From the Chairman’s desk
Satellite Radio’s popularity in the past two years has led
nearly every major radio manufacturer to offer a Satellite
Radio enabled solution to its existing AM and FM turner
frequencies. This is like a radio station that can broadcast
its signal from more than 22,000 miles (35,000 km) away
and then come through on your car radio or home radio
with complete clarity. Danlaw is excited to be part of this
business opportunity.
The ability to communicate from mobile devices like cell
phones or PDAs, to a home security system, or to your
vehicle, opens up a vast array of new business opportunities.
Danlaw’s existing products in the automotive electronics
area along with expertise in WiFi and Bluetooth will position
Danlaw as a market leader in this area in the coming years.
Market forces are placing new demands on businesses and
governments. Clients need more business value from their
technology investments. We understand this need, and we
are investing to help clients and Danlaw meet those
demands and leapfrog the competition.
Among the many market forces in play, we believe:
Global commerce is here to stay. The ability to do
business globally is imperative – whether a company
operates in more than one region or country – or its supply
chain passes through Asia, Europe and South America.
The explosion of technology is pushing demands on
business to the “edge”. The growing number of “always-
on” devices – such as mobile phones, PDAs, toll tags, and
radio frequency Identification (RFID) chips – is increasing
the need for scale, speed and flexibility.
2
There is a shift in how work is done. As business usage
of technology is to be pushed to the edge, it changes how
products and services are bought and delivered – whether
you are using a credit card at a vending machine or a
global positioning system that locates your car for
emergency road side assistance.
Business ecosystems will dominate. Most companies
do not need to own everything – their supply chain is made
up of many companies that span the globe. Companies
are removing inventories, warehouses and administrative
support as they participate more in an overall business
ecosystem.
Legacy systems can’t participate. More and more
enterprises will need help with unravelling the hard-wired
rigid infrastructures that exist today. And they will need help
from those who are experts in both the old and new
technologies, and who know how to apply them to solve
industry issues.
Business and governments, for their part, are asking
technology service providers for:
v Ongoing cost-competitiveness, high-quality service
delivery and the ability to drive real business value.
v Global consistency, because their businesses run in
multiple regions and countries.
v Deep business domain and industry knowledge to
develop relevant business solutions.
Our Strategic response: Investing and partnering to
win
Our growth strategy is to look for companies with industry-
leading technology and expertise that reinforce Danlaw’s
core business and value proposition for customers, while
of the Company of the face value of Rs.10/- each at
a premium of Rs. 55/- per share, aggregating to Rs.
325 lacs, for cash or cash equivalent, ranking pari
passu with the existing equity shares of the Company,
subject however to the Guidelines prescribed by the
Securities and Exchange Board of India (SEBI) in this
regard, and as may be applicable from time to time.
RESOLVED further that for the purpose of giving effect
to this resolution, the Board is hereby authorised to
do all such acts, deeds, matters and things and resolve
any doubts or questions that may arise in the issue
and allotment of fresh shares, to effect any
modification(s) to the foregoing (including any
modification to the terms of the issue) in the best
interests of the Company and its shareholders and to
execute all such writings and instrument (s) as the
Board may in its absolute discretion deem necessary
or desirable.
RESOLVED FURTHER THAT the Board be and is hereby
authorised to delegate all or any of the powers to any
Committee of Directors of the Company to give effect
to the aforesaid resolution.”
6
6. To consider and if thought fit, to pass, with or without
modification, the following resolution as a Special
Resolution
“RESOLVED THAT pursuant to Section 81 (1A) and
other applicable provisions, if any, of the Companies
Act, 1956 (including any amendment thereto or
modification (s) or re-enactment (s) thereof) and in
accordance with the provisions of the Memorandum
and Articles of Association of the Company and subject
to the regulations / guidelines, if any, prescribed by
the Securities and Exchange Board of India, Reserve
Bank of India and all other concerned and relevant
authorities from time to time, and subject to such other
approvals, permissions, consents and sanctions of
such other authorities, as may be necessary and
subject to such conditions and modifications as may
be agreed to by the Board of Directors of the Company
(hereinafter referred to as the “Board”, which terms
shall also include any Committee thereof), consent of
the Company be and is hereby accorded to the Board
to create, offer, issue and allot, at its sole discretion,
in one or more tranches to Promoters and associates,
whose identities are provided in the Explanatory
Statement annexed hereto, 5,00,000 (Five Lakh)
Convertible Share Warrants of the Company at a
price of Rs. 65/- per warrant, for cash or cash
equivalent, with a right entitling the warrant holder
thereof to apply for and be allotted one equity share
per Warrant of Rs.10/- each at a premium of
Rs. 55/- per share ranking pari passu with the existing
equity shares of the Company, subject however, to
the Guidelines prescribed by the Securities and
Exchange Board of India (SEBI) in this regard, and as
may be applicable from time to time.
RESOLVED further that for the purpose of giving effect
to this resolution, the Board is hereby authorised to
issue and allot such number of equity shares as may
be required to be issued and allotted upon approving
the right of warrant holders to exercise the option of
conversion of warrants into equity shares, as may be
necessary in accordance with the terms of this offer
and subject to the provisions of the Memorandum
and Articles of Association of the Company, and also
to do all such acts, deeds, matters and things and
resolve any doubts or question that may arise in the
issue and allotment of warrants, to effect any
modification(s) to the foregoing (including any
modification to the terms of the issue) in the best
interests of the Company and its shareholders and to
execute all such writings and instrument(s) as the Board
may in its absolute discretion deem necessary or
desirable.
RESOLVED FURTHER THAT the Board be and is hereby
authorised to delegate all or any of the powers to any
Committee of Directors of the Company to give effect
to the aforesaid resolution.”
7. To consider and if thought fit, to pass, with or withoutmodification, the following resolution as a SpecialResolution.
“RESOLVED THAT subject to regulatory approvals asmay be required, the consent of the Company beand is hereby accorded for delisting of the equityshares of the Company from the Madras StockExchange Ltd.”
“RESOLVED FURTHER THAT Board of Directors of theCompany be and are hereby authorized to take the
necessary steps for delisting of equity shares.”
By Order of the Board
For Danlaw Technologies India Ltd.
Hyderabad B S BhaskarAugust 22, 2005 Company Secretary
NotesNotesNotesNotesNotes
1. A member entitled to attend and vote at the meeting
is entitled to appoint a proxy and such proxy need
not a member of the Company. In order for the
proxies to be effective, the Company must receive
proxies not less than 48 hours before the
commencement of the meeting.
2. Members/proxies should bring duly filled attendance
slips sent herewith for attending the meeting.
3. The Register of Members and Share Transfer Books
of the Company will remain closed from September
14 to September 17, 2005 (both days inclusive).
4. Members seeking any additional information on the
accounts of the Company should write to the
Company Secretary on or before September 12,
2005, to facilitate compilation of data.
7
Item No. 4
For reasons explained below, your company plans to issue
convertible share warrants as per the Guidelines prescribed
by SEBI. In order to facilitate such issue and allotment of
convertible warrants, an enabling provision is required in
the Articles of Association of the Company.
Hence, your directors recommend passing of the requisite
resolution amending Article 3 of the Articles of Association
by including Clause (f) as proposed.
None of the directors of the Company except Mr. Raju S
Dandu and Mr. D S N Raju are concerned or interested in
the proposed resolution.
Item No. 5 & 6
ESAPCM
ESAP (Case Management) and ESAPSP
ESAP (Service
Provider) are the two Products developed under the ESAP
Public 13,84,508 42.993 18,84,508 50.65 18,84,508 44.65
TOTAL 32,20,300 100.000 37,20,300 100.00 42,20,300 100.00
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Notes:
a) The holding position shown above under “Before Issue ofPreferential shares/warrants” is the position as on June 30,2005.
b) After issue of shares and warrants, 5,00,000 convertiblewarrants will be held by the preferential allottees frompromoters, which will be eligible for conversion into equityshares within a period of 18 months from the date of AGM.
c) The holding pattern “After the Conversion of Warrants” willbe as per the holding shown above, with an assumption thatall the 5,00,000 warrants will be opted for conversion andthere will not be any change in the pre-conversion holding
of promoters equity.
(iv) Proposed time within which the allotment shall
be complete
As required by the SEBI Guidelines in this regard, the
entire process of offer, issue and allotment will be
completed within fifteen days from the date of general
meeting, where the resolution of approval by
shareholders will be passed.
(v) The identity of the proposed allottees and the
percentage of post-preferential issue capital that
may be held by them.
The identity of the proposed allottees of equity shares under preferential offer:
No. Name Address Holding before Holding afterpreferential preferentialallotment allotment
The identity of the proposed allottees of convertible warrants under preferential offer:
No. Name Address Holding before Holding afterpreferential allotment conversion of
of Warrants Warrants intoEquity Shares
1 Danlaw Systems India Ltd. Hyderabad 18,35,792 23,35,792
Raju S Dandu’s Family (57.007%) (55.35%)
Members and Associates
Your directors recommend the proposed resolutions for theapproval of the members.
None of the directors of the Company except Mr. Raju SDandu and Mr. D S N Raju are concerned or interested in
the proposed resolutions.
Item No. 7:
Though the shares of the Company are currently listed onHyderabad (the Regional Stock Exchange), the MadrasStock Exchange and the Stock Exchange, Mumbai (BSE),the trading of the shares of the Company are done only onBSE. The trading volumes are given in the section of‘General Information to Shareholders’ at Page No.: 23.
With the implementation of BOLT (Bombay Online Trading)system and net connectivity of terminals across the countryand also abroad, the concept of share trading hasundergone a complete change.
Hence, your directors propose and recommend delistingthe shares of the Company from Madras Stock Exchange.
None of the directors of the Company are concerned orinterested in the proposed resolution.
By Order of the BoardFor Danlaw Technologies India Ltd.
Hyderabad B S BhaskarAugust 22, 2005 Company Secretary
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Divisional Reports
10
ENGINEERING SOLUTIONS DIVISION (ESD)
Danlaw provides a broad spectrum of engineering
enterprise services, based on a combination of wide-
ranging engineering expertise and industry domain
knowledge. Our mission is to continually upgrade our
resources to fulfill our clients’ product requirements. This
enables us to provide our customers all the benefits of best-
in-class technology and optimal solutions for the automotive
sector. Danlaw’s extensive software development
experience, across multiple mission-critical automotive
applications continues to strengthen our position in the
automotive industry.
Danlaw’s Engineering Division primarily provides
embedded software services to North American, European
and Asian automotive customers. The services involve
Embedded Software Development, Reference Design
Development, Software Verification and Validation & Test
Plan Development. Danlaw’s experience with providing
embedded software services, has led to the successful
development of automated test tools for use by Automotive
Tier 1 and OEMs (Original Equipment Manufacturers).
The SDATT (Serial Data Automated Test Tool) has been
accepted by GM and is under regular production to meet
deliveries for Tier 1 suppliers to GM as well as by GM
OEM development engineers. The acceptance of the SDATT
tool set has led Danlaw to the addition of over thirty new
customers, which are mostly Fortune 50 companies, through
the sale of SDATT systems. Many of these new customers
have offices in Europe, Asia and Australia, allowing Danlaw
to expand its customer base on a global basis. Additionally,
during the current financial year the Engineering Division
also took up several projects from the DRDO.
Danlaw’s Engineering Division has assisted DI in design
and development of the GMLAN RT project, which is
instrumental in the automation of OEM test bench
development activities. This work continued further during
the first quarter of the FY 2005-06. A significant amount of
participation has been in defining the architecture of a
system Integration Bench. Based on this work we expect to
receive significant development orders this quarter.
The AutoBOB equipment has been delivered and accepted
by the client. Some related projects from the client are
expected during the coming year. A Data Acquisition Sub
System with GPS synchronization (GPS-DAAS) has been
developed and is currently in use by a major North
American Telematics supplier. The GPS-DAAS plays a
significant role in the supplier’s development activities and
thus gains a high degree of exposure to Danlaw’s
Embedded Development capabilities within the supplier’s
engineering organization.
Danlaw’s Engineering Division has executed numerous ECU
testing jobs and successfully completed all the three phases
of testing and delivered the test results to M/s CraneRide,
USA and other key Automotive Tier 1 clients. Similar testing
efforts and test plan development work are expected during
the coming year.
R&D Activities: Danlaw’s Engineering Division is also
engaged in development of advanced system designs in
the area of digital signal processing with focus on speech
and communication. The Engineering Division has Signal
Processing capabilities to develop algorithms as per
customer requirements for noise suppression and data
compression for use in modems and related telephony and
communication areas. We are also providing services and
hardware for Voice Over IP (VOIP) to a multinational
customer.
Danlaw’s Engineering Division has developed voice codecs
ranging from 2.4 kbps to 32 kbps operating on C5000
family of processors. Echo cancellers both line and acoustic
types; have been developed for signaling modules and
telephony, leveraging unique DTMF and other tone
detection algorithms. Additional development efforts have
been applied to algorithms for noise estimation and
direction finding with classification of signals. Danlaw’s
R&D group has worked hard toward upgrading our signal
processing capabilities by porting some of the high sample
rate communication front end solutions to FPGAs (Field
Programmable Gate Arrays).
11
Leveraging the above IP has enabled DTIL to design and
develop prototype signal processing systems as per user
requirements in the above areas. The key benefit of the
Danlaw’s R&D efforts toward developing Danlaw specific
IP, is expanding Danlaw’s expertise in the development of
products and services for use in deeply embedded systems
with advanced DSP processors, FPGAs and SOC (System
on Chip) solutions.
The experience gained by its R&D efforts in the DSP focus
area, has allowed Danlaw to successfully develop Satellite
Base band processing for voice telephony, Direction Finding,
Digital Frequency Demodulators, Test modulators and Voice
over IP products for several key customers in India. This
year we are focusing in the areas of audio/multimedia
intellectual property/services in addition to traditional voice
compression and communication.
Danlaw’s Thrust Area in the Domestic market :
Danlaw’s Engineering division has been successful in
making inroads into the defense sector. Efforts made by
Danlaw during the year and introduction of domain
expertise in this sector have yielded results. Danlaw has
secured more than half a dozen projects from the defense
sector. Some DRDO organizations have positively
responded to Danlaw’s delivery capabilities by placing
orders for improved versions of prototype systems delivered
during the current year. During the current year, Danlaw
has been awarded several new projects for SAC,
Ahmedabad. The system is under testing at M/s. Astra.
Production facility (EHTP)
Danlaw’s production facility has been assessed and
awarded ISO 9001- 2000 certification during the first year
of inception. Danlaw’s Engineering Division has established
formal processes, which have led to the rapid pace of
certification. The product line of Danlaw’s production facility
has increased steadily. During the current year it has added
the following products to its product line.
v J2534 New version pilot Version is Tested /Validated
and sent to Vetronix
v GPS-DAAS - Tested /Validated
v DAAS - Tested / Validated
In addition to the automotive products, the facility has also
responded to the ever-increasing demands. Notable among
these are delivery of the following equipment for DRDO
projects.
v Digital Frequency Demodulator (16 Channel)
v VoIP Gateway (4 Channel)
v RF Carrier unit
v HotMike (4 Channel)
Danlaw has also undertaken development support for
an MNC throughout the year for the following:
v VON Framework development
v Wideband CODEC development Projects undertaken
by Production Facility:
In addition to the production tasks, the facility has also
undertaken some important test plan development projects.
These include
v FTCM Test Plan Development
v RFA / TPM Test Plan Development
v GMT800 Test Plan Update
v ASC Test Plan
v GMX245 FTCM Test Plan
v GMT800 DSM Test Plan
In-house Training for Production facility engineers: All
Engineers have been trained for
v Various Protocols CAN / Class II and Trouble shooting
v Techniques of Advanced Micro controllers (Motorola,
ARM, XiLINX etc) based circuits.
12
INFORMATION TECHNOLOGY DIVISION (ITD)
Danlaw’s Information Technology division is a team of highlyexperienced staff having proficiency in business critical areasincluding: e-Governance, education services, web basedsolutions, data warehousing, data mining and SCM to namea few.
Our Strengths:
v Dedicated expert resources – project leaders, developmentengineers and quality assurance resources.
v Project Management – Proven methodologies and bestpractices.
v Rapid development cycles – We leverage time zonedifferences to achieve 24 hour development cycle whichminimizes time to market.
v Unsurpassed quality and reliability – In 2001, Danlaw wasawarded the highly coveted ISO 9001:2000 certificationby AQA, USA and in continuation for its passion Danlawhas also achieved SEI CMM Level 3 certification in May,2003.
v Solid Infrastructure – Our development environment havingnetwork and data links with strict security measures andcentralized backup facilities and policies.
Our Capabilities:
v Software Design and development.v End-to-end business intelligence solutions.v Data Warehouse architecture development.v ETL (Extraction, transformation and load) component
development.v Data warehouse/mart design, modeling and
implementation.v MDDB & OLAP design modeling and implementation.v End-user reporting and analysis design & development.v J2EE and .Net framework.v Application support through helpdesk.v Oracle 11i application (ERP).
Large Statewide e-Governance project:
Government of Andhra Pradesh (GoAP) recognizes thestrategic importance of IT in improving the economy of theState as a whole. Recognizing the need of the technologyenabled service delivery, as a part of its e-Governance initiative,GoAP has initiated Automation of Municipal Services underproject “Suvidha”.
Danlaw has successfully completed the MAS & MMIS (MunicipalAdministration System and Municipal ManagementInformation System) project named “Suvidha” given by GoAP.This application software is being implemented successfullyat 114 ULBs (Urban Local Bodies) across the State of AndhraPradesh. Your Company has also won the contract fordeployment of the human resources (around 122professionals) at each ULB across the State facilitating theimplementation of ‘Suvidha’.
Danlaw is keenly working on the replication of itse-Governance experience in other States. Danlaw’s majorfocus is also on capturing the international markets in theareas of its expertise.
Managed Health Care BPO
IT outsourcing has been slowly increasing over the past fiveyears. Managed health care outsourcing has been commonin the billing industry for decades and continues to be themost reported outsourced business process. Danlaw sees thearea of Managed Health Care as a flourishing and expandingbusiness opportunity, and thus Danlaw is working to establishitself as a BPO provider in the managed health-care industry.
ESAP - Exceptional Student Administration Program
There are various laws that govern the regular and specialeducation services that are to be rendered to disabledindividuals in the United States of America. The Individualswith Disabilities Education Act is one of those laws thatstrengthens academic expectations and accountability for thenation’s children with disabilities and bridges the gap that hastoo often existed between what children with disabilities learnand what is required in regular curriculum. Section 504 of theAct forbids organizations and employers from excluding ordenying individuals with disabilities an equal opportunity toreceive program benefits and services. It defines the rights ofindividuals with disabilities to participate in, and have accessto, program benefits and services.
ESAP allows users to maintain the entire process of the studentsIEP - right from the moment a child is referred or identified tothe transition services that the child may require aftercompletion of their primary education.
ESAPCM
ESAP (Case Management) and ESAPSP
ESAP (ServiceProvider) are the two Products developed under the ESAPrequirement. The former one deals with the IndividualEducation Plan (IEP) required by each physically challengedstudent and the later is designed to record the various otherspecial services provided to such students.
The salient features of the system include:
v Automatic record keeping and retrieval,v Automation of critical tasks and reporting,v Producing reports – includes data analysis and data
extraction.v Compatible with legacy systemv No hardware upgrades requiredv Automatic software upgrades
ESAP saves administration and maintenance costs by reducingpaperwork and allows educators more time to focus oneducation. Additionally, the ESAP system facilitates theobjectives of the Federal statute, while increasing the schooldistrict’s ability to bill for the services that are rendered by theIEP service providers.
ESAP has been in use in several districts of the State of Coloradoand the State of New Mexico. The product has been enhancedsignificantly to work with the currently popular browser“Firefox.” There is considerable interest shown by other statessuch as Illinois, Texas etc. Danlaw expects to add several newstates to the list of ESAP customers in this year. The increasedinterest in Danlaw’s ESAP product is fueled by thecomprehensive nature of its solution, as well as its ability toenhance billing revenue to the ESAP enabled school districts.
etc…) back to your mobile service provider, who will in-
turn relay this information to emergency 911 services.
Other mobile phone services can be envisioned including
opening your garage door, turning on/off home lighting,
and enabling/disabling security systems/alarms.
Danlaw is well positioned and we are already playing a
major role in this opportunity. Our existing products
including the GPS DAAS and VIM module, 22 years of
experience in embedded and automotive electronics, along
with our expertise in Wifi, Bluetooth, Plam OS, WinCE and
other relevant technologies will establish Danlaw as a
market leader with respect to this exciting opportunity.
Preferential Issue
The Board of your company has evolved a clear strategy to
win the advantage of being one of the first developers of
comprehensive and most adaptable software for the IEP
(Individual Education Plan) requirement in US.
The ESAPTM (Exceptional Student Administrative Program)
is a product developed by Danlaw over the past three years,
to exclusively suit the requirements of IDEA (Individuals with
Disabilities Education Act). This is a Federal Law initially
passed in 1997, updated in 1999 and recently reauthorized
18
in 2004. Under this law, K12 school organizations are
required to create an Individual Education Plan (IEP) for
each eligible student. The IEP process is an onerous
mandate that represents a very expensive and legally
entangling challenge for all K12 Schools. IEP must be
created, managed, delivered and documented for millions
of students in US each year.
ESAPCM
: ESAP (Case Management). Meeting the IDEA
mandate requires that each of the physically challenged
students be provided with a detailed education plan (IEP).
Each of these plans must be individually tailored to the
students’ specific requirements. Therefore the US K12
education system must produce an equal number of plans
(IEP’s) every year as to match to the number of physically
challenged persons. They must then administer these
programs. Legal compliance with the IDEA law is a major
issue for all school districts. Schools that do not comply
with the law are exposed to serious legal penalties.
ESAPSP
:ESAP (Service Provider). . . . . The IEP specifies, among
other things, special services each student requires as part
of their special education plan. Approximately 35% of the
students with IEP ’s are eligible for medical aid
reimbursement if schools can document services delivered,
and claim the reimbursement in a timely manner. To receive
these funds the schools are required to document the actual
service delivery as well as file complex claims in a timely
manner. Failure to comply with the documentation
requirements results in loss of the reimbursement.
Danlaw believes that this market can be accessed in a
significant way with the combined ESAPCM
and ESAPSP
products. With the two software packages, Danlaw makes
it possible for school organizations to efficiently fulfill their
special education requirements, automatically documents
the entire process, and maximizes the amount of Medicaid
reimbursements received from the process.
IDEA has been around since 1997. Other organizations
have attempted to deliver products for the IEP process. Most
of these efforts are neither comprehensive nor designed to
meet the needs of the entire organization. Danlaw’s current
product is the most comprehensive offering now available
in the market. A lot of care has been taken on continuous
basis to face competitors and the market requirements.
To market the product aggressively and extensively all over
the US School Districts, to customize the software to suit
the individual requirements of different States in US, to
continuously upgrade the version to make it compatible to
the changing requirement of law and the users and also to
plan strategic alliances/acquisitions, your company needs
funds. In order to meet the requirement, your Board of
Directors have considered the option of raising capital
through issue of equity shares and convertible warrants on
preferential basis. The details are included in the notice
convening the annual general meeting.
Directors
As per the provisions of the Companies Act, 1956 and the
Articles of Association of the Company, Mr. Lloyd R Lawrence
is liable to retire by rotation at the ensuing twelfth annual
general meeting and being eligible offers himself for re-
appointment. His profile is given at page no. 20.
Mr B Bowonder resigned from his dirctorship due to his
busy schedules and pre-occupations. The Board conveyed
its appreciation for the contributions of Mr Bowander. The
Board reserves the right to fill at the appropriate time, the
vacancy caused by the resignation of Mr. Bowonder.
Auditors
M/s. A M Reddy & Co., Chartered Accountants, Hyderabad,
Statutory Auditors of the Company, retire at the conclusion
of the twelfth annual general meeting and are eligible for
reappointment. M/s. A M Reddy & Co. confirmed their
eligibility and willingness to accept the office for another
term till the conclusion of the next annual general meeting,
if reappointed.
Information and explanation as required u/s 217 of the
Companies Act, 1956
The particulars are required u/s 217; sub-sections 1(e),
2A, 2AA and 3 are furnished below:
(A) Conservation of Energy, Research and
Development, Technology Absorption, Foreign
Exchange Earnings and Outgo as required u/s
217 (1)(e) of the Companies Act, 1956.
a) Conservation of Energy:
Since the Company is engaged in software and IT,
which is technology driven and the resource is humans
and talent, the activities do not have huge energy/
power requirements. The power used is electricity
and sometimes diesel, to run generators at occasional
times of power failures. Adequate measures have
been taken to use energy-efficient equipment, such
as computers, electrical systems, air-conditioners and
other test tools, meters etc. We believe that energy
saved is energy produced.
19
b) Research & Development and Technology
Absorption:
1. Research & Development: Your Company has
a team of persons working on R&D. The main
thrust is on the embedded software relating to
digital signal processing and echo cancellation
technologies; and on the ESAP Product.
The Company incurred a deferred revenue
expenditure of Rs.2,37,56,775/- on R & D during
the year under review as compared to
Rs.3,44,96,660/- during the previous year.
2. Technology Absorption: Your Company
continues to use state of the art technology for
improving the productivity and quality of its
products and services. To create adequate
infrastructure, your Company continues to invest
in the latest hardware and software.
c) Foreign Exchange Earnings and Outgo:
The particulars of foreign exchange earnings and
outgo are given below:
Rs.
Particulars 2004-05 2003-04
Earnings 3,87,87,716 3,16,14,626
Outgo 1,95,93,027 2,82,03,706
(B) Employee Particulars: No employee of the Company
falls within the limits prescribed under the Companies
(Particulars of Employees) Rules, 1975, read with
section 217 (2A) of the Companies Act, 1956.
(C) Directors Responsibility Statement: Pursuant to
section 217 (2AA) of the Companies Act, 1956, the
Board of Directors of the Company confirm that:
a. In the preparation of annual accounts for the
year ended March 31, 2005, the applicable
accounting standards have been followed along
with proper explanation relating to any material
departures.
b. Such accounting policies as mentioned in
schedule of the notes of the financial statements
have been selected and applied consistently and
judgments and estimates that are reasonable
and prudent made so as to give a true and fair
view of the state of affairs of the company for
the financial year ended March 31, 2005 and
of the loss of the Company for the year ended
on that date
c. Proper and sufficient care has been taken for
the maintenance of adequate accounting records
in accordance with the provisions of the
Companies Act, 1956 for safeguarding the
assets of the company and for preventing and
detecting fraud and other irregularities.
d. The annual accounts for the financial year 2004-
2005 have been prepared on a going concern
basis.
For and on behalf of the Board
Hyderabad Raju S DanduAugust 22, 2005 Chairman and
Managing Director
Profile of Mr Lloyd R Lawrence :
Lloyd R Lawrence is a Director of DTIL and one of the co-founders of Danlaw Inc. Lloyd has been involved with engineeringindustry for more than thirty-five years.
Lloyd R Lawrence began his career as a project engineer with the General Motors, way back in 1965, in their Safety
Research and Development abs on the Providing grounds. Subsequently, he moved to Xycom Inc. in 1973 as a senior
engineer responsible for new product development that led to electronic engine controls. Later Lloyd worked for Dana
Corp., building CNc controls for various applications like robots and EdI machines. In 1984 when Danlaw Inc. was founded,
he took over responsibilities of factory automation development as well as marketing leading to Danlaw CNC controls
being installed all over the wold from Korea to Argentina. Lloyd was responsible for automation of Bell-Helicopter Textron
and Stowe Woodward plants. In addition he looked after engineering and IT marketing and sales. Lloyd holds a B.S. in
electrical engineering from Lawrence Technological University, Michigan.
20
Report on Corporate Governance
(A) The Philosophy and the Policy
The Company believes in the philosophy that the principles of corporate governance should help the management in
creating and establishing self-regulated control mechanisms. Such an environment should help the management in
performing their duties with a constant sense of ethics, transparency, accountability and responsibility towards
stakeholders.
The work culture, policies, business plans and strategies are all framed to fit into the above philosophy of the Company.
(B) The Board and the Meetings
The Board of Directors consists of five members of whom two are promoter and executive directors; and three are
Independent non-executive directors. Mr. Lloyd R Lawrence, who stays in US, has appointed Mr. M A Ashok Kumar as
his alternate.
Four meetings of the Board of Directors of the Company were held during the financial year 2004-2005 on April 22,
July 30, October 21 of 2004 and on January 28, 2005.
The particulars of Directors, their attendance and other Directorships, Memberships / Chairmanships of Committees
for the financial year 2004-2005 are given below:
Attendance Particulars of other Directorships, CommitteeAt Memberships/Chairmanships
Name CategoryBoard Last Directorship Committee Committee
Meeting AGM Membership Chairmanship
Raju S Dandu Promoter 4 Yes 1 Nil Nil
Executive
DSN Raju Promoter 4 Yes 1 2 Nil
Executive
Lloyd R Lawrence Independent Nil No Nil Nil Nil
Non-executive
PVS Jagan Mohan Rao Independent 4 Yes Nil 1 1
Non-executive
B Bowonder Independent Nil No Nil 1 Nil
Non-executive
M A Ashok Kumar * Independent 4 Yes 1 2 1
Non-executive
* Mr. M A Ashok Kumar, being the alternate director to Mr. Lloyd R Lawrence, attended the meetings.
(C) The Committees of the Board
a) Audit Committee
The Audit Committee consists of four directors as its Members, out of whom three are independent non-executive
directors and one is promoter executive director. The Member Directors consists of Dr. P V S Jagan Mohan Rao
(Chairman of the Committee), Mr. B Bowonder, Mr. Lloyd R Lawrence (represented by his alternate Mr. M A Ashok
Kumar) and Mr. D S N Raju. The Committee met four times during the financial year 2004-2005, on April 22,
2004, July 30, 2004, October 21, 2004 and January 28, 2005.
The terms of reference to the Audit Committee are in line with the powers, duties and responsibilities stipulated in
the ‘Audit Committee Charter’ drafted as per Clause 49 of the Listing Agreement and adopted by the Board.
21
b) Share Transfer and Investors’ Grievance Committee
Mr. Lloyd R Lawrence (represented by his alternate Mr. M A Ashok Kumar) chairs the Committee; with the other
Member being Mr. D S N Raju. Mr. B S Bhaskar, Company Secretary is the Compliance Officer and is responsible
for the share transfers/demat and remat requests. M/s. Sathguru Management Consultants Pvt. Ltd., the Registrars
and Share Transfer Agents, maintain the share accounting package and periodically upgrades the data as per
the information received from NSDL/CDSL.
c) Remuneration Policy
Independent non-executive directors are not paid any remuneration, except sitting fee @ Rs.2,000/- per meeting
attended by them. The two executive directors are paid monthly remuneration by way of salary as approved by
the board of directors and the members. Hence, no separate committee has been constituted.
The following is the remuneration paid the Board Members during the financial year 2004-2005.
The details of transactions with related parties are given in Clause 13.2.5 of the ‘Notes on Accounts’ at Page No., 40
forming part of the accounts. There were no potentially conflicting transactions with the related parties.
Information about Mr. Lloyd R Lawrence seeking re-appointment is given at Page No. 20 as required under Clause 49
VI (A) of the Listing Agreement.
(F) Means of Communication
The Company published its quarterly and half yearly results in the prescribed format within the prescribed time limit.
The results were forthwith sent to the Stock Exchanges where the shares of the Company are listed and the same was
published in two newspapers, usually in Business Standard and Andhra Bhoomi (Telugu). The financial results are also
posted on the website of the Company, www.danlawtechnologies.com. The quarterly results are also uploaded on to
the EDIFAR (Electronic Data Information and Retrieval) of SEBI.
The Company made no presentations during the year under review to any institutional investors or analysts.
22
General Shareholders’ Information
(C) Market Price Data
Month High Low Volume Trades
April, 2004 34.15 22.00 1,27,327 725
May 28.80 19.90 1,64,445 1,104
June 27.80 19.05 1,92,146 1,190
July 24.00 18.80 1,27,373 1,121
August 26.90 19.60 3,35,355 1,871
September 38.00 24.00 12,59,971 8,984
October 36.00 25.00 1,95,976 1,667
November 37.40 23.50 2,04,998 1,680
December 33.00 25.20 2,43,268 1,868
January, 2005 33.55 25.30 3,14,737 2,284
February 33.70 26.00 2,46,717 2,162
March 31.40 22.00 1,56,818 1,100
*The above BSE data is taken, as the share is not quoted on Hyderabad Stock Exchange.
(A) General Information
The general information about the Company, viz., names of directors, management team, Company secretary, addresses
of registered office, branches auditors, demat agents are provided at Page No. 3.
(B) Other Information
Annual General Meeting
Date : September 17, 2005
Time : 11.00 a.m.
Venue: Registered Office, i.e. at
43, Sagar Society, Road No 2
Banjara Hills, Hyderabad – 500 082
Financial Calendar (Provisional):
UFR of 1st quarter April 1 to June 30, 2005: Last week of July 2005
UFR of 2nd quarter July 1 to Sept. 30, 2005: Last week of October, 2005
UFR of 3rd quarter Oct. 1 to Dec., 31, 2005: Last week of January 2006
UFR of 4th quarter Jan. 1 to Mar., 31, 2006: Last week of April, 2006
Audited results of FY 2005-2006: August 2006
Date of Book Closure: Wednesday September 14, 2005 to
Saturday September 17, 2005.
Listing on Stock Exchanges: The Stock Exchange, Mumbai
The Hyderabad Stock Exchange Ltd.
The Madras Stock Exchange Ltd.
Stock Codes: Stock Exchange, Mumbai – 532329
ISIN No.: INE 310 B 01013
23
(D) Distribution of Shareholding as on March 31, 2005
Category Shareholders % Shares %
1 - 500 898 71.50 1,65,827 5.15
501 - 1000 138 10.99 1,18,543 3.68
1001 - 2000 71 5.65 1,09,895 3.41
2001 - 3000 46 3.66 1,21,249 3.76
3001 - 4000 14 1.11 51,844 1.61
4001 - 5000 22 1.75 1,06,619 3.31
5001 - 10000 29 2.31 2,02,609 6.30
10001 and above 38 3.03 23,43,714 72.78
TOTAL 1256 100.00 32,20,300 100.00
(E) Categories of Shareholders as on March 31, 2005
Category Shares %
Promoters 18,35,792 57.01
Banks/FI/MFs 43,000 1.33
Bodies Corporate 2,50,785 7.79
Indian Public 10,90,723 33.87
TOTAL 32,20,300 100.00
(F) Shares and Dematerialization
As per SEBI regulations, the shares of the Company are brought under compulsory dematerialize form, whereby the
shares can be traded only in dematerialized form only. The Company entered into agreement with NSDL and CDSL
whereby shareholders have the option to dematerialize their shares with either of the Depositories. About 94.53% of
shares are dematted as on March 31, 2005. The share transfer and demat/remat requests are processed by the
Registrar and Transfer Agent, M/s. Sathguru Management Consultants Pvt. Ltd., with intimation to the Company.
The MembersDanlaw Technologies India Ltd.Hyderabad
We have examined the compliance of conditions ofCorporate Governance by Danlaw Technologies India Ltd.for the financial year ended March 31, 2005, as stipulatedin Clause 49 of the Listing Agreement of the said Companywith the Stock Exchanges.
The compliance of conditions of Corporate Governance isthe responsibility of the management. Our examinationwas limited to procedures and implementation thereof,adopted by the Company for ensuring the compliance ofthe conditions of the Corporate Governance. It is neitheran audit nor an expression of opinion on the financialstatements of the Company.
In our opinion and to the best of our information andaccording to the explanations given to us we certify thatthe Company has complied with the conditions of Corporate
Auditors’ Certificate
Governance as stipulated in the above-mentioned ListingAgreement.
As required by the Guidance Note issued by the Institute ofChartered Accountants of India, we have to state that asper the records maintained by the Share Transfer Agentson behalf of the Company, there were no investors’grievances remaining unattended/pending for more than30 days.
We further state that such compliance is neither anassurance as to the future viability of the Company nor theefficiency or effectiveness with which the management hasconducted the affairs of the Company.
CURRENT ASSETS, LOANS AND ADVANCESSundry Debtors 5 1,53,03,502 1,66,92,801Cash and bank balances 6 10,00,18,915 8,55,50,493Loans and advances 7 2,44,28,172 2,46,90,609Inventory 84,29,814 28,09,667
14,81,80,403 12,97,43,570Less: Current Liabilities 8 24,99,944 13,54,577
NET CURRENT ASSETS 14,56,80,459 12,83,88,993
Miscellaneous Expenditure:(to the extent not written off or adjusted) 9 9,15,80,630 6,93,85,894
28,02,32,619 27,54,38,081
SIGNIFICANT ACCOUNTING POLICIES ANDNOTES ON ACCOUNTS 13
The schedules referred to above and the notes thereon form an integral part of the Balance Sheet
This is the Balance Sheet referred for and on behalf of the Boardto in our report of even date
For A.M. REDDY & CO RAJU S DANDU D.S.N. RAJUChartered Accountants Chairman & Executive Director
Managing DirectorA.V. RAMANA REDDYPartner
Hyderabad B.S. BHASKARAugust 22, 2005 Company Secretary
EXPENDITURESoftware development expenses 11 5,71,56,362 6,43,63,056Administration and other expenses 12 2,01,60,905 1,91,25,089Miscellaneous Expenses written off 77,135 91,395
Profit before Tax 50,34,980 (44,38,459)Less: Provision for Current Year Income Tax 2,20,087 0
Net Surplus 48,14,893 (44,38,459)
Add: Deferred Tax (14,84,904) 21,67,726
Profit after tax 33,29,989 (22,70,733)Profit carried forward from last year 34,95,081 1,84,05,808
68,25,070 1,61,35,075Less: Unrecoverable Debts written off 0 1,26,39,994
AMOUNT TRANSFERRED TO BALANCE SHEET 68,25,070 34,95,081
Basic & dilluted EPS 1.03 (0.71)
SIGNIFICANT ACCOUNTING POLICIES ANDNOTES ON ACCOUNTS 13
The Schedules referred to above and the notes thereon form an integral part of the Profit and Loss Account
This is the Profit & Loss for and on behalf of the BoardAccount referred to in ourreport of even date
For A.M. REDDY & CO RAJU S DANDU D.S.N. RAJUChartered Accountants Chairman & Executive Director
Managing DirectorA.V. RAMANA REDDYPartner
Hyderabad B.S. BHASKARAugust 22, 2005 Company Secretary
34
GROSS BLOCK DEPRECIATION NET BLOCK
Assets Cost as at Additions Deductions Cost Total For Deductions As at As at As at01-04-2004 during the during as at upto the during 31-03-2005 31-03-2005 31-03-2004
AUTHORISED50,00,000 Equity Shares of Rs.10/- each 5,00,00,000 5,00,00,000
ISSUED, SUBSCRIBED AND PAID UP32,20,300 Equity Shares of Rs.10/- each Fully Paid 3,22,03,000 3,22,03,000
3,22,03,000 3,22,03,000
2. RESERVES AND SURPLUSShare premium account 23,97,40,000 23,97,40,000Transferred from Profit and Loss Account 68,25,070 34,95,081
24,65,65,070 24,32,35,081
35
Schedules to the Balance Sheet as atin Rs.
31-03-2005 31-03-2004
4. INVESTMENTSInvestment in Danlaw Technologies Inc (WOS) 1,59,44,265 1,59,44,265Investment in Equity Shares
GAIL (India) Limited 0 15,03,450(7710 Equity Shares of Rs.10/- each Fully Paid up)Dredging Corporation of India Limited 0 4,77,200
(1193 Equity Shares of Rs.10/- each Fully Paid up)Share Application Money in ONGC IPO 0 99,97,500Investment in Mutual Funds
Templeton Mutual Fund 0 1,53,47,397JM Mutual Fund 0 47,02,494
1,59,44,265 4,79,72,306
5. SUNDRY DEBTORSDebts outstanding for a period less than six months
Unsecured considered good 1,44,92,239 1,64,49,596Debts outstanding for a period exceeding six months 8,11,263 2,43,205
1,53,03,502 1,66,92,801
6. CASH AND BANK BALANCES
Cash on hand 3,344 37,042Balances with banks
- in current accounts 1,39,55,491 32,34,893- in EEFC accounts 11,345 6,272- in deposit accounts in Indian rupees 8,60,48,735 8,22,72,286
10,00,18,915 8,55,50,493
7. LOANS AND ADVANCESUnsecured, considered goodAdvances recoverable in cash or
in kind or for value to be receivedEarnest Money Deposit 3,30,500 2,26,949Power Incentive receivable 10,70,981 20,50,396Advances for expenses 1,18,000 8,47,058
Advances for capital goods 0 17,826Advances for purchases 0 67,956Rent deposits 23,96,000 25,31,350Deposit with Government Agencies 5,10,085 5,15,365Prepaid Expenses 1,92,473 2,84,280Interest Accrued but not due 32,79,262 28,46,834Tax Deduction at Source 75,16,872 62,88,596Intercorporate Deposits 90,13,999 90,13,999
2,44,28,172 2,46,90,609
36
Schedules to the Balance Sheet as atin Rs.
31-03-2005 31-03-2004
8. CURRENT LIABILITIESSundry Creditors - for goods 4,83,159 59,750
- for services 2,039 0- for expenses 19,30,966 8,64,827
Advances from customers 83,780 4,30,000
24,99,944 13,54,577
9. MISCELLANEOUS EXPENDITURETO THE EXTENT NOT WRITTEN OFF OR ADJUSTED:Balance as on 1-4-2004:Capital Issue Increase Expenses 0 14,260Public Issue Expenses 1,54,270 2,31,405
1,54,270 2,45,665Less: Written Off during the yearCapital Issue Increase Expenses (1/10 of Rs.1,42,600) 0 14,260Public Issue Expenses (1/10 of Rs.7,71,350) 77,135 77,135
77,135 91,395Balance as on 31-03-2005:Capital Issue Increase Expenses 0 0
Schedules to the Profit and Loss Account for the period endedin Rs.
31-03-2005 31-03-2004
10. OTHER INCOMEIncome from Investments:
- Dividends from units 0 16,20,369- Profit on sale of investments 26,27,532 29,23,128
Interest Income 56,46,674 56,96,324(TDS - Rs.11,83,505/-, Previous year Rs.12,52,470/-)Royalties/Commission 0 2,22,748Power Incentive 0 21,85,426Investment subsidy 4,00,000 0Interest on IT Refund 0 4,15,254Miscellaneous Income 1,866 28,325
86,76,072 1,30,91,574
11. SOFTWARE DEVELOPMENT EXPENSESSalaries & other benefits 2,49,84,844 2,87,39,854Cost of software packages & biometrics goods sold 2,08,65,691 2,81,67,076Cost of electronic components 62,67,761 24,09,395Communication Expenses 7,03,542 5,99,145Work-in-progress (opening) 0 5,78,019R&D expenses written off 0 1,60,248Software development charges 18,30,288 18,60,577Sales Commission 18,000 21,300Staff welfare 8,95,573 10,57,906Foreign tour and travel 15,90,663 7,69,536
13.1.1 Basis for preparation of financial statements
The financial statements have been preparedunder the historical-cost convention and as agoing concern as per the Generally AcceptedAccounting Principles and the Provisions of theCompanies Act, 1956. All income andexpenditure having a material bearing on thefinancial statements are recognized on accrualbasis.
13.1.2 Revenue recognition
Revenue from software development isrecognized based on software developed andbilled to clients as per the terms of specificcontracts. In the case of fixed-price contracts,revenue is recognized based on the workcompleted.
13.1.3 Expenditure
Expenses are accounted on accrual basis.
13.1.4 Fixed assets
Fixed assets are stated at the cost of acquisition,less accumulated depreciation. Cost comprisesof purchases and attributable cost.
13.1.5 Inventory
Inventory is valued at cost and work-in-progressis valued at cost or realizable value whichever isless.
13.1.6 Depreciation
Depreciation on fixed assets is provided on pro-rata basis on straight-line method at the ratesspecified in Schedule XIV to the Companies Act1956.
13.1.7 Research and development
Revenue expenditure – direct expenses on R&Dincurred during the year for the development ofproducts are treated as deferred revenueexpenditure. The amount shall be amortizedagainst the revenues to be earned over a periodof time, to be determined at the time of productlaunch.
13.1.8 Foreign currency transactions
In the case of sales made to clients outside India,income is accounted on the basis of the exchangerate as on the date of the transaction.Adjustments are made for any variations in thesale proceeds on conversion into Indian currencyupon actual receipt.
In the case of expenditure in foreign currency,the expenses are accounted on the basis ofexchange rate as on the date of the transaction.
In case expenses are met out of EEFC accounts,the same is accounted for at the rate at whichthe EEFC funds are maintained in the books ofaccount.
13.1.9 Investments
The short-term investments are valued andcarried at cost or fair value whichever is lower.In case of sale of investments, the gain/loss isbrought into the books of account.
13.2 Notes on accounts
The previous year’s figures have been regrouped,reclassified / restated, wherever necessary, toconform to the current year’s classification.
13.2.1 Contingent liabilities
The Company has outstanding counterguarantees of Rs.7,69,49,602/- as at March 31,2005, to various banks, in respect of guaranteesgiven by the said banks in favor of bodiescorporate to the extent of Rs. 7,46,91,767/- andRs.22,57,835/- to government authorities. Thecounter guarantees outstanding as at the previousyear-end was Rs. 7,02,58,931/- andRs.19,77,080/- respectively.
13.2.2 Quantitative details
The information as required under paragraphs3, 4C and 4D of Part II of Schedule VI to theCompanies Act, 1956 are not applicable to thiscompany.
13.2.3 A. A provision has been made for CurrentYear Income Tax under Section 115 JB ofIncome-Tax Act, 1961 for an amount ofRs. 2.20 lacs.
B. Taxes on Income as per AccountingStandard 22
a) In accordance with the AccountingStandard (AS) 22 relating to “Accountingfor Taxes on Income” issued by the Instituteof Chartered Accountants of India, anamount of Rs.14.85 lakhs has beenrecognized in Profit & Loss Account asDeferred Tax Liability accrued during theyear.
b) Major components of deferred tax assetson account of timing differences are -
(in Rs.)
Year ended March 31 2005 2004
Fixed Assets 4,17,295 17,85,188
Investments — —
Others (19,02,199) 3,82,538
Total (14,84,904) 21,67,726
13. Significant Accounting Policies and Notes on Accounts
39
13.2.4 Managerial Remuneration
The following managerial remuneration was paidas per the board of director’s decision and ap-proved by the shareholders.
Whole time Directors (in Rs.)
Particulars Raju S Dandu DSN RajuCMD ED
Salary 10,80,000 5,40,000
Contribution to PF 1,29,600 64,800
Other perquisites — 4,77,676
Total 12,09,600 10,82,476
13.2.5 Related Party transactions
The Company had transactions with the followingrelated parties:
Danlaw Inc., USA (DI) in which Mr. Raju S Danduis CEO; Danlaw Technologies Inc., USA, (DTI)which is 100% Subsidiary of Danlaw TechnologiesIndia Ltd., and Danlaw Systems India Ltd. in whichMr. Raju S Dandu and Mr. DSN Raju are directors.Mr. Raju S Dandu, Chairman & ManagingDirector (CMD); Mr. D S N Raju, Executive Director(ED); and Mrs. D Lakshmi, relative of ED.
Summary of the transactions with the aboverelated parties is as follows::
(Rs. in lacs)
Transactions Balance as atNature of for the year March 31
transaction ended March 31
2005 2004 2005 2004
Receipts :Software Services 205.56 141.99 — 92.21
Payments :Remuneration 22.92 23.36 — —
Lease Rentals 33.32 32.23 — —
Productizationexpenses 104.13 229.47 — —
ICD — — *109.65 *99.99
Investment (WOS) — — 159.44 159.44
* Includes accrued interest
13.2.6 Segment reporting
The company’s sales are basically related toproviding software development servicesdelivered to customers situated at USA. Hencethe primary and secondary segment reporting isbased on the software development services toUSA only.
13.2.7 There are no dues to small Scale Industrialundertakings outstanding above Rs. one lakh andexceeding 30 days.
13.2.8 Imports on CIF basisin Rs.
Year ended March 31 2005 2004
Capital goods 1,35,054 9,35,798
13.2.9 Expenditure in foreign currencyin Rs.
Year ended March 31 2005 2004
Expenditure 1,94,57,973 2,72,67,908
13.2.10 Earnings in foreign exchangein Rs.
Year ended March 31 2005 2004
Income fromsoftware developmentservices and 3,87,87,716 3,16,14,626products onaccrual basis
Signatures to Schedules 1 to 13 for and on behalf of the Board
For A.M. REDDY & CO RAJU S DANDU D.S.N. RAJUChartered Accountants Chairman & Managing Director Executive Director
A.V. RAMANA REDDYPartner B.S. BHASKAR
Hyderabad, August 22, 2005Company Secretary
40
Statement of Cash Flows for the year ended March 31
in Rs.
2005 2004
Cash flows from operationsProfit / (Loss) from operations 50,34,980 (44,38,459)Depreciation and depletion 52,17,850 49,76,132Loss on sale of fixed assets 60,475 0Decrease / (increase) in sundry debtors 13,89,299 (3,60,759)Decrease / (increase) in loans and advances 2,62,437 (21,84,861)Decrease / (increase) in inventory (56,20,147) (6,998)Increase / (decrease) in current liabilities 11,45,367 (4,39,834)Decrease / (Increase) in miscellaneous expenditure (2,38,99,727) (3,44,05,265)
Net cash from operations (1,64,09,466) (3,68,60,044)
Cash flows from financingSecured loans received 14,64,549 0
Net cash from financing 14,64,549 0
Cash flows from investingPurchase of Fixed Assets (26,14,702) (25,94,259)Investments 3,20,28,041 5,94,54,525
Net cash from investing 2,94,13,339 5,68,60,266
Total increase (decrease)in cash and equivalents during the year 1,44,68,422 2,00,00,222
Cash and equivalents at thebeginning of the year 8,55,50,493 7,81,90,265
10,00,18,915 9,81,90,487Less: Extraordinary Items written off 0 1,26,39,994
Cash and equivalents at the end of the year 10,00,18,915 8,55,50,493
These are the Cash Flow Statements for and on behalf of the Boardreferred to in our report of even date
For A.M. REDDY & CO RAJU S DANDU D.S.N. RAJUChartered Accountants Chairman & Executive Director
Managing DirectorA.V. RAMANA REDDYPartner
B.S. BHASKARHyderabad Company SecretaryAugust 22, 2005
41
I. Registration Details
Registration No. State Code
II. Capital raised during the year (Amount in Rs.)
Public Issue Rights Issue
Bonus Issue Private Placement
III. Position of Mobilisation and deployment of funds (Amount in Rs.)
Total Liabilities Total Assets
SOURCES OF FUNDS APPLICATION OF FUNDS
Paid-up Capital Net Fixed Assets
Reserves and Surplus Investments
Secured Loans Net Current Assets
Unsecured Loans Miscellaneous Expenditure
IV. Performance of the Company (Amount in Rs.)
Turnover Total Expenditure
Profit/(Loss) before Tax Balance carried to Balance Sheet
Earning per share Rs. Dividend Rate (%)
V. Generic names of principal products/services of the Company
Item Code No. (ITC Code)
Product Description
0 1
N I L
N I L
2 8 0 2 3 2 6 1 92 8 0 2 3 2 6 1 9
2 7 0 2 7 2 6 53 2 2 0 3 0 0 0
1 4 5 6 8 0 4 5 91 4 6 4 5 4 9
1 5 9 4 4 2 6 52 4 6 5 6 5 0 7 0
9 1 5 8 0 6 3 0N I L
8 7 6 4 7 2 3 2 8 2 6 1 2 2 5 2
N I L
5 0 3 4 9 8 0 3 3 2 9 9 8 9
1 . 5 6 N I L
for and on behalf of the Board
For A.M. REDDY & CO RAJU S DANDU D.S.N. RAJUChartered Accountants Chairman & Executive Director
Managing DirectorA.V. RAMANA REDDYPartner
B.S. BHASKARHyderabad Company SecretaryAugust 22, 2005
BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE
1 5 0 9 9
8 5 2 4 9 0 0 9 . 1
C O M P U T E R S O F T W A R E
N I L
42
Subsidiary Financials
43
CERTIFIED PUBLIC ACCOUNTANT CERTIFICATE ON WHOLLY OWNED SUBSIDIARY
GRANT, MILLMAN & JOHNSON, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
AND BUSINESS CONSULTANTS
30180 ORCHARD LAKE ROAD, SUITE 300
FARMINGTON HILLS, MICHIGAN 48334-2266
To the Board of DirectorsDanlaw Technologies, Inc.Farmington Hills, Michigan
We have reviewed the accompanying balance sheets of Danlaw Technologies, Inc. (a wholly owned subsidiary of
Danlaw Technologies India, Ltd.) as of March 31, 2005 and 2004 and the related statements of operations, stockholder’s
equity and cash flows for the years then ended, in accordance with Statements on Standards for Accounting and Review
Services issued by the American Institute of Certified Public Accountants. All information included in these financial state-
ments is the representation of the management of Danlaw Technologies, Inc.
A review consists principally of inquiries of company personnel and analytical procedures applied to financial
data. It is substantially less in scope than an audit in accordance with generally accepted auditing standards, the objective
of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our reviews, we are not aware of any material modifications that should be made to the accompanying
financial statements in order for them to be in conformity with generally accepted accounting principles.
GRANT, MILLMAN & JOHNSON, P.C.
April 26, 2005
44
DANLAW TECHNOLOGIES, INC.
BALANCE SHEETMarch 31, 2005 and 2004
A S S E T S
2005 2004
Current Assets:
Cash $ 1,754 $ 754
Accounts Receivable 18,623 31,290
Accounts Receivable - Affiliate 506,665 95,010
Employee Advances 46,000 16,000
Advances – Officer - 4,900
Total Current Assets 573,042 147,954
TOTAL ASSETS $ 573,042 $ 147,954
L I A B I L I T I E S A N D S T O C K H O L D E R’ S E Q U I T Y
Current Liabilities:
Accounts Payable - Affiliate $ 193,808 $ 58,157
Accounts Payable – Other 127,476 49,865
Accounts Payable – Parent 177,896 -
Accrued Liabilities - 3,547
Accrued Payroll and Payroll Taxes 12,556 15,343
Customer Deposits - 775
Total Current Liabilities 511,736 127,687
Stockholder’s Equity:
Common Stock - $10 Par Value; 34,000 Shares
Authorized, Issued and Outstanding 340,000 340,000
Accumulated Deficit (278,694) (319,733)
Total Stockholder’s Equity 61,306 20,267
TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY $ 573,042 $ 147,954
Read Accountants’ Report and Notes to Financial Statements.
Cost of Sales:Subcontract Work - Parent 282,596 38,960Subcontract Work – Affiliate 100,237 31,930Subcontract Work – Other 7,390 56,375Technical salaries 258,031 259,978Payroll Taxes 19,286 21,069Employee Benefits 12,682 12,614Software Research & Development - 10,516Operating Expenses 13,435 2,976
Total Cost of Sales 693,657 434,418
Gross Profit 386,487 134,721
General and Administrative Expenses: Business Development 96,000 96,000 Travel & Lodging 8,548 15,063 Sales Promotion 2,000 - Sales Salaries 125,431 125,000 Payroll Taxes 7,338 7,506 Sales Commissions 60,000 - Payroll Preparation 1,304 - Auto Expense 5,400 4,800 Telephone 816 822 Meals & Entertainment 3,996 3,234 Sales Expenses 6,000 - Rent & Utilities 21,250 22,379 Consulting Services - 3,547 Professional Services 6,420 3,780 Office Expenses 945 2,149
Total General and Administrative Expenses 345,448 284,280
NET INCOME / (LOSS) $ 41,039 $ (149,559)
Read Accountants’ Report and Notes to Financial Statements.
46
DANLAW TECHNOLOGIES, INC.
STATEMENTS OF STOCKHOLDER’S EQUITYFor the Years Ended March 31, 2005 and 2004
Accumulated Deficit Common Stock Total
Balance March 31, 2003 (170,174) 340,000 169,826
Net Loss (149,559) - (149,559)
Balance March 31, 2004 $ (319,733) $ 340,000 $ 20,267
Net Income 41,039 - 41,039
Balance March 31, 2005 $ (278,694) $ 340,000 $ 61,306
STATEMENTS OF CASH FLOWSFor the Years Ended March 31, 2005 and 2004
2005 2004
Cash Flows From Operating Activities:Net Income / (Loss) $ 41,039 $ (149,559)Adjustments to Reconcile Net Income / (Loss) to
Net Cash Provided by (Used in) Operating Activities:
Changes in Operating Assets and Liabilities:
Accounts Receivable (398,988) 16,091
Employee Advances (30,000) (16,000)
Advances - Officer 4,900 -
Accounts Payable 391,158 18,343
Accrued Liabilities (3,547) (33,243)
Accrued Payroll and Payroll Taxes (2,787) 2,316
Customer Deposits (775) (1,700)
Net Cash Provided by (used in) Operating Activities 1,000 (163,752)
Increase / (Decrease) in Cash 1,000 (163,752)
Cash at Beginning of Year 754 164,506
Cash at End of Year $ 1,754 $ 754
Read Accountants’ Report and Notes to Financial Statements.
47
DANLAW TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 2005 and 2004
NOTE 1 - Summary of Accounting Policies:
Business Activity
The Company is in the business of providing engineering and software development consulting services.
Danlaw Technologies Inc. (DTI) is a wholly owned subsidiary of Danlaw Technologies India Ltd., a foreign
corporation organized in India. DTI was incorporated in September 2001 to market engineering and infor-
mation technology services to customers in the United States of America.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles re-
quires management to make estimates and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Revenue Recognition Policy
The Company’s policy is to recognize revenue as services are provided. Revenue is calculated based on the
hours of service provided at contractual rates and adjusted for expected realization upon final invoicing.
Cash and Cash Equivalents
For the purposes of the statement of cash flows, the Company considers all highly liquid debt instruments
purchased with maturity of three months or less to be cash equivalents. Cash includes amounts in corporate
bank accounts, which may exceed Federal Deposit Insurance Corporation insurance limits of $100,000.
Accounts Receivable and Concentration of Credit Risk
The Company’s receivables are concentrated in the automotive industry. At March 31, 2005 and March 31,
2004, the Company’s accounts receivable are all due from automotive suppliers and manufacturers. Trade
accounts receivable are stated at the amount management expects to collect from outstanding balances.
Management provides for probable uncollectible amounts through a charge to earnings and a credit to
valuation allowance based on its assessment of the current status of individual accounts. Balances that are still
outstanding after management has used reasonable collection efforts are written off through a charge to the
valuation allowance and a credit to trade accounts receivable.
Income Taxes
Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of
deferred taxes related primarily to differences between the bases of certain assets and liabilities for financial
tax reporting. Deferred taxes represent the future tax return consequences of those differences, which will
either be taxable or deductible when the assets and liabilities are recovered or settled.
Research and Development
Research and Development costs are charged to operations when incurred and are included in cost of sales.
The amount charged in 2004 was $10,516.
48
NOTE 2 - Income Taxes:
No provision for income taxes has been included in the 2005 or 2004 statement of operations due to the netoperating losses available to offset taxable income. The current income tax provision is as follows:
2005 2004
Current tax provision Tax on current income $ 14,600 $ - Benefit of net operating loss carryover (14,600) -
Total Current Income Tax $ - $ -
The deferred tax asset is as follows at March 31:
2005 2004
Deferred income taxBenefit of net operating loss carryover $ 93,000 $ 107,600Valuation allowance (93,000) (107,600)
Total Deferred Income Tax $ - $ -
For income tax purposes at March 31, 2005, the Company has net operating loss carryovers which expire asfollows:
Fiscal year ended March 31 :
2024 $148,0002023 $126,000
NOTE 3 - Related Party Transactions:
The Company is related by common ownership to Danlaw Technologies India Ltd. and by common managementto Danlaw Inc. The following summarizes transactions and outstanding balances with the related entities:Transactions For The Year Ended March 31:
2005 2004
SalesDanlaw Inc. $ 961,062 $ 217,247Services PurchasedDanlaw Technologies India, Ltd. $ 282,596 $ 38,960Danlaw Inc. 100,237 31,930Rent ExpensesDanlaw Inc. $ 7,896 $ 7,896Balances as of March 31Accounts ReceivableDanlaw, Inc. $ 506,665 $ 95,010
Accounts PayableDanlaw Technologies India, Ltd. $ 177,896 $ -Danlaw Inc. 193,808 58,157
NOTE 4 – Lease Commitments
The Company rents office space from Danlaw, Inc. on a month-to-month basis. For the years ended March31, 2005 and 2004, rent paid was $7,896 per year.
NOTE 5 – Retirement Plan
The Company maintains a 401(k) Profit Sharing Plan available to all employees meeting certain age andservice requirements. The plan allows employees to contribute up to 15% of their salary to the plan, subject toInternal Revenue Code limitations. The Company may elect to match a portion of the employees’ contributionto the plan and contribute additional amounts at its discretion. There were no employer contributions for the
years ended March 31, 2005 and 2004.
49
Consolidated Financials
50
The Board of Directors ofDANLAW TECHNOLOGIES INDIA LIMITED,
HYDERABAD
We have examined the attached Consolidated Balance
Sheet of Danlaw Technologies India Limited and its
subsidiary as at March 31, 2005, the Consolidated Profit
and Loss Account for the year then ended.
These financial statements are the responsibility of the
Company’s management. Our responsibility is to express
an opinion on the financial statements based on our audit.
We have conducted our audit of the parent Company in
accordance with generally accepted auditing standards in
India. These Standards require that we plan and perform
the audit to obtain reasonable assurance whether the fi-
nancial statements are prepared, in all material respects,
in accordance with an identified financial reporting frame-
work and are free of material misstatements. An audit
includes assessing the accounting principles used and sig-
nificant estimates made by management, as well as evalu-
ating the overall financial statements. We believe that our
audit for the parent Company provides a reasonable basis
for our opinion.
We did not audit the financial statements of the subsidiary,
Danlaw Technologies, Inc., which have been reviewed by
M/s Grant, Millman & Johnson, P.C., Michigan State, USA.
The report of the Certified Public Accountant has been fur-
nished to us, and our opinion, in so far as it relates to the
amounts included in respect of the subsidiary, is based solely
on the report of the CPA.
We report that the consolidated financial statements have
been prepared by the Company in accordance with the
requirements of Accounting Standard (AS) 21, Consolidated
Financial Statements, issued by the Institute of Chartered
Accountants of India and on the basis of the separate au-
dited financial statements of Danlaw Technologies India
Limited and reviewed financial statements of the subsid-
iary are included in the consolidated financial statements.
On the basis of the information and explanations given to
us and on the consideration of the separate audit reports
on individual audited financial statements of Danlaw Tech-
nologies India Limited and its aforesaid subsidiary, we are
of the opinion that:
a) the Consolidated Balance Sheet gives a true and fair
view of the consolidated state of affairs of Danlaw
Technologies India Limited and its subsidiaries as at
March 31, 2005; and
b) the Consolidated Profit & Loss Account gives a true
and fair view of the consolidated results of operations
of Danlaw Technologies India Limited and its subsid-
Profit before Tax 69,18,577 (1,13,04,754)Less: Provision for Current Year Income Tax 2,20,087 0
Net Surplus 66,98,490 (1,13,04,754)Add: Deferred Tax (14,84,904) 21,67,726
Profit after tax 52,13,586 (91,37,028)Profit carried forward from last year (1,15,57,012) 1,02,20,010
(63,43,426) 10,82,982Less: Unrecoverable Debts written off 0 1,26,39,994
AMOUNT TRANSFERRED TO BALANCE SHEET (63,43,426) (1,15,57,012)
Basic & dilluted EPS 1.62 (2.84)
SIGNIFICANT ACCOUNTING POLICIES ANDNOTES ON ACCOUNTS 13
The Schedules referred to above and the notes thereon form an integral part of the Profit and Loss Account
This is the Profit & Loss for and on behalf of the BoardAccount referred to in ourreport of even date
For A.M. REDDY & CO RAJU S DANDU D.S.N. RAJUChartered Accountants Chairman & Executive Director
Managing DirectorA.V. RAMANA REDDYPartner
B.S. BHASKARHyderabad Company SecretaryAugust 22, 2005
53
Schedules to the Consolidated Balance Sheet as at
in Rs.
31-03-2005 31-03-2004
1. SHARE CAPITAL
AUTHORISED50,00,000 Equity Shares of Rs.10/- each 5,00,00,000 5,00,00,000
ISSUED, SUBSCRIBED AND PAID UP32,20,300 Equity Shares of Rs.10/- each Fully Paid 3,22,03,000 3,22,03,000
3,22,03,000 3,22,03,000
2. RESERVES AND SURPLUS
Share premium account 23,97,40,000 23,97,40,000
Exchange conversion reserve (1,84,190) (19,070)
23,95,55,810 23,97,20,930
GROSS BLOCK DEPRECIATION NET BLOCK
Assets Cost as at Additions Deductions Cost Total For Deductions As at As at As at01-04-2004 during the during as at upto the during 31-03-2005 31-03-2005 31-03-2004
Schedules to the Consolidated Balance Sheet as atin Rs.
31-03-2005 31-03-2004
4. INVESTMENTSInvestment in Equity Shares
GAIL (India) Limited 0 15,03,450(7710 Equity Shares of Rs.10/- each Fully Paid up)Dredging Corporation of India Limited 0 4,77,200(1193 Equity Shares of Rs.10/- each Fully Paid up)
Share Application Money in ONGC IPO 0 99,97,500
Investment in Mutual FundsTempleton Mutual Fund 0 1,53,47,397JM Mutual Fund 0 47,02,494
0 3,20,28,041
5. SUNDRY DEBTORSDebts outstanding for a period less than six months
Unsecured considered good 2,94,99,949 2,18,90,600
Debts outstanding for a period exceeding six months 8,11,263 2,43,205
3,03,11,212 2,21,33,805
6. CASH AND BANK BALANCES
Cash on hand 3,344 69,524
Balances with banks
- in current accounts 1,40,31,615 32,34,893
- in EEFC accounts 11,345 6,272
- in deposit accounts in Indian rupees 8,60,48,735 8,22,72,286
10,00,95,039 8,55,82,975
7. LOANS AND ADVANCESUnsecured, considered goodAdvances recoverable in cash or
in kind or for value to be received
Earnest Money Deposit 3,30,500 2,26,949
Power Incentive receivable 10,70,981 20,50,396Advances for expenses 21,14,400 17,47,430Advances for capital goods 0 17,826Other Advances 0 67,956Rent deposits 23,96,000 25,31,350Deposit with Government Agencies 5,10,085 5,15,365Prepaid Expenses 1,92,473 2,84,280Interest Accrued but not due 32,79,262 28,46,834Tax Deduction at Source 75,16,872 62,88,596Inter Corporate Deposits 90,13,999 90,13,999
2,64,24,572 2,55,90,981
55
Schedules to the Consolidated Balance Sheet as atin Rs.
31-03-2005 31-03-2004
8. CURRENT LIABILITIES
Sundry Creditors - for goods 4,83,159 59,750
- for services 2,039 48,06,393
- for expenses 1,64,19,621 15,25,803
Advances from customers 83,780 4,63,387
1,69,88,599 68,55,333
9. MISCELLANEOUS EXPENDITURE TO THE EXTENTNOT WRITTEN OFF OR ADJUSTED:
Balance as on 1-4-2004:
Capital Issue Increase Expenses 0 14,260Public Issue Expenses 1,54,270 2,31,405
1,54,270 2,45,665
Less: Written Off during the year
Capital Issue Increase Expenses (1/10 of Rs.1,42,600) 0 14,260Public Issue Expenses (1/10 of Rs. 7,71,350) 77,135 77,135
77,135 91,395Balance as on 31-03-2005:Capital Issue Increase Expenses 0 0Public Issue Expenses 77,135 1,54,270
Schedules to the Consolidated Profit and Loss Account for the period ended
in Rs.
31-03-2005 31-03-2004
10. OTHER INCOMEIncome from Investments: - Dividends from units 0 16,20,369 - Profit on sale of investments 26,27,532 29,23,128Interest Income 56,46,674 56,96,324(TDS - Rs.11,83,505/-, Previous year Rs.12,52,470/-)Royalties/Commission 0 2,22,748Power Incentive 0 21,85,426Investment Subsidy 4,00,000 0Interest on IT Refund 0 4,15,254Miscellaneous Income 1,866 28,325
86,76,072 1,30,91,574
11. SOFTWARE DEVELOPMENT EXPENSESSalaries 4,62,61,810 5,23,42,796Sub-contract works/services 44,56,713 40,66,638Cost of software packages & biometrics goods sold 2,11,89,060 2,81,67,076Cost of Electronic components 68,50,034 26,16,401Communication Expenses 7,03,542 5,99,145Work-in-progress (opening) 0 5,78,019R&D Expenses written off 0 1,60,248Software development charges 18,30,288 18,60,577Sales Commission 18,000 21,300Staff welfare 16,40,896 17,81,346Foreign tour and travel 19,74,464 14,60,006
Danlaw Technologies India Limited is a company engaged
in providing technology services in the areas of engineering
services, internet, developing software products and security
solutions for the clients. The Company has also entered
into the business of biometric products providing security
solutions to the clients. The company has a single subsidiary
at USA in the name of ‘Danlaw Technologies Inc’ for
promoting the services provided by the Danlaw
Technologies India Limited to US clients. The subsidiary is
wholly owned by the company by virtue of its total holding
of equity of the subsidiary. The Chairman and Managing
Director supported by three marketing staff members and
five technical staff members mans the WOS. The Danlaw
Technologies Inc (DTI) is basically engaged in providing
Engineering and software development and consultancy
services to USA clients. The wholly owned subsidiary of the
company together with the parent shall hereinafter be
referred as Danlaw for the purposes of consolidated
accounts. The accounting year for the parent company and
the US subsidiary is the same i.e. from April 1st to March
31st every year.
Significant Accounting Policies And Notes On
Accounts:
1. Basis for consolidation of financial statements
The consolidation of financial statements of Danlaw
has been made as per the Generally Accepted
Accounting Principles and the Provisions of the
Accounting standard 21 issued by the Institute of
Chartered Accountants of India. The consolidation
of accounts of Danlaw took place based on the
audited financial statements of the parent by the
statutory auditors of the company and reviewed
financial statements of the subsidiary by the Certified
Public Accountants of Michigan State. While
consolidation Inter Company balances and
transactions are eliminated in full. The consolidation
is based on the concepts of accrual, going concern
and conservatism. All income and expenditure
having a material bearing on the financial statements
are recognized on the accrual basis.
2. Revenue recognition
Revenue from software development of Danlaw is
recognized based on software developed and billed
to clients considering the men and material used for
the specific project. In the case of fixed-price
contracts, revenue is recognized based on the work
completed.
3. Expenditure
All expenses of Danlaw are accounted on the accrual
basis.
4. Fixed assets
Fixed assets are there only for the parent company.
They are stated at the cost of acquisition, less
accumulated depreciation. Cost comprises of
purchases and attributable cost. Depreciation on
fixed assets is provided based on the Companies
Act 1956 for the Indian assets and there are no
depreciable assets in the subsidiary.
5. Foreign currency transactions
In the case of sales made to clients outside India for
the parent, income is accounted on the basis of the
exchange rate as on the date of the transaction.
Adjustments are made for any variations in the sale
proceeds on conversion into Indian currency upon
actual receipt.
In the case of expenditure in foreign currency, the
expenses are accounted on the basis of exchange
rate as on the date of the transaction. In case
expenses are met out of EEFC accounts, the same is
accounted for at the rate prevailing on the date of
receipt of funds in EEFC account or at the rate at
which the EEFC funds are maintained.
All transactions of the subsidiary are only in US
dollars. There is no foreign currency transaction per
se. But on account of consolidation all the
outstanding entries of the subsidiary as on March
31, 2005 have been converted into Indian rupees
and consolidation was affected.
58
6. Foreign Currency translations
The accompanying financial statements of WOS are
reported in U.S. dollars. The functional currency of
the parent company in India is the Indian rupee
(“Rs.”). Hence translation of U.S. dollars to Rs is
performed for balance sheet accounts using the
exchange rate prevailing as at the balance sheet
date, and for revenue and expense accounts using
a quarterly average exchange rate for the respective
quarters. The gains or losses resulting from such
translation are reported as “Exchange conversion
reserve”, a separate component of reserves and
surplus head in the consolidated accounts. The
method for translating expenses of overseas
operations depends upon the timing of the funds
used. The balance sheet items of the WOS have been
converted at the rate Rs.43.40 per dollar. For
conversion of the income statement, the statement
figures have been segregated based on the quarter
to which the transaction pertains and translated at
the average quarterly exchange rate of Rs.44.66,
Rs.45.78, Rs.44.52 & Rs.43.34 per US dollar for
the respective quarters.
7. Investments
The short-term investments of the parent company
are valued and carried at cost or fair value whichever
is lower. In case of sale of investments, the gain/
loss is brought into the books of account. There is
no income earning investments in the subsidiary.
8. Related Party transactions
The company entered into related party transactions
during the year with Danlaw Technologies Inc., USA
a wholly owned subsidiary of the company. The CMD
of the company is also CEO of the wholly owned
Subsidiary and Danlaw Inc. The company had
invested USD 340000 in the form of equity divided
in 34000 shares of USD 10 each. The Danlaw
Technologies Inc had sales of Rs.481.93 lakhs during
the year ended March 31, 2005 of which the sales
made to the company are Rs 126.50 lakhs. Both
the company and the subsidiary have entered into
transactions with Danlaw Inc, which is a related party.
Statement of sales and work orders In US Dollars
S WORK ORDERS
A DTIL DTI DI
L DTIL NA 2,82,596 1,74,500
E DTI 0 NA 0
S DI 0 1,00,237 NA
Signatures to Schedules 1 to 13 for and on behalf of the Board
For A.M. REDDY & CO RAJU S DANDU D.S.N. RAJUChartered Accountants Chairman & Executive Director
Managing DirectorA.V. RAMANA REDDYPartner
Hyderabad B.S. BHASKARAugust 22, 2005 Company Secretary
Forward Looking Statement:
Throughout this report, we discuss some of our expectations regarding the Company’s future performance. All of these forward-looking statements arebased on our current views and assumptions. Actual results could differ materially from these current expectations and from historical performance.
Our future results could also be affected by a variety of factors such as competitive dynamics in the market place, changes in capital structure, changes inlaws and regulations including changes in accounting standards, economic conditions and foreign exchange fluctuations.
The company undertakes no obligation to publicly revise any forward-looking statements to reflect future events or circumstances.
