Divis Laboratories

1.  Previous year figures have been regrouped/ recasted/ rearranged
 wherever necessary to conform to current year classification.
 
 2.  CONTINGENT LIABILITIES :              (Rs. in Lakhs)
  Particulars                               2008-09        2007-08
 
 i) On account of Letters of Credit an
 d Guarantees issued by the bankers.        3055.30        5093.76
 ii) On account of bonds and / or legal
  agreements executed with Central
  Excise/ Customs authorities/ Development
  Commissioners                             7250.00        7250.00
 iii) Demands being disputed / contested
  by the Company                             260.82         177.89
 
 3.  Estimated amount of contracts remaining
  to be executed on                          1183.58        4039.52
  capital account and not
  provided for (Gross)
 
 4.  Land admeasuring 29.30 acres acquired under deeds of assignment and
 under possession of the company at Chippada village, Bheemunipatnam
 Mandal, Visakhapatnam Dist. is yet to be registered in the name of the
 company.
 
 5.  EXCHANGE DIFFERENCES :
 
 The Exchange Differences on account of foreign currency transactions of
 both short term and long term monetary items have been duly recognized
 in the profit and loss account. The Company has not exercised the
 option available in respect of exchange difference on long term
 monetary items under Clause No. 46 of Accounting Standard -11 notified
 under the Companies Accounting Standards (Amendment) Rules,2009.
 
 6.  PROVISION FOR TAXATION :
 
 Current Income Tax :
 
 The unit notified under Special Economic Zone Act, 2005 at Chippada
 village, Bheemunipatnam Mandal, Visakhapatnam in “Divis Pharma SEZ”
 has commenced commercial operations on 27/10/2006. The profits derived
 from exports by this unit are eligible for tax exemption under
 Section10AA of the Income Tax Act, 1961 @100% for the first five years
 and @50% for succeeding five years and thereafter for a further period
 of five years not exceeding 50% of the profit on compliance of
 conditions prescribed under the provision.
 
 The provisions of Section 10AA(7) defines the method of calculation of
 the profit derived from the exports. However, the present wording of
 this provision and interpretation of the same restricting the profit
 derived from exports eligible for tax exemption to a greater extent,
 differentiating the quantum of profits eligible for tax exemption from
 the unit between the enterprises having exclusive SEZ unit and
 enterprises having multiple units including SEZ units and also the
 method of calculating the quantum of profits eligible for tax exemption
 from SEZ unit and 100% Export Oriented Undertaking. The industry is
 foreseeing the clarification or amendment to this provision which is
 pending with the relevant authorities since long time.
 
 Having considered the press reports and other information available on
 this matter, the company has preferred for making the provision for
 current income tax calculating the profits eligible for income tax
 exemption in respect of SEZ Unit derived from export in proportion to
 the export turnover of the SEZ Unit to the total turnover of SEZ Unit
 and provision for current income tax has been made accordingly. Had the
 prevailing provisions of Subsection (7) of Section 10AA and the
 interpretations had been followed, the provision for current income tax
 will be higher by about Rs.3425.00 Lakhs and the profit after tax (PAT)
 for the year is less by to that extent.
 
 MAT Credit Entitlements :
 
 The Provision for Current Tax represents the Minimum Alternate Tax
 (MAT) provided as per the provisions of Section 115JB of the Income Tax
 Act, 1961. As it is estimated to be certain in availing the tax credit
 within the specified period as per the provisions of Section 115JAA of
 the Income Tax Act, 1961 against the Minimum Alternate Tax for the
 Current Year, the eligible tax credit is recognised as “MAT Credit
 Entitlements” in the accounts.
 
 Fringe Benefits Tax :
 
 The provision for Fringe Benefits Tax for the current year of Rs. 21.58
 Lakhs is net of fringe benefits tax on benefit of equity shares
 allotted against the stock options during year recovered from employees
 of Rs. 659.03 Lakhs
 
 Deferred Tax :
 
 Movement of Provision for Deferred Tax for the year ended 31.03.2009 is
 as given below :
 
 7. TRANSACTIONS WITH RELATED PARTIES :
 
 a) The List of Related Parties with whom transactions have taken place
 and nature of relationship is:
  i) KEY MANAGEMENT PERSONNEL :
 
 1.  Dr. Murali. K. Divi
 2.  N.V. Ramana
 3.  Dr. P. Gundu Rao
 4.  D. Madhusudana Rao
 5.  Kiran S. Divi
 
 ii) RELATIVES OF KEY MANAGEMENT PERSONNEL:
 
 1.  N. Laxmana Rao
 2.  Mallikarjuna Rao Divi
 3.  Mrs. Nilima Motaparti
 
 (iii) SUBSIDIARIES:
 
 1.  Divis Laboratories (USA) Inc
 2.  Divis Laboratories EUROPE AG
 
 Notes
 
 8.  Depreciation is charged at the following rates:
 
 a) Assets valuing individually not more than CHF 150 have been
 written-off 100%
 
 b) Furniture & Fixtures - 6.33% on Straight Line Method proportionate
 from purchase date
 
 b) Computers/peripherals - 16.21% on Straight Line Method proportionate
 from purchase date
 
 c) Other Equipment - 4.75% on Straight Line Method proportionate from
 purchase date
 
 9.  Deferred Taxation
 
 Deferred Tax Asset/Liability calculated and recognised to the extent of
 reasonable certainty of realisation as per applicable local laws
 
 10.  Explanation of the board of directors with regard to the business
 and the going concern of the Company
 
 These financial statements were prepared on a going concern basis which
 the Companys board of directors believes to be appropriate, in despite
 of the significant losses suffered to date. The board of directors took
 the following remedial actions:
 
 - elaboration of a business plan and cash budget in which break-even is
 expected in the subsequent 18 until 24 month period.
 
 - conclusion of new sales agreements in accordance with the busines
 plan
 
 - market penetration via distribution has been decided and implemented
 
 - interim funding by the shareholder in order to enable and finance the
 sales to Divis Lab Ltd., USA
 
 11.  The board of directors is convinced of the success of the actions
 taken and the business. However, should these remedial actions not be
 successful, this will have a material effect upon the Company and could
 likely result in an inability to continue as a going concern.
 
 The Company is over-indebted as of 31 March 2009. As the shareholder,
 Divis Lab. Ltd, India has subordinated his claims of CHF 3500000 to
 the claims of other creditors, the board of directors according to
 article 725 para 2 of the Swiss Code of Obligation (CO, Company Law)
 renounced to inform the judge.
 
 12.  The board of directors regularly performs a risk assessment (the
 status of the projects is assessed) and assesses the respective
 measures taken to minimize the risk of a material misstatement in the
 financial statements.
 
 The board of directors has not formally documented the risk assessment.