Panacea Biotec Ltd has informed that in the limited review report of the Company for the quarter ended September 30, 2007, the auditors of the Company have made the following observations:
1. Redemption of outstanding amount of US $ 44,800,000 out of USD 50 Million Zero Coupon Convertible Bonds due 2011 is due on February 14, 2011. Unless these Bonds have been previously converted, redeemed, repurchased and cancelled, Company will redeem these Bonds at a Price equal to 142.80% of the outstanding principal amount on the maturity date. Since the redemption of bonds is contingent upon its non-conversion into Equity Shares, the Company has not provided for the proportionate premium on redemption for the period upto March 31, 2007 amounting to Rs 159,623,752. The same was disclosed as a matter of emphasis in the Audited Annual Accounts as in the opinion of the management likelihood of redemption cannot presently be ascertained and the same was disclosed as a contingent liability. Similarly, proportionate premium on redemption of Rs 36,195,500 and Rs 71,319.500 for the three months and six months ending September 30, 2007 respectively, has not been provided for.
2. Annual audited accounts contained a matter of emphasis regarding capitalization of expenditure on clinical trials amounting to Rs 91,557,518 since the ultimate approval of such products, which has been considered as highly likely by the management, was not within the direct control of the entity. Likewise expenses of similar nature amounting to Rs 45,883,751 and Rs 87,640,586 for three months and six months ending September 30, 2007 respectively have been capitalized in the books on similar grounds.
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