Company Registration Number 3134838 NETWORK SOLUTIONS LIMITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31st JANUARY 1999 ASHFORD READ Chartered Accountants & Registered Auditors 40 Alexandra Road Freemantle Southampton Hampshire SO15 5DG NETWORK SOLUTIONS LIMITED FINANCIAL STATEMENTS YEAR ENDED 31st JANUARY 1999
CONTENTS PAGES Officers and professional advisers 1 The directors' report 2 to 3 Auditors' report to the shareholders 4 Profit and loss account 5 Balance sheet 6 Notes to the financial statements 7 to 14 THE FOLLOWING PAGES DO NOT FORM PART OF THE STATUTORY FINANCIAL STATEMENTS Detailed profit and loss account 16 Notes to the detailed profit and loss account 17 to 18
NETWORK SOLUTIONS LIMITED OFFICERS AND PROFESSIONAL ADVISERS THE BOARD OF DIRECTORS Mr A.P. Cowler Mr W. Bridgen Mr S.P. Sutton COMPANY SECRETARY Mr A.P. Cowler REGISTERED OFFICE 104 Mytchett Road Mytchett Camberley Surrey GU16 6ET AUDITORS Ashford Read Chartered Accountants & Registered Auditors 40 Alexandra Road Freemantle Southampton Hampshire SO15 5DG BANKERS Barclays Bank Plc Soho Square Business Centre 8-9 Hanover Square London W1A 4ZW SOLICITORS Gurney-Champion & Co 12 Edinburgh Road Portsmouth Hampshire PO1 1DJ
-1- NETWORK SOLUTIONS LIMITED THE DIRECTORS' REPORT YEAR ENDED 31st JANUARY 1999 The directors present their report and the financial statements of the company for the year ended 31st January 1999. PRINCIPAL ACTIVITIES The principal activity of the company during the year was computer network installations. THE DIRECTORS AND THEIR INTERESTS IN SHARES OF THE COMPANY The directors who served the company during the year were as follows: Mr A.P. Cowler Mr W. Bridgen Mr S.P. Sutton Mr J.C. Beckett (Appointed 2 Jun 98) Mr I.C. Cocks (Retired 2 Jun 98) The company is a wholly owned subsidiary and the interests of group directors are disclosed in the accounts of the parent company. Mr J. C. Beckett resigned as a director of Network Solutions Group Limited, Network Solutions Limited and Network Solutions (Northern) Limited on 9th July 1999. YEAR 2000 ISSUES The directors have considered the risks and uncertainties associated with the year 2000 problem. During the year the company has taken steps to ensure that its internal computer systems are millennium compliant. The directors have also assessed the possibility of year 2000 related failures in significant suppliers, all of whom have indicated that they are already dealing with the problem. Whilst it is impossible to guarantee that no year 2000 problems will remain, the directors are confident that the company will be able to deal promptly with any failures that may occur. DIRECTORS' RESPONSIBILITIES Company law requires the directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the company at the end of the year and of the profit or loss for the year then ended. In preparing those financial statements, the directors are required to select suitable accounting policies, as described on page 7, and then apply them on a consistent basis, making judgements and estimates that are prudent and reasonable. The directors must also prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business. -2- NETWORK SOLUTIONS LIMITED THE DIRECTORS' REPORT (CONTINUED) YEAR ENDED 31st JANUARY 1999 DIRECTORS' RESPONSIBILITIES (CONTINUED) The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the company and to enable them to ensure that the financial statements comply with the Companies Act 1985. The directors are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. AUDITORS A resolution to re-appoint Ashford Read as auditors for the ensuing year will be proposed at the annual general meeting in accordance with section 385 of the Companies Act 1985. SMALL COMPANY PROVISIONS This report has been prepared in accordance with the special provisions for small companies under Part VII of the Companies Act 1985. Registered Office: Signed by order of the directors 104 Mytchett Road Mytchett Camberley Surrey GU16 6ET /s/ A.P. Cowler MR A.P. COWLER Company Secretary Approved by the directors on 12 AUGUST 1999 -3- NETWORK SOLUTIONS LIMITED AUDITORS' REPORT TO THE SHAREHOLDERS YEAR ENDED 31st JANUARY 1999 We have audited the financial statements on pages 5 to 14 which have been prepared in accordance with the Financial Reporting Standard for Smaller Entities (effective March 1999), under the historical cost convention and the accounting policies set out on page 7. RESPECTIVE RESPONSIBILITIES OF THE DIRECTORS AND THE AUDITORS As described on pages 2 to 3, the company's directors are responsible for the preparation of the financial statements. It is our responsibility to form an independent opinion, based on our audit, on those statements and to report our opinion to you. BASIS OF OPINION We conducted our audit in accordance with Auditing Standards issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the company's circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. ADDITIONAL INFORMATION Section 263 of the Companies Act 1989 states that a distribution shall not be made except out of profits available for the purpose. The dividends of L35,600 include dividends that were paid at a time when the company had net realised losses and as a consequence they may have been paid illegally. If so, under s277 of the Companies Act 1989 any member who knew, or had reasonable grounds for believing that the dividend was illegal is liable to repay the amount they received to the company. Our opinion on the financial statements is not qualified in respect of this matter. OPINION In our opinion the financial statements give a true and fair view of the company's state of affairs as at 31st January 1999 and of its loss for the year then ended, and have been properly prepared in accordance with the Companies Act 1985. 40 Alexandra Road /s/ Ashford Read Freemantle Chartered Accountants Southampton & Registered Auditors Hampshire SO15 5DG 12 Aug. 1999 -4- NETWORK SOLUTIONS LIMITED PROFIT AND LOSS ACCOUNT YEAR ENDED 31st JANUARY 1999
Period from Year to 1 Jan 97 to Note 31 Jan 99 31 Jan 98 L L L L TURNOVER 1,031,326 884,623 Cost of sales (863,187) (685,432) --------- --------- GROSS PROFIT 168,139 199,191 Distribution costs (63,526) (38,640) Administrative expenses (213,724) (156,187) --------- --------- OPERATING (LOSS)/PROFIT 3 (109,111) 4,364 Interest receivable 4 17 - Interest payable and (7,951) (2,764) similar charges --------- --------- (LOSS)/PROFIT ON ORDINARY (117,045) 1,600 ACTIVITIES BEFORE TAXATION Tax on (loss)/profit on 5 (20,770) (1,759) ordinary activies --------- --------- LOSS ON ORDINARY (137,815) (159) ACTIVITIES AFTER TAXATION Dividends (including non- 6 (35,600) (42,000) equity) --------- --------- LOSS FOR THE FINANCIAL YEAR (173,415) (42,159) Balance brought forward (39,450) 2,709 --------- --------- Balance carried forward (212,865) (39,450) --------- --------- --------- ---------
The notes on pages 7 to 14 form part of these financial statements. -5- NETWORK SOLUTIONS LIMITED BALANCE SHEET 31st JANUARY 1999
Note 1999 1998 L L L L FIXED ASSETS Tangible assets 7 29,056 26,003 CURRENT ASSETS Stocks 8 47,609 22,764 Debtors 9 321,964 159,094 Cash at bank and in hand 33,409 23,078 ------- ------- 402,982 204,936 CREDITORS: Amounts falling due within one year 10 (643,116) (258,602) ------- ------- NET CURRENT LIABILITIES (240,134) (53,666) ------- ------ TOTAL ASSETS LESS CURRENT LIABILITIES (211,078) (27,633) CREDITORS: Amounts falling due after more than one year 11 (1,667) (11,667) ------- ------ (212,745) (39,330) ------- ------ CAPITAL AND RESERVES Called-up equity share capital 16 120 120 Profit and loss account 17 (212,865) (39,450) ------- ------ DEFICIENCY (212,745) (39,330) ------- ------ ------- ------
These financial statements have been prepared in accordance with the special provisions for small companies under Part VII of the Companies Act 1985 and with the Financial Reporting Standard for Smaller Entities (effective March 1999). These financial statements were approved by the directors on the 12 AUGUST 1999 and are signed on their behalf by: /s/ A.P. COWLER - -------------- MR A.P. COWLER The notes on pages 7 to 14 form part of these financial statements. -6- NETWORK SOLUTIONS LIMITED NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31st JANUARY 1999 1. ACCOUNTING POLICIES BASIS OF ACCOUNTING The financial statements have been prepared under the historical cost convention, and in accordance with the Financial Reporting Standard for Smaller Entities (effective March 1999). TURNOVER The turnover shown in the profit and loss account represents amounts invoiced during the year, exclusive of Value Added Tax. DEPRECIATION Depreciation is calculated so as to write off the cost of an asset, less its estimated residual value, over the useful economic life of that asset as follows: Fixtures & Fittings - 15% reducing balance basis Office Equipment - 33% reducing balance basis
STOCKS Stocks are valued at the lower of cost and net realisable value, after making due allowance for obsolete and slow moving items. WORK IN PROGRESS Work in progress is valued on the basis of direct costs plus attributable overheads based on normal level of activity. Provision is made for any foreseeable losses where appropriate. No element of profit is included in the valuation of work in progress. OPERATING LEASE AGREEMENTS Rentals applicable to operating leases where substantially all of the benefits and risks of ownership remain with the lessor are charged against profits as incurred. DEFERRED TAXATION Provision is made, under the liability method, to take account of timing differences between the treatment of certain items for accounts purposes and their treatment for tax purposes. Tax deferred or accelerated is accounted for in respect of all material timing differences to the extent that it is considered that a net liability may arise. -7- NETWORK SOLUTIONS LIMITED NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31st JANUARY 1999 2. GOING CONCERN At the balance sheet date the company's liabilities exceeded its assets by L212,745. The day to day operation of the company is dependent upon support from its directors, associated companies, bankers and trade creditors. The support of the directors and associated companies has been confirmed for the foreseeable future. Subsequent to the year end the company has arranged increased banking facilities and has taken significant measures to ensure improved management control and trading performance. These steps, together with the assumed continued support of the trade creditors, provide the directors with the opinion that it is appropriate to prepare the financial statements on the going concern basis. 3. OPERATING LOSS/PROFIT Operating (loss)/profit is stated after charging/(crediting):
Period from Year to 1 Jan 97 to 31 Jan 99 31 Jan 98 L L Directors' emoluments 23,807 28,688 Depreciation 12,769 4,589 (Profit)/Loss on disposal of fixed assets (753) 298 Auditors' fees 1,500 1,500 ------ ------
4. INTEREST RECEIVABLE
Period from Year to 1 Jan 97 to 31 Jan 99 31 Jan 98 L L Bank interest receivable 17 - ------ ------
-8- NETWORK SOLUTIONS LIMITED NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31st JANUARY 1999 5. TAX ON LOSS/PROFIT ON ORDINARY ACTIVITIES
Period from Year to 1 Jan 97 to 31 Jan 99 31 Jan 98 L L In respect of the year: Corporation tax based on the results for the year at 21% (1998 - 24/21%) - 1,759 Irrecoverable A.C.T. written off 22,304 - -------- ------ 22,304 1,759 Adjustment in respect of previous years: Corporation tax (1,534) - -------- ------ 20,770 1,759 -------- ------ -------- ------
6. DIVIDENDS The following dividends have been paid in respect of the year:
Period from Year to 1 Jan 97 to 31 Jan 99 31 Jan 98 L L Dividends paid on non-equity shares 35,600 42,000 ------- ------ ------- ------
Dividends paid are in respect of the Ordinary "A" Shares. These share are non-equity shares. Interim dividends of L35,600 (1998-L42,000) paid to holders of the Ordinary "A" shares were in excess of distributable reserves contrary to Section 263 of the Companies Act 1989. Section 263 of the Companies Act 1989 states that a distribution shall not be made except out of profits available for the purpose. The dividends of L35,600 include dividends that were paid at a time when the company had net realised losses and as a consequence they may have been paid illegally. If so, under Section 277 of the Companies Act 1989 any member who knew, or had reasonable grounds for believing that the dividend was illegal is liable to repay the amount they received to the company. -9- NETWORK SOLUTIONS LIMITED NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31st JANUARY 1999 7. TANGIBLE FIXED ASSETS
Fixtures & Fittings Equipment Total L L L COST At 1st February 1998 5,366 26,238 31,604 Additions 1,180 18,909 20,089 Disposals - (5,020) (5,020) ------ ------- ------ At 31st January 1999 6,546 40,127 46,673 ------ ------- ------ ------ ------- ------ DEPRECIATION At 1st February 1998 805 4,796 5,601 Charge for the year 861 11,908 12,769 On disposals - (753) (753) ------ ------- ------ At 31st January 1999 1,666 15,951 17,617 ------ ------- ------ ------ ------- ------ NET BOOK VALUE At 31st January 1999 4,880 24,176 29,056 ------ ------- ------ ------ ------- ------ At 31st January 1998 4,561 21,442 26,003 ------ ------- ------ ------ ------- ------
8. STOCKS
1999 1998 L L Raw materials 25,810 22,764 Work in progress 21,799 - ------- ------ 47,609 22,764 ------- ------ ------- ------
9. DEBTORS 1999 1998 L L Trade debtors 232,547 101,234 Amounts owed by group 69,928 -- 38,509 undertakings Other debtors 2,698 - Directors current accounts 10,792 5,368 ACT recoverable against future - 8,749 taxation Prepayments and accrued income 5,999 5,234 ------- ------- 321,964 159,094 ------- ------- ------- -------
ACT recoverable is in debit to the extent of Lnil (1998 - L8,749). This will not be recoverable until a mainstream liablility arises in the future. -10- NETWORK SOLUTIONS LIMITED NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31st JANUARY 1999 10. CREDITORS: Amounts falling due within one year
1999 1998 L L L L Bank loans and overdrafts 10,000 10,000 Trade creditors 308,930 138,705 Other creditors including: Advance Corporation Tax 25,002 13,404 Corporation tax 3,097 5,198 PAYE and social security 25,915 10,285 VAT 433 20,151 Other Creditors 237,098 42,097 ------- ------ 291,545 91,135 Accruals and deferred income 32,641 18,762 ------- ------- 643,116 258,602 ------- ------- ------- -------
The following liabilities disclosed under creditors falling due within one year are secured by the company:
1999 1998 L L Bank loans and overdrafts 10,000 10,000 ------- ------- ------- -------
11. CREDITORS: Amounts falling due after more than one year
1999 1998 L L Bank loans and overdrafts 1,667 11,667 ------- ------- ------- -------
The following liabilities disclosed under creditors falling due after more than one year are secured by the company:
1999 1998 L L Bank loans and overdrafts 1,667 11,667 ------- ------- ------- -------
-11- NETWORK SOLUTIONS LIMITED NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31st JANUARY 1999 12. COMMITMENTS UNDER OPERATING LEASES At 31st January 1999 the company had aggregate annual commitments under non-cancellable operating leases as set out below.
1999 1998 L L Operating leases which expire: Within 1 year 15,530 - Within 2 to 5 years 15,983 27,091 ------- ------- 31,513 27,091 ------- ------- ------- -------
13. CONTINGENCIES The company paid interim dividends of L35,600 (1998 - L42,000) to the holders of the Ordinary "A" shares in excess of distributable reserves. In the event of a winding up these dividends would be repayable to the company. 14. TRANSACTIONS WITH THE DIRECTORS Two directors had overdrawn loan accounts at the balance sheet date. The closing balances (and maximum amount outstanding during the year) were as follows: Mr. W. Bridgen L7,326 (L7,326); Mr. S. Sutton L3,383 (L3,383). These amounts are shown under "Debtors". -12- NETWORK SOLUTIONS LIMITED NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31st JANUARY 1999 15. RELATED PARTY TRANSACTIONS The company was under the control of the directors (Mr. A. P. Cowler, Mr. W. Bridgen, Mr. S. Sutton and Mr. J. C. Beckett) and Network Solutions Group Limited throughout the year. The four directors are also the sole directors of Network Solutions Group Limited as well as Network Solutions (Northern) Limited. During the year the company sold goods and services to Network Solutions (Northern) Limited amounting to L130,161 (1998 - L1,890). During the year the company also purchased goods and services from Network Solutions (Northern) Limited amounting to L640 (1998 - L291). At the balance sheet date L69,364 (1998 - L38,509) was owed to the company by Network Solutions (Northern) Limited. The company was also owed L563 (1998 - L8) by Network Solutions Group Limited at the balance sheet date. Mr. A. P. Cowler is a director of and has a controlling interest in The Surrey Design Partnership Limited. During the year the company purchased goods and services from The Surrey Design Partnership Limited amounting to L1,840 (1998 - L7,299). During the year the company also made sales to The Surrey Design Partnership Limited of LNil (1998 - L2,631). There were no trading balances outstanding between the companies at the balance sheet date. The company also operates a loan account with The Surrey Design Partnership Limited. At the balance sheet date L237,098 is owing to The Surrey Design Partnership Limited. This amount is shown within "Creditors: amounts falling due within one year". Mr. J. C. Beckett is a director of and has a controlling interest in Total Data Communications Limited. During the year the company purchased goods and services from Total Data Communications Limited amounting to L71,891 (1998 - L85,778). At the balance sheet date L26,080 was owing to Total Data Communications Limited. Mr. A. P. Cowler and Mr. I. C. Cocks are directors of Bastin Stone Enterprises Limited and have a controlling interest in the company. During the year the company purchased goods and services from Bastin Stone Enterprises Limited amounting to L8,009 (1998 - L50). At the balance sheet date L8,664 was owing to Bastin Stone Enterprises Limited. Mr. I. C. Cocks has a controlling interest in Taylor Cocks (formerly Cocks & Co.). During the year the company acquired services from Taylor Cocks amounting to L27,911 (1998 - L26,084). During the year the company also sold goods to Taylor Cocks amounting to L1,682 (1998 - L300). At the balance sheet date L22,419 was owing to Taylor Cocks. 16. SHARE CAPITAL AUTHORISED SHARE CAPITAL:
1999 1998 L L 10,000 Ordinary shares of L1 each 10,000 10,000 100 Ordinary 'A' shares of L1 each 100 100 ------ ------ 10,100 10,100 ------ ------ ------ ------
-13- NETWORK SOLUTIONS LIMITED NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31st JANUARY 1999 16. SHARE CAPITAL (CONTINUED) ALLOTTED, CALLED UP AND FULLY PAID:
1999 1998 No. L No. L Ordinary shares 100 100 100 100 Ordinary 'A' shares 20 20 20 20 ----- ----- ----- ----- 120 120 120 120 ----- ----- ----- ----- ----- ----- ----- -----
The Ordinary 'A' Shares do not receive voting rights and do not have a right to participate in a surplus in a winding up of the company as calculated by reference to the company's assets or profits. 17. PROFIT AND LOSS ACCOUNT
Period from YEAR TO 1 Jan 97 to 31 JAN 99 31 Jan 98 L L Balance brought forward (39,450) 2,709 Retained loss for the financial year (173,415) (42,159) --------- -------- Balance carried forward (212,865) (39,450) --------- -------- --------- --------
18. ULTIMATE PARENT COMPANY The ultimate parent company is Network Solutions Group Limited - a company incorporated within the UK. -14- NETWORK SOLUTIONS LIMITED MANAGEMENT INFORMATION YEAR ENDED 31st JANUARY 1999 THE FOLLOWING PAGES DO NOT FORM PART OF THE STATUTORY FINANCIAL STATEMENTS WHICH ARE THE SUBJECT OF THE AUDITORS' REPORT ON PAGE 4. -15- NETWORK SOLUTIONS LIMITED DETAILED PROFIT AND LOSS ACCOUNT YEAR ENDED 31st JANUARY 1999
Period from Year to 1 Jan 97 to 31 Jan 99 31 Jan 98 L L L L TURNOVER 1,031,326 884,623 COST OF SALES Opening stock and WIP 22,764 1,348 Purchases 545,146 445,574 Direct wages (inc. sales commissions) 266,079 219,174 Subcontract 41,300 42,100 Research and development 35,507 - -------- -------- 910,796 708,196 Closing stock and WIP (47,609) (22,764) -------- -------- 863,187 685,432 --------- -------- GROSS PROFIT 168,139 199,191 OVERHEADS Distribution costs 63,526 38,640 Administrative expenses 213,724 156,187 -------- -------- (277,250) (194,827) --------- -------- OPERATING (LOSS)/PROFIT (109,111) 4,364 Bank interest receivable 17 - --------- -------- (109,094) 4,364 Interest payable and similar charges (7,951) (2,764) --------- -------- (LOSS)/PROFIT ON ORDINARY ACTIVITIES (117,045) 1,600 --------- -------- --------- --------
-16- NETWORK SOLUTIONS LIMITED NOTES TO THE DETAILED PROFIT AND LOSS ACCOUNT YEAR ENDED 31st JANUARY 1999
Period from Year to 1 Jan 97 to 31 Jan 99 31 Jan 98 L L L L DISTRIBUTION COSTS Freight and carriage 5,627 1,383 Vehicle hire 33,007 35,304 Exhibition costs and advertising 24,892 1,953 ------- ------- 63,526 38,640 ------- ------- ------- ------- ADMINISTRATIVE EXPENSES PERSONNEL COSTS: Directors salaries 23,807 28,688 Directors NIC 1,680 4,208 ------ ------ 25,487 32,896 ESTABLISHMENT EXPENSES: Rent 10,421 10,009 Rates and water 3,913 3,865 Light and heat 1,475 1,315 Insurance 13,302 7,543 Repairs and maintenance 1,423 1,422 ------ ------ 30,534 24,154 GENERAL EXPENSES: Motor expenses 25,224 22,280 Travel and subsistence 14,291 6,888 Telephone 30,186 19,746 Internet and computer services 3,063 - Printing, stationery and postage 7,402 2,893 Sundry expenses 2,191 2,940 Laundry and cleaning 1,804 997 Entertaining 3,822 4,083 Legal and professional fees 6,862 2,957 Accountancy fees 36,716 28,473 Auditors remuneration 1,500 1,050 Depreciation 12,769 4,589 (Profit)/Loss on disposal of fixed assets (753) 298 ------ ------ 145,077 97,194 FINANCIAL COSTS: Bad debts written off 10,336 - Bank charges 2,290 1,943 ------ ------ 12,626 1,943 ------- ------- 213,724 156,187 ------- ------- ------- -------
-17- NETWORK SOLUTIONS LIMITED NOTES TO THE DETAILED PROFIT AND LOSS ACCOUNT YEAR ENDED 31st JANUARY 1999
Period from Year to 1 Jan 97 to 31 Jan 99 31 Jan 98 L L INTEREST PAYABLE AND SIMILAR CHARGES Bank interest payable 540 157 Interest on other loans 2,872 2,495 Interest on overdue tax 4,593 112 ------ ------ 7,951 2,764 ------ ------ ------ ------
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