Freesoft Rt. S Brief Report
FreeSoft Rt.’s Brief Report
for the financial year 2004
INTRODUCTION
FreeSoft Software Development and IT Services Corporation (“FreeSoft Rt.” or the "Corporation") in July 2004 raised its capital with an open subscription procedure, where investors subscribed to 385,000 shares at an exchange rate of 1,800 HUF/share. This resulted in the share capital of the corporation to increase to HUF 1,435,000,000. Trading with the Corporation's shares at the Budapest Stock Exchange started on September 22, 2004.
During the year, FreeSoft Budapest Szoftverfejlesztő Korlátolt Felelősségű Társaság (FreeSoft Kft.) merged into FreeSoft Rt, and the Company Registry registered the merger on April 2, 2004.
In the first quarter of 2004, FreeSoft Rt. did not perform any business activities, obtained no revenue from business activities, and had no productive resources. Until the day of registering the merger by the Company Registry, business activities had been performed by FreeSoft Kft, therefore also the revenue was accounted for at FreeSoft Kft.
According to the accounting rules, the 2004 Profit and Loss statement may only contain FreeSoft Rt’s figures, as a result, the Net sales revenue provided in the Brief Report includes only FreeSoft Rt’s actuals for the year 2004, according to the Listing and trading rules of the Budapest Stock Exchange.
Because the registration of the merger by the Company Registry took longer than planned, the IPO occurred later than expected, which resulted in the Corporation not being able to complete all its acquisition targets in 2004.
Of the plans for founding international subsidiaries and purchasing companies in the domestic markets, the foundation of FreeSoft Deutschland GmbH in Germany, the acquisition of BigFish Kft., and the preparation of buying Mooltech Kft’s shares was accomplished. To realize its expansion plans for its product portfolio and market, the corporation continues to seek additional acquisition targets and to prepare additional acquisitions.
BALANCE SHEET AND PROFIT AND LOSS STATEMENT
(Brief Report forms PK 3. and PK 4.)
According to the Listing and Trading Rules of the Budapest Stock Exchange, FreeSoft Rt prepared its Balance Sheet and Profit and Loss statement for the year 2004, and a short analysis of these figures. The report was created in compliance with the Hungarian accounting rules, based on Appendix 1 of the Accountancy Act, with the “cost by nature” method.
The figures in the Balance Sheet and the Profit and Loss statement are not audited and not consolidated.
„A” BALANCE SHEET Assets / Figures in HUF thousandNumber / Description / 12/31/2004
a / b / c
A. / Fixed assets / 1 194 189
I. / INTANGIBLE ASSETS / 725 799
1 / Capitalized value of foundation and restructuring costs
2 / Capitalized value of research and development costs
3 / Concessions and similar rights and assets
4 / Intellectual property / 3 113
5 / Goodwill / 722 686
6 / Advance payments on intangible assets
7 / Revaluation of intangible assets
II. / TANGIBLE ASSETS / 50 076
1 / Land and buildings and related concessions and similar rights
2 / Technical equipment, machinery and vehicles
3 / Other equipment, fittings and vehicles / 50 076
4 / Breeding stock
5 / Capital WIP, renovations
6 / Advance payments on Capital WIP
7 / Revaluation of tangible assets
III. / FINANCIAL INVESTMENTS / 418 314
1 / Long term investments in related companies / 38 569
2 / Long term loans given to related companies
3 / Other long term investments / 2 000
4 / Long term loans given to other investees
5 / Other long term loans given
6 / Securities representing long term loans / 379 745
7 / Revaluation of financial investments / - 2 000
B. / Current Assets / 938 036
I. / INVENTORIES / 1 638
1 / Raw materials and consumables
2 / Work in progress and semi-finished products / 590
3 / Animals
4 / Finished goods
5 / Goods / 1 048
6 / Advance payments on inventories
II. / RECEIVABLES / 559 431
1 / Trade accounts receivable (debtors) / 478 674
2 / Receivables from related companies / 36 367
3 / Receivables from other investees
4 / Bills of exchange receivable
5 / Other receivables / 44 390
III. / MARKETABLE SECURITIES / 325 712
1 / Investments in related companies
2 / Other investments
3 / Own shares, own quotas
4 / Securities representing loans held for sale / 325 712
IV. / LIQUID ASSETS / 51 255
1 / Cash in hand, checks / 1 180
2 / Bank deposits / 50 075
C. / Prepaid expenses and accrued income / 1 954
1 / Accrued income / 280
2 / Prepaid expenses / 1 674
3 / Deferred expenses
Total assets / 2 134 179
“A” BALANCE SHEET Liabilities / Figures in HUF thousand
Number / Description / 12/31/2004
a / b / c
D. / Shareholders equity / 1 841 470
I. / ISSUED CAPITAL / 1 435 000
of which: treasury shares repurchased at face value
II. / ISSUED BUT NOT PAID CAPITAL (-)
III. / CAPITAL RESERVES / 308 000
IV. / RETAINED EARNINGS FROM PREVIOUS YEARS / 5 398
V. / NON-DISTRIBUTABLE RESERVES
VI. / REVALUATION RESERVE
VII. / PROFIT PER BALANCE SHEET / 93 072
E. / Provisions / -
1 / Provisions for expected liabilities
2 / Provisions for future expenses
3 / Other provision
F. / Liabilities / 288 647
I. / SUBORDINATED LIABILITIES / -
1 / Subordinated liabilities to related companies
2 / Subordinated liabilities to other investees
3 / Subordinated liabilities to other enterprises
II. / LONG-TERM LIABILITIES / 579
1 / Long term credits
2 / Convertible bonds
3 / Debts on the issue of bonds
4 / Investment and development loans
5 / Other long term loans
6 / Long term liabilities to related companies
7 / Long term liabilities to other investees
8 / Other long term liabilities / 579
III. / SHORT-TERM LIABILITIES / 288 068
1 / Short term credits
of which: convertible bonds
2 / Short term loans
3 / Advance payments received from customers
4 / Trade accounts payable (creditors) / 276 900
5 / Bills of exchange payable
6 / Short term liabilities to related companies
7 / Short term liabilities to other investees
8 / Other short term liabilities / 11 168
G. / Accrued expenses and deferred income / 4 062
1 / Deferred revenues
2 / ACCRUED EXPENSES AND DEFERRED INCOME / 4 062
3 / Deferred income
Total liabilities / 2 134 179
The balance sheet total exceeds 190% of the consolidated total of FreeSoft Rt. and FreeSoft Kft. in the previous year. The main reason for this is the public stock subscription, which yielded HUF 693 million of fresh capital for the corporation.
Fixed assets
The decisive factor within fixed assets is Intangible assets, and within that, Goodwill with a value of HUF 722,868 thousand. FreeSoft Rt., according to the new regulations of the Accounting Act, did not depreciate this item in 2004.
The value of Tangible assets is not significant (HUF 50 million, because FreeSoft Kft’s assets were taken over in FreeSoft Rt’s books at their net value).
Financial investments include the shares of FreeSoft Deutschland GmbH and BigFish Kft. (total amount HUF 38,569 thousand), and the value of long-term state securities held until expiry (HUF 379,745 Ft).
The row Revaluation of financial investments displays the amount resulting from the revaluation of the HUF 2,000 thousand share in HSA Magyar Szoftverfejlesztő Kft.
Current Assets
On December 31, 2004, a significant amount of Receivables were present: HUF 559 million. Of this amount, HUF 478 million was customer’s debts, which does not contain outstanding items which are overdue by more than 30 days.
Receivables from related companies amount to HUF 36 million; they contain the loan provided to FreeSoft Deutschland GmbH to launch business activities.
Other receivables basically include loans provided to companies outside the group, and receivables from the central budget.
The row Securities displays the value of securities for trading purposes.
Liquid assets show the amount of cash available to the corporation on the Balance Sheet date.
Prepaid expenses and accrued income
The amount is not significant, it contains the prepaid costs and accrued revenue from ordinary business as required by the Accountancy Act.
Shareholders equity
As a result of the stock issue, the Corporation’s capital increased altogether by HUF 693 million, of which HUF 385 million contributed to the Issued capital, HUF 308 million to Capital Reserves.
Liabilities
The decisive part of Liabilities (HUF 289 million) is Accounts Payable (HUF 289 million); no overdue outstanding items exist.
Other short term liabilities (HUF 11 million) include amounts owned to the central budget.
Accrued expenses and deferred income
The amount is not significant, it contains the accrued expenses from ordinary business as required by the Accountancy Act.
“A” PROFIT AND LOSS STATEMENT(cost by nature) / Figures in HUF thousand
Number / Description / 12/31/2004
a / b / c
01. / Net domestic sales revenues / 680 575
02. / Net export sales revenues / 145 177
I. / Net revenue of sales (01 + 02) / 825 752
03. / Change in self-manufactured inventories ±
04. / Capitalized value of self-manufactured assets
II. / CAPITALIZED VALUE OF OWN PERFORMANCE (±03+04) / -
III. / Other revenues / 968
of which: reversal of impairment loss provision
05. / Material costs / 15 197
06. / Value of services used / 144 641
07. / Value of other services / 5 057
08. / Cost of goods sold / 246 660
09. / Value of recharged services / 254 040
IV. / MATERIAL TYPE EXPENDITURE (05+06+07+08+09) / 665 595
10 / Wages / 63 564
11 / Other payments to personnel / 12 058
12 / Personnel related contributions / 25 041
V. / Payments to personnel (10+11+12) / 100 663
VI. / Depreciation charge / 12 806
VII. / Other expenses / 16 503
of which: impairment loss provision / 886
A. / (I±II+III-IV-V-VI-VII) / 31 153
13 / Dividend received / 16 852
of which: received from related companies
14 / Gain on sale of investment
of which: received from related companies
15 / Interest received and gain on financial investments
of which: received from related companies
16 / Other interest received / 7 509
of which: received from related companies
17 / Other revenues for financial transactions / 222 216
VII. / REVENUES FROM FINANCIAL TRANSACTIONS (13+14+15+16+17) / 246 577
18 / Loss on financial investments
of which: given to related companies
19 / Interest paid / 189
of which: given to related companies
20 / Impairment loss of financial investment, securities and bank deposits / 2 000
21 / Other expenditure for financial transactions / 179 657
IX. / Expenditures of financial transactions (18+19±20+21) / 181 846
B. / FINANCIAL PROFIT (VIII.-IX,) / 64 731
C. / PROFIT ON ORDINARY BUSINESS (A.+B.) / 95 884
X. / Extraordinary revenues / 1
XI. / Extraordinary expenditure / 25
D. / PROFIT ON EXTRAORDINARY EVENTS (X-XI) / - 24
E. / NET PROFIT BEFORE TAXATION (±C±D) / 95 860
XII. / Tax liability / 2 788
F. / AFTER TAX PROFIT (±E-XII) / 93 072
22 / Dividends paid out of accumulated profit reserve
23 / Dividends paid (approved) out of current year profits
G. / NET PROFIT PER BALANCE SHEET (±F+22-23) / 93 072
Net revenue of sales (HUF 826 million) exceeded last year's by 30%, and – relative to time – realized the goals in the company's plans. If we add FreeSoft Ltd.'s revenue of HUF 95 million to FreeSoft Rt.'s, then the revenue was 42% higher than that of FreeSoft Kft. in 2003. 18 percent of net revenue originated from abroad.
The core activity of FreeSoft Rt. is services with minimal material requirements, which is reflected in the low amount of Material costs.
To perform its contractual duties, the Corporation often hires external experts and subcontractors, which is displayed in rows Value of services used and Value of recharged services.
The partners often deliver the computing devices and tools (hardware, software) necessary for setting up the operating environment for IT projects; this is reflected in the row Cost of goods sold.
Compared to FreeSoft Kft’s figures in 2003, Payments to Personnel increased significantly, which is the result of the corporation’s policy, according to which highly qualified professionals receive appropriate remuneration.
The Depreciation charge reflects the low amount of tangible assets (HUF 50 million), because FreeSoft Kft.’s assets were taken over in FreeSoft Rt’s books at their net value.
The significant amounts which constitute the row Other expenditure include local taxes (HUF 6.4 million), non-reclaimable VAT (HUF 2.3 million), the personal income tax for company cars (HUF 2.5 million), contributions to foundations (HUF 2.1 million), and impairment loss (HUF 2.9 million).
The corporations’ high Balance Sheet profit is largely attributable to the result of financial operations, which by the investment of liquid assets generated a profit of HUF 64.7 million.
According to Tpt. section 53(2), we announce that the figures and statements in the Brief Report are true, and the report does not hide any facts which are significant from the aspect of judging the corporation's current condition.
Budapest, February 09, 2005
______
Ilona Eck
Member of the Board of Directors
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