Faze Three Ltd Directors Report.

FOR THE FINANCIAL YEAR ENDED MARCH 31, 2019

To,

The members of Faze Three Limited

Your Directors are pleased to present the 34th Annual Report of your Company containing the business performance and the Audited Financial Statements for the year ended on 31st March 2019.

1. FINANCIAL PERFORMANCE (Standalone & Consolidated):

Particulars For the Year ended 31.03.2019 For the Year ended 31.03.2019 For the Year ended 31.03.2018 For the Year ended 31.03.2018
(Standalone) (Consolidated) (Standalone) (Consolidated)
Revenue from Operations 265.71 268.55 239.73 239.73
Other Income 1.77 1.77 10.63 10.63
Profit before tax 19.06 17.82 15.54 15.54
Provision for taxation (incl. deferred tax) 2.77 2.77 (1.29) (1.29)
Profit for the year 16.29 15.05 16.83 16.83
Other comprehensive income for the year (0.17) (0.17) 0.17 0.17
Total comprehensive income for the year 16.12 14.88 16.66 16.66

The standalone and consolidated financial statements for the financial year ended March 31, 2019, forming part of this Annual Report, have been prepared in accordance with the Indian Accounting Standards (Ind AS) as notified by the Ministry of Corporate Affairs.

2. KEY HIGHLIGHTS OF THE FINANCIAL PERFORMANCE:

During the year under review, the Company earned consolidated revenue from operations of Rs. 268.86 Crores as against Rs. 239.73 Crores in the previous year. The Company achieved consolidated Net Profit of Rs. 14.88 crores as against Net Profit of Rs. 16.66 Crores during previous year. There was no change in the nature of the business of the Company during the period.

3. DIVIDEND:

Your Directors have decided to retain the resources to fuel the growth and objectives of the Company. The Directors are confident to derive optimum utilization out of the same which shall be in the best interest of the stakeholders.

4. SHARE CAPITAL:

The Authorised Share Capital of the Company is Rs. 26,00,00,000/- divided into 2,60,00,000 equity shares of face value of Rs. 10/- each. The paid up share capital of the Company is Rs. 24,31,90,000/- divided into 2,43,19,000 equity shares of face value of Rs. 10/- each.

1,45,500 convertible equity warrants issued on 07th April, 2017 and outstanding at the beginning of the financial year were due for conversion into equity shares by 06th October, 2018. The holder of the warrants opted not to convert the same into equity shares and therefore the said warrants were cancelled and the upfront subscription money received by the Company was forfeited as per SEBI (Issue of Capital and Disclosure Requirements) Regulations 2009. Accordingly, there was no change in the paid up share capital of the Company during the year under review.

5. RESERVES:

There were no appropriations to reserves/ general reserves during the year under review.

6. DEPOSITS:

The Company has not accepted any deposits from the public falling within the ambit of Section 73 of the Companies Act, 2013 and the Companies (Acceptance of Deposits) Rules, 2014, or under Chapter V of the Companies Act, 2013.

7. SUBSIDIARY COMPANY:

The Company has a wholly owned subsidiary (WOS) in USA namely Faze Three US LLC which is a front office of the Company in USA and is actively engaged in sourcing local business within USA for supplying the Companys range of products to stores/ retailers. Pursuant to the provisions of Section 129(3) of the Companies Act, 2013, a statement containing salient features of financial statements of the WOS in Form AOC-1 is attached to the Consolidated Financial Statements. The separate audited financial statements in respect of the WOS are also available on the website of the Company.

There were no other Companies which have become or ceased to be Subsidiary, Associate or Joint Venture of the Company during the period under review.

8. DIRECTORS RESPONSIBILITY STATEMENT:

Pursuant to the requirements of Section 134(3)(c) of the Companies Act, 2013, with respect to the Directors Responsibility Statement, the Directors hereby confirm that:

(i) in the preparation of the Annual Financial Statements for the year ended March 31, 2019, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

(ii) such accounting policies as mentioned in Notes to Financial Statements have been selected and applied consistently and judgments and estimates have been made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2019 and of the Profit of the Company for the year ended on that date;

(iii) proper and sufficient care have been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) the Annual Financial Statements have been prepared on a going concern basis;

(v) proper internal financial controls were in place and that the financial controls were adequate and were operating effectively;

(vi) systems to ensure compliance with the provisions of all applicable laws were in place and were adequate and operating effectively.

9. NUMBER OF MEETINGS OF THE BOARD AND AUDIT COMMITTEE:

The Board and Committees of the Board meets at regular intervals to discuss and decide on Company / Business policy and strategy apart from other Board business. In case of a special and urgent business need, where the meeting of the Board of Directors is not envisaged, the Boards approval is taken by passing resolutions by circulation, as permitted by law, which are noted and confirmed in the subsequent Board Meeting.

The details of number of Board and Committee meetings of the Company are set out in the Corporate Governance Report which forms part of this Report.

10. CHANGES IN DIRECTORS AND/ OR KEY MANAGERIAL PERSONNEL

There was no change in the Directors or Key Managerial Personnel during the financial year 2018-19.

The Board of Directors have at its meeting held on 29th May 2019, on recommendation of the Nomination and Remuneration Committee, approved the re-appointment of Mr. Ajay Anand as the Managing Director for a period of 3 years and Mr. Sanjay Anand as the Whole-time Director for the period of 3 years subject to approval of members by passing a Special Resolution. The approval of members for the re-appointment of Mr. Ajay Anand and Mr. Sanjay Anand shall be proposed in the ensuing Annual General Meeting.

11. PERFORMANCE EVALUATION OF BOARD:

The Board of Directors has carried out an annual evaluation of its own performance, Board Committees and individual Directors pursuant to the provisions of the Companies Act, 2013 and the Corporate Governance requirements as prescribed by Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements), Regulations 2015. The same is found to be satisfactory.

The performance of the Board was evaluated by the Board after seeking inputs from all the Directors on the basis of the criteria such as the Board composition and structure, experience & competencies, attendance, effectiveness of board processes, information and functioning, independent approach, etc.

The performance of the Committees was evaluated by the Board after seeking inputs from the committee members on the basis of the criteria such as the composition of committees, attendance of the members, recommendations to the Board and their implementation, effectiveness of committee meetings, etc.

12. DECLARATION BY INDEPENDENT DIRECTORS:

The Company has received necessary declaration from each Independent Director under Section 149(7) of the Companies Act, 2013, that he / she meets the criteria of independence laid down in Section 149(6) of the Companies Act, 2013 and Regulation 25 of SEBI (Listing Obligations and Disclosure Requirements), Regulations 2015.

13. FAMILIARIZATION PROGRAMME FOR THE INDEPENDENT DIRECTORS:

Pursuant to the SEBI regulations, the Company has a Familiarization Programme in place for the independent Directors, with a view to familiarize them with their role, rights and responsibilities in the Company, nature of industry in which the Company operates, business model of the Company, etc. The Board familiarization process comprises of the Induction programme for new independent Directors, sessions on business and functional issues and strategy making.

The policy for Familiarization Programme for the Independent Directors is available on website of the Company.

14. DISCLOSURE RELATING TO REMUNERATION TO DIRECTORS, KEY MANAGERIAL PERSONNEL AND PARTICULARS OF EMPLOYEES:

As required under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personal) Rules, 2014, as amended from time to time, details of Remuneration to Directors and Key Managerial Personnel is provided in Form MGT-9 annexed to this Report.

The Company has no employee who- (i) if employed throughout the financial year, was in receipt of remuneration, in aggregate, more than Rs. 102.00 Lacs, or (ii) If employed for part of the financial year, was in receipt of remuneration, in aggregate, more than Rs 8.50 lacs per month.

15. AUDIT COMMITTEE:

The Audit Committee comprises of three members namely Mr. Vinit Rathod (Chairman), Mr. Manan Shah and Mr. Ajay Anand. Other details pertaining to the Audit Committee are included in the Corporate Governance Report, which forms part of this report. All the Members of the Committee are financially literate.

16. NOMINATION & REMUNERATION COMMITTEE:

The Company has constituted a Nomination & Remuneration Committee pursuant to Section 178(1) of the Companies Act, 2013 and Regulation 19 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The Nomination and Remuneration Committee is responsible for evaluating the balance of skills, experience, independence, diversity and knowledge on the Board and for drawing up selection criteria. The Board of Directors of the Company has defined a policy on Directors appointment and payment of remuneration including criteria for determining qualifications, positive attributes and independence of Directors and terms of reference of the Committee.

The Nomination & Remuneration Committee comprises of three members all being Non-Executive Directors namely Mr. Vinit Rathod (Chairman), Mr. Manan Shah and Ms. Shweta Jain. All the recommendations made by the Committee during the period were accepted by the Board.

17. CORPORATE SOCIAL RESPONSIBILITY STATEMENT (CSR):

The Company has spent Rs. 2.20 lacs towards CSR activities in the area of environment restoration and sustainability during the FY 2018-19. The Committee is in the process of identifying areas of importance for development through CSR activities and will strive to undertake more activities in the coming years for betterment of the society.

The Company has always considered Social Responsibility as an integral part of sustainable growth and has been over the years contributing towards it in various ways. The management of the Company endeavors for the upliftment of the society and the natural resources which are essential for overall economic growth. The Board of Directors has constituted a Corporate Social Responsibility Committee which comprising members of the Board for implementation and monitoring of the CSR activities in accordance with the CSR Policy of the Company. Entire time and energy being devoted towards business and related activities, the Committee and the Board of Directors could not get sufficient time for formulating and implementing the CSR Activities during the year. The Committee will strive to implement the CSR activities in the coming years, proportionate to the profitability of the Company.

The CSR Policy of the Company is placed on its website at http://www.fazethree.com/investors.html#7.

18. CONSERVATION OF ENERGY AND TECHNOLOGY ABSORPTION:

The information as required under Section 134(3)(m) of The Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 with respect to conservation of energy, technology absorption and foreign exchange earnings and outgoings is annexed to this report as Annexure I.

19. CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES:

The Company has entered into transactions with related parties as defined under Section 2(76) during the financial year. All related party transactions were carried on at arms length price. The approval of the Audit Committee has been obtained for all the transactions and the approval of the Board of Directors has been obtained wherever necessary at the beginning of the year or before entering into the transaction. The said transactions are subject to review by the Audit Committee every quarter. All material transactions with related parties during the financial year were in the ordinary course of business and at arms length. The Company proposes to take approval of Members for the material related party transactions to be entered into in the current financial year through Ordinary Resolution.

The policy on Related Party Transactions as approved by the Board is available on the website of the Company at http://www.fazethree.com/investors.html#7.

Information on transactions with related parties pursuant to Section 134(3)(h) of the Act read with rule 8(2) of the Companies (Accounts) Rules, 2014 are given in Form AOC-2 and the same forms part of this report as Annexure II.

20. MATERIAL CHANGES AND COMMITMENT AFFECTING FINANCIAL POSITION OF THE COMPANY:

There are no material changes and commitments, affecting the financial position of the Company which has occurred between the end of the financial year of the Company i.e. March 31, 2019 and the date of the Directors report.

21. VIGIL MECHANISM / WHISTLE BLOWER POLICY

The Company has adopted a Whistle Blower Policy, as part of vigil mechanism as defined under Regulation 22 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 to provide appropriate avenues to the Directors and employees to bring to the attention of the management any issue which is perceived to be in violation of or in conflict with the Code of Conduct of the Company and to report concerns about unethical behavior. The said policy has been posted on the website of the Company at http://www.fazethree.com/investors.html#7.

22. DICSLOSURE AS PER SEXUAL HARRASMENT OF WOMEN AT WORKPLACE (PREVENTION PROHIBITION AND REDRESSAL) ACT, 2013:

The Company has in place a Prevention of Sexual Harassment Policy and an Internal Complaints Committee as per the requirements of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The Company has not received any complaint during the year.

23. RISK MANAGEMENT:

The Company has in place a mechanism to inform Board of Directors about the Risk assessment and risk minimization procedures and periodical reviews to ensure that risk is controlled by the management through the means of a properly laid-out framework.

24. INTERNAL FINANCIAL CONTROLS:

The Company has adequate internal control systems, commensurate with the size, scale and complexity of its operations which monitors business processes, financial reporting and compliance with applicable regulations. The systems are periodically reviewed for identification of control deficiencies and formulation of time bound action plans to improve efficiency at all the levels.

25. MANAGEMENT DISCUSSION AND ANALYSIS REPORT:

Management Discussion and Analysis Report as required under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, is enclosed as Annexure III.

26. CORPORATE GOVERNANCE:

The Company is adhering to good corporate governance practices in every sphere of its operations. The Company has taken adequate steps to comply with the applicable provisions of Corporate Governance as stipulated in SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. A report on Corporate Governance is annexed to this report as Annexure IV.

27. STATUTORY AUDITOR:

M/s. MSKA & Associates Chartered Accountants (Firm Registration No. 105047W), were appointed as the Statutory Auditor by the members of the Company in the 32nd Annual General Meeting for a period of 5 years i.e. till the conclusion of the 37th Annual General Meeting. In accordance with the Companies (Amendment) Act, 2017, implemented on 7th May, 2018 by Ministry of Corporate Affairs, the appointment of Statutory Auditors is not required to be ratified at every AGM. As recommended by the Audit Committee, the appointment of M/s. MSKA & Associates as the Statutory Auditor of the Company shall continue for the FY 2019-20. M/s. MSKA & Associates has confirmed that their appointment is within the prescribed limits specified in Section 139 of the Companies Act, 2013.

28. PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS

Details of loans, guarantees and investments covered under Section 186 of the Companies Act, 2013 is given in the notes to the financial statements

29. FRAUD REPORTED BY THE AUDITOR, IF ANY

There is no fraud reported by the Statutory Auditor.

30. SECRETARIAL AUDITOR:

The Company has undertaken Secretarial Audit for the financial year 2018-19 which, inter alia, includes audit of compliance with the Companies Act, 2013, and the Rules made thereunder, Listing Regulations and other Regulations and Acts applicable to the Company. The Secretarial Audit Report is annexed to this report as Annexure V. Pursuant to the provisions of Section 204 of Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s. Sanjay Dholakia & Associates, Practicing Company Secretary to undertake Secretarial Audit for the financial year 2018-19.

31. OBSERVATIONS - STATUTORY AUDITOR & SECRETARIAL AUDITOR:

Statutory Auditor:

The Auditors Report to the Members does not contain any reservation, qualification or adverse remark.

Secretarial Auditor:

The Secretarial Audit Report to the Members does not contain any reservation, qualification or adverse remark.

32. COST AUDIT AND RECORDS:

The Company maintains the cost records of its products as applicable under the Companies (Cost Records and Audit) Rules, 2014. Under Rule 4(3) (i) of the Companies (Cost Records and Audit) Rules, 2014 the requirement of Cost Audit is not applicable to the Company.

33. EXTRACT OF ANNUAL RETURN:

The details forming part of extract of the annual return in Form MGT-9 is annexed to this report as Annexure VI. The same is also placed on the website of the Company at www.fazethree.com as a part of the Directors Report.

34. INDIAN ACCOUNTING STANDARDS (IND AS):

The Indian Accounting Standards (IND AS) were notified by the Ministry of Corporate Affairs on February 16, 2015. The Company has adopted IND AS with effect from 1st April, 2017 with comparatives for the previous year ending 31st March, 2017. Your Company has taken adequate steps in this regard and has ensured a smooth transition to IND AS.

35. SIGNIFICANT MATERIAL ORDERS PASSED BY COURTS, IF ANY:

There are no significant material orders passed by the Regulators/ Courts which would impact the going concern status of the Company and its future operations.

36. ACKNOWLEDGMENT:

Your Directors wish to place on record their appreciation for the co-operation extended by all the employees, Bankers, Financial Institutions, various State and Central Government authorities and Stakeholders.

For and on behalf of the Board
For Faze Three Limited
Place: Mumbai Ajay Anand
Date: 29th May, 2019 Chairman & Managing Director