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Innovative Tyres & Tubes Ltd.

BSE: 535015 Sector: Auto
NSE: INNOVATIVE ISIN Code: INE070Y01015
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Innovative Tyres & Tubes Ltd. (INNOVATIVE) - Director Report

Company director report

To

Dear Members

Your directors have pleasure in submitting their22ndDirectors’ Report of theCompany together with the audited financial statements ofthe company for the financialyear ended 31stMarch 2017.

1. FINANCIAL RESULTS:

Your company’s financial performance for the year under review has beenencouraging. Key aspects of your Company’s financial position for the currentfinancial year along with comparative previous year are tabulated here under:

(Amount in Rs.)

Particulars Year ended 31st March 2017 Year ended 31st March 2016
Total Revenue 1325392021 1260389570
Total expenses 1263578784 1217042970
Profit/(Loss) before taxation and extraordinary items 61813237 43346600
Exceptional & Extraordinary item- Loss due to fire - 9678771
Profit/(Loss) before tax 61813237 33667829
Less: Tax Expense 12959826 2681176
Profit/(Loss) after tax 48853411 30986653
Add: Balance B/F from the previous year 193132695 162146041
Balance Profit / (Loss) C/F to the next year 193998890 193132695
Earningsper share (Basic) 4.24 3.08
Earnings per share (Diluted) 3.99 3.08

2. DIVIDEND:

Based on company’s performance in the current year profit of the company isincreased as compared to last year but simultaneously also decided to plan businessgrowth your Directors unanimously decided to preserve the profit of the company as aresources for its activities and therefore do not propose any dividend for the financialyear ended March 31 2017.

3. TRANSFER OF UNCLAIMED DIVIDEND TO INVESTOR EDUCATION AND PROTECTION FUND:

Pursuant to the provisions of section 124 read with section 125of the Companies Act2013 (erstwhile section 205C of the Companies Act 1956) your company has to transfer anyamount to the Investor Education and Protection Fund which was lying unclaimed/unpaidwith the Company for a period of seven years after Declaration of Dividend.

In our company there was no dividend declared and paid by the Company since last fewyears hence transfer of amount to Investor Education and Protection Fund was not arisesaccordingly the said provision is not applicable to us.

4. STATE OF THE COMPANY’S AFFAIRS:

The Company is engaged in the business of marketers and manufacturers of tyres &tubes and goods made from natural synthetic reclaimed rubber plastic and its compoundsincluding derivatives and substitute used for automobile vehicles industrial and domesticpurposes etc.

During the year under review there has been no change in the business of the Company.The highlights of the Company’s performance are as under:

1. Total Revenue:

During the year under review total turnover of the Company increased by 5.15% from Rs.1260389570/- to Rs. 1325392021/- as compared to the previous financial year duetoconsistent increase in the sales in domestic segment marginal improvement in exportsales as well as improvement in service charges/Job work income during the currentfinancial year.

2. Total expenses:

During the year under review the total expenses increased by 3.82% from Rs.1217042970/- to Rs. 1263578784/- as compared to the previous financial year which ismainly due to increase in turnover and increase in employee benefit expenses depreciationand other expenses.

3. Profit before Tax:

During the year under review profit before tax expense increased from Rs.33667829/- to Rs. 61813237/- which is mainly due to increase in turnover whichturned into increase in revenue and reduction in finance cost. Besides this the companyincurred loss due to fire in previous year.

4. Net Profit after tax:

Net profit after tax for the current financial year increased by 57.66% from Rs.30986653/- to Rs. 48853411/- as compared to the previous financial year which ismainly due to increase in margins and reduction in finance cost. Besides this the companyincurred loss due to fire in previous year.

Ultimately the basic Earningsper Share of the Company has increased from Rs. 3.08/- toRs. 4.24/- and diluted Earnings per Share increased from Rs. 3.08/- to Rs. 3.99/-.

The Board of Directors of the Company are ensuring that the Company will take variousmeasures to rationalise its operating costs and other expenses whenever necessary. TheCompany is focusing on improvement in revenue and reduction of cost in the next years.During the year under review tax expenses are too high as compared to last year and oneof the reason to restrict our company’s profit.

5. MATERIAL CHANGES AND COMMITMENT:

The Board of Directors of the Company have at their meeting held on 1st April 2017approved issue of further shares to the public by way of Initial Public Offer (IPO) withan issue size of not exceeding Rs. 35 Croresand the same were approved by the members inExtraordinary General Meeting held on 25th May 2017.

The Board in the aforesaid meeting has further modified the terms of redeemablepreference shares and made them convertible. Subsequent to that all the convertiblepreference shares were converted into equity share capital and the same were approved bythe members in Extraordinary General Meeting held on 25th May 2017.

6. RISK MANAGEMENT:

A key factor in determining a Company’s capacity to create sustainable value isthe risks that the Company is willing to take (at strategic and operational levels) andits ability to manage them effectively. Our Company is mainly in manufacturing and supplyof tubes and tyres. Many risks exist in a company’s operating environment and theyemerge on a regular basis. The Company’s Risk Management processes focuses onensuring that these risks are identified on a timely basis and addressed.

The Company has laid down a risk management mechanism covering the risk mapping andtrend analysis risk exposure potential impact and risk mitigation process. A detailedexercise is being carried out to identify evaluate manage and monitor and non businessrisks. In our company audit committee has an additional oversight in the area offinancial risks and its controls. Other major operational risks are being identified bythe management of the Company from time to time.

7. DETAILS OF SUBSIDIARIES JOINT VENTURES AND ASSOCIATE COMPANIES

The Company do not have any subsidiaries/joint ventures/associates during the yearunder review.

8. CONSOLIDATED FINANCIAL STATEMENTS:

The Company do not have any subsidiaries hencethere is no need to prepare consolidatedfinancial statement for the financial year 2016-17.

9. DISCLOSURE ON DEPOSITS UNDER CHAPTER V:

The Company has neither accepted nor renewed any deposits during the financial year2016-17 in terms of Chapter V of the Companies Act 2013. Further the Company is nothaving any unpaid or unclaimed deposits at the end of the financial year.

10. TRANSFER TO RESERVE:

In view of the financial strength of the Company Board of Directors proposes totransfer entire sum of profit amounting Rs. 48853411/- to General Reserves during thefinancial year ended 31st March 2017 and the said amount will be reinvested for operatingpurposes only.

11. INTERNAL FINANCIAL CONTROL SYSTEM:

According to section 134(5)(e) of the Companies Act 2013 the term Internal FinancialControl (IFC) means the policies and procedures adopted by the Company for ensuring theorderly and efficient conduct of its business including adherence to company’spolicies the safeguarding of its assets the prevention and detection of fraud anderrors the accuracy and completeness of the accounting records and the timely preparationof reliable financial information.

The Company has a well-placed proper and adequate internal financial control systemwhich ensures that all assets are safeguarded and protected and that the transactions areauthorised recorded and reported correctly.

Your Company has appointed Chief Financial Officer with effect from 10th February 2017to focus on review of business processes and suggest improvements as applicable.Independence of the audit and compliance is ensured by direct reporting to the AuditCommittee of the Board.

12. DIRECTORS AND KEY MANAGERIAL PERSONNEL:

The appointment of Key Managerial Personnel’s (KMPs) of the Company is inaccordance with the provisions of Section 2(51) and Section 203 of the Companies Act 2013read with Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014(including any statutory modification(s) or re-enactment(s) for the time being in force).During the year under review and thereafterfollowing changes took place with regard toDirectors and Key Managerial Personnel:

Sr. No. Name of Directors/KMP Appointment/Cessation/Change in Designation Effective Date
1. Mr.Mukesh Desai Appointed as Managing Director 1st October 2016
Designated as Chairman and Managing Director 1st April 2017
2. Mr.NitinMankad Change in Designation as Director 1st October 2016
Re-designated as Whole time Director 1st April 2017
3. Mr.Pradip Kothari Re-designated as Whole time Director 1st April 2017
4. CS. Sejal Desai Appointed as whole time Company Secretary 1st July 2016
5. CA. ArvindTambi Appointed as Chief Financial Officer 10th February 2017
6. Dr.Mrs.KalpanabenJoshipura Appointed as an Additional Director 15th June 2017

13. DECLARATION BY INDEPENDENT DIRECTORS AND RE-APPOINTMENT IF ANY:

The Provision of Section 149 of Companies Act 2013 read with Rules 4 of The Companies(Appointment and Qualification of Directors) Rules 2014pertaining to the appointment ofIndependent Directors statesthat Independent directors need to be appointed by everylisted public company and public companies (i) having paid up share capital of ten crorerupees or more; or (ii) having turnover of one hundred crore rupees or more; or (iii) havein aggregate outstanding loans debenture and deposits exceeding fifty crore rupees.

The Company has appointed Mr.KeyoorBakshi (DIN No. 00133588) and Mr.KalyanaramanGanesan(DIN No. 02013349) as an Independent Director of the Company with effect from 1st June2015 for the period of 3 consecutive years. Besides the above Dr. Mrs.KalpanabenJoshipura (DIN: 07849507) was also appointed as additional director w.e.f. 15thJune 2017. In the ensuing Annual General meeting her appointment would be regularized andappointed as an Independent director. In the opinion of the Board all of theabovedirectors fulfill the conditions of independence as specified in the Companies Act2013 and Rules made there under and are independent of the Management.

During the year under review the Independent Directors met on 24th September 2016 tocarry out the evaluation for the financial year 2015 16 and inter alia discussed thefollowing:

* Evaluation of the performance of Non Independent Directors and the Board of Directorsas a whole;

* Evaluation of the performance of the Chairman taking into account the views of theexecutive and non-executive Directors;

* Evaluation of quality content and timelines of flow of information between theManagement and the Board that is necessary for the Board to effectively and reasonableperform its duties. All Independent Directors were present at the Meeting.

14. AUDITORS AND AUDITORS’ REPORT:

Presently the company’s statutory auditor is M/s.Parikh Mehta & AssociatesChartered Accountants Vadodara. They wereappointed as Statutory Auditor at the AnnualGeneral Meeting dated 24th August 2014 for the period of five years. However in terms ofthe provisions of Section 139 of the Companies Act 2013 read with the Companies (Auditand Auditors) Rules 2014 and amendments made there under the term of appointment of M/s.Parikh Mehta & Associates will be completed in the ensuing Annual General Meeting.

The members of the Audit committee at their meeting held on 25th May 2017 haverecommended appointment of M/s. Maloo Bhatt & Co. Chartered Accountants Vadodarahaving Firm Registration Number - 129572W as Statutory Auditors of the Company subject tothe approval of members of the Company at their ensuing Annual General Meeting of theCompany to conduct the audit for the 5 (five) financial years subject to the ratificationat every Annual General Meeting at such remuneration as may be decided by the Board andauditors mutually. Their appointment and payment of remuneration are to be confirmed andapproved in the ensuing Annual General Meeting. The Company has received a certificatefrom proposed statutory auditor to the effect that if they are appointed it would be inaccordance with the provisions of Section 141 of the Companies Act 2013 read with therules if any.

The notes on financial statement referred to in the Auditors Report areself-explanatory and do not call for any further comments. The Auditors Report does notcontain any qualification reservation or adverse remark.

15. COST AUDITORS:

The Audit Committee of the Company has recommended and the Board of Directors at theirmeeting held on 25th May 2017 have approved appointment of M/s. V. P. & AssociatesCost Accountants for audit of cost records of the Company for the financial year 2017-18at a remuneration of Rs. 50000/- plus applicable taxes& out of pocket expensessubject to ratification by the members of the Company at the ensuing Annual GeneralMeeting.

The Company has filed Cost Audit Report for the F.Y. ended 31st March 2016 as on 7thOctober 2016.

16. BOARD’S COMMENT ON THE AUDITORS’ REPORT:

Your Board is happy to inform you that there were no qualifications reservations oradverse remarks made by the Auditors in their report.Hence no need to provide anyclarification/reply of any comments.

17. CHANGES IN SHARE CAPITAL:

During the year under review following changes took place in the share capital of theCompany:

Change in authorized capital:

1. Themembers of the Company at their Extraordinary General Meeting held on 9thApril2016 approved re-classification of the existing share capital of the Company of Rs.170000000/- (Rupees Seventeen Crores Only) divided into 13000000 equity shares ofRs. 10 each & 4000000 cumulative redeemable preference shares of Rs. 10 each to Rs.170000000 (Rupees Seventeen Crores Only) divided into 10500000 (One Crore FiveLakhs) equity shares of Rs. 10/- (Rupees ten Only) each 4000000 cumulative redeemablepreference shares of Rs. 10/- each & 2500000 convertible preference shares of Rs.10/- each.

2. The members of the Company at their Extraordinary General Meeting held on 7thJanuary 2017 increased authorized capital from Rs. 170000000 (Rupees Seventeen Crores)divided into 10500000 (One Crore Five Lakhs) equity shares of Rs. 10 each and 4000000(Forty Lakhs) cumulative redeemable preference shares of Rs. 10/- each and 2500000(Twenty five Lakhs) convertible preference shares of Rs. 10/- each to 190000000 (RupeesNineteen Crores) divided into 10500000 (One Crore Five Lakhs) equity shares of Rs. 10/-each and 6000000 (Sixty Lakhs) cumulative redeemable preference shares of Rs. 10/- eachand 2500000 (Twenty Five Lakhs) convertible preference shares of Rs. 10/- each byinsertion of new 2000000 (Twenty Lakhs) cumulative redeemable preference shares.

3. The members of the Company at their Extraordinary General Meeting held on 7thFebruary 2017 approved re-classification of the existing share capital of the Company ofRs. 190000000/- (Rupees Nineteen Crores only) comprising of Rs. 105000000/- (RupeesTen Crores Fifty Lakhs only) divided into 10500000 equity shares of Rs. 10/- each60000000 (Rupees Six Crores only) divided into 6000000 cumulative redeemablepreference shares of Rs. 10/- each and Rs. 25000000 (Rupees Two Crores Fifty Lakhsonly) divided into 2500000 convertible preference shares of Rs. 10/- each TO Rs.105000000/- (Rupees Ten Crores Fifty Lakhs only) divided into 10500000 equity sharesof Rs. 10/- each 40000000 (Rupees Four Crores only) divided into 4000000 cumulativeredeemable preference shares of Rs. 10/- each and Rs. 45000000 (Rupees Four CroresFifty Lakhs only) divided into 4500000 convertible preference shares of Rs. 10/-each."

Change in Paid up capital:

During the year under review the company has changed its paid up share capital fromtime to time as details as under:

1. The members of the Company at their Extraordinary General Meeting held on 15thApril 2016 approved issue and allotment of 2280000 convertible preference shares of Rs.10/- each.

2. The members of the Company at their Extraordinary General Meeting held on 21stNovember 2016 approved issue and allotment of 500000 cumulative redeemable preferenceshares of Rs. 10/- each.

3. The members of the Company at their Extraordinary General Meeting held on 4th March2017 approved issue and allotment of 1075000 convertible preference shares of Rs. 10/-each.

Consecutively as on 31st March 2017 the authorized capital of the company is Rs.190000000/- and paid up capital is Rs. 169481370/-.

A. Buy Back of Securities

The Company has not bought back any of its securities during the year underreview.

B. Sweat Equity

The Company has not issued any Sweat Equity Shares during the year under review.

C. Bonus Shares

No Bonus Shares were issued during the year under review.

D. Employees Stock Option Plan

The Company has not provided any Stock Option Scheme to the employees.

18. EXTRACT OF ANNUAL RETURN:

The extracts of Annual Return pursuant to the provisions of Section 92 of the CompaniesAct 2013 read with Rule 12 of the Companies (Management and administration) Rules2014in Form No. MGT-9 for the financial year ending 31stMarch 2017 is annexed heretoasAnnexure I and forms part of this report.

19. MEETINGS OF BOARD OF DIRECTORS:

The Company had conducted total 12(twelve)Board meetings dated6thApril 2016 5th May2016 27th June 2016 10th August 201624th September 2016 24thOctober 201621stNovember 201610thDecember 201612th January 2017 7th February 2017 10thFebruary 2017 and 20th March 2017 during the financial year under review. The Companyhas complied the provisions of Companies Act and Secretarial Standards 1 i.e. gap betweentwo Board Meetings was less than one Hundred and Twenty days.

The name of members of the Board and their attendance at the Board Meetings are asunder:

Name of Directors Number of Meetings attended / Total Meetings held during the F.Y.2016-2017.
Mr. NitinbhaiMankad 12/12
Mr. Mukesh Desai 12/12
Mr.AnandPadmanabhanBalkrishnanPalghat 01/12
Mr. PradipkumarKothari 12/12
Mr. KeyoorBakshi 12/12
Mr. KalyanaramanGanesan 12/12

20. PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS MADE UNDER SECTION 186 OF THECOMPANIES ACT 2013:

During the year under reviewthe Company has not made any Loans Investment given anyguarantee and securities under section 186 of the Companies Act 2013.

21. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES:

All related party transactions that were entered into during the financial year ended31st March 2017 were on an arm’s length basis and were in the ordinary course ofbusiness. Therefore the provisions of Section 188 of the Companies Act 2013 were notattracted. Further there are no materially significant related party transactions duringthe year under review made by the Company with Promoters Directors or other designatedpersons which may have a potential conflict with the interest of the Company at largeexcept managerial remuneration paid to Director. Thus disclosure in Form AOC-2 is notrequired. However the disclosure of transactions with related party for the year as perAccounting Standard 18 i.e. Related Party Disclosures is given in Note no. 2(B)(6) to theBalance Sheet as at 31st March 2017.

22. CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS AND OUTGO:

A. Conservation of Energy Technology Absorption

The particulars as required under the provisions of Section 134(3) (m) of the CompaniesAct 2013 in respect of conservation of energy and technology absorption have beenfurnished in Annexure II.

B. Foreign Exchange earnings and Outgo

(Amount in Rs.)
Particulars 2016-17 2015-16
Total foreign exchange outgo 1663397 1099459
Total foreign exchange inflow 395197828 408883623

23. REVALUATION OF FIXED ASSETS:

During the year under review the Company has revalued it’s Land. As a result ofthe revaluation the value of land has been increased by Rs. 728.49 Lakhs (from Rs. 52.17Lakhs to Rs. 780.66 Lakhs). The said amount has been included in Revaluation Reserve.

24. DETAILS OF POLICY DEVELOPED AND IMPLEMENTED BY THE COMPANY ON ITS CORPORATE SOCIALRESPONSIBILITY INITIATIVES (CSR):

The CSR provisions is applicable to every company having net worth of rupees fivehundred crore or more or turnover of rupees one thousand crore or more or a net profit ofrupees five crore or more during any financial year. As our company does not fall in anyof the above criteria hence the Company is not required to develop and implement anyCorporate Social Responsibility initiatives as the said provisions are not applicable toour Company.

25. DISCLOSURE OF COMPOSITION OF AUDIT COMMITTEE AND PROVIDING VIGIL MECHANISM:

The provisions of Section 177 of the Companies Act 2013 read with Rule 6 and 7 of theCompanies (Meetings of the Board and its Powers) Rules 2013 is applicable to every listedcompany and public companies (i) having paid up capital of Ten crore rupees or more; (ii)having turnover of one hundred crore rupees or more; (iii) having in aggregateoutstanding loans or borrowings or debenture or deposits exceeding fifty crore rupees ormore.

The Company has constituted its Audit Committee with following members.

Name of Member Category
Mr. KeyoorBakshi Chairman to the Committee
Mr. KalyanaramanGanesan Member to the Committee
Mr. Mukesh Desai Member to the Committee

During the year under review members of the audit committee meeting met on 10thAugust 2016.

26. COMPANY’S POLICY RELATING TO DIRECTORS APPOINTMENT PAYMENT OF REMUNERATIONAND DISCHARGE OF THEIR DUTIES:

The provisions of Section 178(1) relating to constitution of Nomination andRemuneration Committee are applicable to every listed company and public companies (i)having paid up capital of Ten crore rupees or more; (ii) having turnover of one hundredcrore rupees or more; (iii) having in aggregate outstanding loans or borrowings ordebenture or deposits exceeding fifty crore rupees or more. The Board of Directors of theCompany have approved and adopted Nomination & Remuneration Policy at their meetingheld on 15th June 2017.

The Company has re-constituted its Nomination & Remuneration Committee withfollowing members’w.e.f. 15th June 2017.

Name of Member Category
Dr. Mrs. KalpanabenJoshipura Chairperson
Mr. KeyoorBakshi Member
Mr. KalyanaramanGanesan Member

27. DIRECTORS RESPONSIBILITY STATEMENT:

In accordance with the provisions of Section 134(3) (C) of the Companies Act 2013 theBoard hereby submit its responsibility Statement:

a) In the preparation of the annual accounts the applicable accounting standards hadbeen followed along with proper explanation relating to material departures;

b) the directors had selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the company at the end of the financial year and ofthe profit and loss of the company for that period;

c) the directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the company and for preventing and detecting fraud and other irregularities;

d) the directors had prepared the annual accounts on a going concern basis;

e) the directors had devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively;

f) The Company being unlisted sub clause (e) of section 134(3) of the Companies Act2013 pertaining to laying down internal financial controls is not applicable to theCompany.

28. DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS COURTS ANDTRIBUNALS:

No significant and material order has been passed by any other regulators courtstribunals impacting the going concern status and Company’s operations in future.

29. GENERAL:

Your Directors state that no disclosure or reporting is required in respect of thefollowing items as there were no transactions on these items during the year under review:

1. Details relating to deposits covered under Chapter V of the Companies Act 2013.

2. Issue of shares (including sweat equity shares) to employees of the Company underany scheme.

3. The Company has no subsidiary and neither the Managing Director nor the Whole-timeDirectors of the Company receive any remuneration or commission from any of itssubsidiaries.

4. No significant or material orders were passed by the Regulators or Courts orTribunals which impact the going concern status and Company’s operations in future.

5. CSR is not applicable on the Company.

30. DISCLOSURE OF SEXUAL HARASSMENT OF WOMEN AT WORKPLACE UNDER WORKPLACE (PREVENTIONPROHIBITION AND REDRESSAL) ACT 2013:

The Company is committed to provide a safe and conducive work environment to itsemployees during the year under review.

31. ACKNOWLEDGEMENTS:

It is our strong belief that caring for our business constituents has ensured oursuccess in the past and will do so in future. The Board acknowledges with gratitude theco-operation and assistance provided to your company by its bankers FinancialInstitutions and government as well as Non-government agencies. The Board wishes to placeon record its appreciation to the contribution made by employees of the company during theyear under review. The Company has achieved impressive growth throughthe competence hardwork solidarity cooperation and support of employees at all levels. Your Directorsthanks the customers clients vendors other business associates and consultants fortheir continued support in the Company’s growth.

The Board also takes this opportunity to express its deep gratitude for the continuedco-operation and support received from its valued shareholders.

FOR AND ON BEHALF OF THE BOARD OF DIRECTORS

INNOVATIVE TYRES & TUBES LIMITED

Sd/-

CHAIRMAN & MANAGING DIRECTOR

Date:15.06.2017

Place:Vadodara

Although care has been taken to ensure the accuracy completeness and reliability ofthe information provided I assume no responsibility therefore. Users of this informationare expected to refer to the relevant existing provisions of the Companies Act and Rules.The user of the information agrees that the information is subject to change withoutnotice. I assume no responsibility for the consequences of use of such information.

lN NO EVENT I SHALL BE LIABLE FOR ANY DIRECT. INDIRECT SPECIAL OR INCIDENTAL DAMAGERESULTING FROM ARISING OUT OF OR IN CONNECTION WITH THE USE OF THE INFORMATION.