Temporary working capital

EBIX INC: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTS (Form 10-Q)

As used herein, the terms “Ebix”, “the Company”, “we”, “our” and “our” refer to
Ebix, Inc., a Delaware company, and its subsidiaries consolidated as a combined entity, unless it is clear that the terms only mean Ebix, Inc.

  Safe Harbor for Forward-Looking Statements-This Form 10-Q and certain
information incorporated herein by reference contains forward-looking statements
and information within the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, and
Section 21E of the Securities Exchange Act of 1934. This information includes
assumptions made by, and information currently available to management,
including statements regarding future economic performance and financial
condition, liquidity and capital resources, acceptance of the Company's products
by the market, and management's plans and objectives. In addition, certain
statements included in this and our future filings with the SEC, in press
releases, and in oral and written statements made by us or with our approval,
which are not statements of historical fact, are forward-looking statements.
Words such as "may," "could," "should," "would," "believe," "expect,"
"anticipate," "estimate," "intend," "seeks," "plan," "project," "continue,"
"predict," "will," and other words or expressions of similar meaning are
intended by the Company to identify forward-looking statements, although not all
forward-looking statements contain these identifying words. These
forward-looking statements are found at various places throughout this report
and in the documents incorporated herein by reference. These statements are
based on our current expectations about future events or results and information
that is currently available to us, involve assumptions, risks, and
uncertainties, and speak only as of the date on which such statements are made.
  Our actual results may differ materially from those expressed or implied in
these forward-looking statements. Factors that may cause such a difference
include, but are not limited to, those discussed in   Part I, Item 1A, "Risk
Factors" in our Form 10-K for the year ended December 31, 2020 which is
incorporated by reference herein  , and in Part II, Item 1A "Risk Factors" in
this Form 10-Q, including but not limited to: the willingness of independent
insurance agencies to outsource their computer and other processing needs to
third parties; pricing and other competitive pressures and the Company's ability
to gain or maintain share of sales as a result of actions by competitors and
others; changes in estimates in critical accounting judgments; changes in or
failure to comply with laws and regulations, including accounting standards,
taxation requirements (including tax rate changes, new tax laws and revised tax
interpretations) in domestic or foreign jurisdictions; exchange rate
fluctuations and other risks associated with investments and operations in
foreign countries (particularly in India, Australia, Asia, Latin America, and
Europe wherein we have significant and/or growing operations); fluctuations in
the equity markets, including market disruptions and significant interest rate
fluctuations, which may impede our access to, or increase the cost of, external
financing; the impacts of the COVID-19 global pandemic on our operating
performance; ability to secure additional financing to support capital
requirements; Credit Facility provisions that could materially restrict our
business; costs and effects of litigation, investigations or similar matters
that could affect our business, operating results and financial condition; and
international conflict, including terrorist acts. The Company undertakes no
obligation to update any such factors, or to publicly announce the results of,
or changes to any of the forward-looking statements contained herein to reflect
future events, developments, changed circumstances, or for any other reason.
  Other important factors that could cause actual results to differ materially
from those in our specific forward-looking statements included in this Form 10-Q
include, but are not limited to, the following:

•Our ability to efficiently and effectively integrate acquired business
operations, as discussed in Note 3 of these Condensed Notes to the Condensed
Consolidated Financial Statements pertaining to the business acquisitions we
have made;
•Our future liquidity needs discussed under "Liquidity and Financial Condition"
regarding our ability to generate cash from operating activities and any
declines in our credit ratings or financial condition which could restrict our
access to the capital markets or materially increase our financing costs (refer
to Note 4 of the Notes to these Condensed Consolidated Financial Statements,
"Debt");
•Uncertainties pertaining to the actual ultimate cost of our legal contingencies
(refer to Note 5 of the Notes to these Condensed Consolidated Financial
Statements, "Commitments and Contingencies", and "Contractual Obligations" in
Management's Discussion and Analysis of Financial Condition and Results of
Operation ("MD&A"); and,
•The MD&A and the analysis of the six-month revenue trends regarding actual
realized level of demand for our products during the immediately foreseeable
future, and fluctuations thereof.
  Readers should carefully review the disclosures and the risk factors described
in this and other documents we file from time to time with the SEC, including
future reports on Forms 10-Q and 8-K, and any amendments thereto. You may obtain
our
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Table of Contents SEC filings on our website, www.ebix.com in the “Investor Information” section, or on the Internet at DRY website, www.sec.gov.

  The following information should be read in conjunction with the unaudited
condensed consolidated financial statements and the notes thereto included in
Part 1, Item 1 of this Quarterly Report, and the audited consolidated financial
statements and notes thereto and MD&A contained in the Company's Annual Report
on Form 10-K for the year ended December 31, 2020.

Company presentation

  Ebix is a leading international supplier of on-demand infrastructure exchanges
to the insurance, financial, travel, cash remittances, and healthcare
industries. In the insurance sector, the Company's main focus is to develop and
deploy a wide variety of insurance and reinsurance exchanges on an on-demand
basis using SaaS enterprise solutions in the areas of CRM, front-end and
back-end systems, and outsourced administrative and risk compliance. The
Company's products feature fully customizable and scalable on-demand software
designed to streamline the way insurance and financial industry professionals
manage distribution, marketing, sales, customer service, and accounting
activities. With a "Phygital" strategy that combines physical distribution
outlets in India and many ASEAN countries to an Omni-channel online digital
platform, the Company's EbixCash Financial exchange portfolio of software and
services encompasses domestic and international money remittance, foreign
exchange ("Forex"), travel, pre-paid gift cards, utility payments, lending, and
wealth management in India and other Southeast Asian Markets. The Company has
its headquarters in Johns Creek, Georgia and also conducts operating activities
in Australia, Canada, India, New Zealand, Singapore, the United Kingdom, Brazil,
the Philippines, Indonesia, Thailand and United Arab Emirates. International
revenue accounted for 85.9% and 66.4% of the Company's total revenue for the six
months ended June 30, 2021 and 2020, respectively.

Ebix's goal is to be a leading facilitator of insurance and financial
transactions in the world. The Company's technology vision is to focus on the
convergence of all channels, processes and entities in a manner such that data
seamlessly flows once a data entry has initially been made. Ebix strives to work
collaboratively with clients to develop innovative technology strategies and
solutions that address specific business challenges and requirements. Ebix
combines the newest technologies with its capabilities in consulting, systems
design and integration, IT and business process outsourcing, application
software, and web and application hosting to meet the individual needs of
organizations.
Offices and Geographic Information

  The Company's corporate headquarters, including substantially all of our
corporate administration functions, is located in Johns Creek, Georgia, where we
own a commercial office building and campus facility. In addition, the Company
and its subsidiaries lease office space primarily for sales and operations
support in Salt Lake City, Utah, Pittsburgh, Pennsylvania, Pasadena, California,
Birmingham, Alabama, and Phoenix, Arizona. Additionally, the Company leases
office space in New Zealand, Australia, Singapore, Dubai, Brazil, Canada,
Indonesia, the Philippines and the United Kingdom for support, operations and
sales offices. The Company also leases approximately 115 facilities across
India, while owning six facilities in India.

Trends and uncertainties related to the COVID-19 pandemic

In December 2019, COVID-19 has been reported and has spread around the world, including all states in we On March 11, 2020, the World Health Organization
declared COVID-19 a pandemic, and on March 13, 2020, the we government has declared a national emergency with respect to COVID-19.

  In response to the COVID-19 pandemic, many state, local, and foreign
governments implemented travel restrictions, quarantines, shelter-in-place
orders, and similar government orders and restrictions, in an attempt to control
the spread of the disease. Such restrictions or orders, or the perception that
such restrictions or orders could be implemented, resulted in business closures,
work stoppages, slowdowns and delays, work-from-home policies, and the
cancellation or postponement of events.
  Beginning in March 2020, in an effort to protect our employees and comply with
applicable government orders, we restricted non-essential employee travel and
transitioned our employees to a remote work environment. We have not experienced
a material impact from shifting our employees to a remote work environment,
which we primarily attribute to the professionalism of our workforce and our
extensive use of technology throughout our business. However, COVID-19 could
negatively impact the productivity of our workforce if the pandemic requires
prolonged remote working conditions.

During the year ended December 31, 2020, particularly from March onwards, we experienced a drop in demand for some of our solutions and services, particularly those related to travel, currency exchange,

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remittance and consulting business areas, after certain government restrictions
were put in place. This decreased demand continued throughout 2020 in varying
degrees for each business area, and even persists through the date of this
filing for all of the above mentioned business areas, but most notably in the
travel and forex businesses. We expect that demand variability for our products
and services will continue as a result of the COVID-19 pandemic, and cannot
predict with any certainty when demand for these solutions/services will return
to pre-COVID-19 levels.
  We continue to monitor developments related to COVID-19 and remain flexible in
our response to the challenges presented by the pandemic. Along with measures
mentioned above to protect the health and safety of our employees, we took steps
to strengthen our financial position to mitigate the adverse impact that
COVID-19 has had or may have on our business and operations, including amending
our credit facility, reducing salaries for certain employees, furloughing
employees in the most negatively impacted business areas, eliminating certain
employee positions, and eliminating, reducing, or deferring non-essential
expenditures. As of June 30, 2021 most employees' compensation levels are at
pre-Covid-19 levels. We have also taken steps to preserve cash balances,
including a temporary cessation to our share repurchase program.
  Our reported results for the six-month period ended June 30, 2021 may not be
reflective of current market conditions, or of our results for any future
periods, which may be negatively impacted by the COVID-19 pandemic to a greater
extent than the reported period. The impact of the COVID-19 pandemic may also
exacerbate other risks discussed in this Quarterly Report. Refer to Item 1A,
"Risk Factors" in our Form 10-K for the year ended December 31, 2020 for a
complete description of the material risks that the Company currently faces.
Results of Operations
Operating Revenue
  The Company derives its revenues primarily from subscription and transaction
fees pertaining to products or services delivered over our exchanges or from our
application service provider ("ASP") platforms, fees for business process
outsourcing services, and fees for software development projects, including fees
for consulting, implementation, training, and project management provided to
customers with installed systems, e-governance solutions to governmental
agencies in the health and education sectors, as well as foreign exchange,
remittance (both inward and outward) and travel services from our financial
exchanges.
  Ebix's revenue streams are derived from three product/service channels.
Presented in the table below is the breakout of our revenues for each of those
product/service channels for the three and six months ended June 30, 2021 and
2020.
                                             Three Months Ended             Six Months Ended
                                                  June 30,                      June 30,
                                            2021           2020           2021           2020
                                                              (In thousands)
         EbixCash Exchanges              $ 189,947      $  53,240        422,499        131,095
         Insurance Exchanges                41,916         42,959         85,151         86,960
         Risk Compliance Solutions          14,459         15,113         28,725         31,133
         Totals                          $ 246,322      $ 111,312      $ 536,375      $ 249,188


The table below provides an approximation (in% of total revenue) of revenue based on subscriptions and software maintenance, revenue based on transactions, and revenue from professional services and consulting fees:

                                                  Three Months Ended               Six Months Ended
                                                       June 30,                        June 30,
                                                    2021             2020           2021            2020
Subscription                                               16  %     39  %                15  %     35  %
Transaction-Based                                          78  %     44  %                80  %     48  %
Professional Services/Consulting/Other                      6  %     17  %                 5  %     17  %



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Table of Contents Results of Operations – Three Months Ended June 30, 2021 and 2020 turnover

  During the three months ended June 30, 2021, our total operating revenues
increased $135.0 million, or 121%, to $246.3 million as compared to $111.3
million during the second quarter of 2020. On March 11, 2020, COVID-19 was
declared a global pandemic by the World Health Organization. Across the United
States and the world, governments and municipalities instituted measures in an
effort to control the spread of COVID-19, including quarantines,
shelter-in-place orders, school closings, travel restrictions and the closure of
non-essential businesses. Countries across the world are re-opening economies,
but are doing so in a phased approach that differs in each country and, in many
cases, within individual countries. While our travel, foreign exchange
remittance businesses continue to be materially negatively impacted by COVID-19,
total revenues increased year-over-year during the second fiscal quarter of 2021
due primarily to strong demand for the Company's payment solutions offerings in
India (primarily prepaid gift cards), which increased by more than $128 million
year-over-year, or greater than 375%. Reported revenues were positively impacted
by the strengthening of foreign exchange rates in all of our operating
geographies during the second quarter ended June 30, 2021. The largest positive
impact due to stronger currencies was in the Indian rupee and Australian dollar.
Specifically, the year-over-year impact from fluctuations of exchange rates in
the countries that we operate, in the aggregate, increased reported revenues by
approximately $6.3 million for the three months ended June 30, 2021.
International revenue accounted for 84.7% and 62.5% of the Company's total
revenue for the three months ended June 30, 2021 and 2020, respectively.
Cost of Services Provided
  Costs of services provided, which includes costs associated with customer
support, consulting, implementation, and training services, increased $129.1
million, or 263%, to $178.2 million in the second quarter of 2021 as compared to
$49.1 million in the second quarter of 2020. For the three months ended June 30,
2021, cost of services as a percentage of total revenues increased to 72.3% of
total revenues as compared to 44.1% for the three months ended June 30, 2020.
The increase in the Company's cost of services provided as a percentage of total
revenues is primarily due to revenue mix changes year over year, particularly
the increase of prepaid gift cards sold within the EbixCash India operations.
Prepaid gift card revenues have increased at a materially higher rate versus
other Ebix products and services since the COVID-19 pandemic began in March
2020.  Payment solutions revenues increased by greater than 375% year-over-year
in the second quarter ended June 30, 2021 and carry lower gross margins relative
to other solutions/services offered by the Company.
Product Development Expenses

  The Company's product development efforts are focused on the development of
new technologies for insurance carriers, brokers and agents, the development of
new data exchanges for use in domestic and international insurance markets, as
well as the Forex and travel sectors. Product development expenses increased
$1.8 million, or 22%, to $10.1 million during the second quarter of 2021 as
compared to $8.3 million during the second quarter of 2020. Product development
costs in the second quarter remain below the four-quarter Company average prior
to the advent of Covid-19 (Q2 2019 through Q1 2020) of approximately $10.9
million.
Sales and Marketing Expenses
  Sales and marketing expenses of $3.4 million in the second quarter of 2021
were slightly lower compared to $3.5 million in the second quarter of 2020.
Personnel-related costs declined (10.3)% year-over-year, but the reduction was
offset, in part, by increased marketing/advertising expenditures (6.0% increase
year-over-year).
General and Administrative Expenses
  General and administrative expenses increased $7.9 million, or 51%, to $23.3
million in the second quarter of 2021 as compared to $15.5 million in the second
quarter of 2020. The year-over-year increase is primarily due to increased
personnel costs, including travel expenses, of approximately $4.5 million,
increased rent expense of approximately $0.7 million, primarily from
year-over-year rent increases in our foreign exchange offices at Indian airports
(2020 closures for much of the second quarter due to Covid-19 pandemic), offset
in part by a reduction in bad debt expense of approximately $1.3 million as a
result of a reduction in the Company's allowance for doubtful accounts
associated with our Ebix Vayam joint venture and, in particular, related to a
public sector entity in India, BSNL (see Note 8 - Investment in Joint Ventures).
Additionally, general and administrative expenses in the second quarter of 2020
were reduced due to a $3.3 million decrease in the Company's acquisition
earn-out accrual related to two prior acquisitions, which reduced second quarter
2020 general and administrative expenses. Acquisition earn-out contingent
liabilities are re-measured quarterly based on the assessed fair values and
changes in
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anticipated future revenue levels, with any changes reflected as reductions or
increases to general and administrative expenses as reported in the Company's
Condensed Consolidated Statements of Income.
Amortization and Depreciation Expenses
  Amortization and depreciation expenses increased $876 thousand, or 28%, to
$4.0 million in the second quarter of 2021 as compared to $3.1 million in the
second quarter of 2020, primarily due to the impact of the reclassification of
indefinite-lived intangibles to amortizing intangibles during the second half of
2020, as well as the impact of intangible amortization from acquisitions made in
2020 that are not reflected in Q2 2020 results.
Interest Income

Interest income has declined $ 12,000, or 41%, to $ 17,000 in the second quarter of 2021 compared to $ 29,000 in the second quarter of 2020. Interest expense

  Interest expense of $10.5 million in the second quarter of 2021 increased 46%
as compared to $7.1 million in the second quarter of 2020. While the average
outstanding balance under the Company's corporate credit facilities decreased
year-over-year by approximately $42 million, the Company's interest rate
increased by approximately 1.8% year-over-year. Additionally, interest expense
incurred related to the Company's EbixCash business increased in the second
quarter of 2021 versus the second quarter of 2020 when countrywide lockdowns
were in place in India.
Foreign Currency Exchange Gain (Loss)
  The Company recorded a net foreign currency exchange gain for the three months
ended June 30, 2021 in the amount of $9 thousand which consisted of net losses
realized and unrealized upon the settlement of receivables or payables and
re-measurement of cash balances denominated in currencies other than the
functional currency of the respective operating division recording the
instrument.
Income Taxes
  The Company recorded net income tax expense of $627 thousand (4.03%) during
the three months ended June 30, 2021, which included tax expense of $358
thousand from certain discrete items related to stock compensation and uncertain
tax positions. The income tax expense, exclusive of discrete items, was $269
thousand (1.73%) during the three months ended June 30, 2021. The Company
expects its full year effective tax rate to be in the range of 2.5% to 3.5%
Results of Operations - Six Months Ended June 30, 2021 and 2020
Operating Revenue

  During the six months ended June 30, 2021, our total operating revenues
increased $287.2 million, or 115%, to $536.4 million as compared to
$249.2 million for the same period in 2020. Total revenues increased
year-over-year during the six months ended June 30, 2021 due primarily to
increases in revenues from the Company's payment solutions offerings in India
(primarily prepaid gift cards), which increased by more than $309 million
year-over-year, or greater than 540%. Reported revenues were positively impacted
by the strengthening of foreign exchange rates in all of our operating
geographies except Brazil during the six months ended June 30, 2021. The largest
positive impact due to stronger currencies was in the Australian dollar and
Indian rupee. Specifically, the year-over-year impact from fluctuations of
exchange rates in the countries that we operate, in the aggregate, increased
reported revenues by approximately $5.7 million for the six months ended
June 30, 2021. International revenue accounted for 85.9% and 66.4% of the
Company's total revenue for the three months ended June 30, 2021 and 2020,
respectively.
Cost of Services Provided
  Costs of services provided, which includes costs associated with customer
support, consulting, implementation, and training services, increased
$292.0 million, or 274%, to $398.6 million for the six months ended June 30,
2021 as compared to $106.6 million for the same period in 2020. For the six
months ended June 30, 2021, cost of services as a percentage of total revenues
increased to 74.3% of total revenues as compared to 42.8% for the six months
ended June 30, 2020. The increase in the Company's cost of services provided as
a percentage of total revenues is primarily due to revenue mix changes year over
year, particularly the increase of prepaid gift cards sold within the EbixCash
India operations. Prepaid gift card revenues have increased at a materially
higher rate versus other Ebix products and services since the COVID-19 pandemic
began in March
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2020.  Payment solutions revenues increased by greater than 540% year-over-year
in the six months ended June 30, 2021 and carry lower gross margins relative to
other solutions/services offered by the Company.
Product Development Expenses

Product development expenses increased $ 1.9 million, or 10.9%, to
$ 19.7 million during the six months ended June 30, 2021 compared to
$ 17.8 million during the same period in 2020. Product development expenses since the start of 2020 have been reduced from historical averages due to the impact of Covid-19 on the Company’s development projects.

Sales and marketing costs

Selling and Marketing Costs of $ 7.2 million during the six months ended
June 30, 2021 were flat compared to $ 7.3 million during the same period in 2020. General and administrative expenses

  General and administrative expenses for the six months ended June 30, 2021 of
$44.7 million were flat compared to the comparable prior year period. For the
six months ended June 30, 2021 increased personnel costs, including travel
expenses, of approximately $1.9 million, were more than offset by decreased rent
expense of $3.0 million and a reduction of bad debt expense of approximately
$2.8 million. Additionally, general and administrative expenses for the six
months ended June 30, 2020 were reduced by $3.3 million due to a decrease in the
Company's acquisition earn-out accrual related to two prior acquisitions.
Acquisition earn-out contingent liabilities are re-measured quarterly based on
the assessed fair values and changes in anticipated future revenue levels, with
any changes reflected as reductions or increases to general and administrative
expenses as reported in the Company's Condensed Consolidated Statements of
Income.
Amortization and Depreciation Expenses
  Amortization and depreciation expenses increased $1.0 million, or 15%, to
$7.8 million for the six months ended June 30, 2021 as compared to $6.8 million
for the same period in 2020, primarily due to the impact of the reclassification
of indefinite-lived intangibles to amortizing intangibles during the second half
of 2020, as well as the impact of intangible amortization from acquisitions made
in 2020 that are not reflected in the year-to-date 2020 results.
Interest Income
  Interest income decreased $58 thousand, or 70%, to $25 thousand for the six
months ended June 30, 2021 as compared to $83 thousand in the second quarter of
2020.
Interest Expense
  Interest expense of $18.5 million for the six months ended June 30, 2021
increased by 13.2% year-over-year as compared to $16.4 million for the same
period in 2020. The Company's average debt outstanding under its corporate
credit facilities decreased by over $30 million for the six months ended
June 30, 2021 as compared to the same period in the prior year, but the average
interest rate in the year-to-date period in 2021 increased by approximately 60
basis points. Secondarily, increased interest expense was incurred related to
the Company's EbixCash business in the second quarter of 2021 versus the second
quarter of 2020 when countrywide lockdowns were in place in India.
Foreign Currency Exchange Gain (Loss)
  The Company recorded a net foreign currency exchange loss for the six months
ended June 30, 2021 in the amount of $616 thousand, which consisted of net
losses realized and unrealized upon the settlement of receivables or payables
and re-measurement of cash balances denominated in currencies other than the
functional currency of the respective operating division recording the
instrument.
Income Taxes
  The Company recorded net income tax expense of $1.8 million (4.80%) during the
six months ended June 30, 2021, which included tax expense of $696 thousand from
certain discrete items related to stock compensation and uncertain tax
positions. The income tax expense, exclusive of discrete items, was $1.1 million
(2.98%) during the six months ended June 30, 2021. The Company expects its full
year effective tax rate to be in the range of 2.5% to 3.5%
Liquidity and Capital Resources
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Contents

  Our principal sources of liquidity are the cash flows provided by our
operating activities and cash and cash equivalents on hand.
We intend to utilize cash flows generated by our operations, in combination with
the possible issuance of additional debt or equity, to fund capital expenditures
and organic growth initiatives, to make strategically accretive business
acquisitions, to retire outstanding indebtedness, and to repurchase shares of
our common stock if and as market and operating conditions warrant.
  We believe that anticipated cash flows provided by our operating activities,
together with current cash balances and access to credit and capital markets, if
required, will be sufficient to meet our projected cash requirements for the
next twelve months, although any projections of future cash needs, cash flows,
and the general market conditions for credit and equity securities is subject to
substantial uncertainty. In the event additional liquidity needs arise, we may
raise funds from a combination of sources, including the potential issuance of
debt or equity securities. However, there are no assurances that such financing
will be available in amounts or on terms acceptable to us, if at all. In
addition, the covenants in our Credit Facility could adversely affect our
ability to obtain such financing and our ability to make strategic acquisitions,
fund investments, repurchase shares of our common stock or engage in other
business activities that could be in our interest.

Our cash and cash equivalents were $85.1 million and $105.0 million at June 30,
2021 and December 31, 2020, respectively. The Company holds material cash and
cash equivalent balances overseas in foreign jurisdictions. The free flow of
cash from certain countries where we hold such balances may be subject to
repatriation tax effects and other restrictions. Furthermore, the repatriation
of earnings from some of our foreign subsidiaries would result in the
application of withholding taxes at the foreign source and taxation at the U.S.
parent level upon receipt of the repatriation amounts.

The approximate balances of cash, cash equivalents, restricted cash and short-term investments held in our we operations and each of our foreign subsidiaries in August 2, 2021 are presented in the table below:

             Country/Region          Cash, Restricted Cash and ST investments
                                                  (In thousands)
         India                      $                                  54,749
         United States                                                 20,007
         Australia                                                     12,969
         Philippines                                                    7,440
         Europe                                                         2,339
         Singapore                                                      3,055
         Canada                                                         3,041
         Latin America                                                  2,186
         New Zealand                                                    1,199
         United Arab Emirates                                           1,319
         Indonesia                                                        854
         Mauritius                                                          3

         Total                      $                                 109,161



  Our current ratio increased to 1.96 at June 30, 2021 from 1.89 at December 31,
2020 and our working capital position decreased to $170.3 million at June 30,
2021 from $170.5 million at December 31, 2020.

Business combinations

  The Company seeks to execute accretive business acquisitions in combination
with organic growth initiatives as part of its comprehensive business growth and
expansion strategy. The Company looks to acquire businesses that are
complementary to Ebix's existing products and services.
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Contents

During the six months ending June 30, 2021, the Company has not made any business acquisitions.

  During the twelve months ended December 31, 2020, the Company completed two
business acquisitions, as follows:
Effective May 4, 2020, Ebix acquired from bankruptcy India-based Trimax IT
Infrastructure & Services Ltd ("Trimax"), which provides IT and integration
services to state-owned transport corporations, operates data centers, and is an
IT infrastructure solution provider, for approximately $9.9 million of upfront
consideration. Additionally, Ebix issued preferred shares in Trimax to the
selling shareholders that can be sold five years from the closing of the
acquisition based on an independent valuation performed by a Big 4 valuation
firm. The maximum value of the preferred shares upon sales is approximately
$9.9 million. The valuation and purchase price allocation was finalized during
the second quarter of 2021.
On October 1, 2020 the Company acquired a 70% interest in AssureEdge Global
Services ("(AssureEdge") for a total purchase price of approximately
$5.0 million, including net working capital acquired. AssureEdge is a pan-India
based BPO company, with a variety of BPO offerings via six contact centers
across the country. It serves a number of industries and clients that have
cross-selling value for EbixCash services. The valuation and purchase price
allocation remains preliminary and will be finalized as soon as practicable, but
in no event longer than one year from the effective date of this transaction.
A significant component of the purchase price consideration for many of the
Company's business acquisitions is a potential subsequent cash earn-out payment
based on reaching certain specified future revenue targets. The terms for the
contingent earn out payments in most of the Company's business acquisitions
typically address the GAAP recognizable revenues achieved by the acquired entity
over a one-, two-, and/or three-year period subsequent to the effective date of
their acquisition by Ebix. These terms typically establish a minimum threshold
revenue target to achieve over the agreed upon period post acquisition to earn
the specified cash earn out payment. The Company applies these terms in its
calculation and determination of the fair value of contingent earn out
liabilities for purchased businesses as part of the related valuation and
purchase price allocation exercise for the corresponding acquired assets and
liabilities. The Company recognizes these potential obligations as contingent
liabilities and are reported as such on its Condensed Consolidated Balance
Sheets. As discussed in more detail in Note 1, these contingent consideration
liabilities are recorded at fair value on the acquisition date and are
remeasured quarterly based on the then assessed fair value and adjusted if
necessary. As of June 30, 2021, the total of these contingent liabilities was
$2.6 million, while at December 31, 2020, the total of these contingent
consideration liabilities was $0.

Operating activities

  Net cash provided by our operating activities was $21.7 million for the six
months ended June 30, 2021. The primary components of the cash provided by our
operating activities during the six-month period consisted of net income of
$37.3 million, $7.8 million of depreciation and amortization, $2.7 million of
non-cash share-based compensation, $2.5 million of right-of-use assets
amortization, $1.6 million of amortization of capitalized software development
costs and $(28.3) million of working capital requirements, primarily due to
decreased accounts payable and accrued expenses, an increase in other assets
during the year-to-date period, and an increase in receivables from service
providers. During the six months ended June 30, 2021, the Company made $12.1
million of tax payments.

  Net cash provided by our operating activities was $58.4 million for the six
months ended June 30, 2020. The primary components of the cash provided by our
operating activities during the six-month period consisted of net income of
$48.2 million, $6.8 million of depreciation and amortization, $2.3 million of
non-cash share-based compensation, $3.3 million of right-of-use assets
amortization, $1.7 million of amortization of capitalized software development
costs and $3.0 million of working capital requirements primarily due to
decreased accounts receivable, receivables from service providers, payables to
service agents and accounts payable and accrued expenses. Offsetting these
amounts were a reduction of contingent acquisition earn out accruals of
$3.3 million, a reduction in lease liabilities of $3.0 million, and
$489 thousand of net losses attributable to noncontrolling interest. During the
six months ended June 30, 2020, the Company made $2.1 million of tax payments.


Investing Activities

Net cash used for investing activities during the half-year ended June 30, 2021 has been $ 6.4 million thousand, and consisted mainly of $ 3.1 million for software development costs that have been capitalized, $ 1.7 million for capital expenditure and reductions in marketable securities of $ 11.3 million
(in particular bank certificates of deposit).

  Net cash used for investing activities during the six months ended June 30,
2020 was $36.5 million, and consisted primarily of $5.2 million used for
acquisition-related payments for acquisitions consummated in prior periods, $3.3
million for
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the development costs of table of contents software that have been capitalized, $ 757,000 for capital expenditures and increases in marketable securities of $ 27.3 million
(in particular bank certificates of deposit).

Fundraising activities

  During the six months ended June 30, 2021, net cash used by financing
activities was $43.1 million, which consisted primarily of a $6.9 million
reduction in EbixCash working capital facilities in India, $31.3 million used to
make scheduled payments on the existing term loan and $4.6 million of quarterly
dividends to our common stockholders.

  During the six months ended June 30, 2020, net cash used by financing
activities was $33.9 million, which consisted primarily of a $19.8 million
reduction in EbixCash working capital facilities in India, $9.4 million used to
make scheduled payments on the existing term loan and $4.6 million of quarterly
dividends to our common stockholders. Partially offsetting these financing cash
outflows was $1.4 million of cash proceeds from draws on the Company's revolving
line of credit.

Credit Facility

The Company maintains a senior secured syndicated credit facility, dated August
5, 2014, among Ebix, Inc., as borrower, its subsidiaries party thereto from time
to time as guarantors, Regions Bank (as administrative agent and collateral
agent) and the lenders party thereto from time to time (as amended from time to
time, the "Credit Facility") that provides a $450 million revolving line of
credit (the "Revolver") as well as a term loan (the "Term Loan"), which at
June 30, 2021 had a balance of $224.2 million. The Credit Facility matures in
February 2023.

On April 9, 2021, The Company entered into Amendment No. 12 to its Credit
Facility. Amendment No. 12 provided for, among other things, a waiver of any
potential event of default arising under the Credit Facility from the failure to
timely deliver the Company's audited financial consolidated financial statements
and related compliance certificate for the year ended December 31, 2020,
provided that there is no good faith determination by the requisite lenders
under the Credit Facility of a "Material Circumstance" (as defined and further
described in Amendment No. 12), which determination (if any) may only be made
within a specified period described in Amendment No. 12 and is subject to
certain cure rights of the Company. Amendment No. 12 also modified the
applicable margin that applies from the date of the amendment forward, modified
certain mandatory prepayment provisions, as well as certain other covenants
related to restricted payments, investments and certain reporting requirements.

On March 31, 2021, Ebix entered into Amendment No. 11 to the Credit Facility.
Amendment No. 11 provided, for, among other things, a limited waiver through
April 10, 2021, of any potential event of default arising under the Credit
Facility from failure to deliver the Company's audited consolidated financial
statements and related compliance certificate for the year ended December 31,
2020. Amendment No. 11 also modified certain covenants contained in the Credit
Facility, including with respect to certain permitted restricted payments and
investments.

On May 7, 2020, Ebix entered into Amendment No. 10 to the Credit Facility.
Amendment No. 10 provided for, among other things, increased flexibility under
financial maintenance covenants, which the Company sought in part due to the
unforeseen negative effects of the COVID-19 pandemic.

On March 30, 2020, the Company and certain of its subsidiaries entered into a
waiver related to the Credit Facility (the "Waiver"). The Waiver provided that
so long as the Company's leverage ratio is below 5.0 to 1.0 for the Company's
fiscal quarter ending March 31, 2020 pursuant to the terms of its compliance
certificate required by the Credit Facility, the existing leverage ratio
requirement of 3.5 to 1.0 was waived.

At June 30, 2021, the outstanding balance on the Revolver was $439.4 million and
the facility carried an interest rate of 5.50% at June 30, 2021, an increase
from 3.50% at the closing of Amendment No. 12 to the Credit Facility. The
balance on the Revolver is included in the long-term liabilities section of the
Condensed Consolidated Balance Sheets. During the six months ended June 30,
2021, the average and maximum outstanding balances of the revolving line of
credit component of the credit facility were $439.4 million and $439.4 million,
respectively. At December 31, 2020, the outstanding balance on the revolving
line of credit with Regions was $439.4 million and the facility carried an
interest rate of 3.50%. This balance was included in the long-term liabilities
section of the Condensed Consolidated Balance Sheets. During 2020, the average
and maximum outstanding balances on the revolving line of credit were $438.9
million and $439.4 million, respectively.

  At June 30, 2021, the outstanding balance on the Term Loan was $224.2 million,
of which $24.5 million is due within the next twelve months. $31.3 million of
principal payments were made during the six months ended June 30, 2021, of which
$11.3 million were scheduled amortization payments. This term loan also carried
an interest rate of 5.50% at June 30, 2021,
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subject to the same above mentioned increase in interest rate as the Revolver.
The current and long-term portions of the Term Loan are included in the
respective current and long-term sections of the Condensed Consolidated Balance
Sheets, the amounts of which were $24.5 million and $199.7 million, respectively
at June 30, 2021. At December 31, 2020, the outstanding balance on the Term Loan
was $255.5 million, of which $22.6 million was due within twelve months. The
Term Loan also carried an interest rate of 3.50% during the quarter ended
December 31, 2020.
Contractual Obligations
  For a presentation regarding material changes outside the ordinary course of
business to the Company's contractual obligations please refer to Notes 4 and 5
of the Notes to Condensed Consolidated Financial Statements.
Off-Balance Sheet Arrangements

We do not enter into off-balance sheet financing arrangements. Recent accounting positions

  For information about new accounting pronouncements and the potential impact
on our Consolidated Financial Statements, see Note 1 of the condensed notes to
the Condensed Consolidated Financial Statements in this Form 10-Q and Note 1 of
the Notes to Consolidated Financial Statements in our 2020 Form 10-K.
Application of Critical Accounting Policies
  The preparation of financial statements in conformity with GAAP, as
promulgated in the United States, requires our management to make significant
estimates and assumptions that affect the reported amounts of assets and
liabilities, revenues and expenses and related disclosures in our Condensed
Consolidated Financial Statements and accompanying notes. We believe the most
complex and sensitive judgments, because of their significance to the Condensed
Consolidated Financial Statements, result primarily from the need to make
estimates and assumptions about the effects of matters that are inherently
uncertain. The following accounting policies involve the use of "critical
accounting estimates" because they are particularly dependent on estimates and
assumptions made by management about matters that are uncertain at the time the
accounting estimates are made. In addition, while we have used our best
estimates based on facts and circumstances available to us at the time,
different estimates reasonably could have been used in the current period, and
changes in the accounting estimates that we used are reasonably likely to occur
from period to period both of which may have a material impact on our financial
condition and results of operations. For additional information about these
policies, see Note 1 of the Condensed Notes to the Condensed Consolidated
Financial Statements in this Form 10-Q. Although we believe that our estimates,
assumptions and judgments are reasonable, they are limited based upon
information presently available. Actual results may differ significantly from
these estimates under different assumptions, judgments or conditions.
  COVID-19 has created and may continue to create significant uncertainty in
global financial markets, which may reduce demand for our services, impact the
productivity of our workforce, reduce our access to capital, and harm our
business and results of operations. As of the date of our Condensed Consolidated
Financial Statements, we are not aware of any specific event or circumstance
that would require us to update our estimates or judgments, or to revise the
carrying value of our assets or liabilities. However, these estimates may change
as new events occur and additional information is obtained, which may result in
changes being recognized in our consolidated financial statements in future
periods. While we considered the effects of COVID-19 in our estimates and
assumptions, due to the current level of uncertainty over the longevity of the
economic and operational impacts of COVID-19 on our business, there may be other
judgments and assumptions that were not currently considered. Such judgments and
assumptions could result in a meaningful impact to our financial statements in
future periods. Actual results could differ from those estimates and any such
differences may have a material impact on our financial statements.
Revenue Recognition
  The Company derives its revenues primarily from software subscription and
transaction fees, software license fees, financial transaction fees, risk
compliance solution services fees, and professional service fees, including
associated fees for consulting, implementation, training, and project management
provided to customers with installed systems and applications. Sales and
value-added taxes are not included in revenues, but rather are recorded as a
liability until the taxes assessed are remitted to the respective taxing
authorities.

The Company determines revenue recognition by applying the following steps: • identification of the contract (s) with a customer;

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•identification of the performance obligations in the contract;
•determination of the transaction price;
•allocation of the transaction price to the performance obligations in the
contract; and
•recognition of revenue when, or as, we satisfy a performance obligation.

The Company analyzes its various departments individually to determine the appropriate basis for revenue recognition, as further described below. In addition, some services exist in multiple channels. As Ebix derives revenue from three product / service channels – EbixCash Exchanges, Insurance Exchanges and Risk compliance solutions-For policy disclosure purposes, contracts are discussed in conjunction with the channel for which they are most important.

The Company assesses the terms of customer contracts, including termination rights, penalties (implicit or explicit) and renewal rights. EbixCash Exchanges (“EbixCash”)

  EbixCash revenues are primarily derived from the sales of prepaid gift cards
and consideration paid by customers for financial transaction services,
including services like transferring or exchanging money. The significant
majority of EbixCash revenue is for a single performance obligation and is
recognized at a point in time. These revenues vary by transaction based upon
channel, send and receive locations, the principal amount sent, whether the
money transfer involves different send and receive currencies, and speed of
service, as applicable.

  EbixCash also offers several other services, including payment services and
ticketing and travel services for which revenue is impacted by various factors.
EbixCash acts as the principal in most transactions and reports revenue on a
gross basis, as EbixCash controls the service at all times prior to transfer to
the customer, is primarily responsible for fulfilling the customer contracts,
has the risk of loss, and has the ability to establish transaction prices.

The main services from which EbixCash derives revenue are:

Gift cards

  EbixCash sells general purpose prepaid gift cards to corporate customers and
consumers that can be later redeemed at various merchants. The gift cards are
co-branded between EbixCash and its card-issuing banking partner(s) and are
affiliated with major payment associations such as Visa, Mastercard, and Rupay.
The gift cards are sold to a diversified set of corporate customers from various
industries. The gift cards are used by corporate customers to disburse
incentives to the end users, which are primarily their employees, agents and
business associates. The gift cards sold by EbixCash are not reloadable, cannot
be used at ATMs or for any other cash-out or funds transfer transactions, and
are subject to maximum limits per card (currently 10,000 INR or approximately
$140). Gift cards issued by EbixCash are valid for a period of 15 months from
the date of issuance for virtual cards and three years for physical cards.
EbixCash has entered into arrangements with banks and financial institutions to
settle payments to merchants based on utilization of the gift cards.

The Company has end-to-end responsibilities related to the gift cards sold, from
the activation and ongoing utilization of the gift cards to customer service
responsibilities to risk of loss due to fraud on the gift cards sold. EbixCash
acts a principal in the sale of gift card and, thus, gift card revenue is
recognized on a gross basis (full purchase value at the time of sale) with the
corresponding cost of the gift cards recorded as cost of services provided.
Unredeemed gift cards at June 30, 2021 are recorded as deferred revenues in the
financial results.


EbixCash Travel Exchanges

  EbixCash Travel revenues are primarily derived from commissions and
transaction fees received from various travel providers and international
exchanges involved in the sale of travel to the consumer. EbixCash Travel
revenue is for a single performance obligation and is recognized at a point in
time. Travel revenues include reservation commissions, segment fees from global
travel exchange providers, and transaction net revenues (i.e., the amount
charged to travelers less the amount owed to travel service providers) in
connection with our reservation services; ancillary fees, including travel
insurance-related revenues and certain reservation booking fees; and credit card
processing rebates and customer processing fees. EbixCash Travel services
include the sale of hotel rooms, airline tickets, bus tickets and train tickets.
EbixCash's Travel revenue is also derived from ticket sales, wherein the
commissions payable to EbixCash Travel, along with any transaction fees paid by
travel providers and travel exchanges, is recognized as revenue after completion
of the service. The transaction price on such services is agreed upon at the
time of the purchase.
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  EbixCash Travel revenue for the corporate MICE (Meetings, Incentives,
Conferences, and Exhibitions) packages is recognized at full purchase value at
the completion of the obligation, with the corresponding costs recorded under
direct expenses. For MICE revenues, EbixCash Travel acts as the principal in
transactions and, accordingly, reports revenue on a gross basis. EbixCash Travel
controls the service at all times prior to transfer to the customer, is
responsible for fulfilling the customer contracts, has the risk of loss, and has
the ability to establish transaction prices.

EbixCash money transfer

  For the EbixCash money transfer business, EbixCash has one performance
obligation whereupon the customer engages EbixCash to perform one integrated
service. This typically occurs instantaneously when the beneficiary entitled to
receive the money transferred by the sender visits the EbixCash outlet and
collects the money. Accordingly, EbixCash recognizes revenue upon completion of
the following: 1) the customer's acknowledgment of EbixCash's terms and
conditions and the receipt of payment information, 2) the money transfer has
been processed, 3) the customer has received a unique transaction identification
number, and 4) funds are available to be picked up by the beneficiary. The
transaction price is comprised of a transaction fee and the difference between
the exchange rate set by EbixCash to the customer and the rate available in the
wholesale foreign exchange market, as applicable, both of which are readily
determinable at the time the transaction is initiated.

Currency exchange and remittance services

  For EbixCash's foreign exchange and payment services, customers agree to terms
and conditions for all transactions, either at the time of initiating a
transaction or signing a contract with EbixCash to provide payment services on
the customer's behalf. In the majority of EbixCash's foreign exchange and
payment services transactions, EbixCash makes payments to the recipient to
satisfy its performance obligation to the customer, and, therefore, EbixCash
recognizes revenue on foreign exchange and payment when this performance
obligation has been fulfilled.

Consumer payment services

  EbixCash offers several different bill payment services that vary by
considerations such as: 1) who pays the fee to EbixCash (consumer or biller), 2)
whether or not the service is offered to all potential consumers, or only to
those for EbixCash has a relationship with the biller and 3) whether the service
utilizes a physical agent network offered for consumers' convenience, among
other factors. The determination of which party is EbixCash's customer for
revenue recognition purposes is based on these considerations for each of
EbixCash's bill payment services. For all transactions, EbixCash's customers
agree to EbixCash's terms and conditions, either at the time of initiating a
transaction (where the consumer is determined to be the customer for revenue
recognition purposes) or upon signing a contract with EbixCash to provide
services on the biller's behalf (where the biller is determined to be the
customer for revenue recognition purposes). As with consumer money transfers,
customers engage EbixCash to perform one integrated service - collecting money
from the consumer and processing the bill payment transaction. This service
provides the billers real-time or near real-time information regarding their
customers' payments and, thus, simplifying the billers' collection efforts. The
transaction price on bill payment services is contractual and determinable.
Certain biller agreements may include per-transaction or fixed periodic rebates,
which EbixCash records as a reduction to revenue.

EbixCash technology services

EbixCash also provides on-demand technology to various providers in the areas of lending, wealth and asset management, and travel around the world.

Insurance exchanges

  Insurance Exchanges revenues are primarily derived from consideration paid by
customers related to our SaaS platforms, related services and the licensing of
software. A typical contract for our SaaS platform will also include services
for setup, customization, transaction processing, maintenance, and/or hosting.
Determining whether products and services are considered distinct performance
obligations that should be accounted for separately may require significant
judgment. Set-up and customization services, related to our SaaS platforms, are
not considered to be distinct from the usage fees associated with the SaaS
platform and, accordingly, are accounted for as a single performance obligation.
These services, along with the usage or transaction fees, are recognized over
the contract duration, which considers the significance of the upfront fees in
the context of the contract and which may, therefore, exceed the initial
contracted term. A customer's transaction volume tends to remain
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fairly consistent during the contract period without significant fluctuations.
The invoiced amount is a reasonable approximation of the revenue that would be
allocated to the related period under the variable consideration guidelines in
ASC 606-10-32-40. To the extent that a SaaS contract includes subscription
services or professional services, apart from the upfront customization, these
are considered separate performance obligations. We also have separate software
licensing (on premise/perpetual), unrelated to our SasS platforms, which is
recognized at a point in time when the license is transferred to the customer.
  Contracts generally do not contain a right of return or refund provisions. Our
contracts often do contain overage fees, contingent fees, or service level
penalties that are accounted for as variable consideration. Revenue accounted
for as variable consideration is recognized using the "right to invoice"
practical expedient when the invoiced amount equals the value provided to the
customer.
Software-as-a-Service ("SaaS")

  The Company allocates the transaction price to each distinct performance
obligation using the relative stand-alone selling price. Determining the
stand-alone selling price may require significant judgement. The stand-alone
selling price is the price at which an entity has sold or would sell a promised
good or service separately to a customer. The Company determines the stand-alone
selling price based on the observable price of products or services sold
separately in comparable circumstances, when such observable prices are
available. When standalone selling price is not directly observable, the Company
estimates the stand-alone selling price using the market assessment approach by
considering historical pricing and other market factors.

Software licenses

  Software license revenues attributable to a software license that is a
separate performance obligation are recognized at the point in time that the
customer obtains control of the license.
Subscription Services

  Subscription services revenues are associated with performance obligations
that are satisfied over specific time periods and primarily consist of
post-contract support services. Revenue is generally recognized ratably over the
contract term. Our subscription contracts are generally for an initial
three-year period with subsequent one-year automatic renewals.

Transaction fees

  Transaction revenue is comprised of fees applied to the volume of transactions
that are processed through our SaaS platforms. These fees are typically based on
a per-transaction rate and are invoiced for the same period in which the
transactions were processed and as the performance obligation is satisfied. The
amount invoiced generally equals the value provided to the customer, and revenue
is typically recognized when invoiced using the as-invoiced practical expedient.

Professional services

  Professional service revenue primarily consists of fees for setup,
customization, training, or consulting. Professional service fees are generally
on a time and materials basis or a fixed fee basis. Revenues for time and
materials are recognized as such services are rendered, while fixed fee revenues
are recognized based on the input method that is driven by the expected hours to
complete the project measured against the actual hours completed to date.
Professional services, particularly related to SaaS platforms, may have
significant dependencies on the related licensed software and may not be
considered a distinct performance obligation.

Risk compliance solutions (“RCS”)

  RCS revenues consist of two revenue streams - Certificates of Insurance (COI)
and Consulting Services. COI revenues are derived from consideration paid by
customers for the creation and tracking of certificates of insurance. These are
transaction-based revenues. Consulting Services revenues are driven by distinct
consulting service engagements rendered to customers, for which revenues are
recognized using the output method on a time and material basis as the services
are performed.

COI Creation and Tracking

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  The Company provides services to issue and track certificates of insurance in
the United States and Australian markets. Revenue is derived from transaction
fees for each certificate issued or tracked. The Company recognizes revenue at
the issuance of each certificate or over the period the certificate is being
tracked.

Consulting Services

  The Company provides consulting services to clients around the world for
project management and development. Consulting services fees are generally on a
time and materials basis or a fixed fee basis. Revenues for time and materials
are recognized using an output method as the services are rendered, while fixed
fee revenues are recognized based on the input method that is driven by the
expected hours to complete the project measured against the actual hours
completed to date.
Allowance for Doubtful Accounts Receivable
  Management specifically analyzes accounts receivable and historical bad debts,
write-offs, customer concentrations, customer credit-worthiness, current
economic trends and changes in our customer payment terms when evaluating the
adequacy of the allowance for doubtful accounts.
Income Taxes
  Deferred income taxes are recorded to reflect the estimated future tax effects
of differences between financial statement and tax basis of assets, liabilities,
operating losses, and tax credit carry forwards using the tax rates expected to
be in effect when the temporary differences reverse. Valuation allowances, if
any, are recorded to reduce deferred tax assets to the amount management
considers more likely than not to be realized. Such valuation allowances are
recorded for the portion of the deferred tax assets that are not expected to be
realized based on the levels of historical taxable income and projections for
future taxable income over the periods in which the temporary differences will
be deductible.
  The Company also applies FASB accounting guidance on accounting for
uncertainty in income taxes positions. This guidance clarifies the accounting
for uncertainty in income taxes by prescribing the minimum recognition threshold
a tax position is required to meet before being recognized in the financial
statements.
Foreign Currency Matters

The functional currency is the we Dollar for the Company’s foreign subsidiaries in Dubai and Singapore, because both the research and development of intellectual property provided by its Dubai and Singapore
subsidiaries support the Company’s operating divisions around the world, which are primarily dealt with in we Dollars.

  The functional currency of the Company's other foreign subsidiaries is the
local currency of the country in which the subsidiary operates. The assets and
liabilities of these foreign subsidiaries are translated into U.S. dollars at
the rates of exchange at the balance sheet dates. Income and expense accounts
are translated at the average exchange rates in effect during the period. Gains
and losses resulting from translation adjustments are included as a component of
other comprehensive income in the accompanying Condensed Consolidated Balance
Sheets. Foreign exchange transaction gains and losses that are derived from
transactions denominated in a currency other than the subsidiary's functional
currency are included in the determination of net income.
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