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GOTHAM CITY RESEARCH LLC

Ebix: New Problems Emerge

in Singapore, Sweden, and India

"Fool me once, shame on you; fool me twice, shame on me"

Disclaimer:
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Page 2 of 30

Table of Contents
I.
II.
III.
IV.
V.
VI.
VII.
VIII.

Disclaimer
Summary
Introduction
New Problems Emerge in Singapore and India
Ebixs Swedish Problems
Cherry Bekaert Did Not Audit Ebix (or So We Suspect)
Event of Default
End Notes

Page 3 of 30

GOTHAM CITY RESEARCH LLC

a

GOTHAM CITY RESEARCHS OPINIONS

Ebix improperly financed $100+ million of acquisitions and

stock buybacks, tax free, under the guise of a bogus
intercompany asset sale, between Singapore & India.
Ebix Inc. & its subsidiaries filings are materially incorrect.
Singapore-related irregularities have worsened with time.
Ebix meets the requirements for an Event of Default, per
Article VII (c) of the Credit Agreement.
Cherry Bekaert never properly audited Ebix, as evidenced
by BDO Sweden ABs warnings and the growing list of
material accounting irregularities.
Current shareholders are likely to recover little to no value,
once the USA & Ebixs creditors enforce their claims.

SUMMARY OF FACTS

There is a $1.8, $3.2, & $39.2 million cash flow irregularity

within the 2009, 2010, & 2011 Singapore filings.
No information is provided regarding Singapores largest
2011 cash flow item, a $103 million related party item.
Ebix Singapore sold Ebix Software Asia SEZ to itself for $66
million, and booked a $64 million gain (a 54x ROI).
Swedish pre-tax income is less than %1 of the amounts
claimed in the SEC filings, according to Swedish filings.
In 2011, BDO Sweden was unable to obtain audit evidence
that the Swedish subsidiary owns Ebix Singapore.
BDO Sweden was unable to confirm that any of the
dealings between Ebixs Swedish subsidiary, Ebix
Singapore and Ebix Australia, ever actually occurred.
The Singapore and Indian filings show materially differing
amounts for Ebix Singapores purchase of Ebix Software
Asia SEZ. The difference exceeds $13 million.
There is a $27 million unexplained irregularity in the
related party loan liability, in the 2011 Balance Sheet.
Ebix, Inc.s auditor Cherry Bekaert Holland signed off on
Ebixs 10Ks, despite all the above-mentioned problems.

Company: EBIX
Ticker: EBIX
Share price: $10.60
Market cap: $402M
Enterprise value: $442M
52-week high: $24.64
52-week low: $8.21
Shares outstanding:
37.97M
Float: 33.18M
Avg. Daily Vol: 1,728K
TTM Revenue: $211M
TTM Net income: $67M
2012 YTD FCF: $61M
Net debt: -$36M
Tangible book: -$29M
Dividend yield: 2.8%
FYE: Dec. 31
Ebix Inc. Auditor: Cherry
Bekaert Holland
Singapore Auditor: BDO
LLP
Swedish Auditor: BDO
Sweden AB

Page 4 of 30

INTRODUCTION
Just when we thought we were ready to move on from Ebix, Gotham City Research received a copy of
Ebix Singapores 2011 financial statements (released on July 30, 2013) and EIH Holdings AB (the Swedish
subsidiary) 2011 filings in mid-August. We did not have the opportunity to review the filings until
September. Once we did, however, we were shocked by what we found. We discovered a few smoking
guns, and felt compelled to share our new findings with the public as soon as humanly possible.
So Why Ebix Again? New Problems in Singapore, Sweden, and India
We discovered material and growing holes in Ebix Singapores Balance Sheets and Statements of Cash
Flows. We also found a $103 million transaction, the single largest Statement of Cash Flows transaction
in 2011, without a single sentence explaining what this might be (ironic, given that there is a footnote
dedicated to explaining a $0.5 million transaction). Finally, we found a $27 million accounting deficiency
in the 2011 related party loan balance, as well as an unexplained restatement of 2010s cash flows.1
Problems in Sweden
In addition to all the Singapore-related problems summarized above, we found a whole new set of
problems in Ebixs Swedish subsidiary, EIH Holdings AB. Swedish filings reveal losses2, not the pre-tax
earnings of $6-$7 million as claimed in the 2011 and 2012 SEC filings3. BDO Sweden, EIH Holdings
auditor, warned4:
We have therefore been unable to obtain audit evidence to support the Company's ownership of
its subsidiaries, nor been able to confirm the dealings between the Company and the subsidiaries.
The Underlying Story?
Gotham City Research believes it has identified at least two underlying narratives that tie together
nearly all the concerns raised in this report.
One of the key narratives: In 2011, Ebix wanted to finance over $100 million of acquisitions and stock
buybacks, while avoiding taxes. We believe Ebix cut corners to achieve these objectives. This is why:

Ebix devised a bogus $66 million sale (realizing a magical $64 million gain) of Ebix Software Asia
SEZ to Ebix India Private Ltd., enabling Ebix to transfer funds from India to Singapore.
Ebix Singapore provides no details regarding the largest cash flow line-item in the 2011 filing.
There is an accounting irregularity found with the 2011 $27 million Singapore related party loan.
Ebix exploits the fact that US SEC filings are due within 2-3 months of the fiscal year end,
whereas the Singapore and Indian subsidiaries financials seem due 12-18 months afterwards.
The Swedish subsidiarys auditor, BDO Sweden AB, issued warning statements in 2011.
Ebix stopped filing Swedish financial statements in 2012, and EIH Holdings AB was consequently
liquidated by Swedish regulators in 2013.

Page 5 of 30

New Problems Emerge in Singapore and India

Gotham City Researchs Core Thesis
Our thesis is best summarized by two, overarching narratives:
1. In 2011, Ebix improperly financed $100+million of acquisitions and stock buybacks, tax free,
under the guise of a bogus intercompany asset sale, between Singapore & India.
2. Ebix Inc. and its subsidiarys financial statements are materially inaccurate (since 2009).
Furthermore, the accounting irregularities and omissions have worsened with time.
The following new Singapore and India-related facts support our two-pronged thesis:

Ebix Singapore sold Ebix Software Asia SEZ to itself for $66 million, and booked a $64 million
gain, a 54x ROI.
Ebix Singapore provides the least amount of information (i.e. no information) on its largest cash
flow line-item, a $103 million transaction related party transaction in 2011.
The related party loan balance oddly increases by $27 million in 2011. The notes claim proceeds
were used to purchase intangible assets, yet the Statement of Cash Flows contradicts this claim.
BDO Sweden was unable to confirm that any of the dealings between Ebixs Swedish subsidiary,
Ebix Singapore and Ebix Australia, ever actually occurred. (See Ebixs Swedish Problems)
There are material irregularities found in the Trade and other payables accounts (a current
liability) in the 2009, 2010, and 2011 filings. The irregularities are $1.8 million, $3.2 million, and
$39.2 million respectively.
Ebix Singapores acquisition of Ebix Software Asia SEZ cost $13 million more according to the
India filings than it did according to the Singapore filings.
Ebix Singapore 2010 Statement of Cash Flows was restated in its 2011 filing without explanation.
Swedish pre-tax income is less than %1 of the amounts claimed in the SEC filings, according to
Swedish filings. (See Ebixs Swedish Problems)
In 2011, BDO Sweden was unable to obtain audit evidence that the Swedish subsidiary owns
Ebix Singapore. (See Ebixs Swedish Problems)

Ebix & Robin Raina failed to dispute or address the following irregularities identified in prior reports1

2010 Singapore intangible assets are misstated by $67 million.

2011 long-lived assets do not add up.
The Confirmnet acquisition cost 30% more according to the India filings than it did according to
the SEC filings.
EZ-Datas IP was transferred to Singapore yet Raina says No US IP has been transferred to any
other country.
The Robin Raina Foundations IRS filings are full of material accounting irregularities.
Page 6 of 30

Ebix Singapores $66 million Sale of Ebix Software Asia SEZ in 2011 is a Sham Transaction
Ebix Singapore sold Ebix Software Asia SEZ Pvt Ltd to Ebix Software India Private Limited, and magically
pocketed a gain of $64 million (a 54x return on investment) in just 3 years time 2:

Note that Ebix Singapore owns both of the Indian subsidiaries, Ebix Software Asia SEZ Pvt Ltd and Ebix
Software India Private Limited (India):

This sale is highly unusual because its as if the right hand received money from the left hand, and
somehow minted a handsome profit, funded acquisitions + stock buyback, and avoided paying taxes all
in one fell swoop. The economics of the transaction make little sense and does not meet the criteria of
an arms-length transaction3:

Ebix Software Asia SEZ Sale

Sale price $66,026,971
Initial price $1,220,793
Realized Gain $64,806,178
Returned on Investment
54.1x
India external revenue 2011
ZERO

Page 7 of 30

Gotham City Research believes Ebix Singapores sale of Ebix Software Asia SEZ is a sham transaction,
devised in order to evade repatriation taxes related to its acquisitions and stock buybacks:

Ebixs Indian subsidiaries generated zero external revenue since incorporation.

A third party would not purchase Ebix Software Asia SEZ at a 54.1x multiple of cost, given it
generated zero external revenue. Private market comparable company valuations would lead to
a much lower valuation. A discounted cash flow analysis would also render a low valuation.
Ebix wanted to utilize the $66 million stuck in India, to finance acquisitions and stock buybacks
while avoiding taxes.
As a result of the in-flow of cash to Ebix Singapore, and subsequent acquisitions, Ebix was able
to artificially and improperly reduce Ebix Singapores leverage ratios.
We believe Ebix has avoided public and regulatory scrutiny over this sham transaction, as its
2011 Singapore filing was not signed off by BDO LLP, its auditor, until July 15, 2013.
It seems that BDO Sweden AB, the Swedish subsidiarys auditor, started to question the validity
of Ebixs inter-company transactions in 2011 (See Ebixs Swedish Problems)

How to Mint $20-$25 million ($66 million taxed at a 35% rate) Out of Thin Air
Before the Ebix Software Asia SEZ Transaction

Ebix Singapore

Ebix Software
Asia SEZ

Ebix Software
India Private
Limited

After the Ebix Software Asia SEZ Transaction

Ebix Singapore

Ebix Software
India Private
Limited
Ebix Software
Asia SEZ

Page 8 of 30

Ebix Singapore Provides No Disclosure on Its Largest Cash Flow Line Item
Due from holding company happens to be the single largest item on the 2011 Statement of Cash Flows
($103 million). Yet there is not a single sentence hinting what it might be. This lie of omission leads us to
further believe that Ebix improperly funneled over $100 million out of Singapore4:

Why else would Ebix Singapore provide a footnote for Issue of shares (Note 12), a measley $0.5 million
transaction, but not a footnote (or single sentence), to explain a $100+ million transaction?
BDO LLP, Ebix Singapores Auditor, Signed Off on the 2011 Filings in July 15, 2013

It seems the Swedish regulators shutdown Ebixs Swedish subsidiary, EIH Holdings AB, because it too
found all the above highly problematic. (See Ebixs Swedish Problems)

Page 9 of 30

The $27 Million Related Party Loan Accounting Irregularity

The loan payable account increased by over $27 million in 20115:

Note 10 claims the loan payable was used for the purchase of intangible assets:

The Statement of Cash Flows Does Not Support the Note 10 Explanation:

As shown above, Purchase of intangible assets in 2011 was zero. Yet the loan payable balance, on the
balance sheet, increased by $27 million. Something is amiss. We believe this deficiency supports our
belief that Ebix improperly financed its acquisitions and stock buybacks in 2011. The proceeds from this
$27 million loan were used to complete acquisitions and fund stock buybacks, not purchase intangible
assets.
Page 10 of 30

Cash Flow Irregularities Found in the Singapore 2009 Filing is a Big Problem for Ebix
Between 2003-2008, the calculated year-over-year changes in Trade and other payables as shown on
the Balance Sheets were nearly identical to the Trade and other payables amounts shown in the
working capital changes section within the Statement of Cash Flows6:
Trade and Other Payables - Balance Sheet vs. Statement of Cash Flow Irregularities
2003
2004
2005
2006
2007
2008
Singapore $s
Trade and other payables
$241,233
$580,324
$492,366 $1,097,037 $1,755,692 $1,517,706
y-o-y change as calculated
$339,091
($87,958) $604,671
$658,655
($237,986)
y-o-y change as reported
$339,101
($87,957) $604,672
$658,655
($237,986)
Unexplained Trade & Other Payables:
($10)
($1)
($1)
$0
$0

2009

$10,545,145
$9,027,439
$7,243,916
$1,783,523

Something changed in 2009, as the calculated amount differs from the disclosed amount, as highlighted.
From the Singapore 2009 Balance Sheet:

From the Singapore 2009 Statement of Cash Flows:

Page 11 of 30

Strangely enough, Ebix Singapores Interest Expense for 2009 is identical in amount to the $1,783,523
difference between the calculated and reported change in payables:

2009 Trade and other Payables Irregularities

2008
2009
Singapore $s
Trade and other payables $1,517,706 $10,545,145
y-o-y change as calculated ($237,986) $9,027,439
y-o-y change as reported ($237,986) $7,243,916
Unexplained Trade & Other Payables:
$0 $1,783,523

The Interest expense shown above corresponds to the original undisclosed related party loan Gotham
City Research Uncovered:

Page 12 of 30

The Singapore 2009 Filing Does Not Explain How the Payable Irregularity Equals the Interest Expense
The 2009 interest expense is added back, in its full amount, in the Statement of Cash Flows:

Adding back the Interest expense to cash flow from operating activities mathematically reconciles the
$1,783,525 irregularity between the calculated and reported change in Trade and other payables
However, this apparent mathematical reconciliation makes no sense:

Trade and other payables is a non-interest bearing account, i.e. there is no interest expense
associated with it. An interest expense-related adjustment, therefore, is out of the question.
Trade and other payables represents management and consulting fees. Management and
consulting fee are unrelated to the related party loan.
Trade and other payables is a current liability, whereas the related party loan is a non-current
liability.

Note 8 Supports the Above Two Points:

Page 13 of 30

Note 10 Supports Our Concerns:

Note 16 provides no clarity. Moreover, there is no mention that the interest expenses was a non-cash
expense (if it were a non-cash expense, it would make sense to add it back to cash):

Gotham City Research believes in the following possible explanations (none bode well for Ebix):
1. The interest expense add-back to the Statement of Cash Flows was created so that the Balance
Sheet and Statement of Cash Flows reconcile. That is, it was created in order to disguise the
irregularity.
2. The irregularity is a symptom of a much larger problem. For example, maybe the 2009 Singapore
loan transaction never actually occurred, and Ebix had difficulty reconciling all their shenanigans.
The Singapore filings and transactions are all sham, paper transactions and the company is
caught in the act, as the numbers dont tie in together.
3. Not only is the interest expense added back to disguise the irregularity, it was designed to
conceal illicit activities, e.g. money laundering. Some of the numbers are accurate. The
unexplained differences are reconciled by money laundering and other improper activities.

Page 14 of 30

The Accounting Irregularities Worsen in the Singapore 2010 and 2011 Filings
The Trade and other payables irregularities found in the 2010 and 2011 financial statements are far
larger than the 2009 irregularity7:

Trade and other Payables - Balance Sheet vs. Statement of Cash Flow Irregularities
2008
2009
2010
2011
Singapore $s
Trade and other payables $1,517,706 $10,545,145 $27,888,929 $67,020,032
y-o-y change as calculated ($237,986) $9,027,439 $17,343,784 $39,131,103
y-o-y change as reported ($237,986) $7,243,916 $14,113,283
($27,365)
Variance (calculated vs reported):
$0 $1,783,523 $3,230,501 $39,158,468

Note the following troubling facts:

The 2010 irregularity of $3.2 million is ~2x greater than the 2009 irregularity of $1.8 million.
The 2011 irregularity of $39 million is ~10x greater than the 2010 irregularity of $3.2 million.
There are no financial notes in the 2010 and 2011 Singapore filings that explain the above
irregularities, just as there were no notes within the 2009 financial statements to explain the
$1.8 million irregularity.

Ebix Singapore Restates Its 2010 Statement of Cash Flows in the 2011 Filing, Without Any Explanation
It is fairly common knowledge among short sellers, forensic accountants, and fraud experts that the
Statement of Cash Flows, specifically the Cash Flows from Financing Activities, is the most difficult
statement to fabricate. It is also the most difficult statement to restate.
Ebix Singapore somehow managed to drastically restate its 2010 Statement of Cash Flows in its 2011
filing. It achieved this feat without a single word explaining how or why it restated the 2010 numbers.8
For starters, Ebix introduces new line items to the Statement of Cash flows:

2010's Cash Flows from Financing Activities According to:

2010
2011
Unexplained
Filing
Filing
Variance
Loan from a related company
$0
$0
$0
issue of share capital $500,000
$500,000
$0
Due from holding company Didn't Exist ($21,162,227) ($21,162,227)
Due from related companies, net Didn't Exist $19,793,644 $19,793,644
The Due from holding company and Due from related companies line-items did not exist in the 2010
(or any prior filings). In fact, nowhere else are these items mentioned in the 2011 filing. This is the first
and last time you see these items mentioned in the 2011 fiing. And It gets worse.
The next two pages show the Statement of Cash Flows from the 2010 and 2011 filings:
Page 15 of 30

The 2010 Statement of Cash Flows According to the 2010 Filing:

Page 16 of 30

The 2010 Statement of Cash Flows According to the 2011 Filing:

Page 17 of 30

What was the Sale Price of Ebix Singapores Sale of Ebix Software Asia SEZ to Itself? Its Unclear
Earlier in this report, we highlighted the economic absurdity of marking up an asset 54x and selling it to
oneself for a tidy, tax-free profit. A major accounting inconsistency further undermines the credibility of
the transaction, as the purchase price according to Ebix Software Indias 2011 filings materially differs9:

The snapshot above shows that aggregate consideration for the sale was INR 1,922,487,840 (May 2011).

The transaction cost $52.9 million, according to the Indian filing (0.275 SGD INR exchange rate).
The transaction cost $66.0 million, according to the Singapore filing:

The difference is just over $13 million.

This $13 million irregularity reminds us of the Confirmnet irregularity we identified in our first report10:

Page 18 of 30

The 2010 and 2011 Filings Contain a Deferred Income Related Accounting Error
The 2010 deferred income current liability account, and/or the change in deferred income reported on
the Statement of Cash Flows are incorrect11:

Singapore Deferred Income Error

2008
2009
Singapore $s
Deferred income
$23,665
$0
y-o-y change as calculated
($23,665)
y-o-y change as reported
($23,665)
Unexplained Difference:
$0

2010

2011

$7,874
$7,874
($7,874)
$15,748

$0
($7,874)
($7,874)
$0

Deferred income grew from $0 to $7,874 in 2010, which means that working capital should have
increased by $7,874. The Statement of Cash Flows, instead, shows a decline of $7,874. The 2011 filing
does not correct this error.

Page 19 of 30

Ebixs Swedish Problems

Over the last several years, very little has been said about Ebixs Swedish operations. In fact, the only
article that seems to mention Ebixs Swedish subsidiary, EIH Holdings AB, with some detail is a fairly
recent Bloomberg story titled, Ebixs Raina Loses Magic Touch as U.S. Probes Accounting, dated June 21,
2013. Buried somewhere in the middle of that article1:
EIH Holdings, the companys Swedish subsidiary, is being liquidated by Swedish regulators for
lack of timely filings. Yet, according to SEC filings approved by Cherry Bekaert, the Swedish unit
earned $7 million of the companys $78 million in pre-tax income last year.
In a more recent story, Ebix Said to Be Reviewed by U.S. for Money Laundering, dated August 7, 2013,
Sweden is mentioned in passing2:
One of the people familiar with the probe is a former Ebix executive who was contacted by FBI
agents. Federal Bureau of Investigation agents asked him about the companys wiring of funds
to operations in locations such as India, Sweden and Singapore, the person said.
It is Gotham City Research belief that some of Ebixs more flagrant and obvious offenses are found in
Sweden. Specifically:

Ebixs Swedish earnings are less than 1% of the $6.3 million and $7.0 million pre-tax earnings
claimed in Ebixs 2011 & 2012 10K filings respectively, based on EIH Holdings ABs filings.
In 2011, BDO Sweden was unable to obtain audit evidence to support EIH Holdings AB's
ownership of its subsidiaries.
BDO Sweden AB was unable to get confirmation of any dealings between EIH Holdings AB and
its subsidiaries for fiscal year 2011.
EIH Holdings ABs liquidation is complete as of the writing of this report (it was in liquidation as
recently as several weeks ago), due to lack of timely filings.
Ebix and Cherry Bekaert (Ebix Inc.s auditor) signed off on Swedish pre-tax earnings numbers in
the 2012 10K, despite the fact that the fully liquidated EIH Holdings AB never filed its 2012
financials. It seems CBH has also ignored BDO Swedens warnings.
There is an undisclosed Swedish subsidiary, EIH Holdings Sweden AB. It was incorporated in
September 2012, yet it is not mentioned as a subsidiary in Ebixs 2012 10K filing.

Swedish Income As Claimed in US Filings Are Not Supported by Swedish Filings

EIH Holdings AB filings show net losses not net earnings versus the SEC filings, which claim Swedish
pre-tax earnings between $6 - $7 million for 2011 and 20123:

Swedish Income Overstated in US SEC Filings?

2010
2011
2012
thousands $s
EIH HOLDINGS AB FILINGS
($70)
($45) Does Not Exi s t
SEC FILINGS Undi s cl os ed
$6,340
$6,996
Page 20 of 30

The 2011 10K claims $6.3 million pre-tax income from Sweden for 2011:

The 2012 10K claims $7.0 million pre-tax income from Sweden for 2012:

However, the 2011 EIH Holdings AB Income Statement Says Otherwise:

Income
Statement

Net Profit

As the next page shows, it seems there are no good explanations for the irregularities shown above. The
conclusion that seems most consistent with the facts is that the Swedish pre-tax income is massively
overstated in Ebixs 2011 and 2012 10K filings, and that the resulting tax benefit (taxed at a 0% statutory
tax rate) should not exist.

Page 21 of 30

EIH Holdings AB Is Fully Liquidated and its 2012 Filing Does Not Exist
EIH Holdings AB 2012 filing does not exist. In fact, the Swedish regulator likely liquidated EIH Holdings
AB precisely because it failed to file its 2012 filing, EIH Holdings AB Likvidation avslutad (Liquidation
Complete)4:

EIH Holdings Kommanditbolag Has Not Filed Financial Statements since 2006 5

Page 22 of 30

Undisclosed Swedish Subsidiary

According to the Swedish regulator, there is an additional Swedish subsidiary (in addition to EIH
Holdings AB and EIH Holdings KB), called EIH Holdings Sweden AB6:

There is no mention of EIH Holdings Sweden AB in the 2012 10K filings Exhibit 21.1 (list of subsidiaries),
even though its articles of association were adopted on September 4 th, 2012:

Page 23 of 30

Cherry Bekaert Did Not Audit Ebix (or So We Suspect)

Ebixs Stock Deserves to be Halted
In our first Ebix-related report, The Truth about Ebix, Robin Raina, and the Robin Raina Foundation,
released February 21st 2012, we stated1:
Investors should seriously doubt the accuracy, reliability, completeness of Ebixs financial
statements, disclosures, and past remarks. We doubt CBH obtained reasonable assurance that
Ebixs financial statements & schedules were free of misstatement, contrary to their claims
otherwise.
We believe that Ebixs stock should be halted, until its financial statements are reliable, accurate,
and complete. We also believe the current auditor has to go, as theyre not doing their job.
We not only stand by the above stated opinions, we now believe that Cherry Bekaert never properly
audited Ebixs financial statements.
The following serve as the bases of our opinions:

In 2011, BDO Sweden was unable to obtain audit evidence to support EIH Holding AB's
ownership of its subsidiaries.
BDO Sweden was unable to get confirmation of any dealings between EIH Holdings AB and its
subsidiaries for fiscal year 2011.
EIH Holdings AB was liquidated by Swedish regulators for lack of timely filings. EIH Holdings
never filed financial statements for 2012.
SEC filings approved by Cherry Bekaert show the Swedish unit earned $7.0 million of pre-tax
income in 2012 and $6.3 million in 2011, even though the 2011 Swedish filing shows a net loss.
Cherry Bekaert approved Ebixs 10K filings for the 2009-2012 fiscal years, despite all the material
accounting irregularities we identified in Ebix Singapores 2009-2011 filings.
Unclear how CBH has obtained reasonable assurance that Ebixs financial statements &
schedules are free of misstatement, if Ebix Singapores audited financial statements for 2009,
2010, and 2011 were signed off by BDO 1.25-1.75 years after fiscal year end.

BDO Sweden ABs 2011 Warning2

Page 24 of 30

Translation of BDO Sweden ABs 2011 Warning

Basis to refrain from statement
Financial statements of the subsidiaries have not been finalized yet and details of income and
equity in Note 2 applies in 2010.
We have therefore been unable to obtain audit evidence to support the Company's ownership of
its subsidiaries, nor been able to get confirmation of any dealings between the Company and the
subsidiaries.
Not only was BDO unable to verify basic facts about EIH Holdings AB, it re-used 2010 figures in 2011.
From the 2011 EIH Holdings AB Filing:

Uppgifter om eget
capital och resultat Data on equity and
earnings
Eget Kapital - Equity
Resultat - Earnings

From the 2010 EIH Holdings AB Filing3:

The 2010 and 2011

Equity and Earnings
Amounts Should
Differbut they are
identical, because BDO
Sweden was unable to
verify 2011s numbers.

Page 25 of 30

Event of Default
Gotham City Research Believes Ebix Meets the Requirements for an Event of Default
We believe Ebix meets the requirements for a default on its credit facilities and loans, and that creditors
have the ability to demand immediate payment of principle + interest. We also believe it is in the
creditors best interests to do so as soon as possible.
The following serve as the bases of our opinions:

Ebix, Incs financial statements contain material irregularities, as described in this report as well
as past reports.
Ebix, Incs subsidiaries financial statements (including but not limited to Ebix Singapore, EIH
Holdings AB, and the Indian subsidiaries) are materially incorrect, as described in this report and
elsewhere.
Article VII (c) of the Credit Agreement Dated April 26, 2012 describes the situation in which Ebix
and/or its subsidiaries financial statement(s) are materially incorrect.

ARTICLE VII (c) from the Credit Agreement dated April 26, 20121
Events of Default
If any of the following events (each an Event of Default ) shall occur:
(c) any representation or warranty made or deemed made by or on behalf of any Loan Party or
any Subsidiary in or in connection with this Agreement or any Loan Document or any
amendment or modification thereof or waiver thereunder, or in any report, certificate, financial
statement or other document furnished pursuant to or in connection with this Agreement or any
Loan Document or any amendment or modification thereof or waiver thereunder, shall prove to
have been materially incorrect when made or deemed made;

What Happens in the Event of Default

then, and in every such event (other than an event with respect to the Borrower described in
clause (h) or (i) of this Article), and at any time thereafter during the continuance of such event,
the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the
Borrower, take either or both of the following actions, at the same or different times: (i)
terminate the Commitments, and thereupon the Commitments shall terminate immediately, and
(ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which
case any principal not so declared to be due and payable may thereafter be declared to be due
and payable), and thereupon the principal of the Loans so declared to be due and payable
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What Happens in the Event of Default (continued)

together with accrued interest thereon and all fees and other obligations of the Borrower
accrued hereunder, shall become due and payable immediately, without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by the Borrower; and in case
of any event with respect to the Borrower described in clause (h) or (i) of this Article, the
Commitments shall automatically terminate and the principal of the Loans then outstanding,
together with accrued interest thereon and all fees and other obligations of the Borrower
accrued hereunder, shall automatically become due and payable, without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by the Borrower. Upon the
occurrence and the continuance of an Event of Default, the Administrative Agent may, and at the
request of the Required Lenders shall, exercise any rights and remedies provided to the
Administrative Agent under the Loan Documents or at law or equity, including all remedies
provided under the UCC.
The IRS and Creditors Get Paid Before Shareholders
Many Ebix shareholders seem unaware that the US Government (the IRS, SEC, and/or DOJ) and Creditors
get paid before shareholders do. Lest you forget: The US Government and creditors are senior claimants,
whereas shareholders are last in the pecking order. Heres a visual reminder:

LINE ITEM
EBIT
Less: Tax/Penalties
Less: Interest/Principal
Less: Litigation-related
Net Profit

TRANSLATION
Earnings before Interest and Tax
Government's Claim
Creditors' Claim
Lawsuit settlements & Attorney Fees
Shareholders are Paid Last

If either of the following events occurs:

1. Ebixs creditors demand payment, citing a Section VII (c) related event of default, the IRS is more
likely to take swift action, to ensure it is paid before creditors. It is unclear if the government
gets paid before creditors in this scenario. What is clear is Ebix faces double jeopardy, wiping
out current shareholders.
2. If the IRS takes action against Ebix before creditors, that in turn, will trigger an event of default.
Ebix faces double jeopardy, wiping out current shareholders.
The moral of the story: with so many different regulatory entities involved, shareholders should not
treat these risks as linearly independent events. They are not mutually exclusive.
Shareholders should note that they were handsomely (and prematurely) rewarded in 2011, in the form
of a very large stock buybacklikely funded by the sham Singapore 2011 sham sale/transaction. The
short term buy-back fueled gain may prove to be a source of long term pain.
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Ebix Has Harmed (or is alleged to have) Each and Everyone of its Stakeholders
It has occurred to us that Ebix has harmed (or is alleged to have harmed) each and every one of its
stakeholders. We could not think of a single stakeholder that has remained untouched:

The US Government/US Taxpayers Ebix is believed to owe back taxes, interest, and penalties,
to the tune of $100+ million. If we our correct about the Ebix Singapore sham sales described
earlier in this report, Ebix will likely owe $40-$50 million on that offense alone.
Creditors Creditors trusted and lent to Ebix, believing its financial statements were accurate.
We believe this report offers sufficient evidence that Ebixs filings are materially incorrect.
Vendors Microsoft alleges Ebix has underpaid for its use of Microsoft products & services. 2
Whats particularly disturbing is that Microsoft gave Ebix plenty of opportunity to audit itself,
yet it did not. We wonder if Ebix has short-changed other vendors.
Managers and Employees Former employees/managers have alleged reneging on contract,
underpayment, and other grievances. See the various lawsuit complaints for more details.
Shareholders Shareholders invested in Ebix, trusting Robin Raina and relying on the accuracy
of Ebixs financial statements.
Overall public False charity claims have led many to believe that Mr. Rainas charitable
activities were far greater than they actually were.3

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End Notes
INTRODUCTION
1. Ebix Singapore PTE LTD Report of the Directors and Financial Statements for the financial year
ended 31 December 2011 obtained via ACRA website: http://www.acra.gov.sg/
2. EIH Holdings AB Financial Statements for the year ending December 31, 2011. Obtained from:
https://foretagsfakta.bolagsverket.se/fpl-dft-ext-web/home.seam
3. Ebix 2011 10K and 2012 10Ks
4. EIH Holdings AB Financial Statements for the year ending December 31, 2011. Obtained from:
https://foretagsfakta.bolagsverket.se/fpl-dft-ext-web/home.seam
New Problems Emerge in Singapore and India
1. The Truth about Ebix, Robin Raina, and the Robin Raina Foundation, February 21, 2013
2. Ebix Singapore PTE LTD Report of the Directors and Financial Statements for the financial year
ended 31 December 2011 obtained via ACRA website: http://www.acra.gov.sg/
3. Ebix Singapore PTE LTD Report of the Directors and Financial Statements for the financial year
ended 31 December 2011, Ebix 2011 10K
4.
5.
6. Ebix Singapore Filings 2003 2011
7. Ebix Singapore Filings 2008 2011
8. Ebix Singapore Filings 2010 2011
9. Ebix Software India Private Limited 2011 filing
10. The Truth about Ebix, Robin Raina, and the Robin Raina Foundation, February 21, 2013
11. Ebix Singapore Filings 2008 2011
Ebixs Swedish Problems
1. Ebixs Raina Loses Magic Touch as U.S. Probes Accounting, by Greg Farrell, June 21, 2013
http://www.bloomberg.com/news/2013-06-20/ebix-s-raina-loses-magic-touch-as-u-sprobes-accounting.html
2. Ebix Said to Be Reviewed by U.S. for Money Laundering, by Greg Farrell, August 7, 2013
http://www.bloomberg.com/news/2013-08-06/ebix-said-to-be-reviewed-by-u-s-formoney-laundering.html
3. EIH Holdings AB Financial Statements for 2010 and 2011. Obtained from:
https://foretagsfakta.bolagsverket.se/fpl-dft-ext-web/home.seam . Ebix 2011 and 2012 10Ks.
4. https://foretagsfakta.bolagsverket.se/fpl-dft-ext-web/home.seam
5.
6.

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Cherry Bekaert Did Not Audit Ebix (or So We Suspect)

1. The Truth about Ebix, Robin Raina, and the Robin Raina Foundation, February 21, 2013
2. EIH Holdings AB Financial Statements for the year ending December 31, 2011. Obtained from:
https://foretagsfakta.bolagsverket.se/fpl-dft-ext-web/home.seam
3. EIH Holdings AB Financial Statements for the year ending December 31, 2010. Obtained from:
https://foretagsfakta.bolagsverket.se/fpl-dft-ext-web/home.seam
Event of Default
1. Ebix 8K, April 26, 2012
2. Microsoft vs Ebix complaint
3. The Truth about Ebix, Robin Raina, and the Robin Raina Foundation, February 21, 2013

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