Notes to Accounts of Dhanus Technologies Ltd.

Dec 31, 2011

Corporate Information

Dhanus Technologies Limited ("the Company" or "DTL"), is a listed public limited company incorporated in 1993 under the provisions of Companies Act, 1956. Its shares are listed on Bombay Stock Exchange and National Stock Exchange of India. The Company is primarily engaged in the business of Global calling cards and Mobile SIM cards, IT-ITES and BPO, Fleet Tracking services and Trading sales.

1. Basis of preparation of financial statements.

The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in India (Indian GAAP). The Company has prepared these financial statements to comply in all material respects with the accounting standards notified under the Companies (Accounting Standards) Rules, 2006, (as amended) and the relevant provisions of the Companies Act, 1956. The financial statements have been prepared on an accrual basis and under the historical cost convention. The accounting policies adopted in the preparation of financial statements are consistent with those of previous year, except for the change in accounting policy explained below.

2.1. Other Notes on accounts.

a) Though the books of account have incorporated the major entries in respect of all segments, the key reconciliations and control accounts of receivables and payables in respect of all segments are yet to be confirmed by the concerned parties, the effect of which is not quantifiable. Confirmation on certain material contracts pertaining to revenues and certain material time sheets pertaining to direct expenses are in the process of being collected from relevant parties. The company has pending these confirmations, recognized revenues and expenses as it is confident of the same.

b) Stock and WIP valuation has been done by us, but not subject to separate audit by the statutory auditors.

c) Long Term Borrowings.

Secured loans from banks and others are secured by hypothecation of UPS, Computers, Networking Equipment, Telephone Software, Furniture and Fixtures, Office Equipments; etc arising out of such loan proceeds on a first and exclusive charge basis. Cash Credit is secured against hypothecation of Stocks and Receivables. The company is defaulted in repayment of loans to banks, which is under Debt Recovery Tribunal (DRT).

d) Quantitative Details.

The company is engaged in the sales and services of Global calling Cards and development and maintenance of software, FleeTrac, BPO services and Trading sales. The sales and services of such calling cards, software, FleeTrac, BPO and Trading Activities can not be expressed in any generic unit. Hence, it is not possible to give the quantitative details of sales, services and certain information as required under paragraphs 5 (viii) (c) of general instructions for preparation of the statement of profit and loss as per revised Schedule VI to the Companies Act, 1956.

Footnotes:

(i) The Company has only one class of equity share having a par value of Rs. 10/- per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. In the event of liquidation of the company, the holders of equity shares will be entitled to receive the remaining assets of the company, after distribution of all preferential amounts, in proportion to their shareholding.

During the year ended December 31, 2011, the amount of per share dividend recognized as distribution to equity shareholder is Rs. Nil (Previous year Rs. Nil)

3.1 MICRO, SMALL AND MEDIUM ENTERPRISES

The identification of micro, small and medium enterprise suppliers as defined under the provisions of "Micro, Small and Medium Enterprises Act, 2006" is based on Management's knowledge of their status. There are no dues to micro, small and medium enterprises as on December 31, 2011 or December 31, 2010.

3.2 The Trade receivables and Trade Payables balances of parties are subject to confirmation by the parties.

3.3 The inventories and work in progress are shown at the value as certified by the management.

3.4 Loans & Advances and Trade receivables stated in the Balance Sheet are, in the opinion of the management, realizable in the ordinary course of business.

3.5 Contingent Liabilities, commitments (to the extent not provided for):

1. On account of Income Tax matters in dispute:

a. Income Tax Liability amounting to Rs. 5,77,06,713/- Assessment Year 2006-07

Appeal before Income Tax Appellate Tribunal (ITAT), Chennai Branch, Chennai

b. Income Tax Liability amounting to Rs. 20,09,19,372/- Assessment Year 2007-08

Appeal before Income Tax Appellate Tribunal (ITAT), Chennai Branch, Chennai

c. Income Tax Liability amounting to Rs. 40,37,00,490/- Assessment Year 2008-09

Appeal before CIT (Appeal), Chennai

d. Income Tax Liability amounting to Rs.37,52,62,070/- Assessment Year 2009-10

Appeal before CIT (Appeal), Chennai

2. Claims against the company not acknowledged as debts: Rs. 1800.00 Lakhs (Rs. 1864.00 Lakhs)

3.6 FOREIGN EXCHANGE EARNINGS AND OUTGO:

Earnings in Foreign Currency Rs. NIL/- (Rs. NIL/-)

Foreign Currency outflow Rs. NIL/- (Rs. NIL/-)

3.7 Amount remitted during the year in foreign currency on account of dividends - Nil (Nil)

3.8 PREVIOUS YEAR FIGURES

Till the year ended December 31, 2010, the Company was using pre-revised Schedule VI to the Companies Act 1956, for preparation and presentation of its financial statements. During the year ended December 31, 2011, the revised Schedule VI notified under the Companies Act 1956, has become applicable to the company. The company has reclassified previous year figures to conform to this year's classification.

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Dec 31, 2010

A. Though the books of account have incorporated the major entries in respect of Trading Activities viz., the new segment incorporated in the last quarter of the financial period & year ended 31s1 December, 2010, the key reconciliations and control accounts of receivables and payables in respect of all segments including especially the whole receivables and payables of trading activities segment are yet to be confirmed by the concerned parties, the effect of which is not quantifiable. The company has recognized revenues and expenses as it is confident of the reconciliations of the same.

b. Stock and WIP valuation has been done by us, but not subject to separate audit by the statutory auditors.

1.2 Secured loans

Secured loans from banks and others are secured by hypothecation of UPS, Computers, Networking Equipment, Telephone Softwares, Furnitures and Fixtures, Office Equipments; etc arising out of such loan proceeds on a first and exclusive charge basis. Cash Credit is secured against hypothecation of Stocks and Receivables.

1.3 Retirement Benefits

The Company has a scheme of provident fund for its employees, registered with the Regional Provident Fund Commissioner, Chennai. The Company also has a scheme of employees state insurance for its employees, registered with the Employees State Insurance Corporation, Chennai. The company had no voluntary retirement scheme during the period and year under report. None of the employees have completed five years, hence gratuity has not been provided. Leave encashment is provided as and when paid for.

1.4 Quantitative Details

The company is engaged in the provision and services of Global calling Cards and development and maintenance of software, FleeTrac,BPO services and Trading Activities sales. The sales and services of such calling cards, software, FleeTrac.BPO and Trading activities cannot be expressed in any generic unit. It is not possible to give the quantity details of production and other information as required under the paragraph 3, 4C and 4D of Part II of Schedule VI to the Companies Act, 1956. The services of calling cards are Rs. 23,28,93,257/- (Rs.39,87,36,621/-), for software services Rs. Nil (Rs. 8,91,00,921/-), for FleeTrac Services Rs. 35,34,87,570/- (Rs. 42,21,48,051/-), for BPO services Rs. 20,62,75,515/- (Rs. 26,27,04,492/-), for Trading sales Rs. 40,03,20,650/- (Rs. Nil) and for other income Rs. 8,530/- (Rs. 31,81,570/- ).

1.5 Dues to Small -Scale Industrial undertakings

Amounts due to Small Scale Industries under Current Liabilities is based on the information available with the company regarding the status of the suppliers as defined under the "Micro, Small and Medium Enterprises Development Act, 2006". Amounts overdue as on 31st December, 2010 to Micro, Small and Medium Enterprises on account of principal and interest is Rs. Nil (Rs. Nil)

1.6 The Term Loan balances from IFCI Venture Capital Funds Ltd. is subject to confirmation by the IFCI Venture Capital Funds Ltd. as on 31st December, 2010.

1.7 The Sundry Debtors and Creditors balances of parties are subject to confirmation by the parties.

1.8 The inventories and work in progress are shown at the value as certified by the management.

1.9 Loans, Advances and Sundry Debtors stated in the balance sheet, in the opinion of the management, are realizable in the ordinary course of business.

1.10 As of December 31, 2010, the Contingent Liabilities are as follows:

a. Income Tax Liability amounting to Rs. 5,77,06,713 Assessment Year 2006-07 Appeal before CIT (Appeal), Chennai

b. Income Tax Liability amounting to Rs. 20,09,19,372/- Assessment Year 2007-08 Appeal before CIT (Appeal), Chennai

c. Income Tax Liability amounting to Rs. 40,37,00,490/- Assessment Year 2008-09 Appeal before CIT (Appeal), Chennai

1.11 Amount remitted during the year in foreign currency on account of dividends- Nil (Nil)

1.12 Balance sheet abstract and general business profile as per part IV of schedule VI to the Companies Act, 1956 is annexed here to and forms an integral part of the annual accounts.

1.13 Previous period/year figures have been regrouped / recast wherever necessary to conform to the classification of the current period/year figures.

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Jun 30, 2009

A. Though the books of account have incorporated the major entries, certain key reconciliation and control accounts of receivables and payables are yet to be confirmed by the concerned parties, the effect of which is not quantifiable. " Confirmation on certain material contracts pertaining to revenues and certain materia! time sheets pertaining to direct expenses are in the process of being collected from relevant parties. The company has, pending these confirmations, recognized revenues and expenses as it is confident of the same.

b. Stock valuation and WIP valuation has been done by us, but not subject to separate audit by me statutory auditors.

c. Certain formalities with respect to the RBI and approvals with respect of collection of FIRCs are in process of being completed.

1.2 Secured loans

Secured loans from banks and others are secured by hypothecation of UPS, Computers, Networking Equipment, Telephone Softwares, Furnitures and Fixtures, Office Equipments; etc arising out of such loan proceeds on a first and exclusive charge basis. Cash Credit is secured against hypothecation of Stocks and Receivables.

1.3 Retirement Benefits

The Company has a scheme of provident fund for its employees, registered with the Regional Provident Fund Commissioner, Chennai. The Companys contributions to provident fund and employees state insurance are charged to the Profit and Loss Account. The Company also has a scheme of employees state insurance for its employees, registered with the Employees State Insurance Corporation, Chennai. The company had no voluntary retirement scheme during the period under report. None of the employees have completed five years, hence gratuity has not been provided. Leave encashment is provided as and when paid for.

1.4 Quantitative Details

The company is engaged in the provision and services of Global Calling Cards and development and maintenance of software, FleeTrac and BPO services. The services of such calling cards, software, FleeTrac and BPO activities can not be expressed in any generic unit. It is not possible to give the quantity details of production and other information as required under the paragraph 3, 4C and 4D of Part II of Schedule VI to the Companies Act, 1956. The services of calling cards are Rs.39,87,36,621/- (Rs.81,46,52,671/-), for software services Rs. 8,91,00,921/- (Rs.53,41,85,153/-), for FleeTrac Services Rs.42,21,48,051/- (Rs.32,48,04,295/-), for BPO services Rs.26,27,04,492/- (Rs.27,80,75,936/-) and for other income Rs. 17,76,170/- (Rs. 2,30,83,252/- ).

1.5 Dues to Small -Scale Industrial undertakings

Amounts due to Small Scale Industries under Current Liabilities is based on the information available with the company regarding the status of the suppliers as defined under the "Micro, Small and Medium Enterprises Development Act, 2006". Amounts overdue as on 30th June 2009 to Micro, Small and Medium Enterprises on account of principal and interest is Rs. Nil (Rs. Nil)

1.6 Sundry Debtors and Creditors balances of parties are subject to confirmation by the parties.

1.7 The inventories and work in progress are shown at the value as certified by the management.

1.8 Loans, Advances and Sundry Debtors stated in the balance sheet, are in the opinion of the management, are realizable in the ordinary course of business.

1.9 As of June 30, 2009 the Contingent Liabilities are as follows:

Income Tax Liability amounting to Rs. 5,76,15,246/- Assessment Year 2006-07 Appeal before CIT (Appeal), Chennai

1.10 Foreign Exchange earnings and outgo:

Earnings in Foreign Currency Rs. 3,83,37,873/- (Rs. 43,85,08,995/-) Foreign Currency outflow Rs. 3,94,88,257/- (Rs. 18,34,21,872/-)

1.11 Amount remitted during the year in foreign currency on account of dividends- Nil (Nil)

1.12 Balance sheet abstract and general business profile as per part IV of schedule VI to the Companies Act, 1956 is annexed here to and form an integral part of the annual accounts.

1.13 Previous year figures have been regrouped / recast wherever necessary to conform to the classification of the current year figures.