Notes to Accounts of Canarys Automations Ltd.

Mar 31, 2025

1.18 Provisions and contingent liabilities

Provisions involving substantial degree of
estimation in measurement are recognized
when there is a present obligation as a result of
past events and it is probable that there will be
an outflow of resources. Contingent liabilities are
not recognized but are disclosed in the notes and
are not usually provided for unless it is probable
that future outcome may be detrimental to
the company.

1.19 Cash and cash equivalents

Cash and cash equivalents comprise cash and
balances with banks. The Company considers
all highly liquid investments with an original
maturity of three months or less and that are
readily convertible to known amounts of cash to
be cash equivalents.

1.20 Cash flow statement

Cash flows are reported using the indirect
method, whereby net profit or loss before tax is
adjusted for the effects of transactions of a non¬
cash nature and any deferrals or accruals of past

or future cash receipts or payments. The cash
flows arising from regular revenue generating,
investing and financing activities of the Company
are segregated.

1.21 Related Party Disclosure

Disclosure is made as per the requirements of
Accounting Standard 18. Related Party Disclosures
and as per the clarification issued by the Institute
of Chartered Accounts of India.

1.22 Capital Redemption Reserve (CRR)

In the financial year 2020-21, the company had
issued redeemable preference shares with

certain terms and conditions. All such terms &
conditions connected with issue of preference
shares have been reported elsewhere in the
financial statements. As required under the
Companies Act, 2013, the company has created
the capital redemption reserve on a pro-rata
basis as per the terms of the issue of such
preference shares accordingly. The said CRR has
been transferred from the accumulated profit
of the company. Over a period of five years or
before the redemption of such preference shares
the entire amount of preference shares would be
transferred to capital redemption reserve.

Terms/ rights attached to equity shares

The company has two class of share capital i.e. equity shares having face value of H 2 per share and
Preference share capital of C 10 per share. In the Financial year 2020-21 company has sub divided the face
value of equity shares of H 10 each per share at the beginning of the year into face value of H 2 each fully
paid equity share. Each holder of equity share is entitled to one vote per share.

In the Financial year FY 2020-21, the company had a right issue of equity shares and shareholders
subscribed 1,73,880 equity shares of H 10 each at a premium of H 20 each per equity share.

In the Financial year FY 2021-22, the company had a right issue of equity shares and shareholders
subscribed 1,27,511 equity shares of H 10 each at a premium of H 20 each per equity share.

In the Financial year 2021-22 the company has issued bonus share of 1 equity share to every 1 equity shares
held by the equity shareholders after sub dividing the face value of H 10 each to face value into H 2 per
equity share.

In the Financial year 2023-24 the company has issued bonus share of 1 equity share to every 1 equity
shares held by the equity shareholders to face value into H 2 per equity share.

In the Financial year FY 2023-24, the company had converted 10%of preference shares into equity shares
and shareholders subscribed 2,08,000 equity shares of H 2 each at a premium of H 23 each per equity share.

In the Financial year FY 2023-24, the company shares got listed in NSE SME and shareholders subscribed
1,561,72,000 equity shares of C 2 each at a premium of C 29 each per Equity shares

In the Financial year FY 2024-25, the company had converted 10,12,193 shares warrants into equity shares
and shareholders subscribed 10,12,193 equity shares of H 2 each at a premium of H 39 each per equity share.

The Equity Shares issued during the years has rank pari passu with the other equity shares that company
had already issued.

Terms & Conditions attached to the preference shares issued by the company during the year are:

a. The Partially redeemable & convertible Preference shares issued during the year has maximum 5
years tenure.

b. The Preference shares shall carry on dividend of the rate of 10% per annum on the nominal value
of share. The Dividend shall be calculated on pro-rata basis from the date of allotment of such
preference shares. The Dividend to be paid shall be cumulative in nature.

c. The Preference Shareholders does not have right to participate in the surplus funds of the Company.

d. The Preference shareholder shall have liquidation preference in the event of winding up of the
Company as provided under the Act and the preference shareholders shall not have only right to
participate in the surplus asset & profit of the Company.

e. The 90% of the preference share paid-up capital held by the shareholders are redeemable. The
remaining 10% of the paid-up preference shares capital has been converted into equity shares at the
fair value determined at the time of conversion.

f. The Preference Shares shall not carry any voting rights except in case of any resolution placed before
the Company which directly affects the rights attached to such shares or as otherwise provided in the
Companies Act.

g. The preference shareholders or Company shall redeem 90% of Preference shares at par value in the
following manner:

i. 30% of the preference shares has been repaid at the end of 3^rd year

ii. 30% of the preference shares has been repaid at the end of 4^th year

iii. 30% of the preference shares shall be repaid at the end of 5^th year

iv. The balance 10% has been converted into Equity share at a fair market value determined at that
time of such conversion

v. The Company may redeem the preference shares at any time after expiry of one year from the
date of issue of such shares.

During the Financial year FY 2023-24 the company has converted 10% of preference shares
(5.2 Lakhs) into equity shares( 2.08 Lakhs) at a market valuation of C 25 per Equity shares.

During the Financial year FY 2023-24 the company has redeemed 30% of preference shares
(15.60Lakhs ) at a Face Value of C 10 per Preference shares.

During the Financial year FY 2024-25 the company has redeemed 30% of preference shares
(15.60Lakhs ) at a Face Value of C 10 per Preference shares.

Unpaid calls on shares - There have been no unpaid calls.

Forfeiture of shares - None of the shares have been forfeited during the year.

Employee stock option scheme - During the previous year the company had reserved 43,50,000
shares towards employee stock option scheme Canarys ESOS. Upon exercise and payment of the
exercise price, the option holder will be entitled to be allotted 43,50,000 Equity Share per employee
stock option. Accordingly, the number of Equity Shares that may be issued under the Canarys ESOS

*The company has availed the Cash Credit Limit of H 500 Lakhs, One time Ad-Hoc Credit 450 Lakhs & non fund based limit of H 800
lakhs towards issue of bank guarantee from State Bank of India.

The primary security towards cash credit of H 500 lakhs & One time Ad-Hoc Credit 450 Lakhs is hypothecated by first charge of stock,
receivables and other assets procured out of bank finance.

The above said facilities are further secured by the collataral security of a house property owned by Mr. Raman Subba Rao the
Managing Director of the Company and secured by Industrial Flat at Electronic City owned by the Company. This is further secured
by personal grantees offered by the Directors of the Company.

The working capital is repayble on demand and subject to review by the Bank once in every 12 months.

The One time Ad-Hoc credit is repayable on demand and This Facility is available for a period of 12 months from the date for a
period of 3 months when availed after which it has to be closed or Liquidated . This facility can further extended for a period not
more than 3 months.

Rate of interest on cash credit is @12.65% & on one time Ad-Hoc credit is @ 13.65% and Bank shall any time and from time to time be
entitled to vary the margin base on Credit Risk Assessment of the borrower and the EBR/MCLR at its discretion.

Margin for non fund based limit of H 800 lakhs towards issue of bank guarantee is 25%

Statements of Stocks / Receivables hypothecated / pledged to the Bank are to be submitted regularly at monthly intervals by the
Company

36 The company has neither advanced or loaned or invested funds nor received any advances (either
borrowed funds or share premium or any other sources or kind of funds) from any other person(s) or
entity(ies), including foreign entities (Intermediaries) with the understanding (whether recorded in writing
or otherwise) that the Intermediary shall

(i) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by
or on behalf of the company (Ultimate Beneficiaries)

(ii) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries

37 Impairment of assets

No impairment of assets was recognized by the Company during the financial year 2024-25.

38 Intangible asset under development -

The company is developing software and the same have been capitalized as per AS26 and shown
under PPE.

Canarys Modernization Framework Solution (CMF)

The company has recognized "software modernization", "Digital DevOps" and "Water Resource Management
(WRM)" a as a key challenge to many small, medium and large-scale enterprises. Understanding the
presence of several flavors, sizes, and outcomes of software modernization, the company has started
creating a modernization framework branded as CMF - Canarys Modernization Framework. The Company
is in the process of completion of the development phase. The Product CMF is a platform which is an
interconnected IT Eco-system of homegrown and third-party systems that accelerates development of
other IT products by reducing their turnaround time and fostering innovation. The Company has done
thorough research and analysis on the technical and commercial viability of the said product and
concluded that the Product is technically viable and marketable. The Company has also identified the
target clientele for the product. The Company plans to launch the product in the Financial Year 2025-26,
hence the direct cost relating to the development of the product is computed meticulously and accounted
for as Capital Work in Progress as per the provisions of AS-26: Intangible Assets. The company intends to
obtain appropriate intellectual property rights for individual components as well as the whole solution
suite once it completes the testing phase and is ready for Go-live.

Basis of Value for Capitalization of the Intangible Asset:

Cost incurred by the Company in the Development Phase of the Product directly attributable to the
development of the product until the Product completes Final Testing is capitalized, capitalization will seize
once final testing is completed. Any further expenses would be capitalized only if it results in altering the
products utility beyond its initially expected and intended use or results in any new utility for the Product.

The Company intends to amortize the capitalized value of the Product over a period of 5 years on a
straight-line basis from the time the product is ready for commercial exploitation.

Once the product it ready for commercial exploitation, the Company will periodically review the product
for Impairment including technological obsolescence and provide for impairment if situation requires.

39 Prior year comparatives

The previous year''s figures have been regrouped / reclassified wherever necessary to correspond with
the current year''s classification. Further, disclosures are amended wherever necessary, in line with the
amendments in Schedule III vide Notification dated March 24, 2021.

43 Subsequent Events

On 15 April 2025, the Company acquired a 51% equity interest in Fortira Inc., thereby obtaining control and
establishing it as a subsidiary. This acquisition marks a significant milestone in the Company''s strategic
growth and expansion initiatives.

Additional regulatory Requirements

44 Wilful Defaulter

The company has not been declared as wilful defaulter by any bank or financial Institution or other lender.

45 Relationship with Struck off Companies

The company has not had any transactions with companies struck off under section 248 of the Companies
Act, 2013

47 Backup of Books of accounts and Audit trail

Backup of books of account: As per MCA notification dated August 05, 2022, the Central Government has
notified the Companies (Accounts) Fourth Amendment Rules, 2022. As per these Rules, the companies
are required to maintain back-up of books of account and other relevant books and papers in electronic
mode that should be accessible in India at all the time. Also, the Companies are required to create backup
of accounts on servers physically located in India on a daily basis.

The Company maintains its books of account, along with other relevant books and papers in electronic
format. The back-up of the books of account occurs daily in servers physically located in India.

Audit trail: Based on the requirements of proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014
applicable from 01 April 2023 and reporting under Rule 11(g) of the companies (Audit and Auditors) Rules,
2014, the Company has preserved audit trail as per the statutory requirements for the year ended 31 March
2025. In respect of certain instances in Payroll Process, PPE & Account relating to inventory the softwares
and for databases the audit trail feature was not enabled during the year. The Company has established
and maintained an adequate internal control framework and based on its assessment, believes that this
was effective as of March 31, 2025

As per our report of even dated attached for and on behalf of the Board of Directors of

for SURESH & CO Canarys Automations Limited

Chartered Accountants

Firm Registration Number: 004255S

Udupi Vikram Raman SubbaRao M R Sheshadri Y S

Partner Managing Director Executive Director & CEO

Membership Number: 227984 DIN:00176920 DIN: 03367545

Raghu C Ambikeshwari M A

Bengaluru Whole-time Director & CFO Company Secretary

29 May 2025 DIN: 01065269 M. No.: A67639

---

Mar 31, 2024

1.18 Provisions and contingent liabilities

Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources. Contingent liabilities are not recognized but are disclosed in the notes and are not usually provided for unless it is probable that future outcome may be detrimental to the company.

1.19 Cash and cash equivalents

Cash and cash equivalents comprise cash and balances with banks. The Company considers all highly liquid investments witli an original maturity of three months or less and that are readily convertible to known amounts of cash to be cash equivalents,

1.20 Cash flow statement

Cash flows arc reported using the indirect method, whereby net profit or loss before tax is adjusted for the effects of transactions of a non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows arising from regular revenue generating, investing and financing activities of the Company are segregated.

1.21 Related Party Disclosure

Disclosure is made as per the requirements of Accounting Standard IX. Related Party Disclosures and as per the clarification issued by the Institute of Chartered Accounts of India.

1.22 Cupitul Redemption Reserve (CRR)

In the financial year 2020-21. the company had issued redeemable preference shares with certain terms and conditions. All such terms & conditions connected with issue of preference shares have been reported elsewhere in the financial statements. As required under the Companies Act. 2013. the company has created the capital redemption reserve on a pro-rata basis as per the terms of the issue of such preference shares accordingly. The said CRR has been transferred from the accumulated profit of the company. Over a period of five years or before the redemption of such preference shares the entire amount of preference shares would be transferred to capital redemption reserve.

1.23 Investments classified as long term investments should be carried in the financial statements at cost. However, provision for diminution shall be made to recognise a decline, other than temporary, in the value of the investments, such reduction being determined and made for each investment individually.

Terms/ rights attached to c<|iiity shares

The company has two class of share capital i.c. equity shares having face value of Ks. 2 per share ami Preference share capital ofRs 10 per share. In the Financial war 2020-21 company has suh divided the Taco value of equity shares of Rs. 10 each per share at the beginning of the year into face value of Rs. 2 each fully paid equity share, Each holder of equity share is entitled to one vote per share.

in die Financial year F''Y 2020-21. the company had a right issue of equity shares and shareholders subscribed 1,73,880 equity shares of Rs 10 each at n premium of Rs. 20 each per equity share.

In the Financial year F''Y 2021-7.2, the company had a right issue of equity shares and shareholder subscribed 1,27,511 equity shares of Rs. 10 each at a premium of Rs. 20 each per equity share.

In the Financial year 2021-22 (he company lias issued bonus share of I equity share to every l equity shares held by the equity shareholders alter sub dividing the face value of Rs. 10 each 10 face value into Rs. 2 per equity share.

In the Financial year 2023-24 the company has issued bonus share of l equity share 10 every I equity shares held by the equity shareholders to face value into Rs. 2 per equity share.

In the Financial year FY 2023-24. the company had converted 10''MiOfprclcmacc slimes Into equity shares and .shareholders subscribed 2.08.000 equity shares of Rs. 2 each at a premium of Rs. 23 each per equity share.

In the Financial year FY 2023-24, the company shares got listed in NSF SMC mid shareholders subseibod 1.501.72,000 equity shares of Rs 2 each at a premium ofRs 29 each per Equity shares

The Equity Shares issued din ing the years has rank pan pussu with the other equity shares that company had already issued.

Terms & Conditions attached to the preference shares issued by the company during the year are:

a. The Partially redeemable & convertible Preference shares issued during the year has maximum 5 years tenure.

b. The Preference shares shall carry on dividend of the rale of 10% per annum on the nominal value of share. The Dividend shall be calculated on pro-rata basis from the date of allotment of such preference shares. The Dividend shall be paid in cumulative in nature.

c. The Preference Shareholders does not have right to participate tn (he surplus funds oflho Company.

d. The Preference shareholder shall have liquidation preference in the event of winding up of the Company as provided under the Act and Ihc preference shareholders shall not have only right to participate in the surplus asset & profit of the Company

e. Hie 90% of the preference share paid-up capital held by Ihc shareholders are redeemable. In ease, if the subscribers opt fur conversion, the remaining 10% Of the paid-up preference shares capilol will be converted into equity shares at the fair value determined at the lime of conversion

f. The Preference Shares shall not carry any voting rights except in case of any resolution placed before Ihc Company which directly n libels the rights attached to such shares or as otherwise provided in the Companies Act.

g. Tlte preference shareholders or Company shall redeem 90% of Preference shares at par value in the following manner: i. 30V* of die preference shares shall be repaid at the end of 3rd year

it. 30% of the preference shares shall be repuid at the end oMlh ycat tit 30% or the preference shares shall he repaid at the end of 5t|t year

iv. The balance 10% may lie converted into Equity share at a fair market value determined at that tunc of such conversion

v. Tlte Company may redeem the preference shares at any lime after expiry of one year from the date of issue of such shares.

vi At the end of 5lh year, the balance 10% maybe converted into Equity share at the option of the preference shareholder at a lair market value determined nf that lime

l With the consent of preference shareholders, the Company may convert 10% of preference share capital into equity shares of only time after expiry of one year from the date of issue, of fair market value determined of the lime of conversion.

During the Financial year FY 2023-24 the company has converted 10% of preference sharcs(5.2 Lakhs) into equity shares( 2.08 Lakhs) ut a market valuation of Rs 25 per Equity shares.

During the Financial year FT 207.3-24 ihc company has redeemed 30% of preference shares(l5.60Lakhs ) at a Face Value of Rs 10 per Preference shares Unpaid calls on shares - There have been no unpaid calls.

Forfeiture of shares - None of the shares have been forfeited din ing the year

♦Amount included in "Due to MSME" in Previous year is relating to amount payable to Canary* -Manuka Apo Technologies Private Limited A joint venture entered between Canarys Automation Limited and Manuka Technologies Solutions Private Limited.

In reality, there are only two partners to the JV (Canarys Automations Private Limited and Manuka Technology Solutions Private Limited) wherein both partners contribute towards the resources required tor the purpose of execution of JV objective. The tact remains that the JV Company consisting of two partners, as aforesaid, have conic together and are more in the nature of contributors rather than buyers and sellers or service providers and service recipients. In view of this. The company has obtained a board resolution from Canarys -Manuka Apo Technologies Private Limited which has been taken as a basis to waive the rights of Canarys -Manuka Apo Technologies Private Limited as per sections 15, end 16 or the MSMKD Act, 2006. (Provisions of claiming interest on delayed payments)

In view of the above circumstances, it is our firm opinion that not making any such provision us per the requirements of Section 15 and 16 of the MSMED Act. 2016. is not overriding such requirements and the need to make a provision does not arise.

•*Under the Micro. Small and Medium Enterprises Development Act, 2006 which came into force from 2nd October 2006, certain disclosures are required to be made relating to Micro and Small Enterprises.

The company has not received the required information from any of the suppliers regarding their status under the Micro, Small and Medium Enterprises Development Act. 2006 (Except as mentioned above). Hence disclosures, if any, relating to amounts unpaid as the year end together with interest paid/payable as required under the Act have not been made.

36 The company lias neither advanced or loaned or invested funds nor received any advances (either borrowed funds or share premium or any other sources or kind of funds) from any other person) s) or entity(ies), including foreign entities (Intermediaries) with the understanding (whether recorded in writing or otherwise) that the Intermediary shall

(i) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (Ultimate Beneficiaries)

(ii) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries

37 impairment of assets

During the previous financial year 2022-23 the company has impaired assets of book value amounting to Rs. 13,33,146 which are at salvage value. For which we have not received any cash

38 Intangible asset under development - The company is developing software and the same have been amortised as per AS26 and shown under PPE.

Canarvs Modernization Framework Solution (CMF)

The company has recognized "software modernization", “Digital DevOps" and "Water Resource Management (WRM)” a as a key challenge to many small, medium and large-scale enterprises. Understanding the presence of several llavors, sizes, and outcomes ot software modernization, the company has started creating a modernization framework branded as CMF - Canary? Modernization Framework. The Company is in the process of completion of the development phase. The Product CMF is a platform which is an interconnected IT Eco-systcm of homegrown and third-party systems that accelerates development of other 11 products by reducing their turnaround time and fostering innovation The Company has done thorough research and analysis on the technical and commercial viability ol the said product and concluded that the Product is technically viable and marketable. The Company has also identified the target clientele for the product. The Company plans to launch the product in the Financial Year 2025-26, hence the direct cost relating to the development of the product is computed meticulously and accounted tor as Capital Work in Progress as per the provisions of AS-26: Intangible Assets, The company intends to obtain appropriate intellectual property rights for individual components as well as the whole solution suite once it completes the testing phase and is ready for Go-live.

Basis of Value for Capitalization of llic Intangible Asset:

Cost incurred by the Company in the Development Phase of die Product directly attributable to the development of the product until the Product completes Final Testing is capitalized, capitalization will seize once linal testing is completed. Any further expenses would be capitalized only if it results in altering the products utility beyond its initially expected and intended use or results in any new utility for the Product.

Die Company intends to amortize the capitalized value of the Product over a period of 5 years on a straight-line basis from the time the product is ready for commercial exploitation

Once the product it ready for commercial exploitation, the Company will periodically review the product for Impairment including technological obsolescence and provide for impairment if situation requires.

46 Audit trail

As per the requirements ot rule 3(11 ol the Companies (Accounts) Rules 2014 Company uses only such accounting software for maintaining its books of account that have a feature of recording audit trail of each and every transaction creating an edit log of each change made in the books of account along with (he date when such changes were tirade within such accounting software. This feature or recording audit trail has operated throughout the year and was not tampered with during the year. In respect of certain instances in Payroll Process. PPE & Account relating to inventory the softwares and fot databases the audit trail feature was not enabled during the year. The Company bus established and maintained an adequate internal control framework and based on its assessment, believes dial this was effective as of March 31. 2024

As per our report of even dated attached for and on behalf of the hoard of Directors of

forSURESH&CO ^_____^ Canary* Automations Limited Y

Chartered Accountants U

Udupt Vikram w Raman SubbaRao M R SheshadriVS

I’ortttcr- VvkSv ./^/ Managing Director Director & CEO

Membership Number\^rr~^₀^ DIN:00I76920 DIN: 03367545

M^ng«"^r,^U,„a Bengaluru Bengal,,™

May 28.2024 Way 28.2024 \ May 28,2024

Raj^hu C Nagasbree Hegdc

Whole-lime Director & CFO Company Secretary DIN: 01065269 M. No.: A66166

Bengaluru Bengaluru

May 28, 2024 May 28, 2024

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