Source Natural Foods & Herbal Supplements Ltd

TO THE MEMBERS OF INWINEX PHARMACEUTICALS LIMITED

1. We have audited the attached Balance Sheet of INWINEX PHARMACEUTICALS LIMITED("the Company") as at 31^st March 2011, the Profit and Loss Accountand the Cash Flow Statement of the Company for the year ended on that date annexedthereto. These financial statements are the responsibility of the Company's Management.Our responsibility is to express an opinion on these financial statements based on ouraudit.

2. We conducted our audit in accordance with the Standards on Auditing generallyaccepted in India. Those Standards require that we plan and perform the audit to obtainreasonable assurance about whether the financial statements are free of materialmisstatement.An audit includes examining on a test basis, evidence supporting the amountsand disclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by the Management, as well asevaluating the overall financial statement presentation. We believe that our audit provide;s reasonable basis for our opinion.

3. As required by the companies (Auditor's Report Order, 2003 as amended by theCompanies (Auditor's Report) (Amendment) Order, 2004 (the Order) issued by the CentralGovernment of India in terms of sub-section (4A) of Section 227 of the Companies Act,1956,we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5of the said Order.

4. Further to our comments in the Annexure referred to above, we report that:

i) We have obtained all the information and explanations, which to the best of ourknowledge and belief were necessary for the purposes of our audit:

ii) In our opinion, proper books of account as required by law have been kept by theCompany so far as appears from our examination of those books of the Company:

iii) The Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealtwith by this report are in agreement with the books of account:

iv) In our opinion, the Balance Sheet, the Profit and Loss Account and the Cash FlowStatement dealt with by this report are in compliance with the Accounting Standardsreferred to in sub-section (3C) of Section 211 of the Companies Act, 1956.

v) On the basis of the written representation received from the directors, as on 31^stMarch, 2011 and taken on record by the Board of Directors, we report that none of thedirectors is disqualified as on 31^st March, 2011 from being appointed as adirector in terms of clause (g) of sub-section (1) of section 274 of the Companies Act,1956.

vi) In our opinion and to the best of our information and according to the explanationsgiven to us, the said accounts together with the notes thereon give the informationrequired by the Companies Act, 1956, in the manner so required and give a true and fairview in conformity with the accounting principles generally accepted in India:

a) In the case of the Balance Sheet, of the state of affairs of the Company as at 31^stMarch 2011;

b) In the case of the Profit and Loss Account,of the Loss for the year ended on thatdate; and

c) In the case of Cash Flow Statement, of the Cash Flows for the year ended on thatdate.

For Vijay Narayan & Co.

Firm Registration No.010917S

Chartered Accountants

Vijay N. Kale

Proprietor

Membership No.020322

Place: Hyderabad

Date: 23^rd May 2011

ANNEXURE TO THE AUDITOR'S REPORT

i) a) The Fixed asset register showing full particulars, including quantitative detailsand situation of fixed assets is under updation by the management.

b) All fixed assets have not been physically verified by the management during the yearbut there is a regular programme of verification under development which in our opinion,is reasonable having regard to the size of the Company and the nature of its assets .Nomaterial discrepancies were noticed on such verification.

c) There was no substantial disposal of fixed assets during the year.

ii) a) The management has conducted physical verification of inventory at reasonableintervals during the year.

b) In our opinion and according to explanation given to us the procedures of physicalverification of inventory followed by the management are reasonable and adequate inrelation to the size of the Company and the nature of its business.

c) In our opinion, the Company is maintaining proper records of inventory and nomaterial discrepancies were noticed on physical verification.

iii) a) As informed, the Company has not granted any loans, secured or unsecured tocompanies, firms or other parties covered in the register maintained under section 301 ofthe Companies Act ,1956.

b) As informed, the Company has takenloans, secured or unsecured from companies, firmsor other parties covered in the register maintained under section 301 of the CompaniesAct, 1956. The number of parties and the amount involved in the transaction are giverbelow.

c) the rate of interest and other term and conditions of loans taken by the companysecured or unsecured are prime face not prejudicial to the interest of company

d) The terms of repayment for loans taken have not been specified

e) There is no overdue amount more than rupees one lakh to be recovered and as such noaction required in this regard.

iv) In our opinion and according to the information and explanation given to us, thereare adequate internal control system commensurate with the size of the Company and thenature of its business with regards to purchase of inventories and fixed assets and withregards to the sale of goods. During the course of our audit, we have not observed anymajor weakness in the internal control system in respect of these areas. During the courseof our audit, we have not observed any continuing failure to correct major weakness ininternal control system of the company.

(v) In respect to contracts or arrangements entered in the register maintained inpursuance to Section 301 of the Companies Act, 1956, to the best of our knowledge andbelief and according to the information and explanations given to us:

a) The particulars of contracts or arrangements referred to in section 301 that need tobe entered in the Register maintained under the said section have been so entered.

b) Each of these transactions have been made at prices which are reasonable havingregard to the prevailing market prices.

(vi) According to the information and explanations given to us, the Company has notaccepted any deposits from the public to which the provisions of section 58A and 58AA orany other relevant provision of the Companies Act, 1956 and the Companies (Acceptance ofDeposit) Rules, 1975.

(vii) In our opinion, the Company has an internal audit system commensurate with thesize and nature of its business.

(viii) According to the information and explanations given to us, the CentralGovernment has prescribed maintenance of cost records under section 209(1 )(d) of theCompanies Act, 1956. We have broadly reviewed the books of account maintained and in ouropinion; prima facie, the prescribed accounts and records have been made and maintained bythe Company. We have not, however, made a detailed examination of the records with a viewto determine whether they are accurate or complete.

(ix) a) According to the records of the Company, provident fund, investor education andprotection fund, employees' state insurance, income tax, sales tax, wealth tax, servicetax, custom duty, excise duty, cess and other material statutory dues applicable to ithave generally been regularly deposited during the year with appropriate authorities.

b) According to the information and explanations given to us, no undisputed amountspayable in respect of provident fund, investor education and protection fund, employeesstate insurance, income tax, sales tax, wealth tax, service tax, custom duty, excise duty,cess and other material undisputed statutory dues were outstanding, at the year end, for aperiod of more than six months from the date they became payable.

c) According to the records of the Company, the dues outstanding of income tax , salestax, wealth tax, service tax , custom duty, excise duty, cess on account of any dispute,are as follows : Disputed Sales Tax Demand Rs.3.40 Lakhs

(x) Accumulated losses of Rs. 24,066,586at the end of the financial year are lessthan50% of its net worth and the Company has incurred cash losses in the current financialyear and in the financial year immediately preceding financial year also.

(xi) As per the information and explanations given by the management, the Company hasnot taken any loan from financial institutions, bank or debenture holders. Accordingly,the provisions of clause 4(xi) of the Order are not applicable to the Company.

(xii) In our opinion and according to the information and explanation given to us andbased on the document and records provided to us, the Company has not granted loans andadvances on the basis of security by way of pledge of shares, debenture and othersecurities. Accordingly, the provisions of clause 4(xii) of the Order are not applicableto the Company.

(xiii) According to information and explanations given to us, the Company is not a chitfund or a nidhi / mutual benefit fund / society, the provisions of clause (xiii) of theCompanies (Auditor's Report) Order, 2003 (as amended) are not applicable to the Company.

(xiv) According to information and explanations given to us, the Company is not dealingin or trading in shares, securities, debentures and other investments. Accordingly, theprovisions of clause (xiv) of the Companies (Auditor' Report) Order, 2003 (as amended) arenot applicable to the Company.

(xv) According to the information and explanation given to us, the Company has notgiven any guarantee for loans taken by others from banks or financial institutions.

(xvi) In our opinion and according to the information and explanation given to us bythe management, the Company has not taken any term loans. Accordingly the provisions ofClause (xvi) of the Para 4&5 of the Order are not applicable to the Company during theyear.

(xvii) In our opinion and according to the information and explanations given to us andon an overall examination of the Balance Sheet of the Company, we report that no fundraised on short -term basis have been used for long-term investment and vice versa.

(xviii) According to the information and explanations given to us, during the year, theCompany has not made any preferential allotment of shares to parties or companies coveredin the register maintained under section 301 of the Companies Act, 1956.

(xix) According to the information and explanations given to us, the Company has notissued any debentures. Accordingly, the provisions of clause (xix) of the Order is notapplicable to the Company.

(xx) The Company has not raised any money by the way of public issue during the year.

(xxi) To the best of our knowledge and belief and according to the information andexplanations given to us, we report that no fraud on or by the Company has been noticed orreported, during the year.

For Vijay Narayan& Co.

Firm Registration No.010917S

Chartered Accountants

Vijay N. Kale

Proprietor

Membership No. 020322

Place: Hyderabad

Date: 23^rd May 2011