SQL Star International Ltd Auditor Reports

SQL Star International Limited

1. We have audited the attached Balance Sheet of SQL STAR INTERNATIONAL LIMITED as at 31st March 2012, the Statement of Profit and Loss and also the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor’s Report) Order, 2003 issued by the Central Government 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 5 of 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 our knowledge 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 the Company so far as appears from our examination of those books.

(iii) The Balance Sheet, the Statement of Profit and Loss and Cash Flow Statement dealt with by this report are in agreement with the books of account.

(iv) In our opinion, the Balance Sheet, the Statement of Profit and Loss and Cash Flow Statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956.

(v) On the basis of written representations received from the directors, as on 31st March 2012 and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on 31st March 2012 from being appointed as a director 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 explanations given to us, the said accounts give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view 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 31st March 2012; (b) in the case of the Statement of Profit and Loss, of the LOSS for the year ended on that date; and

(c) in the case of the Cash Flow Statement, of the Cash Flows for the year ended on that date.

(Referred to in paragraph 3 of our report of even date)

i) a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets

b) These fixed assets have been physically verified by the management at reasonable intervals which, in our opinion, is reasonable having regard to the size of the Company and the nature of its business and assets. No material discrepancies were noticed on verification.

c) No substantial part of fixed assets has been disposed off during the year.

ii) a) Inventories have been physically verified during the year by the management. In our opinion, the frequency of verification is reasonable.

b) The procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the company and the nature of its business.

c) The Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and book records have been properly dealt with in the books of accounts and were not material.

iii) a) The Company has not granted secured/unsecured loan to a Company covered in the register maintained under section 301 of the Companies Act, 1956.

b) The Company has taken unsecured loans from three Companies covered in the register maintained under section 301 of the Companies Act; 1956.The amount outstanding at the end of the year is Rs.430.54 lakhs including interest of Rs 28.54 lakhs.

c) In our opinion, the rate of interest and other terms and conditions on which loans have been taken are not, prima facie, prejudicial to the interest of the Company.

d) The Company is regular in repaying the principal amounts as stipulated however interest has not been paid from March 2008 onwards.

iv) In our opinion and according to the information and explanations given to us, there are adequate internal control System commensurate with the size of the Company and the nature of its business for the purchases of inventory and fixed assets and for the sale of goods and services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal controls.

v) The Company has not entered into any contracts or arrangements with any parties referred to under section 301 of the Companies Act, 1956.

vi) The Company has not accepted loans which are in the nature of deposits without complying with provisions of section 58A and the rules made there under.

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

viii) The Central Government has not prescribed the maintenance of cost records under Section 209 (1) (d) of the Companies Act, 1956

ix) a) Undisputed Statutory dues including Provident Fund, Income Tax,, Service Tax, Employees State Insurance and Cess have not been regularly deposited with the appropriate authorities and there have been delays in a number of cases except in respect of Investor Education and Protection Fund, Sales Tax and Wealth Tax.

b) The arrears of Statutory dues as at the last day of the Financial year outstanding for a period of more than six months from the day it is payable is detailed below:

c) According to the information and explanations given to us, there are no dues of Sales Tax, Income Tax, Customs Duty, Wealth Tax, Service Tax, Excise Duty and Cess which have not been deposited on account of any dispute other than the following:

x) The accumulated losses, as at 31^st March 2012 is more than 50% of the Companies Net worth. The Company has incurred cash losses in the financial year under report and in the immediately preceding financial year.

xi) The Company has not defaulted in repayment of dues to a financial institution, bank or debenture holders.

xii) The Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities .

xiii) The Company is not a chit fund or a nidhi / mutual benefit fund / society. xiv) The Company is not dealing or trading in shares, securities, debentures and other investments. xv) The Company has not given any guarantees for loans taken by others from banks or financial institutions.

xvi) According to the information and explanations given to us, the Company has not raised any term loans during the year.

xvii) According to the information and explanations given to us and on overall examination of the financial statements of the Company as at 31st March, 2012, we report that funds raised on short-term basis have not been used for long-term investment.

xviii) The Company has not made any preferential allotment of shares to parties and Companies covered in the register maintained under section 301 of the Companies Act, 1956 during the year.

xix) The Company has not issued any debentures during the year.

xx) The Company has not raised money by public issues during the year

xxi) According to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the course of our audit.