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Auditor Report of Helios and Matheson Information Technology Ltd.

Sep 30, 2013

We have audited the accompanying financial statements of Helios and Matheson Information Technology Ltd PRODUCTS LIMITED ("the Company"), which comprise the Balance Sheet as at March 31,2013, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management''s Responsibility for the Financial Statements

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance of the Company in accordance with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 ("the Act").This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor''s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluation of the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for ouraudit opinion. Opinion

In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Act 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 march 31, 2013,

(b) in the case of the Profit and Loss Account, of the profit for the year ended on that date.

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



Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2003 ("the Order") issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Act, we give in the Annexure a statement on the matters specified in paragraph 4 and 5 of the Order.

2. As required by section 227(3) of the Act, We report that:

(a) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;

(b) 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;

(c) the Balance Sheet and Statement of Profit and Loss & Cash Flow Statement dealt with by this Report are in agreement with the books of account;

(d) in our opinion, the Balance Sheet and Statement of Profit and Loss comply with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

(e) on the basis of written representations received from the directors as on March 31, 2013, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31,2013, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the companies Act, 1956.

(f) Since the Central Government has not issued any notification as to the rate at which the cess is to be paid under section 441A of the Companies Act, 1956 nor has it issued any Rules under the said section, prescribing the manner in which such cess is to be paid, no cess is due and payable by the Company.

(Referred to in paragraph lunderthe heading Report on Legal and Regulatory Requirements of our Report of even date)

1. (a) The Company has maintained proper records showing full particulars, including quantitative details and situation, of its fixed assets.

(b) Fixed Assets have been physically verified by the management during the year. No material discrepancies were noticed on such verification.

(c) Substantial part of fixed assets have not been disposed off during the year.

2. (a) The inventory of the Company, has been physically verified by the Management during the year. The frequency of verification is reasonable.

(b) In our opinion, the procedures of physical verification of stocks followed by the Management are reasonable and adequate in relation to the size of the Company and nature of its business.

(c) The Company has maintained proper records of inventory and the discrepancies noticed between the physical stocks and the book record were not material.

3. (a) The Company has not granted any loan, secured or unsecured to companies, firms or other parties covered in the register maintained under section 301 of the Act.

(b) As the company has not given any loan hence the requirement of rate of interest & other terms & conditions of loan given by the company, secured or unsecured are prejudicial to the interest of the company or not is not applicable.

(c) Requirement of regular receipt of the principal amount and interest is not applicable being no loan given by the company.

(d) Company has not given any loan hence there is no overdue amount of more than rupees one lakh.

(e) The company has not taken any loans, secured or unsecured from companies firm or other parties covered in the register maintained under section 301 of the Act.

(f) As the Company has not taken any loan hence the requirement of rate of interest and other terms & conditions of loans taken by the Company, secured or unsecured are prejudicial to the interest of the Company or not is not applicable.

(g) Requirement of regular payment of the principal amount and interest is not applicable being no loan taken by the Company.

4. There are adequate internal control system commensurate with the size of the Company and the nature of its business with regard to the purchases of inventories, fixed assets and for the sale of goods. There is no continuing failure to correct major weaknesses in internal control system.

5. (a) According to the information and explanations given to us, we are of the opinion that the particulars of contract or arrangements that need to be entered into the register maintained under section 301 of the Companies Act, 1956 have been so entered. (b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and exceeding the value of rupees five lakhs in respect of any party during the year have been made at prices which are reasonable having regard to prevailing market prices at the relevant time.

6. The Company has not accepted any deposits under the provisions of Section 58A and 58AA or any other relevant provisions of the Act and the rules framed there under.

7. In our opinion, the Company''s present internal audit system is commensurate with its size and nature of its business.

8. On the basis of records produced to us, we are of the opinion that, prima facie, the cost records prescribed by the Central Government of India under section 209(l)(d) of the Act have been maintained. However, we are not required to and have not carried out any detailed examination of such accounts and records.

9. (a) According to the books and records as produced and examined by us in accordance with generally accepted auditing practices in India and also based on Management representations, undisputed statutory dues in respect of Provident Fund, Employee''s State Insurance dues, Investor Education and Protection Fund, Income Tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess and Other Statutory dues have generally been regularly deposited, by the Company during the year with the appropriate authorities in India. (b) As at 31st March, 2013, there have been no disputed dues which have not been deposited with the respective authorities in respect of Income Tax, Wealth Tax, Service Tax, Sales Tax, Custom Tax, Excise Duty and Cess.

10. The Company has neither accumulated losses as at 31st March, 2013, nor it has incurred any cash loss either during the financial year ended on that date or in the immediately preceding financial year.

11. As per the records of the Company, it has not defaulted in repayment of its dues to any financial institution or bank or to debenture holders during the year.

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

13. Considering the nature of activities carried on by the Company during the year, the provisions of any special statute applicable to chit fund/nidhi/mutual benefit fund/societies are not applicable to it.

14. The Company has not dealt or traded in shares, securities, debentures or other investments during the year.

15. The Company has not given guarantees for loans taken by others from banks or financial institutions.

16. The Company has not taken any term loan during the year.

17. On the basis of review of utilization of funds which is based on overall examination of the balance sheet of the company, related information as made available to us and as represented to us by the Management, funds raised on short term basis have not been used for long term investment.

18. The Company has not made preferential allotment of shares to parties & companies covered in the register maintained under Section 301 of the Act during the year.

19. The Company has not issued any debentures during the year.

20. The Company has not raised any money by public issue during the year.

21. As per the information and explanations given to us and on the basis of examination of records, no fraud on or by the Company was noticed or reported during the year.

For Madhukar Garg & Company

Chartered Accountants FRN 000866C

Place: Jaipur SunilShukla

Date: 30.05.13 Partner

M.NO.-071179


Sep 30, 2012

We have audited the attached balance sheet of helios and matheson information technology limited as at 30th September, 2012, the profit and loss account and also the cash flow statement of the company 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.

we conducted our audit in accordance with 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 to support the financial statement amounts and disclosures in the financial statements, an audit also includes assessing the accounting principles used in preparation of financial statements, assessing significant estimates made by management in the preparation of financial statements and evaluation the overall financial statement presentation, we believe that our audit provides a reasonable basis for our opinion.

we report that:

1. as required by the companies (auditor''s report) order, 2003 issued by the central government of india in terms of subsection 4a of section 227 of companies act, 1956, we annex hereto a statement on the matters specified in paragraphs 4 & 5 of the said order.

2. further to our comments in the annexure referred to above in paragraph 1 above we report that:

a. we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;

b. 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 the books;

c. the balance sheet and profit and loss account and cash flow statement dealt with by this report are in agreement with the books of account;

d. in our opinion, the profit and loss account and balance sheet are compiled in accordance with the accounting standards referred to in sub-section (3c) of section 211 of companies act, 1956.

e. on the basis of written representations received from directors, as on 30th September, 2012 and taken on record by the board of directors, we report that none of the directors of the company are disqualified, as on 30th September, 2012, from being appointed as director of the company under clause (g) of sub-section (1) of section 274 of the companies act, 1956;

f. in our opinion and to the best of our information and according to the explanations given to us, the said balance sheet and profit and loss account read together with other notes and accounting policies 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:

i. in the case of the consolidated balance sheet, of the state of affairs of the company as at 30th September, 2012;

ii. in the case of the consolidated profit and loss account, of the profit for the period ended on that date; and

iii. in the case of the consolidated cash flow statement, of the cash flows of the period ended on that date.

annexure to auditors'' report

annexure referred to in paragraph 1 of the auditors'' report on the accounts of helios & matheson information technology limited, for the year ended 30th September, 2012

1. a. the company is maintaining proper records showing full particulars, including quantitative details and situations of fixed assets.

b. the fixed assets have been physically verified by the management at reasonable intervals and no material discrepancies were noticed on such verification.

c. no fixed assets have been disposed off during the year and the going concern concept is not altered.

2. the company''s nature of operations does not require it to hold an inventory and accordingly clause 4 (ii) of the companies auditors report order 2003 is not applicable.

3. a. the company had taken loan from its wholly owned subsidiary covered in the register maintained u/s.301 of the companies act, 1956. the maximum amount involved during the year was Rs..1,00,00,000/- and theyear-end balance of loan taken from such party is nil.

b. the company has granted interest free advances to three of its subsidiaries covered in the register maintained u/s 301 of the act without stipulation as to repayment, the maximum amount during the year was Rs..46,17,76,686/- at the year-end balance of advance given to such parties was Rs..46,17,76,686/-

c. in our opinion the terms and conditions on which loans have been taken from / granted to company listed in the register maintained under section 301 are not, prima facie, prejudicial to the interest of the company.

d. the company is regular in repayment of the principal and interest amounts wherever stipulated.

e. there are no overdue amount in respect of advances granted to companies listed in the register maintained under section 301 of the companies act,1956

4. in our opinion and according to the information and explanation given to us there is an adequate internal control procedure commensurate with the size of the company and the nature of its business, for the purchase of fixed assets and for the sale of services, no instances of continuing failure to correct major weakness in internal control where notice by us during the course of audit.

5. a. in respect of contractual arrangements entered in the register maintained in pursuance of section 301 of the companies act and to the best of our knowledge and belief and according to the information and explanation given to us, where each of such transaction made in pursuance of contract or arrangement, is in excess of Rs..5 lacs in respect of each party, transaction have been made at prices which are prima facie reasonable having regard to prevailing market prices at the relevant time.

b. in respect of sale of services to parties listed in the register maintained u/s.301 of the companies act, 1956 these transactions have been made at prices which are prima facie reasonable having regard to prevailing market prices at the relevant time.

6. the company has accepted deposits from public, the provision of section 58a & 58aa of the companies act, 1956 and the rules made there under are complied with.

7. in our opinion the company has an internal audit system commensurate to the size of the company and the nature of business.

8. the central government has not prescribed maintenance of any costing records for the services of the company under section 209(1)(d) of the companies act, 1956.

9. a. according to the information and explanation given to us, and according to the books and records as produced and by us, in our opinion, the undisputed statutory dues including provided fund, income tax, sales tax, wealth tax, service tax, vat , customs duty, excise duty, cess and other material statutory dues as applicable, have generally been regularly deposited by thecompany duringtheyearwith appropriate authorities, according to the information and explanation given to us, there are no arrears of outstanding statutory dues as mentioned above as at 30th September, 2012 for a period of more than 6 months from the date they became payable

b. according to the information and explanations produced to us, there are no dues in respect of sales tax, customs duty, excise duty and cess that have not been deposited with appropriate authorities on account of any dispute.

a in respect of assessment year 2006-2007, the company has been served with a demand of Rs..1,94,98,583/- against which the company has gone on appeal to the commissioner of income tax (appeals) and the company has paid Rs..5,00,000/- and contested the demand.

b in respect of assessment year 2008-09, the company has been served with a demand of Rs.15,94,66,361/- against which the company has gone on appeal to the commissioner of income tax (appeals) and the company has paid Rs..1,70,00,000/- and contested the demand.

c in respect a.y.2009-2010, the company has been served with a demand of Rs..2,47,10,740/- against which the company has gone on appeal to the commissioner of income tax (appeals) and the company has paid Rs..45,00,000/- and contested the demand.

d the company has filed an appeal before commissioner of central excise (appeals) disputing the service tax levy or demand of Rs..3,93,720 and the company has paid under protest of Rs..1,90,000/- towards demand.

10. the company has no accumulated losses at the end of 30th September, 2012, the company has not incurred cash losses during the financial year on that date and in the immediately preceding financial year.

11. the company has not defaulted in repayment of dues to any financial institution or bank or debenture holders.

12. the company has not granted any loans or advances on the basis of security by way of pledge of shares, debentures and other securities, hence we do not comment on the adequacies of securities and documents.

13. the company is nota nidhi or mutual benefitfund orasociety.

14. the company is not dealing or trading in shares, securities, debentures and other investments and therefore, we do not comment on the maintenance of proper records.

15. the company has not given any guarantee for loans taken by others from bank or financial institutions except in the case of guarantee given to its subsidiary company, the terms and conditions, whereof, in our opinion or not prejudicial to the interest of the company.

16. the company has obtained term loans during the year and as per the records of the company the term loans were applied for the purpose for which they were raised.

17. as per the records of the company funds raised on short term basis were not used for long term investments and vice versa.

18. during the year the company has issued convertible warrants to the promoters and in terms of the issue and as per preferential guidelines of sebi 25% of conversion price amounting to Rs..1,82,75,000/ - was received by the company during the year.

19. no debentures were issued by the company, hence we have nothing to comment on the security or charges created on debentures.

20. no funds were raised from public issues during the year.

21. during the course of our examination of the books and records of the company, carried out in accordance with the generally accepted auditing practices in india and according to the information and explanations given to us we have neither come across any instance of significant fraud on or by the company, noticed or reported during the year nor we have been informed of such case by the management.

for venkatesh & co

chartered accountants

fr.no.0043635

place: chennai ca. v.dasaraty

date : february 05 , 2013 partner

m.no.26336


Sep 30, 2011

1. we have audited the attached balance sheet of helios and matheson information technology limited as at 30th September, 2011, the profit and loss account and also the cash flow statement of the company 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 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 to support the financial statement amounts and disclosures in the financial statements, an audit also includes assessing the accounting principles used in preparation of financial statements, assessing significant estimates made by management in the preparation of financial statements and evaluating the overall financial statement presentation, we believe that our audit provides a reasonable basis for our opinion.

as required by the companies (auditor's report) order, 2003 issued by the central government of india in terms of subsection 4A of section 227 of companies act, 1956, we annex hereto a statement on the matters specified in paragraphs 4 & 5 of the said order.

further to our comments in the annexure referred to above, we report that:

a. we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;

b. 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 the books;

c. the balance sheet and profit and loss account and cash flow statement dealt with by this report are in agreement with the books of account;

d. in our opinion, the balance sheet, profit and loss account and cash flow statement dealt with by this report comply with the accounting standards referred to in sub-section (3c) of section 211 of companies act, 1956.

e. on the basis of written representations received from directors, as on 30th September, 2011 and taken on record by the board of directors, we report that none of the directors of the company is disqualified, as on 30th September, 2011, from being appointed as director of the company under clause (g) of sub-section (1) of section 274 of the companies act, 1956;

f. in our opinion and to the best of our information and according to the explanations given to us, the said balance sheet and profit and loss account read together with other notes and accounting policies 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:

i. in the case of the balance sheet of the state of affairs of the company as at 30th September, 2011 and

ii. in the case of the profit and loss account, of the profit for the year ended on that date

iii. in the case of the cash flow statement, of the cash flows of the year ended on that date.

annexure to auditors' report

annexure referred to in paragraph 1 of the auditors' report on the accounts of helios and matheson information technology limited, for the year ended 30th September, 2011

1. a. the company is maintaining proper records showing full particulars, including quantitative details and situations of fixed assets.

b. the fixed assets have been physically verified by the management at reasonable intervals and no material discrepancies were noticed on such verification.

c. no fixed assets have been disposed off during the year and the going concern concept is not altered.

2. the company's nature of operations does not require it to hold an inventory and accordingly clause 4 (ii) of the companies auditors report order 2003 is not applicable.

3. a. the company had taken loan from its wholly owned subsidiary covered in the register maintained u/s 301 of the companies act,1956. the maximum amount during the year was Rs.2,50,00,000 and the year-end balance of loan taken from such party is Rs.1,00,00,000

b. the company has granted advances to three companies which are its subsidiaries covered in the register maintained u/s 301 of the act the maximum amount during the year was Rs.36,60,89,181 and the year-end balance of loan given to such parties was Rs. 36,60,89,181

c. in our opinion the terms and conditions on which loans have been taken from / granted to company listed in the register maintained under section 301 are not, prima facie, prejudicial to the interest of the company.

d. the company is regular in repayment of the principal and interest amounts wherever stipulated.

e. there are no overdue amount in respect of advances granted to companies listed in the register maintained under section 301 of the companies act,1956

4. in our opinion and according to the information and explanation given to us there is an adequate internal control procedure commensurate with the size of the company and the nature of its business, for the purchase of fixed assets and for the sale of services, no instances of continuing failure to correct major weakness in internal control where notice by us during the course of audit.

5. a. in respect of contractual arrangements entered in the register maintained in pursuance of section 301 of the companies act and to the best of our knowledge and belief and according to the information and explanation given to us, where each of such transaction made in pursuance of contract or arrangement, is in excess of Rs.5 lacs in respect of each party, transaction have been made at prices which are prima facie reasonable having regard to prevailing market prices at the relevant time.

b. in respect of sale of services to parties listed in the register maintained u/s.301 of the companies act, 1956 these transactions have been made at prices which are prima facie reasonable having regard to prevailing market prices at the relevant time.

6. the company has accepted deposits from public, the provision of section 58A & 58AA of the companies act, 1956 and the rules made there under are complied with.

7. in our opinion the company has an internal audit system commensurate to the size of the company and the nature of business.

8. the central government has not prescribed maintenance of any costing records for the services of the company under section 209(1)(d) of the companies act, 1956.

9. a. according to the information and explanation given to us, and according to the books and records as produced and examined by us, in our opinion, the undisputed statutory dues including provided fund, income tax, sales tax, wealth tax, service tax, vat , customs duty, excise duty, cess and other material statutory dues as applicable, have generally been regularly deposited by the company during the year with appropriate authorities, according to the information and explanation given to us, there are no arrears of outstanding statutory dues as mentioned above as at 30th September, 2011 for a period of more than 6 months from the date they became payable

b. according to the information and explanations produced to us, there are no dues in respect of sales tax, customs duty, excise duty and cess that have not been deposited with appropriate authorities on account of any dispute, according to the information and explanation given to us the income tax demand of Rs.2,38,53,150 excluding interest relating to the assessment year 1997-1998 is being contested by the company in the supreme court as the madras high court ruled in favour of the income tax department, the company has paid Rs.2,42,77,990 towards the demand, the company has been served with a demand in respect of assessment year 2006 -07 for Rs.1,94,98,583, 2008-09 for Rs.15,94,66,361 and 2009-10 for Rs.2,47,10,740. the company has gone on appeal to the commissioner of income tax (appeals) and the company paid Rs.1,25,00,000 for the a.y. 2008-09 towards the demand, the company has filed an appeal before commissioner of central excise (appeals (disputing the service tax levy or demand ofRs.3,93,720.

10. the company has no accumulated losses at the end of 30th September, 2011, the company has not incurred cash losses during the financial year on that date and in the immediately preceding financial year.

11. the company has not defaulted in repayment of dues to any financial institution or bank or debenture holders.

12. the company has not granted any loans or advances on the basis of security by way of pledge of shares, debentures and other securities, hence we do not comment on the adequacies of securities and documents.

13. the company is not a nidhi or mutual benefit fund or a society.

14. the company is not dealing or trading in shares, securities, debentures and other investments and therefore, we do not comment on the maintenance of proper records.

15. the company has not given any guarantee for loans taken by others from bank or financial institutions except in the case of guarantee given to its subsidiary company, the terms and conditions, whereof, in our opinion or not prejudicial to the interest of the company.

16. the company has obtained term loans during the year and as per the records of the company the term loans were applied for the purpose for which they were raised.

17. as per the records of the company funds raised on short term basis were not used for long term investments and vice versa.

18. the company has not made preferential allotment during the year.

19. no debentures were issued by the company, hence we have nothing to comment on the security or charges created on debentures.

20. no funds were raised from public issues during the year.

21. during the course of our examination of the books and records of the company, carried out in accordance with the generally accepted auditing practices in india and according to the information and explanations given to us we have neither come across any instance of significant fraud on or by the company, noticed or reported during the year nor we have been informed of such case by the management.

for venkatesh & co

chartered accountants

fr.no.0043635

place: chennai ca. v.dasaraty

date : february 14, 2012 partner m.no.26336


Sep 30, 2010

1. we have audited the attached balance sheet of helios Et matheson information technology limited as at 30th September, 2010, the profit and loss account and also the cash flow statement of the company for the year ended on that date annexed thereto. these financial statements are the responsibility of the companys management, our responsibility is to express an opinion on these financial statements based on our audit.

2. we conducted our audit in accordance with 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 to support the financial statement amounts and disclosures in the financial statements, an audit also includes assessing the accounting principles used in preparation of financial statements, assessing significant estimates made by management in the preparation of financial statements and evaluation the overall financial statement presentation, we believe that our audit provides a reasonable basis for our opinion.

we report that:

1. as required by the companies (auditors report) order, 2003 issued by the central government of india in terms of subsection 4a of section 227 of companies act, 1956, we annex hereto a statement on the matters specified in paragraphs 4 £t 5 of the said order. further to our comments in the annexure referred to above in paragraph 1 above we report that:

a. we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit.

b. 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 such books.

c. the balance sheet, profit and loss account and cash flow statement dealt with by this report are in agreement with the books of accounts.

D. in our opinion, the profit and loss account and balance sheet are compiled in accordance with the accounting standards referred to in sub-section (3c) of section 211 of companies act, 1956.

e. on the basis of written representations received from directors, as on 30th September, 2010 and taken on record by the board of directors, we report that none of the directors of the company are disqualified, as on 30th September, 2010, from being appointed as director of the company under clause (g) of sub-section (1) of section 274 of the companies act, 1956;

F. in our opinion and to the best of our information and according to the explanations given to us, the said balance sheet and profit and loss account read together with other notes and accounting policies 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:

i. in the case of the balance sheet of the state of affairs of the company as at 30th September, 2010 and

ii. in the case of the profit and loss account, of the profit for the year ended on that date

iii. in the case of the cash flow statement, of the cash flows of the year ended on that date.

annexure to auditors report annexure referred to in paragraph 1 of the auditors report on the accounts of helios & matheson information technology limited, for the year ended 30th September, 2010

1. a. the company is maintaining proper records showing full particulars, including quantitative details and situations of fixed assets.

b. the fixed assets have been physically verified by the management at reasonable intervals and no material discrepancies were noticed on such verification.

c. no fixed assets have been disposed off during the year and the going concern concept is not altered.

2. the companies nature of operations does not require it to hold an inventory and accordingly clause 4 (ii) of the companies auditors report order 2003 is not applicable.

3. a. the company had taken loan from one company covered in the register maintained u/s 301 of the companies act,1956. the maximum amount involved during the year was rs.3.5 crore and the year end balance of loan taken from such pary is rs.2 crore.

b. the company has granted interest free advances to three companies which are its subsidiaries covered in the register maintained u/s 301 of the act without stipulation as to repayment, the maximum amount involved during the year was rs. 11,57,55,244/- at the year end balance of loan taken from such parties was rs. 11,57,55,244/-

c. in our opinion the terms and conditions on which loans have been taken from / granted to company listed in the register maintained under section 301 are not, prima facie, prejudicial to the interest of the company.

d. there are no overdue amount in respect of advances granted to companies listed in the register maintained under section 301 of the companies act, 1956

4. in our opinion and according to the information and explanation given to us there is an adequate internal control procedure commensurate with the size of the company and the nature of its business, for the purchase of fixed assets and for the sale of services, no instances of continuing failure to correct major weakness in internal control where notice by us during the course of audit.

5. in respect of contractual arrangements entered in the register maintained in pursuance of section 301 of the companies act and to the best of our knowledge and belief and according to the information and explanation given to us, where each of such transaction made in pursuance of contract or arrangement, is in excess of rs. 5 lacs in respect of each party, transaction have been made at prices which are prima facie reasonable having regard to prevailing market prices at the relevant time.in respect of sale of services to parties listed in the register maintained u/s.301 of the companies act, 1956 these transaction have been made at prices which are prima facie reasonable having regard to prevailing market prices at the relevant time.

6. the company has accepted deposits from public, the provision of section 58a 6 58aa of the companies act, 1956 and the rules made there under are complied with.

7. in our opinion the company has an internal audit system commensurate to the size of the company and the nature of business.

8. the central government has not prescribed maintenance of any costing records for the services of the company under section 209(1 )(d) of the companies act, 1956.

9. a. according to the information and explanation given to us, and according to the books and records as produced and examined by us, in our opinion, the undisputed statutory dues including provided fund, income tax, sales tax, wealth tax, service tax, vat , customs duty, excise duty, cess and other material statutory dues as applicable, have generally been regularly deposited by the company during the year with appropriate authorities, according to the information and explanation given to us, there are no arrears of outstanding statutory dues as mentioned above as at 30th September, 2010 for a period of more than 6 months from the date they became payable

b. according to the information and explanations produced to us, there are no dues in respect of sales tax, customs duty, excise duty and cess that have not been deposited with appropriate authorities on account of any dispute, according to the information and explanation given to us the income tax demand of rs.2,38,53,150/- relating to the assessment year 1997-1998 is being contested by the company in the supreme court as the madras high court ruled in favour of the income tax department, the company has paid rs.2,17,77,990/- towards the demand, in respect of assessment year 2008-09, the company has been served with a demand of rs.17,84,49,650/- against which the company has gone on appeal to the commissioner of income tax (appeals).the company has filed an appeal before commissioner of central excise (appeals) disputing the service tax levy or demand of rs.3,93,720/-.

10. the company has no accumulated losses at the end of 30th September, 2010, the company has not incurred cash losses during the financial year on that date and in the immediately preceding financial year.

11. the company has not defaulted in repayment of dues to any financial institution or bank or debenture holders.

12. the company has not granted any loans or advances on the basis of security by way of pledge of shares, debentures and other securities, hence we do not comment on the adequacies of securities and documents.

13. the company is not a nidhi or mutual benefit fund or a society.

14. the company is not dealing or trading in shares, securities, debentures and other investments and therefore, we do not comment on the maintenance of proper records.

15. the company has not given any guarantee for loans taken by others from bank or financial institutions except in the case of guarantee given to its subsidiary company, the terms and conditions, whereof, in our opinion or not prejudicial to the interest of the company.

16. the company has obtained term loans during the year and as per the records of the company the term loans were applied for the purpose for which they were raised.

17. as per the records of the company funds raised on short term basis were not used for long term investments and vice versa.

18. the company has made preferential allotment to parties u/s 301 of the act was made by the company during the year. In our opinion, prices at which share have been issued are not prejudicial to the interest of the company.

19. no debentures were issued by the company, hence we have nothing to comment on the security or charges created on debentures.

20. no funds were raised from public issues during the year.

21. during the course of our examination of the books and records of the company, carried out in accordance with the generally accepted auditing practices in india and according to the information and explanations given to us we have neither come across any instance of significant fraud on or by the company, noticed or reported during the year nor we have been informed of such case by the management.

for venkatesh & co

chartered accountants

fr.no.0043635

place: chennai ca. v.dasaraty

date : february 14, 2011 partner

m.no.26336


Sep 30, 2009

1. we have audited the attached balance sheet of helios and matheson information technology limited as at September 30, 2009, the profit 6t loss account and also the cashflow statement for the eighteen month period ended on that date annexed thereto. these financial statements are the responsibility of the companys management, our responsibility is to express an opinion on these financial statements based on our audit.

2. we conducted our audit in accordance with 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 misstatements, an audit includes examining, on a test basis, evidence to support the financial statement amounts and disclosures in the financial statements, assessing the accounting principles used in the preparation of financial statements, assessing significant estimates made by management in the preparation of financial statements and evaluating overall financial statement presentation. we believe that our audit provides a reasonable basis for our opinion.

3. as required by the companies (auditors report) order, 2003 issued by the central governtment 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 & 5 of the said order.

further to our comments in the annexure referred to in paragraph 3 above, we report that

a. we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit.

b. 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 such books.

c. the balance sheet, profit and loss account and cash flow statement dealt with by this report are in agreement with the books of accounts.

d. in our opinion, the profit and loss account,balance sheet and cash flow statement comply with accounting standards referred to in sub section (3c) of section 211 of the companies act, 1956.

f. in our opinion and to the best of our information and according to the explanations given to us, the said balance sheet and profit and loss account read together with the other notes and accounting policies 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:

i. in the case of the balance sheet of the state of affairs of the company as at 30th September, 2009

li. in the case of the profit and loss account, of the profit of the eighteen month period ended on that date and

iii. in the case of the cash flow statement, of the cash flows of the eighteen month period ended on that date.

iv. on the basis of written representation received from the directors as at 30th September 2009, and taken on record by the board of directors, we report that none of the directors is disqualified from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the companies act, 1956.

annexure to auditors report (referred to in paragraph 3 of our report of even date)

in terms of the information and explanation given to us and the books and records examined by us in the normal course of audit and to the best of our knowledge and belief, we state as under :-

1. a. the company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.

b. the fixed assets of the company have been physically verified by the management at reasonable intervals, no material discrepancies were noticed on such verification.

c. no fixed assets have been disposed off during the year.

2. the companys nature of operations does not require it hold inventories, accordingly, clause 4(ii) of the companies auditors report (order), 2003 is not applicable.

3. the company has not granted loans, secured or unsecured to and from companies, firms or other parties covered in the register maintained under section 301 of the companies act, 1956 and hence, clauses (iii)(b), (iii)(c),(iii)(d),(iii)(f) and (iii)(g) of paragraph 4 of the said order are not applicable to the company.

4. the company has taken unsecured loan from the company covered in the register maintained under section 301 of the companies act, 1956. the terms & conditions of the loan are not prejudicial to the interest of the company

5. in our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the company and the nature of its business with regard to purchases of fixed assets and the sale of services, no instances of continuing failure to correct major weaknesses in internal control were noticed by us during the course of audit.

6. a. in respect of contractual arrangements entered in the register maintained in pursuance of section 301 of the companies act, 1956 and to the best of our knowledge and belief and according to the information and explanations given to us, where each of such transactions made in pursuance of contracts or arrangements, is in excess of rs.5 lacs in respect of each party, the transactions have been made at prices which are prima facie reasonable having regard to the prevailing market prices at the relevant time.

b. in respect of sale of services to parties listed in the register maintained under section 301 of the companies act, 1956, these transactions have been made at prices which are reasonable having regard to prevailing market prices at the relevant time.

7. the company has accepted deposits from the public, the provisions of sections 58A & 58AA of the companies act, 1956, and the rules made there under are complied with.

8. in our opinion, the company has an adequate internal audit system commensurate with the size of the company and the nature of its business.

9. the central government has not prescribed the maintenance of cost records under section 209 (1) (d) of the companies act, 1956.

10. a. according to the information and explanations given to us, and according to the books and record as produced and examined by us, in our opinion, the undisputed statutory dues including provident fund, income-tax, sales tax, wealth tax, service tax, value added tax customs duty, excise duty, cess and other material statutory dues as applicable, have generally been regularly deposited by the company during the year with the appropriate authorities, according the the information and explanations given to us, there are no arrears of outstanding statutory dues as mentioned above as at 30th September, 2009 for a period of more than six months from the date they became payable.

b. according to the information and explanations produced to us, there are no dues in respect of sales tax, customs duty, excise duty and cess that have not been deposited with the appropriate authorities on account of any dispute, according to the information and explanations given to us, the income tax demand of rs.2,38,53,150 relating to the assessment year 1997-98, is being contested by the company in the madras high court, the company has paid rs.57,77,990 towards the demand, the company has filed an appeal before the commissioner of central excise (appeals). disputing the service tax levy/ demand of rs.3,93,720.

11. the company has no accumulated losses at the end of 30th September 2009. the company has not incurred cash losses during the financial year ended on that date and in the immediately preceding financial year.

12. the company has not defaulted in the repayment of dues to financial institutions or banks or debenture holders.

13. the company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

14. the company has not given any guarantee for loans taken by others from banks or financial institutions except in the case of guarantee given to its subsidiary company, the terms and conditions, whereof, in our opinion, are not prejudicial to the interest of the company.

15. the company has obtained term loans during the year and as per records of the company, the term loans were applied for the purpose for which they were raised.

16. as per the records of the company, funds raised on short-term basis were not used for long term investment and vice-versa.

17. the company has issued convertible warrants on a preferential basis to the promoters and non promoter group and In terms of the issue and as per preferential guidelines of SEBI, 10 % of the conversion price amounting Rs. 3,70,27,200 was received by the company during the year.

18. the company has not issued any debentures and hence, creation of securities in respect of debentures does not arise.

19. the company has not raised money by way of public issues.

20. during the course of our examination of the books and records of the company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of significant fraud on or by the company, noticed or reported during the year nor have we been informed of such case by the managment.

for venkatesh & co chartered accountants

place: chennai ca. v.dasaraty

date : January 30, 2010 partner

M.no.26336

 
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