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