1.  We have audited the attached balance sheet of INNOVATIVE FOODS
 LIMITED, Amalgam House, Bristow Road, Willingdon Island, Kochi - 682
 003 as at 31st March 2010, the profit and loss account and also the
 cash flow statement 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 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 (Auditors Report) Order, 2003 as
 amended by the Companies (Auditors Report) (Amendment Order), 2004
 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.  Attention is drawn to note no. 1 dealing with the Company preparing
 its financial statements on the basis that it is a going concern in
 view of the plans of management to revive the Company.
 
 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 the books
 
 (iii) The balance sheet, profit and loss account and cash flow
 statement dealt with by this report are in agreement with the books of
 account;
 
 (iv) In our opinion, the balance sheet, profit and loss account and
 cash flow statement dealt with by this report comply with the mandatory
 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 2010 and taken on record by the Board of
 Directors, we report that none of the directors are disqualified as on
 31st March 2010 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 financial statements together
 with the notes thereon attached thereto, give, in the prescribed manner
 the information required by the Companies Act, 1956, 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, 2010;
 
 (b) in case of the profit and loss account, 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 the Auditors report to the members of
 INNOVATIVE FOODS LIMITED on the Accounts for the year ended 31st March
 2010,
 
 (i) (a) The Company has maintained proper records showing full
 particulars, including quantitative details and situation of fixed
 assets.
 
 (b) According to the information and explanation given to us, the fixed
 assets have been physically verified by the management during the year
 based on a program of verification in a phased manner over a period of
 two years, which, in our opinion, is reasonable, having regard to the
 size of the Company and nature of the assets. The discrepancies noticed
 on such verification have been properly dealt with in the books of
 account.
 
 (c) In our opinion and according to the information and explanations
 given to us, the Company has not disposed off a substantial part of its
 fixed assets during the year.
 
 (ii) (a) During the year, the inventories have been physically verified
 by the management. In our opinion, the frequency of verification is
 reasonable;
 
 (b) In our opinion and according to the information and explanations
 given to us, 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 for
 quantities (and not for value) and discrepancies noticed on physical
 verification were not material. The same have been properly dealt with
 in the books of account by valuing the physical inventories;
 
 (iii) (a) According to the information and explanations given to us,
 the Company has, during the year, not granted any loans, secured or
 unsecured to companies, firms or other parties covered in the Register
 maintained under section 301 of the Companies Act, 1956. Accordingly,
 paragraphs 4 (iii) (a), (b), (c) and (d) of the Companies (Auditors
 Report) Order, 2003 (hereinafter referred to as the Order) are not
 applicable.
 
 (b) According to the information and explanations given to us, the
 Company has, during the year, not taken any loans, secured or unsecured
 from companies, firms or other parties covered in the Register
 maintained under section 301 of the Companies Act, 1956. Accordingly,
 paragraphs 4 (iii) (e), (f) and (g) of the Order, are not applicable
 
 (iv) In our opinion and according to the information and explanations
 given to us, there is an adequate internal control system commensurate
 with the size of the Company and the nature of its business with regard
 to the purchase of inventory and fixed assets and with regard to sale
 of goods. On the basis of our examination and according to the
 information and explanations given to us, there is no continuing
 failure to correct major weaknesses in the aforesaid internal control
 system
 
 (v) (a) In our opinion and according to the information and
 explanations given to us, all particulars of contracts or arrangements
 referred to in section 301 of the Companies Act, 1956 have been entered
 in the Register required to be maintained under that section.
 
 (b) In our opinion and according to the information and explanations
 given to us, there are no transactions made in pursuance of such
 contracts or arrangements exceeding the value of five lakh rupees. .
 
 (vi) The Company has not accepted any deposits from the public within
 the meaning of section 58A and 58AA of the Act and the rules made there
 under
 
 (vii) The Company has an internal audit system commensurate with its
 size and nature of its business;
 
 (viii) The Company is not required to maintain cost records prescribed
 by the Central Government under clause (d) of sub-section (1) of
 section 209 of the Act.
 
 (ix) (a) According to the information and explanations given to us and
 the records of the Company examined by us, the Company has generally
 been regular in depositing undisputed statutory dues including
 provident fund, employees state insurance dues, income-tax, Investor
 Education and Protection Fund, wealth tax, sales tax, customs duty,
 excise duty, cess and other material statutory dues applicable to it
 with the appropriate authorities except for some minor delays in
 remittance of service tax.  We are informed that there are no
 undisputed statutory dues as at the year end, outstanding for a period
 of more than six months from the date they became payable except for
 Sales Tax arrears of Rs. 65465 pertaining to a demand in July 2009
 (Since paid on 27th April 2010) & Short remittance of Kamataka VAT to
 the tune of Rs. 341 payable for the month of May 2009.
 
 (b) According to the information and explanations given to us, and the
 records of the Company examined by us, there are no disputed dues of
 sales tax, wealth tax, service tax, custom duty and cess, which have
 not been deposited. The particulars of Income Tax & excise duty as at
 March 31st, 2010 which have not been deposited on account of dispute
 are as follows
 
 Name of Statute   Nature of 
                   the dues    Period for which   Amount  Forum where
 
                               it relates to      (Rs. in 
                                                  Lakhs)  dispute is 
                                                          pending
 
 Income Tax Act    Taxes on 
                   Income      Assessment Year    1494.88 CIT (Appeals)
 
                   2007-08
 
 Central Excise &  Excise duty 2003-04              42.31 Supreme Court
 
 Tariff Act                                               of India
 
 (x) The Company was a sick company as per the Sick Industrial Companies
 (Special Provisions) Act. The Board for Industrial and Financial
 Reconstruction (BIFR) has passed an order dated 8th December 2006
 approving a scheme of revival, and this scheme is under implementation.
 The Companys accumulated losses at the end of the financial year are
 more than its net worth. The Company has incurred cash losses during
 the financial year ended 31st March 2010 and in the immediately
 preceeding financial year ended 31st March 2009.
 
 (xi) According to the records of the Company examined by us and on the
 basis of information and explanations given to us, the Company has not
 defaulted in repayment of dues to banks and financial institutions
 during the year.
 
 (xii) The Company has not granted any loans and advances on the basis
 of security by way of pledge of shares, debentures and other
 securities, accordingly paragraph 4 (xii) of the Order is not
 applicable.
 
 (xiii) The Company is not a chit fund / nidhi / mutual benefit fund /
 society to which the provisions of special statute relating to chit
 fund are applicable, accordingly paragraph 4 (xiii) of the Order is not
 applicable.
 
 (xiv) As the Company is not dealing or trading in shares, securities,
 debentures and other investments, paragraph 4 (xiv) of the Order is not
 applicable.
 
 (xv) According to the information and explanations given to us, the
 company has not given any guarantee during the year for loans taken by
 others from banks or financial institutions
 
 (xvi) In our opinion and according to the information and explanations
 given to us, term loans were applied for the purpose for which the
 loans were obtained
 
 (xvii) According to the information and explanations given to us and on
 an overall examination of the balance sheet of the Company, we report
 that, during the year, short-term funds have been used to finance
 long-term investment;
 
 (xviii)The Company has not made any preferential allotment of shares
 during the year.
 
 (xix) The Company has not issued any debentures during the year.
 
 (xx) The Company has not raised any money by way of public issue during
 the year.
 
 (xxi) Based upon the audit procedures performed and information and
 explanations given by the management, we report that no fraud on or by
 the Company has been noticed or reported during the year ended 31st
 March 2010.
 
 
 
                                           For PKF Sridhar & Santhanam 
                                                 Chartered Accountants
 
                                                        S.RAMAKRISHNAN
 
                                                               Partner 
 Mumbai                                          Membership No.: 18967
 
 17th May 2010                                Firm Regn. No. : 003990S