1.  We have audited the attached Balance Sheet of Shimoga Technologies
 Limited as at 31 March 2011 and the Proft and Loss Account and Cash
 Flow Statement for the period 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 have 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 as
 amended by Companies (Auditors Report) (Amendment) Order, 2004,
 (together the order) issued by the Government of India in terms of
 sub-section (4A) of section 227 of the Companies Act, 1956, and on the
 basis of such checks of the books and records of the company as we
 considered appropriate and according to the information and
 explanations given to us, we enclose in the Annexure a statement on the
 matters specified in paragraphs 4 and 5 of the said Order.
 
 4.  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 and Profit and Loss Account dealt with by this
 report are in agreement with the books of account.
 
 iv) In our opinion the Balance Sheet and, Profit & Loss Account and the
 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 to the extent it is applicable.
 
 v) On the basis of written representations received from the directors,
 as on 31 March 2011 and taken on record by the Board of Directors, we
 report that none of the directors are disqualified as on 31 March 2011
 from being appointed as a director in terms of clause (g) of
 sub-section (1) of section 274 of the Companies Act, 1956;
 
 vi) Attention is invited to :
 
 a.) Note No.8 of schedule 5 regarding preparation of accounts on a
 going concern basis although the networth of the company has
 substantially eroded and note regarding 19 of schedule 5 leasing of the
 land, building and plant and machinery to Smiths & Founders (India) ltd
 (formerly known as Bhagavathi Enterprises Ltd). Accordingly, the
 accounts do not include adjustments aforesaid in case the management’s
 business plans do not materialise.
 
 b.) Note No.16 of Schedule 5 regarding the company is a sick industrial
 company within the meaning of clause (o) of sub section (1) of section
 3 of the Sick Industrial Companies Act 1985, and the company has filed
 a draft rehabilitation scheme with the Board of Industrial and
 Financial Reconstruction (‘BIFR’) under the provisions of the Act the
 matter is pending before the BIFR.
 
 vii) Subject to the matters referred to above, in our opinion and to
 the best of information and according to the explanations given to us,
 the said accounts read with the notes thereon gives 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 31 March 2011;
 
 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 flows for the
 year ended on that date;
 
 Annexure to the Auditors'' Report
 Referred to in paragraph 3 of my report of even date,
 
 i) (a) the Company has maintained proper records showing full
 particulars, including quantitative details and situation of fixed
 assets;
 
 (b) All the fixed assets have been verified by the management during
 the year and according to the information and explanation given to us,
 there is a regular programme of verification which in our opinion needs
 improvement and further strengthening, considering the size of the
 company and nature of assets. The discrepancies noticed on physical
 verification have been properly dealt with in the books of accounts;
 
 (c) During the year, the company has not disposed off substantial/
 major part of fixed assets. The company has leased its factory building
 and plant and machinery in order to curtail future losses. The
 assumption of going concern has been followed in view of the reasons
 set forth in note no.8 of notes to accounts.
 
 ii) The company did not have inventories at any time during the year.
 Consequently,the requirements regarding physical verification of
 inventories,maintenance of records of inventory and discrepancies
 between physical stocks and book records are not applicable to the
 company for the year.
 
 iii) (a) The Company has not granted any loans, secured or unsecured,
 to companies, firms or other parties listed in the Register maintained
 under Section 301 of the Companies Act, 1956, during the period. As the
 Company has not granted any loans, secured or unsecured, to parties
 listed in the register maintained under Section 301 of the Companies
 Act, 1956, clauses iii(b), iii(c), and iii(d) of the paragraph 4 of the
 Order, are not applicable;
 
 (b) The Company has not taken any loans, secured or unsecured, from
 companies, firms or other parties listed in the Register maintained
 under Section 301 of the Companies Act, 1956, during the period. As
 the Company has not taken any loans, secured or unsecured, from parties
 listed in the register maintained under Section 301 of the Companies
 Act, 1956, clauses iii(f) and iii(g) of the paragraph 4 of the Order,
 are not applicable;
 
 iv) In our opinion and according to the information and explanations
 given to us, there is an internal control system commensurate with the
 size of the Company and the nature of its business with regards to the
 purchase of inventory and fixed assets and for the sale of goods.
 During the course of our audit no major weakness has been noticed in
 respect of these areas;
 
 v) Based on the audit procedures applied by us and according to the
 information and explanations provided by the management, we are of the
 opinion that all transactions that need to be entered into the register
 in pursuance of Section 301 of the Act have been so entered;
 
 vi) The Company has not accepted any deposits from the public within
 the meaning of section 58A and 58AA of the Companies Act, 1956 and the
 Rules framed thereunder;
 
 vii) The company has an internal audit system,which in our opinion
 needs to be improved;
 
 viii) According to the information and explanation given to us,the
 Central Government has not prescribed the maintenance of cost records
 under Section 209(1)(d) of the Companies Act, 1956;
 
 ix) (a) According to the records of the Company and information and
 explanations given to us, the Company has not been regular in
 depositing undisputed statutory dues including tax deducted at source,
 excise duty,sales tax/value added tax, entry tax and professional tax
 and other statutory dues with the appropriate authorities during the
 period;
 
 (b) According to the information and explanation given to us, and on
 the basis of our examination of the books of account, the following
 undisputed dues in respect of income tax, wealth tax, sales tax,
 customs duty and excise duty outstanding, as at the last day of the
 financial period, for a period of more than six months since they
 became payable;
 
 Name of the Statute   Nature of Dues                 Amount 
                                                        (Rs.)
 
 Income-tax Act        Tax Deducted at source/       2,11,397 
                       Tax collected at source 
                       including interest.  
 
 The Central Excise    Excise duty, Education          13,271 
 Act                   cess and Higher 
                       education cess 
 
 Karnataka Sales       VAT Payable including           30,729 
 Tax Act, Value        interest 
 added Tax Act 
 
 Tha Karnataka Tax     Entry Tax including           5,47,540 
 On Entry Of Goods     interest
 Act 
 
 Service Tax           Service Tax payable           2,87,065 
                       including interest 
 
 The Employees State   ESI Payable including            8,310 
 Insurance Act         interest 
 
 Karnataka Tax on      Professional Tax Payable      3,42,337 
 Trades, Professionals including interest 
 and Callings Act, 
 Karnataka Professi
 -onal Tax Act, 1976
 
 
 Name of the Statute    Due Date             Date of Payment
 
                                                     
 
 Income-tax Act         On monthly basis,    Not paid
                        on 7th of the
                        following month            
 
 The Central Excise     On monthly basis,    Not paid
 Act                    on 5th of the
                        following month
                 
 
 Karnataka Sales        On monthly basis,    Not paid
 Tax Act, Value         on 20th of the
 added Tax Act          following month.
 
 Tha Karnataka Tax      On monthly basis,    Not paid
 On Entry Of Goods      on 20th of the
 Act                    following month.
       
 Service Tax            On monthly basis,    Not paid
                        on 5th of the
                        following month
                   
 The Employees State    On monthly basis,    Not paid
 Insurance Act          on 21st of the
                        following month.
 
 Karnataka Tax on       On monthly basis,
 Trades, Professionals  on 20th of the
 and Callings Act,      following month.
 Karnataka Professi
 -onal Tax Act, 1976
 
 
 (c) As at 31 March 2011, according to the records of the company, no
 dues outstanding as Sales Tax, Investor Education and Protection Fund,
 Income Tax, Custom Duty, Wealth Tax, Excise Duty and Cess on account of
 any dispute.
 
 x) In our opinion, the accumulated losses of the company at the end of
 the financial year is greater than fifty percent of its networth as at
 the last day of the financial period and has incurred cash loss during
 the financial period ended on that date;
 
 xi) according to the information and explanation given to us and based
 on our audit procedures, we are of the opinion that the Company, has
 not defaulted in repayment of its dues to any financial institution,
 bank or to debenture holder during the period;
 
 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;
 
 xiii) in our opinion, the Company is not a chit fund or a nidhi/ mutual
 benefit fund/ society. Therefore, clause (xiii) of the Order is not
 applicable to the Company;
 
 xiv) in our opinion and according to information and explanations given
 to us, the Company is not a dealer or trader in securities;
 
 xv) according to the information and explanations given to us and the
 records examined by us, 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, no term
 loans has been borrowed by the company;
 
 xvii) based on the information and explanations given to us and on an
 overall examination of the balance sheet of the Company, in our
 opinion, there are no funds raised on short term basis which have been
 used for long-term investment;
 
 xviii) the Company has not made any preferential allotment of shares to
 parties and the companies covered in the Register maintained under
 Section 301 of the Companies Act, 1956;
 
 xix) the Company has not issued any debentures during the period;
 
 xx) the Company has not raised any money by public issue during the
 period , accordingly clause 4(xx) of the order is not applicable;
 
 xxi) During the course of examination of the books and records of the
 company, carried out in accordance with the generally accepted
 accounting practices in India and according to the information and
 explanation given by the management, we report that no fraud on or by
 the company has been noticed or reported for the period;
 
 
                                    For Raghavendra Naik & Associates
                                                Chartered Accountants
                                        Firm Reg. Number : FRN010270S
 
 
 
 Place : Bangalore                                T. RAGHAVENDRA NAIK
 Date : 30.05.2011                                         Proprietor
                                           Membership Number : 210228