Zicom Security Systems

1.  We have audited the attached Balance Sheet of Zicom Electronic
 Security Systems Limited as at March 31, 2009, related Profit and Loss
 Account and the Cash Flow statement for the year ended on that date
 annexed thereto.  These financial statements are 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 supporting the amounts
 and disclosures in the financial statements. An audit also includes
 assessing the accounting principles used and significant estimates made
 by the management, as well as evaluating the overall financial
 statement presentation.  We believe that our audit provides a
 reasonable basis for our opinion.
 
 3.  Without qualifying our report, we draw attention to Note no. 7 of
 Schedule 14 of the financial statement. As on March 31, 2009, the
 Company has Equity Investment of Rupees 4,101 Lacs in its wholly owned
 subsidiary Zicom Retail Products Private Limited and has advanced
 unsecured loan of Rupees 1,092 Lacs. The Said Subsidiary Company is
 incurring Losses and its accumulated losses as of March 31, 2009 is
 Rs. 1,793 Lacs. As explained by the management, that they are confident
 of generating greater business and improving profitability by the
 retail expansion and creation of Retail Electronic Security Brand.
 Accordingly management considers such diminution to be temporary in
 nature and hence no provision is required for diminution in the value
 of investments and in respect of Unsecured Loan.
 
 4.  As required by the Companies (Auditors Report) Order, 2003 (the
 Order) 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.
 
 5.  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 purposes 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, Profit and Loss Account and the 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 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;
 
 (e) On the basis of written representations received from the
 directors, as on March 31, 2009 and taken on record by the Board of
 Directors, we report that none of the directors is disqualified as on
 March 31, 2009 from being appointed as a director in terms of 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 provided to us, the said financial statements read
 with the notes thereon, 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 March 31, 2009;
 
 (ii) in the case of the Profit and Loss account, of the profit for the
 year ended on that date; and
 
 (iii) 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)
 
 1.  The Company has maintained proper records showing full particulars,
 including quantitative details and situation of fixed assets.
 
 The fixed assets have been physically verified by the management as per
 a phased programme of verification, except fixed assets having net
 block value of Rupees 33,634,589 installed at customers place, which
 are not physically verified. In our opinion, the frequency of
 verification is reasonable having regard to the size of the Company and
 the nature of its fixed assets. The discrepancies noticed on such
 verification were not material and have been properly dealt with in the
 books of accounts.
 
 Fixed assets disposed off during the year were not substantial and
 therefore do not affect the going concern assumption.
 
 2.  The management has conducted physical verification of inventory at
 reasonable intervals.
 
 In our opinion, the procedures of physical verification of inventory
 followed by the management are reasonable and adequate in relation to
 the size of the Company and the nature of its business.
 
 The Company is maintaining proper records of inventory. The
 discrepancies noticed on such verification between physical inventories
 and the book records were not material in relation to the operations of
 the Company and the same have been properly dealt with in the books of
 account.
 
 3.  According to the information and explanations provided to us and as
 per the records examined by us, the Company has granted unsecured loan
 to two of its subsidiaries amounting to Rupees 210,026,631. The Maximum
 balance outstanding during the year was Rupees 453,193,355.
 
 In our opinion rate of interest and other terms and conditions are not
 prima facie prejudicial to the interest of the Company.
 
 In absence of repayment schedule of principal and interest, we are not
 able to comment on the regularity of the same.
 
 The Company has not taken any loan secured or unsecured from companies,
 firms or other parties covered in the register maintained under section
 301 of the Companies Act, 1956.
 
 4.  In our opinion and according to the information and explanations
 provided to us, having regards to the explanations that some of the
 items of Plant and Equipments purchased are of special nature and
 suitable alternative sources do not exist for obtaining comparable
 quotations, the internal control procedures are commensurate with the
 size of the Company and the nature of its business, for the purchase of
 inventory, fixed assets and for the sale of goods and services. During
 the course of our audit, no major weakness has been noticed in the
 internal controls.
 
 5.  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 the particulars of contracts or arrangements that need
 to be entered into the register maintained under section 301 of the
 Companies Act, 1956 have been so entered.
 
 In our opinion and according to the information and explanations
 provided to us, the transactions made in pursuance of such contracts or
 arrangements have been made at reasonable prices having regard to the
 prevailing market prices at the relevant time.
 
 6.  In our opinion and according to the information and explanations
 provided to us, the Company has not accepted any deposits from the
 public within the meaning of Section 58A, 58AA or any other relevant
 provisions of the Companies Act, 1956 and the rules framed thereunder.
 
 7.  The Company has internal audit system commensurate with the size
 and nature of its business; however same needs to be strengthened.
 
 8.  According to the information and explanations given to us, the
 Central Government has not prescribed for the maintenance of the cost
 records under Section 209(1) (d) of the Companies Act, 1956, for any of
 the products of the Company.
 
 9.  According to the information and explanations provided to us and on
 the basis of our examination of the books of account, the Company has
 been generally regular in depositing undisputed statutory dues
 including Provident Fund, Investor Education and Protection Fund,
 Employees State Insurance, Income-tax, Sales Tax, Customs Duty, Wealth
 Tax, Service Tax, Cess and other statutory dues during the year with
 the appropriate authorities. As on March 31, 2009, there are no
 undisputed dues payable for a period of more than six months from the
 date they became payable.
 
 As at March 31, 2009, according to the records of the Company and the
 information and explanation given to us, the following are the
 particulars of disputed dues on account of Sales Tax that have not been
 deposited:
 
 Name of the Statute     Nature of Dues            Amount in
                                                    Rupees
 
 Sales Tax Act          Classification              21,561
                        Dispute
 Sales Tax Act          Non-submission of           68,967
                        statutory forms
 Sales Tax Act          Levy of Penalty            137,778
 Works Contract Tax     Disallowance of            164,296
                        WCT certificate
 Works Contract Tax     Disallowance of            430,999
                        WCT certificate
 
 Period to which the         Forum where the
 amount relates              dispute is pending
 
 2002 - 2003                   Deputy Commissioner
                               Appeals
 2002 - 2003                   Deputy Commissioner
                               Appeals   
 2002 - 2003                   Assistant Commissioner
                               Appeal
 2002 - 2003                   Deputy Commissioner
                               Appeals
 2002 - 2003                   Deputy Commissioner
 2003 - 2004                   Appeal
 
 10.  The Company does not have accumulated losses at the end of the
 financial year and it has not incurred cash losses in the current and
 immediately preceding financial year.
 
 11.  Based on our audit procedures and as per the information and
 explanations provided by the management, we are of the opinion that,
 during the year the Company has not defaulted in repayment of dues to
 any financial institution or bank. No debentures were issued or were
 outstanding during the year.
 
 12.  Based on our audit procedures and according to the information and
 explanations provided to us, the Company has not granted loans and
 advances on the basis of security by way of pledge of shares,
 debentures and other securities.
 
 13.  In our opinion and according to the information and explanations
 provided to us, the nature of activities of the Company does not
 attract any special statute applicable to chit fund and nidhi/mutual
 benefit fund/societies.
 
 14.  In our opinion and according to the information and explanations
 provided to us, the Company is not dealing or trading in shares,
 securities, debentures and other investments. Accordingly, the
 provisions of clause 4 (xiv) of the Companies (Auditors Report) Order,
 2003 (as amended) are not applicable to the Company,
 
 15.  According to the information and explanations provided to us and
 the records examined by us, the Company has given guarantee for loan
 taken by two of its subsidiaries from bank. In our opinion, terms and
 conditions of guarantee are not prejudicial to the interest of the
 Company.
 
 16.  According to the information and explanations provided to us and
 the records examined by us, in our opinion, the term loans were applied
 by the Company for the purpose for which they were obtained.
 
 17.  According to the information and explanations provided to us and
 on an overall examination of the records and cash flow statement of the
 Company, in our opinion, the funds raised on short-term basis have not
 been used for long-term investment.
 
 18.  During the year, 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.
 
 19.  According to the information and explanations provided to us and
 the records examined by us, no debentures were issued or were
 outstanding during the year.
 
 20.  During the year, the Company has not raised any money through
 public issue.
 
 21.  Based upon the audit procedures performed and the information and
 explanations provided by the management, we report that no fraud on or
 by the Company has been noticed or reported during the course of our
 audit.
 
                                                       For P. RAJ & CO.
                                                  Chartered Accountants
                                                             P. S. Shah
                                                             Proprietor
                                                   Membership No. 44611
 
 Mumbai, June 29, 2009