Directors Report of LS Industries Ltd.

Mar 31, 2010

The Directors present their Sixteenth Annual Report along with the audited Financial Statements for the year ended on 31 st March, 2010.

1. FINANCIAL RESULTS (Rs. in lacs)

2009-10 2008-09

Sales & Other Income 258.51 Nil

Profit/(Loss) before Depreciation, (46.92) (2.03) Interest and taxation

Less: Net Interest Nil Nil

Profit / (Loss) after Interest but (46.92) (2.03) before Depreciation and Taxation

Less: Depreciation 3.05 Nil

Profitless) before tax (49.97) (2.03)

Less: Short provision for Income 1.57 Nil Tax of earlier years

Profit / (Loss) for the year (51.54) (2.03)

Balance as per last years (655.06) (653.03) Balance Sheet

Balance carried to Balance Sheet (706.60) (655.06)

2. OPERATIONS

You directors inform you that since company was taken over by new management on 7.5.2009 and immediate after takeover, the management has taken lots of steps and initiatives for long term survival and growth of the Company The Company has taken up factory premises on rent and started manufacturing of garments in Ludhiana in Punjab. The company has made capital expenditure on installation of garment machines imported from abroad. The Company has also set up another garment manufacturing unit at Nalagarh in Himachal Pradesh in the area notified by Government for receiving various subsidies and benefits. The Company is on horizon of expansion track and wish to set international quality standards to mark its presence worldwide in garment business. The Company is also planning to get heights in wholesale distributorship business of Computer hardware, software, papers, etc. Your directors are confident that operations would bring positive results in nearfuture.

3. REDUCTION OF CAPITAL AND CONSLIDATION OF EQUITY SHARES

In order to restructure balance sheet and to write off past accumulated losses, special resolution was passed by way of postal ballot and also in Extra Ordinary General Meeting held by shareholders on 10.07.2009 for reduction of equity share capital of the Company by 80% by canceling Rs. 8 per share aggregating Rs 4.40 crore from the paid up equity capital of the company and writing off the debit balance of the Profit & Loss Account of the Company by an equivalent amount. Subsequently, the Honble High Court of Gujarat at Ahmedabad vide order dated 12.4.2010 / 17.12.2009 approved the petition for reduction of Capital filed by the Company. The said order got registered with Registrar of Companies Ahmedabad on 17.05.2010. Consequently, upon registration of above said orders, par value / paid up value of each equity shares of Rs. 10 each was reduced to Rs. 2 per share.

Further Company has taken prior approval from shareholders in extraordinary general meeting held on 31.3.2010 for consolidation of 5 equity Shares of Rs. 2 each (post implementation of reduction of equity capital) into 1 equity share of Rs. 10 each.

In view of the above Court orders and approval given by shareholders, the board of Directors of the Company fixed Wednesday, 9th June, 2010 as the record date for giving effect to the reduction of capital and simultaneous consolidation of equity shares. Accordingly, based upon holding on the record date, Board of Directors of the Company in their meeting held on 14th June, 2010 has issued new share certificates to those shareholders holding shares in physical form and similarly Company has done credit of new equity shares in the account of shareholders holding shares in electronic form as the case may be in lieu and cancellation of all existing equity shares, through corporate action form filed with Central Depositories Services (India) Limited. The new shares are now listed with Bombay Stock Exchange Limited.

4. PREFERENTIAL ALLOTMENT

In order to enlarge the scale of operations and also for general corporate and other business purposes, the Company raised funds by making preferential allotment of 6,22,30,000 Convertible warrants to the promoters and 2,15,51,870 Mandatorily Convertible Preference Shares to Non-Promoters of face value of Rs. 10/- each for cash at price of Rs. 12.20 including premium of Rs. 2.20 as per SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 on 12.04.2010. After enhancing capital and on receipt of full consideration and request for conversion, the said shares were converted into equivalent equity shares of the Company on 20.07.2010. The Bombay Stock Exchange Limited has given listing approval for above mentioned shares.

5. SUB DIVISION OF EQUITYSHARES

In order to improve liquidity position and easy tradability of shares, shareholders in Extra Ordinary General Meeting held on 21.08.2010 has approved the sub division of Equity shares capital of the Company by sub dividing the Equity Shares of face value of Rs 10 each to Rs. 1 each/however its implementation is in process.

6. ACQUISITION

The Board of Directors of the Company made total acquisition of control and management of M/s Ezy Infosoft Pvt. Ltd. and thus made it a wholly owned subsidiary of the Company w.e.f. 19.052010.

7. DIVIDEND

In view of the loss for the year and carried forward losses of the Company, your directors do not recommend any dividend for the year under review.

8. DIRECTORS

Mr. Akash Deep Sharma who was appointed as Additional Director of the Company by the Board of Directors at their meeting held on 28th August, 2009, holds the office upto the date of this ensuing Annual General Meeting and Ms Chay Suet Meng, Mr. Yasunobu Kuramoto and Mr. Joel Anthony Stead, who were appointed as Additional Directors of the Company by the Board of Directors at their meeting held on 30th April, 2010, hold offices upto the date of this ensuing Annual General Meeting.

Mr. Vikas Shekhar who retires by rotation and being eligible, offers himself for reappointment as a Directorof the Company in the ensuing meeting. The Company has received the notices in writing under Section 257 from the members proposing candidature of above said Directors. Yours directors recommend their appointments/ re-appointment as Directors for the approval of the members.

Mr. Rajesh Kumar Garg ceased as director of the Company w.e.f. 28th August, 2009 on account of failure of nomination by any member of the Company by virtue of provisions of section 257 and 260 of the Companies Act, 1956. The Board of Directors took note of the same & recorded its appreciation for the services rendered by the said director.

9. REPORT ON CORPORATE GOVERNANCE

A separate report on Corporate Governance is being published as a part of the Annual Report of the Company. Acertificate from the Auditors of the Company regarding compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement is annexed to the Report on Corporate Governance.

10. AUDITORS

M/s Doogar & Associates, Chartered Accountants, whose term of office as the Statutory Auditors will expire at the conclusion of the ensuing Annual General Meeting of the Company being eligible, offer themselves for re- appointment as Auditors of the Company.

11. LISTING WITH STOCK EXCHANGE

The shares of the Company are presently listed at Bombay Stock Exchange Limited. The Company voluntary delist equity shares from Ahmedabad Stock Exchanqe Limited w.e.f. 21.10.2009. The_

Listing fee for the year 2009-10 has been paid to the Bombay Stock Exchange Limited.

12. AUDITORS" REMARKS

Comments made by the Statutory Auditors in the Auditors Report are self-explanatory and do not require any further clarification.

13. INFORMATION PURSUANT TO SECTION 217 OF THE COMPANIES ACT, 1956

A. PARTICULARS OF EMPLOYEES Employee relations remained cordial. There is no information as is required to be provided in terms of Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975

B. PARTICULARS OF EMPLOYEES AND INFORMATION REGARDING CONSERVATION OF ENERGYETC.

The information required under Section 217(1 )(e) of the Companies Act, read with Rule 2 of the Companies [Disclosure of Particulars in the Report of Board of Directors) Rules 1988 has been given as Annexure to the Directors Report.

C.CEO/CFO CERTIFICATION

The Certificate addressed to the Board of Directors of the Company required under Corporate Governance concerning the annual financial statement is annexed to the Corporate Governance Report.

D. DIRECTORS RESPONSIBILITY STATEMENT

In compliance of Section 217 (2AA) of the Companies Act, 1956, the Directors state that:

1. In the preparation of the annual accounts for the year ended 31st March, 2010, the applicable accounting standards have been followed There are no material departures from the applicable accounting standards.

2. Such accounting policies have been selected and applied consistently and such judgments and estimates have been made as are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year ended on and loss of the Company fortheyear.

3. Proper and sufficient care have been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

4. The Annual Accounts has been prepared on a going concern basis.

14. ACKNOWLEDGEMENT

Your Directors record their appreciation of support and co-operation extended by all shareholders, banks, government authorities and business associates towards growth of the Company.

For and on behalf of the Board

Place : Panchkula Birendra Kumar Vikash Shekhar Date: 31.08.2010 Chairman Director