Notes to Accounts of SQL Star International Ltd.

Mar 31, 2010

1. Share Capital and Share Warrants

a) During the year the Company has issued 10,525,000 equity shares of Rs 10/-each on preferential basis at a premium of Rs 0.50 per share as per SEBI Guidelines. The Company has also allotted 4,825,000 share, warrants at a price of Rs 10.50 per warrant on Preferential basis as per SEBI Guidelines. These warrants are convertible at the option of the holders at any time before the expiry of 18 months from its allotment in to fully paid up equity shares of Rs 10/-each at a premium of Rs 0.50 any time between November, 2009 to May, 2011 against which Rs. 3/- per warrant of the value has been received as at 319 March, 2010.

2. Capital reserve

Represents balance brought forward relating to amounts forfeited on non subscription of 520,000 Share Warrants on due dates.

3. ESOP Scheme

The shareholders haye approved in November, 2005, scheme titled "SQL ESOP 2005", which provides for an option to issue equity shares not exceeding 801,000 shares constituting 5% of the paid up capital of the company to permanent employees of the company subject to such conditions the Board may determine. Under this plan, Company granted 750,000 Employee Stock Options to 37 Employees pursuant to the resolution passed at the extra-ordinary general meeting of the Company held on 30th November, 2005. Out of the options granted, 700,000 (645,000) options were lapsed due to resignation of the employees and 50,000 (105,000) options are in force as on 31.03.2010.

SQL ESOP Trust holds 159 980 (159 980) equity shares as on 31.03.2010 that were allotted under the ESOP Plan in December 1998 for and on behalf of the eligible employees and will be offered to the Employees as per the terms and conditions of the ESOP Scheme-2005. The total options available for grant is 751,000 (696,000) as on 31.03.2010.

4. The Company has sent letters of Confirmation during the year to Debtors, Creditors and Loans and Advances; however the company received the confirmation only in a few cases.

5. Madhya Pradesh State Agricultural Marketing Board (MANDI BOARD) has resorted to unlawful and unilateral termination of the Service Contract by their letter dated 17th February, 2010 on the purported reason of Deficiency/ under performance, besides

a) Refusing to settle the dues for services from April, 2008 to termination date amounting to Rs 28.77 Crores (out of which Rs 20.22 Crores pertains to billing raised on behalf of Outsourcing partner)

b) Refusing to give required documents for billing from April, 2009 to January, 2010

c) Invoking performance bank guarantee of Rs 5 Lakhs and

d) Confiscating the assets of the company located in the Mandis.

While the matter is referred to arbitration which is pending disposal, as a consequence write off / provision has been made for the following:

a) Impairment loss on assets located at Mandis Rs 120.63 Lakhs included under depreciation and deducted from carrying amount of the assets.

b) Provision for work in progress Rs 5.70 Crores included under income due to uncertainty in the ultimate collection.

c) Provision for the bank guarantee invoked Rs 5.00 Lakhs debited Claims from Customer and Grouped under Other expenses.

Consequent to the above no provision is made for Rs 3.74 Crores being dues to the outsourcing partners in the Mandi operations.

The above are subject to review depending upon the outcome of the arbitration proceedings and will be suitably dealt in the financial statements in that year.

6. The Company has sent letters to the creditors to identify under MSMED Act, enterprises which have provided goods and services to the Company. Accordingly, the disclosure in respect of the amounts payable to such enterprises as at March 31, 2010 has been made in the financials statements based on the information received and available with the company.

7. Related Party Disclosures

(a) List of Related Parties where control exists:

Name of the Related Parties

a) Wholly owned Subsidiaries

SQL Star International Inc., USA International SQL Star Pte Ltd., Singapore

b) Wholly owned subsidiary of US Subsidiary

SQL Star International Pty Ltd., Australia

c) Others

Super Star Exports Private Limited

Systematix Capital Services Private Limited

Systematix Fincorp (India) Limited

Systematix Shares & Stock (I) Limited

Systematix Commodities Services Private Limited

Systematix Corporate Services Limited

Ceepeek Real Estate Limited

Rangsharda Properties Private Limited

Shubhamangalam Real Estate Limited

Snehavardhini Real Estate Limited

Tek Point Properties Private Limited

Funsign Real Estate Limited

Shivshakthi Real Estate Limited

Riteplaza Trading Company Private Limited

Magicline Trading Company Private Limited

Topcity Trading Company Private Limited

Goldflog Exports Private Limited

Coldlife Trading Company Private Limited

Thirdwave Mercantile Company Private Limited

Raneka Fincorp Private Limited

Nikunj Mercantile Private Limited

h) Transaction with related parties other than stated above

i) No amount has been written off or written back during the year in respect of debts due from or to related parties