- 2007.10 EGANAGOLDPFEIL
Company Name: EGANAGOLDPFEIL (Holdings) LimitedStock Code: 48Year end: May 31, 2007
Basis of disclaimer of opinion
1. Scope limitation – material sales transactions and receivable provision
Included in consolidated turnover of $7,025,459,000 were recorded sales of $1,816,741,000 to several customers during the year ended 31st May, 2007. The recorded gross profit arising on these transactions in the amount of $448,040,000 has been included in determining the Group’s gross profit of $2,573,373,000. The consolidated net loss to the equity holders of the Company for the year of $1,959,408,000 includes a full provision of $548,646,000 against the year end outstanding balances due from these same customers. We were unable to obtain reasonable representations and assurances from management that these sales transactions represented genuine sales to independent third party customers. Accordingly, we were unable to satisfy ourselves as to the original sales, the related costs thereof, the gross profit so arising, or the appropriateness of the provision made in respect of the outstanding balances.
2. Fundamental uncertainty relating to the going concern basis
As explained in (note 2) to the accounts, that the Group incurred a consolidated net loss to the equity holders of the Company of $1,959,408,000 for the year ended 31st May 2007 and had consolidated net current liabilities of $17,703,000 at 31st May 2007. The accounts have been prepared on a going concern basis, the validity of which is dependent on the successful outcome of the proposed acquisition of a controlling interest in the Company, and related proposed funding, by a prospective investor, and the Group’s current negotiations with its principal bankers regarding a rescheduling of the Group’s bank borrowings. The accounts do not include any adjustments that would result from a failure to obtain such funding support. We consider that appropriate disclosures have been made. However, the uncertainty surrounding the outcome of this proposed acquisition and funding by a prospective investor and negotiations with the principal bankers raises a significant doubt regarding the Group’s ability to continue as a going concern.
Disclaimer of opinion: disclaimer on view given by the accounts
Because of the significance of the matters described in the basis for disclaimer of opinion paragraph, we do not express an opinion as to whether the accounts give a true and fair view of the state of affairs of the Company and of the Group as at 31st May, 2007 and of the Group’s loss and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards. In all other respects, in our opinion, the accounts have been properly prepared in accordance with disclosure requirements of the Hong Kong Companies Ordinance.
- 2007.10 SMART RICH
Company Name: Smart Rich Energy Finance (Holdings) LimitedStock Code: 1051Year end: June 30, 2007
Basis for disclaimer of opinion
Included in the consolidated balance sheet at 30 June 2007 was an available-for-sale investment stated at cost of HK$140,020,000 in respect of the 21% equity interest in Madagascar Petroleum International Limited (“MPIL”). As disclosed in note 16 to the consolidated financial statements, MPIL is directly held by two subsidiaries, Hopestar Group Limited (“Hopestar”) and Dorson Group Limited (“Dorson”). MPIL is an investment holding company and entered into the oil and gas product sharing agreement with The National Office for Mining and Strategic Industries of the Republic of Madagascar in respect of an onshore block of land (“Block 2104”) in the Republic of Madagascar for oil and gas exploitation and operation. MPIL is eligible to obtain the mining titles required for exploration, exploitation and transportation for the available crude oil and available associated natural gas on Block 2104 (the “Mining Titles”). However, we were unable to obtain sufficient documentary evidence to satisfy ourselves as to assess whether any impairment is required to be recognised in respect of the carrying amount of the available-for-sale investment. In additions, we were unable to obtain sufficient evidence to satisfy ourselves as to assess whether MPIL obtained the Mining Titles, commenced any significant business operations and the Group has any long term liability and commitment in respect of the investments in Hopestar, Dorson or MPIL as at 30 June 2007.
Included in the consolidated balance sheet at 30 June 2007 was a deposit paid for acquisition of a subsidiary of approximately HK$100,000,000. As disclosed in note 18 to the consolidated financial statements, the deposit was paid to Udaya Holdings Limited (“Udaya”) for the acquisition of 96.66% equity interests in Dormer Group Limited (“Dormer”) and the sole asset held by Dormer is the 15% equity interests in MPIL. Further to the limited evidence in relation to MPIL as mentioned above, we were unable to obtain the sufficient information to satisfy ourselves as to assess whether any impairment is required to be recognised in respect of the deposit paid for the acquisition of a subsidiary.
Moreover, as disclosed in note 16 to the consolidated financial statements, the board of directors of MPIL comprises of three directors, one of whom was nominated by the Company. However, the directors of the Company are of the opinion that a substantial or majority ownership is held by another investor who actually precludes them from having significant influence in MPIL. Therefore, the investment in MPIL is regarded as available-for-sale investment.
In the absence of the sufficient reliable evidence, we were unable to assess whether the classification of interests in MPIL as available-for-sale investment in the consolidated balance sheet was appropriate or not.
There were no other satisfactory audit procedures that we could adopt to satisfy ourselves as to the matters set out above. Any adjustments found to be necessary in respect of the matters set out above would have a consequential significant effect on the net assets of the Group at 30 June 2007 and the loss of the Group for the year then ended.
Disclaimer of opinion: disclaimer on view given by consolidated financial statements
Because of the significance of the matters described in basis for disclaimer of opinion paragraphs, we do not express an opinion on the consolidated financial statements as to whether the consolidated financial statements give a true and fair view of the state of the Group’s affairs as at 30 June 2007 and of its loss and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards. In all other respects, in our opinion the consolidated financial statements have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.