2016.09 HMV DIGIT CHINA

Company Name: HMV Digital China Group Limited
Stock Code: 08078
Year end: June 30, 2016

BASIS FOR QUALIFIED OPINION

(a)  Corresponding figures

Included in the Group’s investment at fair value through other comprehensive income as at 30 June 2014 was an investment in Dragonlott Holdings Limited (“DHL”) of approximately HK$46,674,000 in which the Group holds 13.28% equity interests. The directors of the Company have not been provided with any financial or other relevant information of DHL from the management of DHL and therefore it was unable to determine the fair value of the investment in DHL. The investment in DHL was fully written off during the year ended 30 June 2015. We have not been provided with sufficient audit evidence as to whether the other comprehensive loss arising from the written off of the investment in DHL should be recorded in the prior years. However, we are satisfied that the investment in DHL is fairly stated as at 30 June 2015. Any adjustment to this figure might have a consequential effect on the Group’s other comprehensive loss for the year ended 30 June 2015.

(b)  Revenue and distribution costs of a firm

As explained in note 5 to the consolidated financial statements, the directors of the Company had not been provided with sufficient information regarding the revenue from box office takings and the related distribution costs of a film. As such, we had not been provided with sufficient evidence in relation to the audit of the amounts of revenue and trade receivable from box office takings and the related distribution costs and other payables of the film. There are no other satisfactory audit procedures that we could adopt to determine the amounts of revenue from box office takings and the related distribution costs of the film for the year ended 30 June 2016 and the corresponding trade receivable and other payables as at 30 June 2016. Any adjustment to these figures might have a consequential effect on the results for the year and net assets as at 30 June 2016.

QUALIFIED OPINION

In our opinion, except for the possible effects on the matter described in the basis for qualified opinion paragraphs, the consolidated financial statements give a true and fair view of the financial position of the Group as at 30 June 2016, and of its financial performance and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards and have been properly prepared in compliance with the disclosure requirements of the Hong Kong Companies Ordinance.

MATERIAL UNCERTAINTY RELATING TO THE GOING CONCERN BASIS

Without further qualifying our opinion, we draw attention to the consolidated financial Statements which mentions that the Group incurred a loss of approximately HK$181,139,000 for the year ended 30 June 2016 and as at 30 June 2016 the Group had net current liabilities of approximately HK$16,805,000. These conditions indicate the existence of a material uncertainty which may cast significant doubt about the Group’s ability to continue as a going concern.