G-Resources Group Limited — Audit Report / Information 2003

Oct 28, 2003

Listed Company Information

DNA SECURITY<01051> - Results Announcement Credit Card DNA Security System (Holdings) Limited announced on 28/10/2003: (stock code: 01051 ) Year end date: 30/6/2003 Currency: HKD Auditors' Report: Qualified (Audited ) (Audited ) Last Current Corresponding Period Period from 1/7/2002 from 1/7/2001 to 30/6/2003 to 30/6/2002 Note ('000 ) ('000 ) Turnover : 11,176 28,221 Profit/(Loss) from Operations : (45,564) (47,887) Finance cost : (650) (1,637) Share of Profit/(Loss) of Associates : N/A N/A Share of Profit/(Loss) of Jointly Controlled Entities : N/A N/A Profit/(Loss) after Tax & MI : (59,577) (31,006) % Change over Last Period : N/A % EPS/(LPS)-Basic (in dollars) : (0.0116) (0.0223) -Diluted (in dollars) : N/A N/A Extraordinary (ETD) Gain/(Loss) : N/A N/A Profit/(Loss) after ETD Items : (59,577) (31,006) Final Dividend : Nil Nil per Share (Specify if with other : N/A N/A options) B/C Dates for Final Dividend : N/A Payable Date : N/A B/C Dates for (-) General Meeting : N/A Other Distribution for : N/A Current Period B/C Dates for Other Distribution : N/A Remarks: 1) Basis of opinion We conducted our audit in accordance with Statements of Auditing Standards issued by the Hong Kong Society of Accountants, except that the scope of our work was limited as explained below. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgments made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the circumstances of the Company and the Group, consistently applied and adequately disclosed. We planned our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance as to whether the financial statements are free from material misstatement. However, the evidence available to us was limited as set out below. (i) the Group's interest in an associate represents a 30% interest in Ming Yuen Assets Limited ("Ming Yuen") stated at a carrying value of HK$28,500,000. However, we were unable to obtain sufficient audit evidence to assess whether any impairment loss is required to be recognized in respect of the goodwill arising on acquisition of Ming Yuen. Accordingly, we were unable to satisfy ourselves that the Group's interest in Ming Yuen was fairly stated. (ii) In related to unlisted investments securities of HK$3,420,000, we were unable to obtain sufficient audit evidence to assess whether any impairment is required in respect of the unlisted securities. Accordingly, we are unable to satisfy ourselves that the carrying value of the investment in securities amounting to Hk$3,420,000 was fairly stated. Any adjustments to the figures in (I) and (ii) above would have a consequential effect as appropriate on the net liabilities of the Group and the company as at 30th June, 2003 and on the net loss of the Group for the year then ended. Fundamental uncertainty relating to the going concern basis In forming our opinion, we have considered the adequacy of the disclosure made in note 2 to the financial statements concerning the uncertainty relating to the going concern status of the Group in light of its net liabilities of approximate Hk$9,841,000 of the Group. As disclosed in Note 33, after the balance sheet date, the Company issued and allotted 200,000,000 shares of HK$0.01 to an independent third party for HK$3,200,000 under a private share placement. 101,800,000 shares of HK$0.01 each are issued for HK$1,444,000 as a result of the exercise of share options. In addition, convertible notes with principal amount of HK$11,200,000 are converted into ordinary shares after the balance sheet date. However, in the light of normal operational expenditures to be incurred by the Group in the foreseeable future, the directors are currently actively seeking equity investment from certain potential strategic investors. And the Group has recently entered into agreements with certain banks in PRC to provide credit card security device and digital network authorization services. Provided that the Group successfully obtain equity investment form these potential strategic investors and the credit card security device and digital network authorization service generate budgeted cash inflow, the Group will be able to meet in full its financial obligations as they fall due for the foreseeable future. Accordingly, the financial statements have even prepared on a going concern basis. The financial statements do not include any adjustments that would result from a failure to obtain such funding. In view of the extent of the uncertainty surrounding the new equity capital injection for the Group, we disclaim our opinion in respect of the fundamental uncertainty relating to the going concern basis. Disclaimer of opinion Because of the significance of the possible effect of the limitations in evidence available to us referred to in the basis of opinion section of this report and the fundamental uncertainty relating to the going concern basis, we are unable to form an opinion as to whether the financial statements give a true and fair view of the state of affairs of the Company and the Group as at 30th June, 2003 and of the loss and cash flows of the Group for the year then ended. In all other respects, in our opinion the financial statements have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance. In respect alone of the limitations on our work as set out in the basis of opinion section of this report, we have not obtained all the information and explanations that we considered necessary for the purpose of our audit. 2) An analysis of turnover and profit/(loss) from continuing operations and discontinued operations Continuing Discontinued Operations Operations HK$'000 HK$'000 Turnover 3,491 7,685 Profit/(Loss) (28,015) (31,562) In March 2003, the Group disposed of its entire interest in Thinking Group Limited ("Thinking Group"). In June 2003, the Group disposed of its entire interests in Star Paging Telecom Technology (Shenzhen) Co. Ltd. ("Star Paging") and GSM Roaming Plug (H..K.) Ltd. ("GSM"). All these disposed companies were mainly engaged in the manufacture and sales of electronic products. Upon the completion of the disposal, the business segments of manufacture and sales of electronic products was regarded as discontinuing operations. In August 2002, the Group disposed of its entire interest in Fu Yuk DNA Holistic Limited ("Fu Yuk") and other subsidiaries, which was engaged in the sales of health products. Upon the completion of the disposal, the business segment of sales of health products was regarded as discontinued operations. In June 2002, the Group disposed of its entire interests in Chung Hwa Food & Beverages Limited, Chung Hwa Food & Beverages Holdings Limited, Harbin Dongfang (Hong Kong) Food Company Limited, Harbin HDL (New Zealand) Limited, Xiamen Dongchen Food Industry Company Limited, Full Support Technology Limited and other subsidiaries, which were mainly engaged in the manufacture and sales of food products and provision of internet consultancy services. Upon the completion of the disposal, the business segments of manufacture and sales of food products and provision internet consultancy services were regarded as discontinued operations. 3) Impairment Loss recognized in Respect of Goodwill In view of the net selling price of Thinking Group Limited which was engaged in trading of electronic products, the Group has recognised impairment losses in respect of goodwill relating to that business and the entire amount of HK$11,000,000 has been recognised in the consolidated income statement during the year. 4) Discontinuing Operations During the current year, the Group disposed of its entire interest in subsidiaries engaged in the manufacture and sales of electronice products and a loss on disposal of subsidiaries amounting to HK$12,714,000 was recognised in the consolidated income statement. The Group also disposed of its entire interest in a subsidiary engaged in the sale of health products and other subsidiaries during the year and net loss on disposal of HK$1,697,000 was recognised in the consolidated income statement, accordingly. For the year ended 30th June, 2002, the gain on disposal of subsidiaries represented the gain on disposal of the Group's entire interest in certain subsidiaries engaged in the manufacture and sales of food products of HK$31,747,000 and a subsidiary engaged in provision of internet consultancy services of HK$3,645,000. 5) Profit / (Loss) from Operations 1.7.2002 1.7.2001 to to 30.6.2003 30.6.2002 HK$'000 HK$'000 Loss from operations has been arrived at after charging: Staff costs: Dirctors' remumeration 7,148 11,774 Other staff costs 10,689 12,375 Pension scheme contributions 287 317 ------------ ------- 18,124 24,466 Auditors' remuneration: Current year 800 1,085 Overprovision in prior year - (20) ------------ --------- 800 1,065 Depreciationand amortisation Owned assets 2,562 3,999 Assets held under hire purchase contracts 48 21 Loss on disposal of property, plant and equipment 50 2,325 and after crediting: Gain on disposal of property, plant and equipment 401 - Interest income 90 115 Rental income from properties under operating leases, net of outgoings - 156 =========== ======