G-Resources Group Limited — Audit Report / Information 2006

Oct 16, 2006

Listed Company Information

Listed Company Information
SMART RICH<01051> - Results Announcement Smart Rich Energy Finance (Holdings) Limited announced on 16/10/2006: (stock code: 01051 ) Year end date: 30/06/2006 Currency: HKD Auditors' Report: Qualified (Audited ) (Audited ) Last Current Corresponding Period Period from 01/07/2005 from 01/07/2004 to 30/06/2006 to 30/06/2005 Note ('000 ) ('000 ) Turnover : 3,974 3,332 Profit/(Loss) from Operations : (48,643) (31,480) Finance cost : (121) (1,582) Share of Profit/(Loss) of Associates : N/A N/A Share of Profit/(Loss) of Jointly Controlled Entities : (450) (79) Profit/(Loss) after Tax & MI : (83,193) (71,410) % Change over Last Period : N/A % EPS/(LPS)-Basic (in dollars) : (0.0391) (0.0402) -Diluted (in dollars) : N/A N/A Extraordinary (ETD) Gain/(Loss) : N/A N/A Profit/(Loss) after ETD Items : (83,193) (71,410) 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 PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS 1.1 Basis of preparation These consolidated financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards ("HKFRSs"), which collective term includes all applicable individual Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards ("HKASs") and interpretations issued by the Hong Kong Institute of Certified Public Accountants (" HKICPA"), and accounting principles generally accepted in Hong Kong, requirements of the Hong Kong Companies Ordinance and applicable disclosure requirements of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited ("Listing Rules"). The Group has early applied, for the first time, a number of new and revised HKFRSs and HKASs that are effective for accounting periods beginning on or after 1st January 2005 in the consolidated financial statements for the year ended 30th June 2005. 1.2 Fundamental uncertainty In preparing the consolidated financial statements, the directors of the Company have given careful consideration to the future liquidity of the Group as the Group sustained continuous operating losses and incurred loss attributable to the equity holders of the Company of HK$83,193,000 for the year ended 30th June 2006. In view of the substantial losses in consecutive years and the liquidity position of the Group, the directors have adopted the following measures with a view to maintain the Group's existence as a going concern basis and to improve the Group's overall financial and cash flow position: (a) the Group continues to explore opportunities for different sources of financing to strengthen the Group's working capital position; and (b) the Group continues to implement measures to tighten cost controls over various general and administrative expenses and to improve the Group's operating results and positive cash flow operation. In the opinion of the directors of the Company, if the measures described above accomplish the expected results, the directors are satisfied that the Group will be able to have sufficient working capital to meet in full its financial obligations as they fall due in the foreseeable future and be able to return to a commercially viable concern. Accordingly, the directors of the Company considered that it is appropriate to prepare the consolidated financial statements on a going concern basis, notwithstanding the Group's financial position and tight cash flows as at 30th June 2006. Should the Group be unable to continue as a going concern, adjustments would have to be made to restate the value of the assets to their recoverable amounts, to provide for any further liabilities which might arise and to reclassify non-current assets and liabilities as current assets and liabilities respectively. The effects of these adjustments have not been reflected in the consolidated financial statements. 2. APPLICATION OF HONG KONG FINANCIAL REPORTING STANDARDS At the date of authorisation of these consolidated financial statements, the following standards and interpretations and amendments were in issue but not yet effective for the years covered by these consolidated financial statements. HKAS 1 (Amendment) Capital Disclosures1 HKAS 19 (Amendment) Actuarial Gains and Losses, Group Plans and Disclosures2 HKAS 21 (Amendment) Net Investment in a Foreign Operation2 HKAS 39 (Amendment) Cash Flow Hedge Accounting of Forecast Intragroup Transactions2 HKAS 39 (Amendment) The Fair Value Option2 HKAS 39 & HKFRS 4 (Amendments) Financial Guarantee Contracts2 HKFRS 6 Exploration for and Evaluation of Mineral Resources2 HKFRS 7 Financial Instruments: Disclosures1 HK(IFRIC)-Int 4 Determining whether an Arrangement Contains a Lease2 HK(IFRIC)-Int 5 Rights to Interests Arising from Decommissioning, Restoration and Environmental Rehabilitation Funds2 HK(IFRIC)-Int 6 Liabilities arising from Participating in a Specific Market, Waste Electrical and Electronic Equipment3 HK(IFRIC)-Int 7 Applying the Restatement Approach under HKAS 29 Financial Reporting in Hyperinflationary Economies4 HK(IFRIC)-Int 8 Scope of HKFRS 25 HK(IFRIC)-Int 9 Reassessment of Embedded Derivatives6 HK(IFRIC)-Int 10 Interim Financial Reporting and Impairment7 1 Effective for annual periods beginning on or after 1st January 2007. 2 Effective for annual periods beginning on or after 1st January 2006. 3 Effective for annual periods beginning on or after 1st December 2005. 4 Effective for annual periods beginning on or after 1st March 2006. 5 Effective for annual periods beginning on or after 1st May 2006. 6 Effective for annual periods beginning on or after 1st June 2006. 7 Effective for annual periods beginning on or after 1st Novement 2006. The Group has not early applied the new standards, interpretations and amendments that have been issued but are not yet effective as at 30th June 2006. The directors of the Company anticipate that the application of these new standards or interpretations will have no material impact on the consolidated financial statements of the Group. 3. TAXATION No provision for taxation in other jurisdictions for both years has been made in the consolidated financial statements as neither the Company nor any of its subsidiaries and a jointly controlled entity had any assessable profits subject to tax in other jurisdictions. For the years ended 30th June 2006 and 2005, no provision for Hong Kong Profits Tax had been made in the consolidated financial statements as the Group had no assessable profit. 4. LOSS PER SHARE The calculation of the basic loss per share is based on the loss attributable to equity holders of the Company of HK$83,193,000 (2005 : HK$71,410,000) and on the weighted average number of 2,128,120,533 (2005 as restated : 1,774,779,744 due to a share consolidation of every six shares of the Company into one share which was completed on 30th March 2006) ordinary shares in issue during the year. No diluted loss per share has been presented for the two years ended 30th June 2006 and 2005 as the outstanding during both years had an anti- dilutive effect on the basic loss per share for both years. 5. DIVIDEND No dividend have been paid or declared by the Company for the year ended 30th June 2006 (2005:nil). QUALIFIED AUDITORS' REPORT The Directors would like to draw your attention that the report of the auditor, ShineWing (HK) CPA Limited, on the accounts of the Group for the year ended 30th June 2006 has been qualified. The relevant parts of the auditors' report that dealt with the qualification as well as the relevant notes to the accounts to which the auditors' report refers to are quoted as follow: Basis of opinion We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public 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 consolidated financial statements. It also includes an assessment of the significant estimates and judgments made by the directors in the preparation of the consolidated financial statements, and of whether the accounting policies are appropriate to the circumstances of 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 consolidated financial statements are free from material misstatement, however, the evidence available to us was limited as further explained below. Scope limitation Included in the consolidated balance sheet at 30th June 2006 was an available-for-sale investment stated at cost of HK$140,020,000 in respect of the equity interest in Madagascar Petroleum International Limited (" MPIL") as disclosed in note 17 of 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 30th June 2006. There were no other satisfactory audit procedures that we could adopt to satisfy ourselves that the carrying value of the available-for-sale investment was free from material misstatement. Included in the consolidated balance sheet at 30th June 2006 was an intangible asset stated at the net carrying amount of HK$10,472,000 after an impairment losses recognised. An impairment assessment has been performed by the directors of the Company to determine the recoverable amount on the basis of future value in use and an impairment loss of HK$ 37,128,000 has been recognised in the consolidated income statement for the year ended 30th June 2006. In the absence of the sufficient reliable evidence to support the directors' assessment of the future value in use, we have not been able to satisfy ourselves as to whether any impairment loss is required to be recognised in respect of this intangible asset. Also we were unable to obtain sufficient evidence to assess whether the existing impairment loss of HK$37,128,000 recognised in respect of the intangible asset for the year ended 30th June 2006 was adequate, and in consequence we were unable to satisfy ourselves that the net carrying value of the intangible asset as at 30th June 2006 was free from material misstatement. Any adjustment found to be necessary would affect the net assets of the Group as at 30th June 2006 and the loss of the Group for the year then ended. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion. Fundamental uncertainty relating to the going concern basis In forming our opinion, we have considered the adequacy of the disclosures made in note2.2 to the consolidated financial statements which explain that the directors are taking active steps to improve the liquidity position of the Group and the adoption of the going concern on which the consolidated financial statements have been prepared. Provided that additional equity fundings can be secured, the directors are satisfied that the Group will be able to meet its future working capital. The consolidated financial statements have been prepared on a going concern basis, the validity of which is dependent upon the successful outcome of the Group's funding plans and the improvement of operating results and positive cash flow operations of the Group to meet its future working capital. The consolidated financial statements do not include any adjustments that would result from failure to obtain such future funding. We consider that the fundamental uncertainty has been adequately disclosed in the consolidated financial statements. However, we consider that this fundamental uncertainty relating to whether the going concern basis is appropriate is so extreme, 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 limitation in evidence available to us in relating to the carrying value of the available-for-sale investment and carrying amount of intangible asset and the fundamental uncertainty relating to the going concern basis, we are unable to form an opinion as to whether the consolidated financial statements give a true and fair view of the state of affairs of the Group as at 30th June 2006 and of the loss and cash flows of the Group for the year then ended. 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. In respect alone of the limitations on our work relating to the carrying value of the available-for-sale investment and carrying amount of intangible asset, we have not obtained all the information and explanations that we considered necessary for the purpose of our audit.