Medlive Technology Co., Ltd. — Interim / Quarterly Report 2006

Aug 29, 2006

Listed Company Information

Listed Company Information
GUANGDONG KELON<00921> - Results Announcement Guangdong Kelon Electrical Holdings Company Limited announced on 28/08/2006: (stock code: 00921 ) Year end date: 31/12/2006 Currency: RMB Auditors' Report: N/A Interim report reviewed by: Both Audit Committee and Auditors (Unaudited ) (Unaudited ) Last Current Corresponding Period Period from 01/01/2006 from 01/01/2005 to 30/06/2006 to 30/06/2005 Note ('000 ) ('000 ) Turnover : 3,586,177 4,558,273 Profit/(Loss) from Operations : 48,689 (368,260) Finance cost : (83,068) (79,474) Share of Profit/(Loss) of Associates : (2,256) (236) Share of Profit/(Loss) of Jointly Controlled Entities : N/A N/A Profit/(Loss) after Tax & MI : (29,153) (434,554) % Change over Last Period : N/A % EPS/(LPS)-Basic (in dollars) : (0.03) (0.44) -Diluted (in dollars) : N/A N/A Extraordinary (ETD) Gain/(Loss) : N/A N/A Profit/(Loss) after ETD Items : (29,153) (434,554) Interim Dividend : N/A N/A per Share (Specify if with other : N/A N/A options) B/C Dates for Interim 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 The Group incurred losses of approximately RMB38 million and RMB3,767 million for the six months ended 30 June 2006 and year ended 31 December 2005 respectively. As at 30 June 2006, the Group's current liabilities exceeded its current assets by approximately RMB3,271 million. In addition, the Group has outstanding short-term loans in the aggregate of approximately RMB2,090 million of which approximately RMB1,446 million were overdue as at 30 June 2006. The management has implemented various measures including: (1) streamlining operational processes and improving internal management mechanism; (2) introducing cost reduction plans; (3) rationalising business structures of the Group; and (4) rebuilding the image and reputation of the Group. In addition, the Group is in the process of negotiating with certain banks to restructure the amounts due to them and the Company's management confirmed that most of the Group's bankers have expressed their intention to reschedule overdue bank borrowings and/or renew/grant credit facilities to the Group. Further, the successor single largest shareholder of the Company, Hisense Air- Conditioner Company Limited has expressed its intention to provide necessary financial support to the Group so as to enable it to continue as a going concern. Based on the above assessments, the directors are of the opinion that the Group will have sufficient working capital to finance its normal operations and to meet its financial obligations as they fall due for the foreseeable future and have prepared the consolidated financial statements on a going concern basis. 2. BASIC LOSS PER SHARE The calculation of basic loss per share attributable to equity holder of the Company was based on the net loss attributable to equity holders of the Company for the six months ended 30 June 2006 of RMB29,153,000 (six months ended 30 June 2005: net loss attributable to equity holders of the Company of RMB434,554,000) and on 992,006,563 shares (six months ended 30 June 2005: 992,006,563 shares) outstanding during the period. No diluted loss per share has been presented as there were no dilutive potential ordinary shares in issue in both periods. 3. EXTRACT FROM AUDITORS' INDEPENDENT REVIEW REPORT REVIEW WORK PERFORMED We conducted our review in accordance with Statements of Auditing Standards No. 700 "Engagements to Review Interim Financial Reports" issued by the Hong Kong Institute of Certified Public Accountants, except that the scope of our review was limited as explained below. A review consists principally of making enquiries of group management and applying analytical procedures to the interim financial report and based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the interim financial report. The scope of our review was limited as follows: a. Our audit report on the financial statements of the Group for the year ended 31 December 2005 contained a qualified opinion arising from limitation of audit scope and disclaimer on view given by consolidated income statement and consolidated cash flow statement, details of which were set out in our report dated 11 August 2006. Any adjustments to the opening net assets of the Group would have a consequential effect on the net loss of the Group for the six months ended 30 June 2006. Also the comparative figures in the consolidated balance sheet as at 31 December 2005 and in the consolidated income statement and condensed consolidated cash flow statement for the six months ended 30 June 2005 may not be comparable with the figures for the current period. b. The interim financial report include the financial statements of Jiangxi Kelon Industrial Development Co., Ltd. ("Jiangxi Kelon"), the business of which was interrupted after the freezure of its assets by the Higher People's Court of Jiangxi Province in August 2005. The scope of our review on Jiangxi Kelon was limited as personnel responsible for the operations of Jiangxi Kelon had left and the management of the Group was unable to ascertain the accuracy and completeness of the books and records of Jiangxi Kelon. Due to this limitation, we were unable to obtain sufficient reliable evidence to assess whether the carrying amounts of the following significant financial statement areas (after elimination of intra-group balances and transactions), relating to Jiangxi Kelon, were free from material misstatements: - Property, plant and equipment of approximately RMB56 million; - Inventories of approximately RMB22 million; - Other receivables of approximately RMB48 million; - Amounts due from companies suspected to be connected with Mr. Gu (as defined in point (f) below) of approximately RMB85 million; - Cash and bank balances of approximately RMB1.3 million; - Trade payables of approximately RMB114 million; - Other payables of approximately RMB23 million; - Amounts due to Greencool Enterprise and its affiliates (as defined in point (f) below) of approximately RMB13 million; - Taxation payable of approximately RMB23 million; - Short-term bank borrowings of approximately RMB111 million; and - Net loss attributable to the Group of approximately RMB20 million. c. Included in leasehold land and buildings at 30 June 2006 were asset appreciation adjustments made in prior years of an aggregate gross amount and net book value of approximately RMB133 million and RMB94 million respectively. Those asset appreciation adjustments were initially recorded in lump sums without sufficient details as to the individual asset items they relate to. As no further information was available to us with respect to the lump sums, we were unable to determine with reasonable certainty whether the carrying amounts of the property, plant and equipment and revaluation reserve at 30 June 2006 were free from material misstatements and the possible impact on the Group's income statement in the current period should adjustments be found necessary. d. At 30 June 2006, included in trade and other receivables under current assets were intra-group receivables of approximately RMB121 million and included in trade and other payables under current liabilities were intra-group payables of approximately RMB106 million. This resulted from an inability to eliminate balances among companies within the Group on consolidation. We were unable to obtain sufficient information and explanation concerning the timing and nature underlying the unreconciled receivables and payables. We were therefore unable to assess the validity and recoverability of the unreconciled receivables amount of approximately RMB121 million and the validity and completeness of the unreconciled payables amount of approximately RMB106 million and the possible impact on the Group's income statement in the current period should adjustments be found necessary. e. Included in trade and other receivables at 30 June 2006 was a receivable arising from the sale of an interest in leasehold land under operating lease in Shunde, the People's Republic of China (the "PRC"), of gross amount and carrying amount of approximately RMB169 million and RMB85 million respectively. Although the land use right was registered in the name of the purchaser in June 2005, no settlement of the receivable has been recorded in the Company's books up to the date of this report. During the course of our review, we were unable to obtain sufficient information to satisfy ourselves concerning the continued existence of the receivable nor for us to assess its recoverability. Accordingly, we were unable to assess with reasonable certainty whether the carrying amount of such receivable at 30 June 2006 was free from material misstatement. f. It was reported by the Company that the controlling shareholder, Guangdong Greencool Enterprise Development Company Limited ("Greencool Enterprise"), had entered into a series of activities/transactions during the period from 2001 to 2005 which had been harmful to the Group, including but not limited to unauthorised use of the Group's funds, fictitious sales of goods and scrap materials, unreasonable prepayments and purchases of raw materials and property, plant and equipment at unreasonable quantities and prices. These transactions were conducted through Greencool Enterprise, its affiliates and/or companies suspected to be connected with the Company's former chairman, Mr. Gu Chu Jun ("Mr. Gu "). As at 30 June 2006, the aggregate net amount of receivables and aggregate amount of payables due from/to these companies were approximately RMB294 million (net of an impairment loss of approximately RMB374 million) and RMB129 million respectively which are reflected in the condensed consolidated balance sheet at 30 June 2006 as "Amounts due from Greencool Enterprise and its affiliates" and "Amounts due from companies suspected to be connected with Mr. Gu" within current assets and "Amounts due to Greencool Enterprise and its affiliates" and "Amounts due to companies suspected to be connected with Mr. Gu" within current liabilities. Due to the irregularity of the transactions mentioned above and limitation of information available to us, we were unable to obtain sufficient information to assess the appropriateness of the impairment amount and the recoverability of the net carrying amounts. MODIFIED REVIEW CONCLUSION ARISING FROM LIMITATIONS OF REVIEW SCOPE On the basis of our review which does not constitute an audit, with the exception of the possible adjustments that might have been determined to be necessary had the above limitations not existed, we are not aware of any material modifications that should be made to the interim financial report for the six months ended 30 June 2006. Without modifying our review conclusion, we draw to your attention that the Group incurred losses of approximately RMB38 million and RMB3,767 million for the six months ended 30 June 2006 and year ended 31 December 2005 respectively. As at 30 June 2006, the Group's current liabilities exceeded its current assets by approximately RMB3,271 million. In addition, the Group had outstanding short-term loans in the aggregate of approximately RMB2,090 million of which approximately RMB1,446 million were overdue as at 30 June 2006. The Group is in the process of negotiating with certain banks to restructure the amounts due to them and the Company's management confirmed that most of the Group's bankers have expressed their intention to reschedule overdue bank borrowings and/or renew/grant credit facilities to the Group. In addition, the successor single largest shareholder of the Company, Hisense Air-Conditioner Company Limited has expressed its intention to provide necessary financial support to the Group so as to enable it to continue as a going concern. Based on the above assessments, the directors are of the opinion that the Group will have sufficient working capital to finance its normal operations and to meet its financial obligations as they fall due for the foreseeable future and have prepared the interim financial report on a going concern basis.