09:05 EFORCE HOLDINGS<00943> - Results Announcement (3) Fundamental uncertainty As mentioned above, the Company's directors consider that the Company and the Group are able to continue as a going concern and to meet their obligations when they fall due assuming the loan facilities totalling HK$ 30 million are made available to the Company. In forming our opinion, we have considered the adequacy of the disclosure made in note 2(a) to the financial statements concerning the ability of the Company and the Group to continue as a going concern. However, it is uncertain that the financial institutions will continue to provide financial support to the Company and the Group as they reserve the right to terminate the revolving loan facilities at any time by written notice to the Company. The financial statements do not contain any adjustments that would result from the failure of the Company and the Group to obtain adequate financial assistance to enable it to continue as a going concern. These would include any adjustments to write down the Company's and the Group's assets to their recoverable amounts, to provide for any liabilities which may arise on cessation of business and to reclassify non-current assets as current assets. We consider that appropriate disclosure concerning the fundamental uncertainty has been made, but the fundamental uncertainty is so extreme that we are unable to form an opinion as to whether the Company and the Group can continue as a going concern. Additionally, we are unable to quantify the adjustments that would be required if these financial statements were not to be prepared on a going concern basis. Disclaimer of opinion on view given by the financial statements Because of the significance of the possible effect of the limitation in evidence available to us as set out in paragraphs (1) and (2) of the basis of opinion section of this report and because of the fundamental uncertainty as referred above, 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 31 December 2004 and of the Group's loss and cash flows 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 limitation 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. IV LOSS FROM ORDINARY ACTIVITIES BEFORE TAXATION Loss from ordinary activities before taxation is arrived at after charging/(crediting): (a) Finance costs: 2004 2003 HK$'000 HK$'000 Interest on bank advances and other borrowings repayable within five years 1,384 2,527 Factoring loan interest 72 - -------- -------- 1,456 2,527 ======== ======== (b) Loss from operations is arrived at after charging: 2004 2003 HK$'000 HK$'000 Cost of inventories # 132,988 77,223 Staff costs including directors' remuneration (including contributions to retirement scheme of HK$559,000 (2003: HK$605,000))#/* 36,750 30,681 Amortisation of development costs - 5,845 Amortisation of positive goodwill 111 3,063 Amortisation of positive goodwill included in share of losses of associates 1,813 605 Auditors' remuneration - audit services 580 1,095 Research and development costs * 3,558 3,782 Depreciation # 4,964 8,071 Operating lease charges in respect of land and buildings 2,330 2,142 Provision for impairment of investment securities 4,731 - Provision for quality guarantee deposit - 44,933 ========= ======== # Cost of inventories includes HK$12,797,000 (2003: HK$13,799,000) relating to staff costs and depreciation expenses, which amount is also included in the respective total amounts disclosed separately above for each of these types of expenses.