Audit Report
Daxin Audit No. (2005) 0433
To all shareholders of Monkey King Co., Ltd.:
We have been entrusted to audit the balance sheet of Monkey King Co., Ltd. (hereinafter referred to as "Monkey King") as of December 31, 2004, as well as the profit and profit distribution statement, consolidated profit and profit distribution statement, and cash flow statement for the year 2004. The preparation of these financial statements is the responsibility of Monkey King's management. As stated in notes "5, 9, 15, 16" and notes "8 and 12," Monkey King is unable to repay substantial overdue debts, has accumulated significant losses, is severely insolvent, and faces difficulties in obtaining necessary funds for developing new products or making investments. There are also substantial contingent liabilities for guarantees, and the company has no substantial operational activities.
As of the audit report date, Monkey King indicated that it is actively taking measures to improve its situation, including negotiating with major creditors for continued debt restructuring and asset restructuring. However, as noted in "11 (2)," the debt settlement agreement reached with major creditors has not been fully executed, and the debt restructuring efforts have not achieved the expected results, affecting the progress of asset restructuring. There is significant uncertainty regarding the company's ability to continue as a going concern, and we are unable to assess the appropriateness of the financial statements prepared under the going concern assumption.
Due to the reasons stated in note "11 (2) 2," we were unable to audit the financial statements of Monkey King Welding Wire Co., Ltd. for the months of January to May. We believe that due to the existence of the above matters, we cannot determine the extent of their impact on the overall representation of the financial statements, and therefore we are unable to express an opinion on the aforementioned financial statements of Monkey King.
Daxin Accounting Firm Certified Public Accountant Li Weizhong Wuhan, China Certified Public Accountant Wei Shidang April 25, 2005
Balance Sheet
Prepared by: Monkey King Co., Ltd. As of December 31, 2004 Unit: RMB
| Item | Note | Consolidated Amount | Parent Company Amount |
|---|---|---|---|
| Current Assets: | |||
| Cash and Cash Equivalents | 1 | 41,751.30 | 278,398.26 |
| Short-term Investments | 10,080.00 | 9,937,092.81 | |
| Accounts Receivable | 2 | 56,754,321.80 | 79,611,525.65 |
| Prepaid Expenses | 4 | 1,169,097.16 | |
| Inventory | 5 | 7,333,618.58 | |
| Other Current Assets | |||
| Total Current Assets | 56,806,153.10 | 98,353,899.14 | |
| Long-term Investments: | |||
| Long-term Equity Investments | 6 | 13,544,105.07 | |
| Total Long-term Investments | 13,544,105.07 | ||
| Fixed Assets: | |||
| Fixed Assets Original Cost | 7 | 20,947,003.44 | 47,820,292.84 |
| Less: Accumulated Depreciation | 7 | 7,628,915.70 | 21,668,709.73 |
| Net Fixed Assets | 13,318,087.74 | 26,151,583.11 | |
| Less: Fixed Asset Impairment Reserve | 7 | 11,831,349.67 | 15,268,382.44 |
| Net Fixed Assets | 1,486,738.07 | 10,883,200.67 | |
| Construction in Progress | 27,222.80 | ||
| Total Fixed Assets | 1,486,738.07 | 10,910,423.47 | |
| Intangible Assets and Other Assets: | |||
| Intangible Assets | 8 | 154,004,152.46 | 188,579,094.40 |
| Total Assets | 212,297,043.63 | 297,843,417.01 |
Balance Sheet (Continued)
Prepared by: Monkey King Co., Ltd. As of December 31, 2004 Unit: RMB