Boyuan Files Amended Financial Statements and Provides Disclosure Update

TORONTO, Dec. 11, 2015 /CNW/ - Boyuan Construction Group, Inc. (TSX: BOY, BOY.DB.A) ("Boyuan" or the "Company"), a growing construction company in China of commercial, residential and municipal infrastructure projects. In accordance to the issuance of a management cease trade order ("MCTO") by the Ontario Securities Commission ("OSC") on October 14, 2015, following the filing on November 27, 2015 of restated audited annual financial statements and revised MD&A for the year ended June 30, 2014, the Company has now filed amended and restated interim financial statements and revised MD&As for the three subsequent quarters ended September 30, 2014, December 31, 2014 and March 31, 2015, which can be found on SEDAR (www.sedar.com) under the Company's profile.

The effect of the restatement is detailed as follows:

Nine months ended March 31, 2015






Previously

reported

Adjustments

As restated



$

$

$

Consolidated Statement of Financial Position





Accounts receivable – current


30,192,016

(835,480)

29,356,536

Unbilled revenue – current


158,486,540

(61,859,768)

96,626,772

Accounts receivable – non current


-

425,964

425,964

Unbilled revenue – non current


-

42,136,168

42,136,168

Deferred tax assets


-

1,885,976

1,885,976

Convertible debentures  – current


4,951,917

(3,092,650)

1,859,267

Deferred tax liabilities


1,435,762

(1,435,762)

-

Convertible debentures  – non current


4,308,029

1,042,874

5,350,903

Contributed surplus


6,622,020

180,370

6,802,390

Equity component of convertible debentures


2,699,879

1,903,591

4,603,470

Retained earnings


86,827,143

(18,717,582)

68,109,561

Accumulated other comprehensive income


9,379,498

1,872,019

11,251,517







Previously

reported

Adjustments

As restated








$

$

$

Consolidated Statement of Comprehensive Income (Loss)





Construction revenue


233,549,183

(4,468,768)

229,080,415

Interest and other income


119,066

2,608,255

2,727,321

Gain on extinguishment of debt


2,100,022

(1,906,204)

193,818






Management conducted a review of certain accounting issues and determined that the following items required adjustment in the unaudited condensed interim consolidated financial statements for the nine months ended March 31, 2015 and 2014:

i.    

Certain amounts in unbilled revenue and accounts receivable should have been classified as non-current as the amounts were not expected to be collected within one year subsequent to the reporting period or in the Company' normal operating cycle. The amounts recorded as non-current were discounted to reflect the long-term nature;



ii.    

The Company engaged an independent valuator to assess the fair value of the liability and equity components of modified convertible debentures as at the date of approval of modification, which are substantially different with the amounts previously recognized by the Company.

 

The misstatements identified resulted in a decrease in revenue, net income and comprehensive income. Current assets, total assets, current liabilities, and retained earnings have also decreased. Non-current assets have increased.

The following notes describe the impact of the adjustments to the condensed interim consolidated financial statements:

(a)  

The Company reclassified unbilled revenue of $48,941,254 as at March 31, 2015 from current to non-current assets. A discount of $6,805,086 was applied on the non-current balance as at March 31, 2015 with the offsetting decrease to revenue.



(b)  

The Company reclassified accounts receivable of US$467,043 as at March 31, 2015 from current to non-current assets. A discount of $41,079 was applied on the non-current balance as at March 31, 2015 with the offsetting decrease to revenue.



(c)   

Accretion income from the discount on non-current accounts receivable and unbilled revenue of $2,608,255 and $3,211,919 was recorded to interest and other income for the nine months ended March 31, 2015 and 2014 respectively.



(d) 

The Company offset deferred tax liabilities of $1,435,762 with deferred tax assets.



(e) 

The Company derecognized convertible debentures of US$3,092,650 as at March 31, 2015 from current liabilities and recognized convertible debentures of US$1,042,874 as at March 31, 2015 to non-current liabilities. The Company also recognized US$1,903,591, US$180,370 and US$1,872,019 to equity component of convertible debentures, contributed surplus and foreign currency translation adjustment. As a result of above, the Company derecognized gain on extinguishment of debt of US$1,906,204 for the nine months ended March 31, 2015. 

 

Six months ended December 31, 2014







Previously

reported

Adjustments

As restated



$

$

$

Consolidated Statement of Financial Position





Accounts receivable – current


17,924,978

(3,489,756)

14,435,222

Unbilled revenue – current


167,017,143

(74,313,964)

92,703,179

Accounts receivable – non current


-

2,641,270

2,641,270

Unbilled revenue – non current


-

53,639,721

53,639,721

Deferred tax assets


-

1,887,764

1,887,764

Deferred tax liabilities


1,433,974

(1,433,974)

-

Retained earnings


78,785,804

(18,200,991)

60,584,813







Previously

reported

Adjustments

As restated








$

$

$

Consolidated Statement of Comprehensive Income (Loss)





Construction revenue


144,055,835

(4,988,962)

139,066,873

Interest and other income


71,371

1,738,836

1,810,207

                                             

Certain amounts in unbilled revenue and accounts receivable should have been classified as non- current as the amounts were not expected to be collected within one year subsequent to the reporting period or in the Company' normal operating cycle. The amounts recorded as non-current were discounted to reflect the long-term nature. 

The misstatements identified resulted in a decrease in revenue, net income and comprehensive income. Current assets, total assets, retained earnings have also decreased. Non-current assets have increased.

The following notes describe the impact of the adjustments to the condensed interim consolidated financial statements:

(a)    

The Company reclassified unbilled revenue of $61,395,450 as at December 31, 2014 from current to non-current assets. A discount of $7,755,728 was applied on the non-current balance as at December 31, 2014 with the offsetting decrease to revenue.



(b)  

The Company reclassified accounts receivable of 3,121,319 as at December 31, 2014 from current to non-current assets. A discount of $480,049 was applied on the non-current balance as at December 31, 2014 with the offsetting decrease to revenue.



(c)   

Accretion income from the discount on non-current accounts receivable and unbilled revenue of $1,738,836 and $2,141,280 was recorded to interest and other income for the six months ended December 31, 2014 and 2013 respectively.



(d) 

The Company offset deferred tax liabilities of $1,433,974 with deferred tax assets.

 

Three months ended September 30, 2014







Previously

reported

Adjustments

As restated



$

$

$

Consolidated Statement of Financial Position





Accounts receivable – current


11,499,625

(3,462,114)

8,037,511

Unbilled revenue – current


152,615,319

(49,674,312)

102,941,007

Accounts receivable – non current


-

2,584,092

2,584,092

Unbilled revenue – non current


-

31,218,488

31,218,488

Deferred tax assets


-

2,157,156

2,157,156

Deferred tax liabilities


1,164,582

(1,164,582)

0

Retained earnings


75,931,175

(16,012,108)

59,919,067







Previously

reported

Adjustments

As restated








$

$

$

Consolidated Statement of Comprehensive Income (Loss)





Construction revenue


67,732,119

(1,930,661)

65,801,458

Interest and other income


35,907

869,418

905,325






 

Certain amounts in unbilled revenue and accounts receivable should have been classified as non-current as the amounts were not expected to be collected within one year subsequent to the reporting period or in the Company' normal operating cycle. The amounts recorded as non-current were discounted to reflect the long-term nature. 

The misstatements identified resulted in a decrease in revenue, net income and comprehensive income. Current assets, total assets, retained earnings have also decreased. Non-current assets have increased.

The following notes describe the impact of the adjustments to the condensed interim consolidated financial statements:

(a)        

The Company reclassified unbilled revenue of $36,755,798 as at September 30, 2014 from current to non-current assets. A discount of $5,537,310 was applied on the non-current balance as at September 30, 2014 with the offsetting decrease to revenue.



(b)  

The Company reclassified accounts receivable of 3,093,677 as at September 30, 2014 from current to non-current assets. A discount of $509,585 was applied on the non-current balance as at September 30, 2014 with the offsetting decrease to revenue.



(c)   

Accretion income from the discount on non-current accounts receivable and unbilled revenue of $869,418 and $1,070,640 was recorded to interest and other income for the three months ended September 30, 2014 and 2013 respectively.



(d) 

The Company offset deferred tax liabilities of $1,164,582 with deferred tax assets.

 

As previously announced, The MCTO was issued as a result of Boyuan's delay in filing its audited annual financial statements for the fiscal year ended June 30, 2015 and related Management's Discussion & Analysis, Annual Information Form and CEO and CFO certification of filings (collectively, the "2015 Filings"), by the required date.  The MCTO restricts all trading in and all acquisitions of the securities of the Company, whether direct or indirect, by the Chief Executive Officer and the Chief Financial Officer of the Company until two full business days following the receipt by the OSC of all Annual Filings.  The MCTO will not affect the ability of persons who are not insiders of Boyuan to trade its securities.

Further to its press releases issued on November 27 and 16, 2015, the Company intends to file the FY2015 filings by December 18, 2015 and file the interim financial statements and MD&A for the first quarter FY2016 by December 23, 2015.

Boyuan intends to satisfy the provisions of the Alternative Information Guidelines as set out in National Policy 12 - 203 for as long as Boyuan remains in default, including the issuance of further by-weekly default status reports, each of which will be issued in the form of a press release. A general cease trade order may be issued if Boyuan fails to file such default status reports on a timely basis.

A copy of the MCTO can be found at the Company's website at www.boyuangroup.com.

About Boyuan Construction Group, Inc.
Based in Jiaxing City, China, Boyuan Construction Group, Inc. is in the business of commercial building and residential construction, municipal infrastructure and engineering projects. In its last three fiscal years ending June 30, 2014, Boyuan completed 45 projects for a number of private and public sector clients. Boyuan's current project backlog includes residential, commercial, industrial and mixed-use developments. From its operating bases in Zhejiang Province and in Hainan Province, Boyuan focuses on construction projects in China's fast-growing regions of the Yangtze River Delta, Hainan Province and Shandong Province. For more information visit www.boyuangroup.com.

Caution Regarding Forward-Looking Information:
Certain information contained in this press release constitutes forward-looking information, which is information relating to future events or the Company's future performance and which is inherently uncertain.  All information other than statements of historical fact may be forward-looking information.  Forward-looking information is often, but not always, identified by the use of words such as "seek", "anticipate", "budget", "plan", "continue", "estimate", "expect", "forecast", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe" and similar words or phrases (including negative variations) suggesting future outcomes or statements regarding an outlook. Forward-looking information contained in this press release includes, but is not limited to, management's expectations to make the 2015 annual filings and Q1 FY2016 filings and expected timing for the filings; and management's expectation to comply with the Alternative Information Guidelines. Forward-looking information involves known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information.  The Company believes the expectations reflected in the forward-looking information are reasonable but no assurance can be given that these expectations will prove to be correct and readers are cautioned not to place undue reliance on forward-looking information contained in this press release.  Some of the risks and other factors which could cause results to differ materially from those expressed in the forward-looking information contained in this press release include, but are not limited to: risk of a general cease trade order bing issued, risk of risk of macro-economy cycle, risk from competition, risk from insufficient marketing to secure new projects, risk in obtaining additional financing, risk involving permits and licences, reliance on key management member, risk from supply of raw materials, risk of financial leverage, risk of bad debts in accounts receivables, risk involved in real estate development, foreign exchange fluctuations, political and economic conditions in China and other risks included in the Company's AIF for the fiscal year ended June 30, 2014 and in the Company's public disclosure documents filed with certain Canadian securities regulatory authorities and available at www.sedar.com.  The forward-looking information contained in this press release are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as otherwise required by law. 

SOURCE Boyuan Construction Group, Inc.

For further information: Boyuan Construction Group, Inc., Mr. Paul Law, CFO, + (852) 9329 5088, paullaw@zjboyuan.com.cn; National Equicom, Ms. Renée Lam, (416) 848-1405, rlam@national.ca


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