VANCOUVER, May 31, 2018 /CNW/ - Axion Ventures Inc. ("Axion" or the "Company") (TSX VENTURE: AXV) announced today that as a result of the previously announced review by the British Columbia Securities Commission ("BCSC"), disclosed on February 9, 2018, Axion is pleased to announce that, further to its press release dated May 1, 2018 and related bi-weekly updates, it has filed its audited annual financial statements for the year ended December 31, 2017 (with the auditor's opinion also opining on financial statements for the year ended December 31, 2016) (the "YE Filings"). The YE Filings are available on the Company's SEDAR profile at www.sedar.com.
As disclosed on February 9, 2018, the BCSC concluded that Axion's former auditors did not meet the professional standards relating to independence and subsequently requested that Axion refile its annual financial statements for the year ended December 31, 2016, audited by an acceptable auditor. Alternatively, Axion could file comparative annual audited financial statements for the year ended December 31, 2017 with the auditor's opinion also opining on financial statements for the year ended December 31, 2016, the latter of which the Company elected to pursue.
As a result of the Company's delay in filing/re-filing its audited annual financial statements for the year ended December 31, 2017, on May 1, 2018 (as amended on May 17, 2018), the BCSC issued a management cease trade order ("MCTO") against certain officers of the Company. The MCTO restricted all trading in securities of the Company by such officers until the required filings were completed by the Company. However, the MCTO did not generally affect the ability of shareholders who were not insiders of the Company to trade their securities.
"We are pleased that the BCSC has worked with us to ensure an orderly filing of our annual statements and has not generally affected the ability of our shareholders to trade their securities," said John Todd Bonner, Chairman and CEO of Axion. "Upon receiving knowledge of the BCSC's requests, we engaged a large international auditor, BDO Limited, hired additional accounting staff, and appointed a new CFO, Steve Ng, an experienced partner from Grant Thornton."
Adjustments to the Consolidated Financial Statements for the Year Ended December 31, 2016
In connection with the re-audit of the consolidated financial statements for the year ended December 31, 2016, the Company identified the following adjustments and made corrections accordingly:
- Management revisited the accounting treatment of "recapitalisation" incurred from the Qualifying Transaction (as that term is defined in the policies of the TSX Venture Exchange) completed during the year ended December 31, 2016 and made corrections to the corresponding accounting entries. The corrections affect the consolidated statement of financial position of the Company as at December 31, 2016 by: (i) increasing the share capital by $12,074,000; (ii) decreasing the foreign currency translation reserve of $916,000; (iii) decreasing the reverse acquisition reserve by $15,114,000, (iv) decreasing the accumulated losses by $2,346,000; and (v) increasing the non-controlling interests by $1,610,000. The effect on the consolidated statement of comprehensive income is to decrease the listing expense by $631,000 for the year ended December 31, 2016.
- Management re-assessed the provision for social security funds and determined an overstatement provision amounting to $580,000 as at December 31, 2016. The effect of the restatement on the consolidated statement of financial position of the Company as at December 31, 2016 results in the following: (i) a decrease of the provision for social security funds by $580,000; (ii) a decrease of accumulated losses by $672,000; and (iii) a decrease of non-controlling interests by $92,000. The effect on the consolidated statement of comprehensive income results in an increased provision for social security fund by $237,000 for the year ended December 31, 2016.
- Management re-evaluated the average gamer life by using the active player data for the past three years ended December 31, 2016 and determined the average gamer life changed from 410 days to 336 days as at January 1, 2016 and from 484 days to 379 days as at December 31, 2016. The effect on the restatement of the consolidated statement of financial position of the Company as at December 31, 2016 results in the following: (i) a decrease of deferred revenue by $228,000; (ii) a decrease of accumulated losses by $139,000; and (iii) an increase to the non-controlling interests by $89,000. The effect on the consolidated statement of comprehensive income is to increase revenue by $228,000 for the year ended December 31, 2016.
- Management re-assessed the nature of these balances and determined to re-present the Company's financial statements for presentation of a correct classification. Such re-classification does not cause any change in the Company's net assets position as at December 31, 2016 or loss for the year then ended.
Effect on Past Consolidated Interim Financial Statements
In the Company's quarterly filing of the unaudited consolidated condensed financial statements for the three and nine months ended September 30, 2017 dated November 29, 2017 ("Q3 2017"), the Company considered itself an "investment entity" in accordance with the definition and characteristics of an "investment entity" set out in IFRS 10. As a result, the Company ceased consolidation of its subsidiaries as at September 30, 2017 and measured its subsidiaries and other investments at fair value through profit or loss in accordance with IFRS 9 "Financial Instruments".
During the audit of the consolidated financial statements of the Company as at and for the years ended December 31, 2017 and 2016, the Company re-assessed its investment entity status with assistance from its professional advisors and determined that the Company had not yet changed to investment entity status from the perspective of accounting standards. Therefore, no exception to consolidation should be adopted during the nine months ended September 30, 2017 or the year ended December 31, 2017.
Accordingly, the Company will amend, restate, and refile its unaudited consolidated condensed financial statements for the three and nine months ended September 30, 2017 to consolidate its subsidiaries as at September 30, 2017.
Mr. Bonner added: "Axion has considered itself an investment entity since the completion of our Qualifying Transaction in May 2016 and intends to upgrade its financial and internal control procedures with the assistance of external professional advisors in an effort to fully comply with the IFRS 10 requirements to achieve an exception to consolidation during the current year."
Although today's YE Filings will result in the revocation of the MCTO by the BCSC, as a result of the materiality of the Q3 2017 amended and restated refiling, the applicable provincial securities commissions will keep the Company on their respective defaulting reporting issuer lists until Q3 2017 is refiled. The Company anticipates refiling Q3 2017 in the coming weeks.
In addition to amending and restating Q3 2017, as a result of the adjustments noted above in connection with the re-audit of the consolidated financial statements for the year ended December 31, 2016, the Company also intends to amend and restate other quarterly results during the year ended December 31, 2017, even if materially positive. The Company expects the adjustments to be similar to the year-end adjustments noted above and will provide details of the adjustments upon completion of each respective quarter.
About Axion Ventures
Axion Ventures is an Investment Issuer with majority ownership in Axion Games, an online video game development and publishing company headquartered in Shanghai, China as well as in True Axion Interactive Ltd., a video game development company headquartered in Bangkok, Thailand cofounded with True Corporation. Axion Ventures also maintains complementary, minority holdings in innovative technology companies.
Axion Ventures Inc. is listed on the TSX Venture Exchange under the symbol (TSXV: AXV).
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Cautionary Statement Regarding Forward-Looking Information Certain statements contained in this press release may constitute forward-looking information. These statements relate to future events or future performance. The use of any of the words "could", "intend", "expect", "believe", "will", "projected", "estimated", "proposed" and similar expressions and statements relating to matters that are not historical facts are intended to identify forward-looking information and are based on the Company's current belief or assumptions as to the outcome and timing of such future events. Such forward-looking information are subject to risks and uncertainties that may cause actual results, performance or developments to differ materially from those contained in the statements. In particular, this release contains forward-looking information relating to the anticipated filing dates of the various financial statements. Various assumptions or factors are typically applied in drawing conclusions or making the forecasts or projections set out in forward-looking information. Those assumptions and factors are based on information currently available to the Company. The forward-looking information contained in this release is made as of the date hereof and the Company is not obligated to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by applicable securities laws. Because of the risks, uncertainties and assumptions contained herein, investors should not place undue reliance on forward-looking information. The foregoing statements expressly qualify any forward-looking information contained herein.
SOURCE Axion Ventures Inc.
For further information: Axion Ventures Inc., John Todd Bonner, Chief Executive Officer, (604) 687-7767; Matthew Sroka, Corporate Development, (604) 219-2140