TORONTO, Nov. 2, 2015 /CNW/ - Boyuan Construction Group, Inc. (TSX: BOY, BOY.DB.A), a growing construction company in China of commercial, residential and municipal infrastructure projects, provides an update following the issuance of a management cease trade order ("MCTO") by the Ontario Securities Commission ("OSC") on October 14, 2015. 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.
The delay is due to issues raised by the OSC in their continuous disclosure review of the Company which will require the Company to restate the Company's annual financial statements for the year ended June 30, 2014 and subsequent interim periods and to revise its annual and interim MD&As for the same periods (collectively, the "2014 Filings"). The Company has advised the OSC that the Company will use its best efforts to restate and revise the 2014 Filings as soon as possible, and after which will make the 2015 Filings as soon as possible.
The 2014 Filings may contain the following misstatements, which will require the Company to restate and revise the 2014 Filings:
- The Company has not adequately impaired certain assets accounts receivable and unbilled revenues in the 2014 Filings.
- The Company is performing an impairment analysis on a case by case basis for accounts receivable and unbilled revenue as at June 30, 2014, and the Company is in the progress of quantifying the amount of impairment losses.
- Revenue Recognition:
- The Company is revisiting the impairment analyses as stated above and will use the results of the impairment analyses to revisit whether it is still appropriate to conclude that it was probable that the economic benefits associated with the contract will flow to the Company.
- The Company should not have classified the entire unbilled revenue balance as current as at June 30, 2014 and subsequent quarters. Further, unbilled revenues can be considered financial assets, and the Company should have provided an analysis of the age of financial assets that are past due but not impaired as at the end of the reporting period.
- The Company is revisiting the classification of unbilled revenue as current and non-current assets based on its normal operating cycle. The Company is currently quantifying the amount and preparing the aging analysis for the age of the financial assets that are past due but not impaired as at the end of the reporting period based on the contract terms. Once completed the financial statements will be revised accordingly.
- The OSC noted several deficiencies in the Company's 2014 annual MD&A and subesent interim MD&As, including:
- missing an analysis of liquidity and capital resources
- insufficient disclosure on transactions between related parties, specifically advances to project managers, such as identifying the business purpose of the transaction.
- In discussing results of operations, not providing a detailed explanation of the reasons for the increase in revenues making reference to specific projects and their stage of completion.
- In summary of quarterly results, there is no discussion of the factors that have caused variations in revenues and profit over the quarters necessary to understand general trends that have developed and the seasonality of the business
- The Company will make the changes suggested by OSC. The changes will be reflected in the restated MD&A for FY2014 and the three subsequent quarterly MD&As.
Boyuan intends to file the restated financial statements and MD&A for FY2014 by November 27, 2015, file restated interim financial statements and MD&As for three subsequent quarters by December 11, 2015, make 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.
As long as a general cease trade order is not issued against the Company, the Company expects that the retraction of $5 million of the Company's 11.5% unsecured convertible debentures due October 31, 2018 will proceed as scheduled on October 31, 2015.
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 expectation to restate and revise the 2014 Filings and expected timing for the completion of the restatement and refiling, management's expectations on the areas and contents of the restatements; management's expectations to make the 2015 filings and expected timing for the filing; management's expectation of completing the retraction of $5 million of its convertible debentures and timing for the retraction; 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, email@example.com; NATIONAL Equicom: Ms. Renée Lam, (416) 848-1405, firstname.lastname@example.org