VANCOUVER, BRITISH COLUMBIA -- (Marketwired) -- 02/26/15 -- Huaxing Machinery Corp. (TSX VENTURE: HUA) ("Huaxing" or the "Company") announces that it plans on restating its audited financial information. The retrospective restatement will be presented in the Company's audited financial statements for the year ended December 31, 2014.
The restatements primarily result from adjustments to the Company's revenue recognition practices for its sales of robotic welding equipment to the Company's related party Shandong Huaxing Steel Construction Co., Ltd. ("Shandong Steel"). Shandong Steel is a subsidiary of Shandong Huaxing Mechanical Inc., the 20% equity owner of Shandong Gold Rhino Huaxing Machinery Corp., of which the Company owns 80% equity through the Company's wholly owned subsidiary Gold Rhino Limited.
The Company's robotic welding equipment sales contracts with Shandong Steel stipulate that Shandong Steel is liable to pay the Company 65% of the sales contracts upon delivery in accordance with the terms of the contracts and the remaining 35% of the sales amounts one year after installation and confirmation the equipment meets specified quality and capacity requirements.
The Company's financial statements since the year ended December 31, 2012 have recognized 100% of the sales amounts as revenue upon successful commissioning of the equipment and the assurance of Shandong Steel's payment for the full sales amounts. The restatement will primarily impact the timing of recognition of revenue between the years 2012, 2013, and 2014. Sales revenue adjustments will result in adjustments to accounts receivable from Shandong Steel and VAT recoverable and may also result in changes to cost of goods sold and inventory.
In addition, certain amounts of VAT recoverable and inventory in relation to the sales contracts with Shandong Steel are expected to be reclassified from current assets to long term.
All adjustments will be subject to audit by our current auditor PricewaterhouseCoopers LLP.
The Board of Directors and the Audit Committee of the Company are working with their advisors, the Company's auditors and management to more specifically quantify the extent and scope of the restatements required for the financial information to ensure that the financial information is disclosed in accordance with the Company's accounting policies and International Financial Reporting Standards. Until the Company issues the restated financial information, investors should not rely on the previously disclosed financial information. The Company has been informed by the British Columbia Securities Commission that it will issue an order requiring all trading in the securities of the Company cease until the Company has filed the restated Financial Information.
About Huaxing Machinery Corp.
Huaxing is a manufacturer of stone processing equipment and steel structure fabrication equipment. Through its wholly owned subsidiary Gold Rhino Limited, Huaxing holds an 80% controlling equity interest in Shandong Gold Rhino Huaxing Machinery Corp., the operating entity that holds the manufacturing facilities located in Boxing County, Shandong Province, China. Its main products are stone sawing, cutting, polishing and processing machinery, and robotic welding system for steel structure fabrication. The processed stones and steel structures are both used in the building and infrastructure construction industry.
Certain information regarding Huaxing and its subsidiaries contains herein may constitute forward-looking statements within the meaning of applicable securities laws. Forward-looking statements may include estimates, plans, expectations, opinions, forecasts, projections, guidance or other statements that are not statements of fact, including statements regarding the nature of the restatement of the financial information and that the Company plans to restate the financial information in its audited financial statements for the year ended December 31, 2014. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Developing forward-looking information involves reliance on a number of assumptions and consideration of certain risks and uncertainties, some of which are specific to the Company and others that apply to the industry generally. The factors or assumptions on which the forward-looking information is based include without limitation: management's current expectations, estimates and assumptions about the Company's current assets, the global economic environment, and the Company's ability to manage our assets and operating results. A number of risks and uncertainties could cause our actual results to differ materially from those expressed or implied by the forward-looking statements, including: potential negative financial impact from regulatory investigations, claims, lawsuits and other legal proceedings and challenges and other factors beyond our control. The Company assumes no obligation to update such forward-looking statements, except as required by applicable securities laws or exchange regulations. The Company's forward-looking statements are expressly qualified in their entirety by this cautionary statement.
Neither 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.
Huaxing Machinery Corp.
Y.B. Ian He