VANCOUVER, BRITISH COLUMBIA--(Marketwired - May 6, 2015) - Huaxing Machinery Corp. (TSX VENTURE:HUA) ("Huaxing" or the "Company") announces that the Company has not filed its audited annual financial statements for the year ended December 31, 2014, related management discussion and analysis, and certifications of annual filings (the "2014 Annual Filings") within the time period prescribed by securities regulation due to remaining audit procedures to be completed and pending the resolutions to the transactions and issues described below.
Given the Company's negative working capital position and limited available cash on hand, material uncertainty exists as to the Company's ability to continue as a going concern. The Company's current financial position is a result, in part, of the significant deterioration in the working capital position of Shandong Gold Rhino Huaxing Machinery Corp. ("SGRHM"), the Company's operating company in China of which the Company holds an 80% equity interest.
The significant deterioration in the working capital position of SGRHM has been impacted by non-collection of accounts receivable from Shandong Huaxing Steel Structure Co., Ltd. ("Shandong Steel"), a Chinese company, which is wholly-owned by Shandong Huaxing Mechanical Inc., SGRHM's 20% shareholder. The total amount owed by Shandong Steel at the date of this press release is approximately RMB 80 million (approximately CAD$16 million). The Company and Shandong Steel are in negotiations to reach a repayment plan. Because of this problem, SGRHM does not have sufficient working capital to, or is unwilling to, fund the operations of the Company, including compensating directors, officers and auditors of the Company. Xianhua Sun, the Company's Chairman and director, is also Chairman and director of Shandong Huaxing Mechanical Inc. The Company plans to address this conflict of interest in accordance with the provisions of the Business Corporations Act (British Columbia).
In addition, the Company and its auditors are currently having difficulties in obtaining the information relating to the acquisition of the land purchase quota in China, which is necessary to complete the audit. As disclosed in the Company's November 3, 2014 press release, SGRHM entered into a land purchase quota transfer agreement with Shandong Steel, whereby Shandong Steel has agreed to transfer to SGRHM, state owned land purchase quotas for approximately 20.9 Ha of undeveloped industrial land located in Boxing County, Shandong Province, China. There are two reasons for acquiring the land purchase quota. Firstly, SGRHM is currently leasing land and plant buildings and needs to buy land to build its own plant buildings. Secondly, the land purchase quota is an asset which can be used to offset part of the accounts receivable from Shandong Steel. This agreement is subject to the approval of the TSX Venture Exchange (the "TSXV"). Currently the Company is diligently working on providing the TSXV the information that the TSXV needs to complete its review.
On February 26, 2015, the British Columbia Securities Commission issued a Cease Trade Order (the "CTO") which requires all persons to cease trading in the securities of the Company until the Company files amended and restated audited financial information for the financial years ended December 31, 2013 and 2012 (the "Restated Financial Information"). Also, due to the CTO and issues described herein, the Company expects that the TSXV will commence a listing review of the Company's common shares.
The Company's management intends to provide further updates as to progress of the situation and actions to be taken.
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.
HUAXING MACHINERY CORP.
Y.B. Ian He, Deputy Chairman
Forward-Looking Statements
Certain information regarding Huaxing and its subsidiaries contained 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 the Company's plan to address the conflict of interest in accordance with the provisions of the Business Corporations Act (British Columbia), the Company's expectation that the TSXV will commence a listing review of the Company's common shares and the Company's intention to provide further updates as to progress of the situation and actions to be taken. 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 ability to obtain the information relating to the land purchase quota transfer agreement and the Company's ability to collect accounts receivable from Shandong Steel. A number of risks and uncertainties could cause its actual results to differ materially from those expressed or implied by the forward-looking statements, including: potential claims, lawsuits and other legal proceedings relating to the collection of accounts receivable from Sandong Steel and challenges and other factors beyond its 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.