China Advanced Construction Issues Warning on Recent Earnings; Shares Plunge
A review by the company's accounting firm revealed “errors primarily as a result of omission of certain contingencies,” according to the SEC filing.
China Advanced Construction Materials Group Inc., a provider of concrete and related products, closed sharply lower on the Nasdaq market today after the company delayed its shareholder meeting and warned that its three latest financial reports "should no longer be relied upon."
The caution, filed with the Securities and Exchange Commission today, stemmed from a review of the reports for the quarters ended Sept. 28, 2017, Dec. 31, 2017, and March 31 of this year, the company said.
That review, which followed discussions between the board's audit committee and the company's accounting firm, revealed "errors primarily as a result of omission of certain contingencies," according to the SEC filing.
In reaction, the stock of China Advanced Construction (Nasdaq: CADC) dropped nearly 17 percent on the day, closing at $2.79 per share, down 56 cents.
Shares in China Advanced Construction over the past year.
In a separate SEC filing, the company said it had delayed its annual shareholders' meeting, scheduled for 10 a.m. today in Beijing, until Nov. 13, citing the errors in its previous financial filings as well as its anticipated failure to achieve a quorum for the meeting.
The company said the delay would allow it to release its annual report for its fiscal year ended June 30 and "to provide shareholders with additional time to review and consider such information prior to the Meeting."
While it was not clear precisely what contingencies were in question, the company said it was also evaluating whether "any of the contingencies loss" should be included in the financial statements. If included, the potential impact could not yet be determined, the company said.
China Advanced Construction, which provides materials for large-scale developments in China, described itself as "highly leveraged" in its most recent financial report for the quarter ended March 31.
The company, with $12.3 million in revenue for the three months, showed current assets of $54.2 million of which $46 million were net accounts receivable. That figure excluded $17 million in receivables considered "doubtful." At the same time, the company listed $28 million in current liabilities and $1.1 million in cash and cash equivalents.
The company reported net income for that three-month period of $350,559, or 15 cents per share.