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catoismymotor (< 20)

Oh Crap! NEP!!!

Recs

13

May 28, 2010 – Comments (13) | RELATED TICKERS: CNEP.DL

Form 8-K for CHINA NORTH EAST PETROLEUM HOLDINGS LTD

27-May-2010

Notice of Delisting or Failure to Satisfy a Continued Lis


Item 3.01 Notice of Delisting of Failure to Satisfy a Continued
Listing Rule or Standard; Transfer of Listing

On May 25, 2010, the Company received a written notice from NYSE AMEX LLC ("AMEX") advising that the Company is not in compliance with AMEX's continuing listing criteria set forth in Sections 134 and 1101 of the NYSE Amex LLC Company Guide (the "Company Guide"). Specifically, AMEX noted that the Company has not timely filed its annual report on Form 10-K for the fiscal year ended December 31, 2009 and its quarterly report on Form 10-Q for the quarter ended March 31, 2010 (together, the "Reports"). In addition, AMEX stated that the Company's failure to file its Reports is a material violation of its listing agreement. Pursuant to 1003(d) of the Company Guide, AMEX is authorized to suspend, and unless prompt corrective action is taken, remove the Company's common stock from AMEX. AMEX halted trading of the Company's common stock on the same day.

As the Company disclosed in its current report on From 8-K filed on April 16, 2010, AMEX required that the Company submit a plan of compliance by April 29, 2010 with the action the Company has taken, or will take, to file the 10-K for 2009 and bring the Company into compliance with the listing standards no later than July 14, 2010 (the "Plan"). As AMEX required, the Company submitted its Plan on April 29, 2010, which the Corporate Compliance Department of AMEX currently is evaluating. As stated in the current notice from AMEX, the Company may supplement its Plan until June 8, 2010. The Company intends to submit such supplement by June 8, 2010.

The Company also previously disclosed in a press release issued on April 16, 2010 and as an exhibit to its current report on From 8-K filed on April 16, 2010, that, in the process of the Company's 2009 year end audit review, the Company identified potential internal control deficiencies over financial reporting in connection with certain expenditures relating to business development activities and the accounting treatment of certain of the Company's accounts payables. In response, on April 15, 2010, the Board of Directors directed and authorized the Audit Committee of the Board of Directors (the "Audit Committee") to conduct a thorough review of the situation and to determine what corrective action, if any, should be taken.

On April 19, 2010, the Audit Committee retained the services of John Lees & Associates Limited of Hong Kong ("JLA") to conduct a forensic audit of the Company's bank accounts with respect to the expenditures relating to business development activities in question. The forensic audit preliminarily found that in 2009, cash transfers occurred between the bank accounts of the Company and its subsidiaries and the personal bank accounts of Mr. Hongjun Wang, the Company's chief executive officer, and Ms. Guizhi Ju, a Company director and mother of Mr. Hongjun Wang. The forensic audit has confirmed that some of the transferred funds were used to pay the Company's expenses. To date, there is no indication that any of the funds were used for personal purposes. The forensic audit is ongoing.

Immediately following the JLA preliminary report, on May 6, 2010, the Board of Directors adopted a specific policy that none of its assets, including cash, should be transferred or paid to any officer or director of the Company or its subsidiaries for any purpose without the approval of the Audit Committee other than (i) payment of transfers pursuant to service agreements between the Company and its officers and directors duly authorized and adopted by the Board of Directors or its committees; or (ii) reimbursement of reasonable expenses not exceeding $10,000 in any given week.

After an update of the preliminary report by JLA, the Board called a special meeting to discuss the situation on May 21 and 22, 2010. As a result of these meetings, on May 23, 2010, the Board through unanimous written consent took the following corporate actions:

(i) Accepted the resignation of its chief financial officer, Mr. Yang Zhang, and appointed Mr. Andrew Kan from JLA to serve as interim acting chief financial officer until a permanent chief financial officer is duly appointed.

(ii) Accepted the resignation of Ms. Ju as a director of the Company.

(iii) Accepted the resignation of Mr. Hongjun Wang as the Chairman of the Board but allowed him to continue as a director pending the outcome of the current forensic audit.

(iv) Appointed the Company's independent director, Mr. Edward Rule, as Chairman of the Board.

(v) Placed Mr. Hongjun Wang on administrative leave as chief executive officer pending the outcome of the current forensic audit.

(vi) Appointed the Company's independent director, Mr. Jingfu Li, as the interim acting chief executive officer.

(vii) Directed that all expenditures of the Company and its subsidiaries over US$10,000 be approved in advance by the Chairman of the Audit Committee.

The Company believes that these remedial measures will prevent further failure of the Company's financial controls and procedures and preserve the assets of the Company. As the forensic audit continues, the Company is treating this serious matter with the utmost urgency. Upon further findings of the forensic audit, the Company will continue to implement measures as the situation demands.

On May 27, 2010 the Company issued a press release containing the above information, a copy of which is attached to this 8-K as Exhibit 99.1.

 



Item 5.02 Departure of directors or Certain Officers; Election of
Directors; appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On May 23, 2010, the Board of Directors of the Company accepted the resignations of Mr. Yang Zhang as the Company's chief financial officer and Ms. Guizhi Ju as a Director. The Company has begun its search for a new chief financial officer and intends to fill the position as soon as practicable. In the interim, the Company's Board of Directors has appointed Mr. Andrew Kan to serve as the acting chief financial officer until a permanent chief financial officer is duly appointed.

Mr. Kan is a manager of the Forensic Accounting Department at John Lees & Associates Limited in Hong Kong and has held that position since June 2009. Between June 2009 and August 2005, Mr. Kan served as the Assistant Manager of Forensics Services at Ferrier Hodgson Limited in Hong Kong. Prior to joining Ferrier Hodgson, Mr. Kan had 5 years of experience engaged in statutory audit and advisory roles for listed company clients in Hong Kong, the PRC and Taiwan. Mr. Kan is a member of the Association of Certified Fraud Examiners (The United States of America); practicing member of the Hong Kong Institute of Certified Public Accountants (Hong Kong); and member of the Institute of Chartered Accountants in English and Wales (The United Kingdom). Mr. Kan received his Bachelor of Business Administration in Accountancy from the City University of Hong Kong and his Professional Diploma in Fraud Examination from the Chinese University of Hong Kong.

The Board of Directors of the Company also placed the Company's chief executive officer on administrative leave effective as of May 23, 2010, pending the completion of the current forensic audit and direction from the Board of Directors of the Company after consideration of the results of the audit and related implementation of mitigation measures. In the interim, the Company's Board of Directors has appointed Mr. Jingfu Li, the Company's independent director, to serve as the acting chief executive officer of the Company.

Mr. Li has served as Director of the Company since May 2008. Mr. Li is the Chairman and top representative of Joint Management Committee of Qian Guo County Longhai Petroleum & Natural Gas Co., Ltd. and was appointed to that position by Petro China's Jilin branch in 2005. Mr. Li has been in the petroleum industry since 1970. In his extensive career he has served as Vice Monitor for Jiang Han Oil Field's comprehensive logging team, Secretary of Command Department of Petroleum Hui Zhan in Jilin Province, Vice President of Jilin Oilfield Exploration and Development Research Institute. From 1995 to 2002, Mr. Li was appointed by PetroChina's Jilin branch to serve as General Manger of management and production operation of oil exploitation of Jilin Jiyuan Petroleum & Natural Gas Development Co. Ltd. From 2002 to 2005, Mr. Li, served as Project Manager of Song Yuan City Qian Yuan Oil & Gas Development Co., Ltd. also by appointment by PetroChina's Jilin branch. Mr. Li received his bachelor's degree from Chang Chun Geology Institute in Jilin, China.

***LINK***

13 Comments – Post Your Own

#1) On May 28, 2010 at 3:28 PM, catoismymotor (< 20) wrote:

In my opinion this is a huge deal. I'm glad I sold all my shares in NEP earlier this month.

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#2) On May 28, 2010 at 3:52 PM, ragedmaximus (< 20) wrote:

heads still roll literally in china and this makes investing in china alot harder for stock holders

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#3) On May 28, 2010 at 9:18 PM, Tastylunch (29.36) wrote:

Holy Biscuits!

I was going to shrug it off (late fillings are often a correctible problem for young foreign firms) until I saw the bits about forsenic accountants and all the resignations

$#%%$! it! Chinese Accounting strikes again.

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#4) On May 28, 2010 at 9:34 PM, HarryCaraysGhost (99.59) wrote:

Good call on selling Cato, I am holding the small position I took, and am getting beatan down like a rented mule.

Gonna hold but this will get worse before it gets better.

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#5) On May 29, 2010 at 12:36 PM, Teacherman1 (28.03) wrote:

I have just about come to the conclusion that the only way to "play" the Chinese stocks, is to create a small "China Fund" of your own. This would probably keep you from any really big gains, but should also protect you from any big losses.

You would have to do it as a "trader" rather than as an "investor", and keep a close eye on it.

I believe the key is to pick stocks in companies that, at least on the surface, look good in and of themselves, pick a good entry point, and be ready to take profits frequently.

Selling the profitable ones, and holding those that are (hopefully temporary) "losers", could aid in culling and refining your "basket", and help avoid those whose financial statements and press releases are "pure fantasy".

Will be working on this over the summer when I have time to devote to research and close watching.

JMO and worth exactly what I am charging for it.

Have a nice holiday weekend all. 

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#6) On May 29, 2010 at 3:31 PM, soycapital (< 20) wrote:

Glad that I got out when I did. I'm not investing in individual stocks in China anymore. Took a hit with FUQI also.

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#7) On May 30, 2010 at 11:16 AM, tedoso (< 20) wrote:

This mess will hurt all Chinese stocks. Birds of a feather will flock together isn't something to be ignored. I am very disappointed and will use a lot of caution before I invest in Chinese stocks again.

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#8) On June 02, 2010 at 5:30 PM, cdulan (91.38) wrote:

Does anyone here remember Biosden Biotech, BBC, another Chinese start up that got a lot of hype?  I was long, very long. I bought the stock, I bought the hype.  Just like this stock, all on potential and a "captured" market that they just have to crack open and reap the gold from.  

Then AMEX gave them their first delisting notice. Great damage control. Explanations, promises, scoffs at press conferences.   I stayed long. "It can't be that big of a scam, is it?  They have real earnings"  The stock has already imploded.  "Not much left to lose now and they still have a locked market"

The CFO is fired, the CEO quits, accounting investigations.  It is all over.  Pennies.  Still a good story, but it seems like only one person is telling it.

 I paid dearly for that wisdom.

There are lots of parallels to the situation described regarding this stock also.  Just get out and wait.  You will not miss the train and you may save your ticket for different ride.

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#9) On June 03, 2010 at 12:35 PM, jmbring (< 20) wrote:

i still hold a little bit of NEP, mostly due to lack of planning on my part.

so at the risk of asking a dumb question,  can one still trade a de-listed stock?  luckily for me, this is the first time i've had to deal with a Chinese Accounting Bomb :^)

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#10) On June 04, 2010 at 6:53 PM, HarryCaraysGhost (99.59) wrote:

 jmbring

Obviously not, I tried scrambling to sell, no dice.

I believe we are what is referred to as the bagholders. Next time I think it's a good Idea to invest in China I'm going with an index fund.

Commie Bastards

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#11) On June 05, 2010 at 12:48 PM, jmbring (< 20) wrote:

hey msftgev

i believe de-listed stocks sometimes trade OTC, not sure if NEP will go this route. just looking for any outlet to dump the little bit i have if they aren't re-listed.   who knows...

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#12) On June 10, 2010 at 4:14 AM, ozzfan1317 (78.75) wrote:

And its at .02 so hows china look now?

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#13) On June 14, 2010 at 3:18 AM, ayaghsizian (95.90) wrote:

10 bagger? Yeah right.  This is now my first (-1) bagger.  China sux.  I had so much hope for this one. 

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