InvestorsHub Logo
Followers 452
Posts 21811
Boards Moderated 7
Alias Born 01/20/2005

Re: 10 bagger post# 15

Saturday, 04/17/2010 9:38:11 AM

Saturday, April 17, 2010 9:38:11 AM

Post# of 121
CNER.. $0.33

Non-Reliance on Previous Financials, Audits or Interim Review
Form 8-K for CHINA NEW ENERGY GROUP CO -

15-Apr-2010

Non-Reliance on Previous Financials, Audits or Interim Review...

Item 4.02. Non-reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review
On April 9, 2010, the Company's Chief Executive Officer and Chief Financial Officer concluded that the previously issued audited financial statements for the fiscal years ended December 31, 2010 included in the Company's Annual Report on Form 10-K (the "2008 10-K") filed on April, 15, 2009 and the unaudited financial statements for the three months ended March 31, 2009, June 30, 2009 and September 30, 2009 included in its Quarterly Reports on Form 10-Q filed on May 15, 2009, August 14, 2009 and November 16, 2009 (collectively, the "2009 10-Qs") should no longer be relied upon and that disclosure should be made and action should be taken to prevent future reliance.

Contemporaneously with the filing of this Current Report on Form 8-K the Company is filing an amendment to the 2008 10-K, which filing will contain restated financial statements for the fiscal year ended December 31, 2008. The Company intends to file amendments to the 2009 10-Qs as soon as is practicable.

The principal changes in the amendment to the 2008 10-K are as follows:

1. There were errors in the recording of the fair value of the assets acquired during the acquisition of Qinhuangdao Chensheng Gas Co. Ltd. ("Chensheng"). Therefore, the Group has recorded the increase to the fair value from the book value of several assets, including $1,036,655 of Property, plant and equipment, $3,012 of Inventories, and $63,014 of Goodwill and the decrease in $505,941 in Land use right. Consequently, we recalculated the $96,489 of the depreciation for such increment of those assets and minority interest in Chensheng, which caused a decrease to the minority interest by $77,647 in the consolidated balance sheet and a decrease to the minority interest's share of net income by $414,763 in the consolidated statement of operations and comprehensive income.

2. There was an error in the elimination of its intercompany accounts. Therefore, we have recorded a decrease in the related party receivable balances by $84,120 and an increase in the general and administrative expenses by $54,196 and the comprehensive income of $29,924.

3. We have reassessed the nature of the preferred stock together with warrants and we reclassified $1,857 and $7,029,961 (total amounting to $7,031,818) from preferred stock and additional paid in capital. Also, we reclassified warrant liabilities of $2,952,273 from additional paid in capital and recognized a $2,553,870 loss from the change in fair value of the warrant liabilities in the income statement and the total amount of the warrant liabilities was $5,506,143 as of December 31, 2008. In addition, we have accrued $900,000 registration right liabilities as of December 31, 2008.

4. There was an error in recording the pre-acquisition cash flow activities of the newly acquired subsidiary, Chensheng and the cash flow activities of disposed subsidiary, Hunchun. We have excluded the cash flow activities of Chensheng and included the cash flow activities of Hunchun under discontinued operations in each section of the cashflow activities. As a result, we made those adjusting entries in the cash flow statement for the year ended December 31, 2008.

5. We have some reclassifications in both Consolidated Balance Sheets and Consolidated Statements of Operations and Comprehensive Income.

Beginning in November 2009 the company began reviewing its previously filed reports and discovered the errors set forth above Those errors were discussed with board following which the company determined that a restatement was necessary and appropriate..
The Company discussed the foregoing matters with the Company's independent registered public accounting firm. The chief executive officer has authorized that the chief financial officer take the appropriate and necessary actions to restate the 2008 10-K and the 2009 10-Qs.