Each one in plain English, with the numbers worked through for a shareholder.
6 July 2007material agreement▲ GoodMajor
On June 29, 2007 the chairman Wang Hongjun and his mother Ju Guizhi gave the company, as a capital contribution, $7,197,813 of short-term advances it owed them (as of March 31, 2007) and the 10,000,000 shares issued for Yu Qiao (valued at about $3.1M). This removes those debts and cancels the shares, and the company expects no material tax effect. It reverses the January 2007 share issue to Ju and clears much of the related-party borrowing, though the filing does not say whether the shares are retired.
This amendment adds the financial statements for Yu Qiao, bought in January 2007. For 2006 it shows revenue of about $2.68M (2005: $3.13M) and net income of $29,431 (2005: $424,128). At year-end 2006 it had total assets of $18.8M, accounts payable of $13.8M and equity of $2.8M. It also corrects the trust holdings: the company indirectly owns 63% of Yu Qiao, Ju Guizhi 7%, and the company benefits from trusts over a further 30%. A pro forma statement is listed but its figures are not shown in the text provided.
23 Mar 2007material agreement termination● Neutral
Around March 19, 2007 the company closed down two Chinese subsidiaries, Hong Xiang Technical and Hong Xiang Oil Development, which held the Qian'an 112 lease from Yu Qiao. The lease was no longer needed after the JV bought Yu Qiao in January 2007, so the company will operate Qian'an 112 through Yu Qiao. The BVI parent, Hong Xiang Petroleum, stays. The company expects no material cost or significant financial impact. This resolves the earlier thread about the Qian112 operating structure and the 2% management fee paid to Yu Qiao.
On January 26, 2007 the Song Yuan JV agreed to buy Yu Qiao, the company that holds the PetroChina contract for Qian'an 112, the oilfield the company's own subsidiary had been drilling. The company will issue 10,000,000 new shares (about US$4 million at market) to the sellers, and 70% of Yu Qiao comes from Ju Guizhi, the president's mother, so this is another insider deal. Two other sellers hold 30% in trust for the JV because of PRC foreign-ownership limits. A fairness opinion is promised within 90 days of closing, and the price can be cut but not raised. Closing was expected in about 30 days, and the filing says financial statements would follow.
28 Dec 2006asset acquisition disposition● NeutralMajor
The company reports that its July 2006 joint venture, Song Yuan North East Petroleum Technical Service Co., Ltd., was completed on October 8, 2006, when it put in $490,000 (borrowed from a related party) and received 90%. The venture already owned LongDe, which holds a 20-year PetroChina contract for the Hetingbao Oilfield 301 Area (PetroChina takes 20% of output for 10 years, then 40%). The company still owes $510,000 of the $1 million, which is later than the 3-month window in the July 2006 deal. The company expected to pay by the end of Q4 2006. The chairman's mother, Ju Guizhi, now holds the other 10% after the chairman gifted her his stake in December 2006. The company says the deal is not significant enough to need financial statements.
On July 26, 2006 the company agreed with Ms. Ju GuiZhi and Mr. Wang Hongjun to form a Chinese joint venture, Song Yuan North East Petroleum Technical Service Co., Ltd., to acquire and operate oil and gas development assets and sell crude oil. The company commits US$1 million within 3 months for 90%; Ju and Wang commit RMB 1 million for 10%. Wang is the company's president, chairman and a significant shareholder, and Ju is an immediate family member of his, so this is a deal with insiders.
On May 5, 2006 the Hong Xiang operating subsidiary signed a contract with Daqing City Ranghu Lu District Xu Yang Petroleum Tool Manufacturing Co. to drill 20 wells in the Qian112 oilfield by December 31, 2006 (extendable), for RMB 18.8 million in cash. RMB 300,000 is due before each well and the rest in monthly installments over a year after each well is accepted. The attached press release describes the drilling as the first stage of a plan to reach 102 wells, and names Rising Sun Oil Exploration and Production Limited as the contractor, which does not match the counterparty named in the agreement.
On March 24, 2006 the board said its 2003 and 2004 financial statements should no longer be relied on because proved oil and gas reserves were materially overstated, using estimates that did not meet SEC Industry Guide 2. New estimates from R.A. Lenser and Associates affect depreciation and reserve figures, and an amended 2004 annual report is planned. This is a second restatement after the 2004 quarterly errors disclosed in November 2005.
The board determined on May 18, 2005 that the company's June 30 and September 30, 2004 quarterly financials contained material errors and should not be relied on. The errors were found during the audit by the new auditor engaged in March 2005; corrected figures are in later filings and amended quarterly reports have been filed. This follows the auditor change earlier in 2005.
On May 3, 2005 the company ended HJ & Associates as auditor; Jimmy C.H. Cheung & Co., CPA had been appointed on April 11, 2005. HJ's 2002 and 2003 reports carried a going-concern warning (doubt about the company's ability to continue), and the filing states there were no disagreements with the auditor.
12 July 2004asset acquisition disposition● Neutral
This is an amended copy of the April 30, 2004 report on the Hong Xiang share exchange, now filed under the new name China North East Petroleum Holdings Limited. The text shown repeats the same exchange terms, management and business description; no new figures or changes are visible in the portion provided (the filing is truncated).
