BEIJING, Nov. 1, 2019 /PRNewswire/ -- Tarena
International, Inc. (Nasdaq: TEDU) ("Tarena" or the
"Company"), today announced the results of the previously
announced independent investigation conducted by
the independent audit committee of its board of directors (the
"Audit Committee") regarding certain accounting and other
matters, and provided an update on its financial statements review
and Nasdaq listing.
The Independent Investigation
As previously announced by the Company in its May 17, 2019 press release, the Audit
Committee commenced an independent investigation in April 2019 regarding, among other things, certain
issues identified during the course of the audit of the Company's
financial statements for the year ended December 31, 2018, including issues related to
the Company's revenue recognition (the "Investigation"). The
Audit Committee retained Kirkland & Ellis International LLP
("K&E") as independent legal counsel to advise the Audit
Committee in conducting the Investigation. K&E was
assisted by Deloitte & Touche Financial Advisory Services
Limited as forensic accounting expert (together, the "Independent
Advisors").
The Investigation is now substantially complete. The
Investigation entailed review of documents and data from multiple
Company employees, including review of approximately 260,000 emails
and other electronic files and communications, 58 interviews of
Company employees and relevant third parties, and analysis and
testing of the Company's financial data, books and records. The
Company provided substantial cooperation with the
Investigation.
Summary of Findings
The following is a summary of the principal findings of the
Investigation as of the date hereof. Unless otherwise
indicated, the Investigation findings generally cover the fiscal
years 2014 through 2018.
- Revenue Inaccuracies: The Audit Committee's independent
review found that the Company's reported revenues for fiscal years
2014, 2015, 2016 and 2017 and previously announced unaudited
revenues for each quarter of and full year 2018 were not
accurate. Factors contributing to the misstatement of revenue
included intentional revenue inflation, inaccurate student account,
status and loan data recorded in the Company's customer
relationship management (CRM) system, premature recognition of
revenue from certain students, and inaccurate accounting treatment
of tuition refunds.
- Expense Inaccuracies and Irregularities: The Audit
Committee discovered instances of improper charges against accounts
receivable and/or bad debts through payment to third parties, as
well as guarantee payments to certain financial institutions or
peer-to-peer financial tools for certain overdue student loans. The
Audit Committee also identified certain expenses that were not
supported by appropriate documentation and indications that funds
or other benefits were provided to third parties contrary to
Company policy.
- Conflicts of Interest and Related Party
Transactions: The Audit Committee found evidence that the
Company engaged in business transactions with organizations owned,
invested in or controlled by Company employees or their family
members which in some instances were not properly disclosed by the
Company.
- Interference With External Audit Process: It was found
that certain employees interfered with the external audit of the
Company's financial statements for certain periods.
The Company is assessing the overall financial impact of these
findings on its financial statements. The management team of the
Company anticipates that the total amount of revenue misstatement
between fiscal years 2014 through 2018 to be less than RMB900 million, representing approximately 11.5%
of the total revenue previously reported by the Company for such
period. This figure represents the estimate of the management team
based on currently available information. The actual amount of
revenue misstatement may be higher.
Remedial Measures in Response to Investigation
The Audit Committee has recommended that the Company take a
number of remedial measures in response to the Investigation,
including enhancement of the Company's internal policies and
controls, enhancement of the Company's financial reporting
function, provision of additional training to Company employees
regarding the issues implicated in the Investigation findings,
adjustment of the Company's internal structure and reporting lines
where appropriate, disciplinary measures for employees engaged in
misconduct, and addition of new resources and personnel where
needed. The Company has accepted these recommendations and is in
the process of implementing them.
To date, the Company has already taken certain remedial measures
to address the issues identified in the Investigation, including
(i) adjusting Company internal audit reporting structures to
provide enhanced oversight over the Company's financial reporting
function, (ii) suspending payments to third party vendors
implicated in the Investigation findings, (iii) providing training
to Company employees on issues implicated in the Investigation
findings, and (iv) placing certain employees found to have engaged
in misconduct on administrative leave pending further deliberation
by the board of directors regarding appropriate employee discipline
and remedial measures.
Financial Statement Review
In light of the Audit Committee's findings, management
of the Company is evaluating the necessity, nature and scope of any
restatements to any of its previously filed financial
statements. Due to the ongoing nature of this
evaluation, the Company cannot at this time provide an
estimate of the timing, extent, or effect of any such restatements
and the timing of completing the financial statements for fiscal
year 2018.
In addition, management is considering the Company's prior
conclusion of the adequacy of its internal control over financial
reporting and disclosure controls and procedures, and related
material weaknesses in such controls. The Company intends to
amend certain prior disclosures pertaining to its evaluation
of such controls and procedures, and material weaknesses, as
appropriate in connection with any amended filings, and will
consider whether any further remedial measures may be
advisable.
Nasdaq Listing
On October 29, 2019, the Company
received a letter from the Staff of the Listing Qualifications
Department of the Nasdaq Stock Market LLC ("Nasdaq") notifying the
Company that since it remains delinquent in filing its Annual
Report on Form 20-F for the fiscal year ended December 31, 2018 (the "2018 Annual Report"), it
has not regained compliance with Nasdaq Listing Rule 5250(c)(1),
which requires timely filing of periodic reports with the
Securities and Exchange Commission. Previously, Nasdaq granted the
Company an extension until October 28, 2019 to file all delinquent
periodic reports. As described in the letter, as a result of the
continued delinquency, the Company's American depositary shares are
subject to delisting unless the Company timely requests a hearing
before a Nasdaq Hearings Panel ("Panel").
The Company intends to timely request a hearing before the Panel
to present its plan for regaining compliance and request continued
listing pending its return to compliance. The hearing request
will automatically stay the delisting for a period of 15 calendar
days from the date of the request, and the hearing will typically
occur approximately 30 to 45 days after the date of the hearing
request. The Company will provide information to the Panel,
which will then make a decision regarding whether to grant the
Company an extension to regain compliance.
Safe Harbor Statement
This press release contains forward-looking statements made
under the "safe harbor" provisions of Section 21E of the Securities
Exchange Act of 1934, as amended, and the U.S. Private Securities
Litigation Reform Act of 1995. These forward-looking statements can
be identified by terminology such as
"will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and
similar statements. Tarena may also make written or oral
forward-looking statements in its reports filed with or furnished
to the Commission, in its annual report to shareholders, in press
releases and other written materials and in oral statements made by
its officers, directors or employees to fourth parties. Any
statements that are not historical facts, including any statements
about Tarena's beliefs and expectations, are forward-looking
statements. Many factors, risks and uncertainties could cause
actual results to differ materially from those in the
forward-looking statements. Such factors and risks include,
but not limited to the following: uncertainty surrounding
management's ongoing evaluation of any potential restatements
to any of the Company's previously filed financial statements,
the types of errors and adjustments that may be required
in any such restatement, the extent of any material weaknesses or
significant deficiencies in the Company's internal and
disclosure controls, how promptly and thoroughly
the recommendations of the Audit Committee can
be implemented, potential legal or regulatory action
related to the matters under Investigation, and adverse decisions
by the SEC or Nasdaq. In addition, the Company
faces other risks and uncertainties that could affect its ability
to complete the restatement of its financial statements,
to file its periodic reports, and to regain compliance with
the Nasdaq listing requirements. Further information
regarding these and other risks, uncertainties or factors is
included in Tarena's filings with the Commission. All
information provided in this press release is current as of the
date of the press release, and Tarena does not undertake any
obligation to update such information, except as required under
applicable law.
About Tarena International, Inc.
Tarena International, Inc. (NASDAQ: TEDU) is a leading provider
of professional education services in China. Through its innovative education
platform combining live distance instruction, classroom-based
tutoring and online learning modules, Tarena offers professional
education courses in IT and non-IT subjects. Tarena also
offers kid education programs. Its professional education
courses provide students with practical skills to prepare them for
jobs in industries with significant growth potential and strong
hiring demand.
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SOURCE Tarena International, Inc.