SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
Date of
report (Date of earliest event reported): August 6, 2010
SHENGKAI INNOVATIONS,
INC.
(Exact
Name of Registrant as Specified in Charter)
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Florida
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001-34587
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11-3737500
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(State
or Other Jurisdiction
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(Commission
File Number)
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(IRS
Employer
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of
Incorporation)
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Identification
No.)
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No.
27, Wang Gang Road,
Jin
Nan (Shuang Gang) Economic and
Technology
Development Area
Tianjin,
People’s Republic of China 300350
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(Address
of Principal Executive Offices)
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Registrant's
telephone number, including area code: (86) 22-2858-8899
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General
Instruction A.2. below):
Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item
4.02 Non-Reliance on Previously Issued Financial Statements or Related Audit
Report or Completed Interim Review.
On August
6, 2010, the Audit Committee of Shengkai Innovations, Inc. (the “Company”),
concluded that the Company’s financial statements for the three, six, and nine
months ended September 30, 2009, December 31, 2009, and March 31, 2010, which
are included in its Forms 10-Q for the quarters ended September 30, 2009,
December 31, 2009, and March 31, 2010, respectively, did not properly account
for the following items as of July 1, 2009 in accordance with United States
generally accepted accounting principles, and, as a result, cannot be relied
upon:
1. Classification
of certain warrants in accordance with ASC 815-40-15-7I as adopted on July 1,
2009
During
the course of internal evaluation, our management and accounting staff
re-evaluated the Company’s accounting treatment as of July 1, 2009 for the
warrants issued in the private placements in June and July, 2008, the
denominated currency of the strike price of which is different from the entity’s
functional currency. According to ASC 815-40-15-7I, if the
denominated currency of an equity-linked financial instrument’s strike price is
different from the entity’s functional currency, an equity-linked financial
instrument is not indexed to the entity’s own stock. ASC 815-40-55-36
illustrates the implementation of the above standard. The Company’s primary
operations are conducted in the PRC through its subsidiary, Tianjin Shengkai
Industrial Technology Development Company Limited, and the operating incomes and
expenses are transacted in Renminbi (RMB), which is different from the strike
price of the warrants, which are denominated in US dollars. Therefore, our
accounting staff determined that warrant shall not be considered
indexed to the entity’s own stock and hence adjustments in classification of the
warrants are required.
We have
performed a complete assessment of our warrants and concluded that the warrants
issued in the June and July 2008 private placements are within the scope of ASC
815 due to the difference between the denominated currency of the warrants’
strike price and the Company's functional currency. Accordingly, ASC
815 should have been adopted as of July 1, 2009 by classifying the warrants as a
liability measured at fair value with changes in fair value recognized in
earnings each reporting and recording a cumulative-effect adjustment to the
opening balance of retained earnings. We have calculated the fair
value of the warrants at the date of adoption as well as at September 30, 2009,
December 31, 2009 and March 31, 2010. Based on our calculations and
assessment of materiality, we have concluded that our previously filed Forms
10-Q for the quarters ended September 30, 2009, December 31, 2009 and March 31,
2010 require restatement and the Company will file amended reports on Forms
10-Q/A.
2. Classification
of the embedded conversion option of the Series A preferred stock in accordance
with ASC 815-40-55-33 as adopted on July 1, 2009
During
the course of internal evaluation, our management and accounting staff
re-evaluated the Company’s accounting treatment as of July 1, 2009 for the
Series A convertible preferred stock issued in the June and July 2008 private
placements (the “Series A preferred stock”). The Certificate of
Designations of the Series A preferred stock include a down-round provision
pursuant to which, if the Company issues any additional shares of common stock
at a per share price of less than $2.5357, the conversion ratio will be adjusted
downward to reflect such lesser issued price for the first two years from the
initial issuance date of the Series A preferred stock.
We have
performed a complete assessment of our preferred stock and concluded that the
Series A preferred stock issued in the June and July 2008 private placements is
within the scope of ASC 815-40-55-33 due to the down-round provisions included
in the terms of the agreements. Pursuant to ASC 815-40-55-33, the
down-round provision precludes the embedded conversion option of the Series A
preferred stock from being considered indexed to the entity’s own stock.
Accordingly, ASC 815 should have been adopted as of July 1, 2009 by bifurcating
the embedded conversion option of the Series A preferred stock which should be
recorded as a liability measured at fair value with changes in fair value
recognized in earnings for each reporting period and recording a
cumulative-effect adjustment to the opening balance of retained
earnings. We have calculated the fair value of the embedded
conversion option of the Series A preferred stock at the date of adoption as
well as at September 30, 2009, December 31, 2009 and March 31,
2010. Based on our calculations and assessment of the materiality, we
have concluded that our previously filed Forms 10-Q for the quarters ended
September 30, 2009, December 31, 2009 and March 31, 2010 require restatement and
the Company will file amended reports on Forms 10-Q/A.
Management
of the Company will restate the Company’s financial statements for the quarterly
periods ended September 30, 2009, December 31, 2009, and March 31, 2010 to
restate all of such financial statements to correct the errors noted above and
file amendments to the Company’s periodic reports filed with the Securities and
Exchange Commission.
The
Company’s Audit Committee as well as its management has discussed the matters in
this Report with its independent auditors.
Item
9.01 Financial Statements
and Exhibits.
(d) Exhibits.
None.
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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Date:
August 9, 2010
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SHENGKAI
INNOVATIONS, INC.
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By:
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/s/
David Ming He
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David
Ming He
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Chief
Financial Officer
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