Attached files
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Mark One)
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ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended June 30, 2010
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TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period for , 2010
Commission File No. 001-34793
LONGWEI PETROLEUM
INVESTMENT HOLDING LIMITED
(Name of small business issuer in its charter)
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Colorado
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84-1536518
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(State or other jurisdiction of
incorporation or organization)
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(IRS Employer Identification No.)
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No. 30 Guanghau Street, Xiaojingyu Xiang, Wan Bailin District, Taiyuan City,
Shanxi Province, China
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030024
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(Address of principal executive offices)
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(Zip Code)
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(727) 641-1357
(Registrant’s telephone number, including area code)
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Securities registered under Section 12(b) of the Exchange Act:
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Title of each class registered:
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Name of each exchange on which registered:
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Common Stock, no par value
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NYSE Amex LLC
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Securities registered under Section 12(g) of the Exchange Act: Common Stock, no par value per share.
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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
(Do not check if a smaller reporting company)
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Smaller reporting company
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ
Revenues for year ended June 30, 2010: $343,249,462
The aggregate market value of the registrant’s voting common stock held by non-affiliates as of June 30, 2010 based upon the closing price reported for such date on the OTC Bulletin Board was US $46,067,745.
As of January 14, 2011 the registrant had 100,197,133 shares of its common stock issued and outstanding.
Documents Incorporated by Reference: None.
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EXPLANATORY NOTE
This amendment on Form 10-K/A (the “Amendment”) amends the Annual Report on Form 10-K for Longwei Petroleum Investment Holding Limited, as initially filed with the Securities and Exchange Commission (“SEC”) on September 28, 2010 (the “Original Report”). The purpose of this Amendment is to (i) amend the “Director Independence” section of Item 10 to clarify that three of our directors are independent in accordance with NYSE Amex listing standards, (ii) amend Item 11 to include clarification in our Summary Compensation Table that stock awards presented represent the aggregate grant date fair value computed in accordance with FASB ASC Topic 718, (iii) amend a statement in Item 1A "Risk Factors" to clarify that our PRC resident shareholders have completed their respective SAFE registrations pursuant to the SAFE notice, and (iv) amend Item 13 to clarify that other than as may be disclosed herein, there are no other related transactions to disclose. Other than as amended by this Amendment, the Original Report remains in full effect.
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ITEM 1A. RISK FACTORS
RISK FACTORS
You should carefully consider the risks described below together with all of the other information included in this report before making an investment decision with regard to the Company’s securities. The statements contained in or incorporated into this annual report that are not historic facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward looking statements. If any of the following risks actually occurs, the Company’s business, financial condition or results of operations could be harmed. In that case, the trading price of the Company’s common stock could decline, and you may lose all or part of your investment.
Risks Related to Business Operations
We may be unable to manage our growth.
We are planning for rapid growth and intend to aggressively expand operations. The growth in the size and geographic range of our business will place significant demands on management and our operating systems. Our ability to manage growth effectively will depend on our ability to attract additional management personnel; to develop and improve operating systems; to hire, train, and manage an employee base; and to maintain adequate service capacity. Additionally, the proposed expansion of operations may require hiring additional management personnel to oversee procurement duties. We will also be required to rapidly expand operating systems and processes in order to support the projected increase in product demand. There can be no assurance that we will be able to effectively manage growth and build the infrastructure necessary to achieve growth as management has forecasted.
The strategy of acquiring complementary businesses and assets may fail which could reduce our ability to compete for customers.
As part of our business strategy, we have pursued, and intend to continue to pursue, selective strategic acquisitions of businesses, assets and technologies that complement our existing business. We intend to make other acquisitions in the future if suitable opportunities arise. Acquisitions involve uncertainties and risks, including:
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potential ongoing financial obligations and unforeseen or hidden liabilities;
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failure to achieve the intended objectives, benefits or revenue-enhancing opportunities;
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costs and difficulties of integrating acquired businesses and managing a larger business; and
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diversion of resources and management attention.
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The failure to address these risks successfully may have a material adverse effect on our financial condition and results of operations. Any such acquisition may require a significant amount of capital investment, which would decrease the amount of cash available for working capital or capital expenditures. In addition, if we use our equity securities to pay for acquisitions, we may dilute the value of your shares. If we borrow funds to finance acquisitions, such debt instruments may contain restrictive covenants that could, among other things, restrict us from distributing dividends. Such acquisitions may also generate significant amortization expense related to intangible assets.
We depend on our key executives, and our business and growth may be severely disrupted if we lose their services.
Our future success depends substantially on the continued services of our key executives. In particular, we are highly dependent upon Mr. Cai Yongjun, our chairman and chief executive officer, who has established relationships within the industries we operate. If we lose the services of one or more of our current management, we may not be able to replace them readily, if at all, with suitable or qualified candidates, and may incur additional expenses to recruit and retain new officers with industry experience similar to our current officers, which could severely disrupt our business and growth. In addition, if any of our executives joins a competitor or forms a competing company, we may lose some of our suppliers or customers. Furthermore, as we expect to continue to expand our operations and develop new products, we will need to continue attracting and retaining experienced management and key research and development personnel.
Competition for qualified candidates could cause us to offer higher compensation and other benefits in order to attract and retain them, which could have a material adverse effect on our financial condition and results of operations. We may also be unable to attract or retain the personnel necessary to achieve our business objectives, and any failure in this regard could severely disrupt our business and growth.
The current economic and credit environment could have an adverse effect on demand for certain of our products and services, which would in turn have a negative impact on our results of operations, our cash flows, our financial condition, our ability to borrow and our stock price.
Since late 2008, global market and economic conditions have been disrupted and volatile. Concerns over increased energy costs, geopolitical issues, the availability and cost of credit, the U.S. mortgage market and a declining residential real estate market in the U.S. have contributed to this increased volatility and diminished expectations for the economy and the markets going forward. These factors, combined with volatile oil prices, declining business and consumer confidence and increased unemployment, have precipitated a global recession.
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It is difficult to predict how long the current economic conditions will persist, whether they will deteriorate further, and which of our products, if not all of them, will be adversely affected. As a result, these conditions could adversely affect our financial condition and results of operations.
Our business will suffer if we cannot obtain, maintain or renew necessary permits or licenses.
All PRC enterprises engaging in the sale of finished oil products are required to obtain from various PRC governmental authorities certain permits and licenses, including, without limitation, the Certificate for Wholesale Distribution of Finished Oil and the Dangerous Chemical Distribution License. We have obtained permits and licenses required for the distribution of finished oil. Failure to obtain all necessary approvals/permits may subject us to various penalties, such as fines or being required to vacate from the facilities where we currently operate our business.
These permits and licenses are subject to periodic renewal and/or reassessment by the relevant PRC government authorities and the standards of compliance required in relation thereto may from time to time be subject to change. We intend to apply for renewal and/or reassessment of such permits and licenses when required by applicable laws and regulations, however, we cannot assure you that we can obtain, maintain or renew the permits and licenses or accomplish the reassessment of such permits and licenses in a timely manner. Any changes in compliance standards, or any new laws or regulations that may prohibit or render it more restrictive for us to conduct our business or increase our compliance costs may adversely affect our operations or profitability. Any failure by us to obtain, maintain or renew the licenses permits and approvals may have a material adverse effect on the operation of our business. In addition, we may not be able to carry on business without such permits and licenses being renewed and/or reassessed.
Power shortages, natural disasters, terrorist acts or other events could disrupt our operations and have a material adverse effect on our business, financial position or results of operations.
Our business could be materially and adversely affected by power shortages, natural disasters, terrorist attacks or other disruptive events in the PRC. For example, in early 2008, parts of the PRC were affected by severe snow storms that significantly impacted public transportation systems and the power supply in those areas. In May 2008, Sichuan Province in the PRC suffered a strong earthquake measuring approximately 8.0 on the Richter scale that caused widespread damage and casualties. The May 2008 Sichuan earthquake had a material adverse effect on the general economic conditions in the areas affected by the earthquake and severely affected the transportation systems in those areas. Any future natural disasters, terrorist attacks or other disruptive events in the PRC could cause a reduction in usage of or other severe disruptions to, public transportation systems and could have a material adverse effect on our business, financial position or results of operations.
If we require additional financing, we may not be able to find such financing on satisfactory terms or at all.
Our capital requirements may be accelerated as a result of many factors, including timing of development activities, underestimates of budget items, unanticipated expenses or capital expenditures, future product opportunities with collaborators and future business combinations. Consequently, we may need to seek additional debt or equity financing, which may not be available on favorable terms, if at all, and which may be dilutive to our stockholders.
We may seek to raise additional capital through public or private equity offerings or debt financings. To the extent we raise additional capital by issuing equity securities, our stockholders may experience dilution. To the extent that we raise additional capital by issuing debt securities, we may incur substantial interest obligations, may be required to pledge assets as security for the debt and may be constrained by restrictive financial and/or operational covenants. Debt financing would also be superior to our stockholders’ interest in bankruptcy or liquidation.
Our operating results may fluctuate, which makes our results difficult to predict and could cause our results to fall short of expectations.
We currently consume a large amount of refined diesel and gasoline. While we try to adjust the sales price of the products to track international crude oil price fluctuations, our ability to pass on the increased cost resulting in diesel and gasoline price increases to our customers is dependent on international and domestic market conditions as well as the PRC government’s price control over refined petroleum products. For example, the international crude oil price reached its historically high level in July 2008, but we were not able to effectively pass the increased cost to our customers. Although the current price-setting mechanism for refined petroleum products in China allows the PRC government to adjust price in the PRC market when the average international crude oil price fluctuates beyond certain levels within a certain time period, the PRC government still retains discretion as to whether or when to adjust the refined petroleum products price. The PRC government will exercise certain price controls over refined petroleum products once international crude oil price experiences sustained growth or becomes significantly volatile. As a result, our results of operations and financial condition may be materially and adversely affected by the fluctuation of crude oil and refined petroleum product prices. Our operating results may fluctuate as a result of a number of factors, many of which are outside of our control, such as the price of crude oil. For these reasons, comparing operating results on a period-to-period basis may not be meaningful, and you should not rely on our past results as an indication of future performance. Quarterly and annual revenues, costs and expenses as a percentage of our revenues may be significantly different from our historical or projected rates. Operating results in future quarters may fall below expectations. Any of these events could cause the price of our common stock to fall.
We rely heavily on outside suppliers for products derived from crude oil and other raw materials, and may even experience disruption of our ability to obtain products refined from crude oil and other raw materials.
We purchase a significant portion of our products from outside suppliers located in different provinces within the PRC. We are also aware that a large portion of our products originated in other countries. We are subject to the political, geographical and economic risks associated with these other provinces and perhaps even the countries where the products have originated. If one or more of our material supply contracts were terminated or disrupted due to any natural disasters or political events, it is possible that we would not be able to find sufficient alternative sources of supply in a timely manner or on commercially reasonable terms. As a result, our business and financial condition would be materially and adversely affected.
Our business faces operation risks and natural disasters that may cause significant property damages, personal injuries and interruption of operations, and we may not have sufficient insurance coverage for all potential financial losses incurred.
Transporting petroleum products involves a number of operating hazards. Significant operating hazards and natural disasters may cause interruption to business operations, property or environmental damages as well as personal injuries, and each of these incidents could have a material adverse effect on our financial condition and results of operations.
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We do not yet maintain insurance coverage on our property, plant, equipment and inventory. However, preventative measures such as insurance may not be effective in any event and if we should acquire insurance coverage it may not be sufficient to cover all the financial losses caused by operation risks and potential natural disasters, among other risks. Losses incurred or payments required to be made by us due to operating hazards or natural disasters, which are not fully insured, may have a material adverse effect on our financial condition and results of operations.
We are dependent on third parties to transport our products, so their failure to transport the products could adversely affect our earnings, sales and geographic market.
We use third parties for the vast majority of our shipping and transportation needs. If these parties fail to deliver products in a timely fashion, including lack of available trucks or drivers, labor stoppages or if there is an increase in transportation costs, including increased fuel costs, it would have a material adverse effect on our earnings and could reduce our sales and geographic market.
We have limited business insurance coverage and potential liabilities could exceed our ability to pay them.
The insurance industry in the PRC is still at an early stage of development. Insurance companies in the PRC offer limited business insurance products. We do not have any business liability or disruption insurance coverage for our operations in the PRC. Any business disruption, litigation or natural disaster may result in substantial costs and the diversion of our resources.
Our common stock is classified as a “penny stock” as that term is generally defined in the Securities Exchange Act of 1934 to mean equity securities with a price of less than $5.00. Our common stock will be subject to rules that impose sales practice and disclosure requirements on broker-dealers who engage in certain transactions involving a penny stock.
We are subject to the penny stock rules adopted by the Securities and Exchange Commission that require brokers to provide extensive disclosure to its customers prior to executing trades in penny stocks. These disclosure requirements may cause a reduction in the trading activity of our Common Stock, which in all likelihood would make it difficult for the Company’s stockholders to sell their securities.
Rule 3a51-1 of the Securities Exchange Act of 1934 establishes the definition of a "penny stock," for purposes relevant to us, as any equity security that has a minimum bid price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to a limited number of exceptions which are not available to us. It is likely that our shares will be considered to be penny stocks for the immediately foreseeable future. This classification severely and adversely affects any market liquidity for our common stock.
For any transaction involving a penny stock, unless exempt, the penny stock rules require that a broker or dealer approve a person's account for transactions in penny stocks and the broker or dealer receive from the investor a written agreement to the transaction setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person's account for transactions in penny stocks, the broker or dealer must obtain financial information and investment experience and objectives of the person and make a reasonable determination that the transactions in penny stocks are suitable for that person and that that person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by the SEC relating to the penny stock market, which, in highlight form, sets forth:
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the basis on which the broker or dealer made the suitability determination, and
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that the broker or dealer received a signed, written agreement from the investor prior to the transaction.
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Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions.
Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.
Because of these regulations, broker-dealers may not wish to engage in the above-referenced necessary paperwork and disclosures and/or may encounter difficulties in their attempt to sell shares of our common stock, which may affect the ability of selling shareholders or other holders to sell their shares in any secondary market and have the effect of reducing the level of trading activity in any secondary market. These additional sales practice and disclosure requirements could impede the sale of our common stock. In addition, the liquidity for our common stock may decrease, with a corresponding decrease in the price of our common stock. Our common stock is subject to such penny stock rules for the foreseeable future and our shareholders will, in all likelihood, find it difficult to sell their common stock.
The market for penny stock has experienced numerous frauds and abuses which could adversely impact subscribers of our stock.
We believe that the market for penny stocks has suffered from patterns of fraud and abuse. Such patterns include:
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control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer;
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manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases;
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“boiler room" practices involving high pressure sales tactics and unrealistic price projections by inexperienced sales persons;
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excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and
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wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses.
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We believe that many of these abuses have occurred with respect to the promotion of low price stock companies that lacked experienced management, adequate financial resources, an adequate business plan and/or marketable and successful business or product.
We are controlled by the officers and directors of the Company.
Our officers, directors and principal stockholders and their affiliates own or control a majority of our outstanding common stock. As a result, these stockholders, if acting together, would be able to effectively control matters requiring approval by our stockholders, including the election of our Board of Directors.
Our certificate of incorporation limits the liability of members of the Board of Directors.
Our certificate of incorporation limits the personal liability of the director of the Company for monetary damages for breach of fiduciary duty as a director, subject to certain exceptions, to the fullest extent allowed. We are organized under Colorado law. Accordingly, except in limited circumstances, our directors will not be liable to our stockholders for breach of their fiduciary duties.
Provisions of our certificate of incorporation, bylaws and Colorado corporate law have anti-takeover effects.
Some provisions in our certificate of incorporation and bylaws could delay or prevent a change in control of us, even if that change might be beneficial to our stockholders. Our certificate of incorporation and bylaws contain provisions that might make acquiring control of us difficult, including provisions limiting rights to call special meetings of stockholders and regulating the ability of our stockholders to nominate directors for election at annual meetings of our stockholders. In addition, our board of directors has the authority, without further approval of our stockholders, to issue common stock having such rights, preferences and privileges as the board of directors may determine. Any such issuance of common stock could, under some circumstances, have the effect of delaying or preventing a change in control of us and might adversely affect the rights of holders of common stock.
In addition, we are subject to Colorado statutes regulating business combinations, takeovers and control share acquisitions, which might also hinder or delay a change in control of us. Anti-takeover provisions in our certificate of incorporation and bylaws, anti-takeover provisions that could be included in the common stock when issued and the Colorado statutes regulating business combinations, takeovers and control share acquisitions can depress the market price of our securities and can limit the stockholders’ ability to receive a premium on their shares by discouraging takeover and tender offer bids, even if such events could be viewed by our shareholders or others as beneficial transactions.
Our internal financial reporting procedures are still being developed. During the fiscal year ending June 30, 2011, the Company will need to allocate significant resources to meet applicable internal financial reporting standards .
We have adopted disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports that we submit under the Securities Exchange Act of 1934, as amended, are recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act are accumulated and communicated to management, including principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. We are taking steps to develop and adopt appropriate disclosure controls and procedures.
These efforts require significant time and resources. If we are unable to establish appropriate internal financial reporting controls and procedures, our reported financial information may be inaccurate and we will encounter difficulties in the audit or review of our consolidated financial statements by our independent auditors, which in turn may have material adverse effects on our ability to prepare consolidated financial statements in accordance with generally accepted accounting principles in the United States of America and to comply with SEC reporting obligations.
Failure to achieve and maintain effective internal controls in accordance with Section 404 of the Sarbanes Oxley Act of 2002 could prevent us from producing reliable financial reports or identifying fraud. In addition, current and potential stockholders could lose confidence in our financial reporting, which could have an adverse effect on our stock price.
We are subject to Section 404 of the Sarbanes-Oxley Act of 2002. Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud, and a lack of effective controls could preclude the Company from accomplishing these critical functions. We are required to document and test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, in connection with, Public Company Accounting Oversight Board (“PCAOB”) Auditing Standard No. 5 (“AS 5”) which requires annual management assessments of the effectiveness of our internal controls over financial reporting. Although we intend to augment our internal control procedures and expand our accounting staff, there is no guarantee that this effort will be adequate.
During the course of testing, we may identify deficiencies which we may not be able to remediate in time to meet the deadline imposed by the Sarbanes-Oxley Act for compliance with the requirements of Section 404 and AS5. In addition, if we fail to maintain the adequacy of our internal accounting controls, as such standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404. Failure to achieve and maintain effective internal controls could cause us to face regulatory action and also cause investors to lose confidence in our reported financial information, either of which could have an adverse effect on our stock price.
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Shareholders may have difficulty trading and obtaining quotations for our common stock.
Our common stock may not be actively traded, and the bid and ask prices for our common stock on the NYSE-Amex may fluctuate widely. As a result, shareholders may find it difficult to dispose of, or to obtain accurate quotations of the price of, our securities. This severely limits the liquidity of the common stock, and would likely reduce the market price of our common stock and hamper our ability to raise additional capital.
The market price of our common stock may, and is likely to continue to be, highly volatile and subject to wide fluctuations.
The market price of our common stock is likely to be highly volatile and could be subject to wide fluctuations in response to a number of factors that are beyond our control, including:
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dilution caused by the issuance of additional shares of common stock and other forms of equity securities in connection with future capital financings to fund business operations and growth, to attract and retain valuable personnel and in connection with future strategic partnerships with other companies;
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announcements of new acquisitions or other business initiatives by the Company’s competitors;
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our ability to take advantage of new acquisitions or other business initiatives;
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fluctuations in revenue from our petroleum products;
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changes in the market for petroleum products and/or in the capital markets generally;
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changes in the demand for petroleum products, including changes resulting from the introduction or expansion of new petroleum products;
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quarterly variations in our revenues and operating expenses;
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changes in the valuation of similarly situated companies, both in our industry and in other industries;
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changes in analysts’ estimates affecting us, our competitors and/or our industry;
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changes in the accounting methods used in or otherwise affecting our industry;
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additions and departures of key personnel;
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announcements of technological innovations or new products available to our industry;
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announcements by relevant governments pertaining to incentives for biodegradable product development programs;
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fluctuations in interest rates and the availability of capital in the capital markets; and
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significant sales of our common stock, including sales by the investors following registration of the shares of common stock issued in future offerings by us.
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These and other factors are largely beyond our control, and the impact of these risks, singularly or in the aggregate, may result in material adverse changes to the market price of our common stock and/or our results of operations and financial condition.
Our operating results may fluctuate significantly, and these fluctuations may cause our stock price to decline.
Operating results will likely vary in the future primarily as the result of fluctuations in our revenues and operating expenses, expenses that we incur, and other factors. If results of operations do not meet the expectations of current or potential investors, the price of our common stock may decline.
We are required to pay dividends under certain recent financing arrangements but otherwise we do not expect to pay dividends in the foreseeable future.
We do not intend to declare dividends payable to common stock shareholders for the foreseeable future. We anticipate that we will reinvest any future earnings in the development and growth of our business. Therefore, investors will not receive any funds unless they sell their common stock, and stockholders may be unable to sell their shares on favorable terms or at all. Investors cannot be assured of a positive return on investment or that they will not lose the entire amount of their investment in our common stock.
Risks Related to the Company’s Corporate Structure
PRC laws and regulations governing our business and the validity of certain contractual arrangements are uncertain. If we are found to be in violation, we could be subject to sanctions which could result in significant disruptions to our operations and/or our ability to generate revenues.
There are substantial uncertainties regarding the interpretation and application of PRC laws and regulations, including, but not limited to, the laws and regulations governing our business, or the enforcement and performance of our contractual arrangements with our vendors and customers. We are considered a foreign person or foreign enterprise under PRC law. These laws and regulations are relatively new and may be subject to change, and their official interpretation and enforcement may involve substantial uncertainty. The effectiveness of newly enacted laws, regulations or amendments may be delayed, resulting in detrimental reliance by foreign investors. New laws and regulations that affect existing and proposed future businesses may also be applied retroactively.
The PRC government has broad discretion in dealing with violations of laws and regulations, including levying fines, revoking business and other licenses and requiring actions necessary for compliance. In particular, licenses and permits issued or granted to us by relevant governmental bodies may be revoked at a later time by higher regulatory bodies. We cannot predict the effect of the interpretation of existing or new PRC laws or regulations on our business. We cannot assure our shareholders that our current ownership and operating structure would not be found in violation of any current or future PRC laws or regulations. As a result, we may be subject to sanctions, including fines, and could be required to restructure our operations or cease to provide certain services. Any of these or similar actions could significantly disrupt our business operations or restrict us from conducting a substantial portion of our business operations, which could materially and adversely affect our business, financial condition and results of operations.
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Risks Related to Doing Business in China
Governmental control of currency conversion may affect the value of your investment.
The PRC government imposes controls on the convertibility of Renminbi (“RMB”) into foreign currencies and, in certain cases, the remittance of currency out of China. We receive substantially all of our revenues in RMB. Under our current structure, our cash receipts are primarily derived from cash transfers from our PRC subsidiaries. Shortages in the availability of foreign currency may restrict the ability of our PRC subsidiaries and our affiliated entities to remit sufficient foreign currency to pay cash or other payments to us, or otherwise satisfy their foreign currency denominated obligations. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and expenditures from trade-related transactions, can be made in foreign currencies without prior approval from the PRC State Administration of Foreign Exchange by complying with certain procedural requirements. However, approval from appropriate government authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of bank loans denominated in foreign currencies. The PRC government may also at its discretion restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currency to satisfy our currency demands, we may not be able to pay dividends in foreign currencies to our shareholders, including holders of our common stock.
Recent PRC regulations relating to acquisitions of PRC companies by foreign entities may create regulatory uncertainties that could limit the ability of our PRC subsidiaries to distribute dividends or otherwise adversely affect the implementation of our acquisition strategy.
The PRC State Administration of Foreign Exchange (“SAFE”), issued a public notice in January 2005 concerning foreign exchange regulations on mergers and acquisitions in China. The public notice states that if an offshore company intends to acquire a PRC company, such acquisition will be subject to strict examination by the relevant foreign exchange authorities. The public notice also states that the approval of the relevant foreign exchange authorities is required for any sale or transfer by the PRC residents of a PRC company’s assets or equity interests to foreign entities, such as us, for equity interests or assets of the foreign entities.
In April 2005, SAFE issued another public notice clarifying the January notice. In accordance with the April notice, if an acquisition of a PRC company by an offshore company controlled by PRC residents had been confirmed by a Foreign Investment Enterprise Certificate prior to the issuance of the January notice, each of the PRC residents is required to submit a registration form to the local SAFE branch to register his or her respective ownership interests in the offshore company. The SAFE notices do not specify the timeframe during which such registration must be completed. The PRC resident must also amend such registration form if there is a material event affecting the offshore company, such as, among other things, a change to share capital, a transfer of stock, or if such company is involved in a merger and an acquisition or a spin-off transaction or uses its assets in China to guarantee offshore obligations. We have notified our shareholders who are PRC residents to register with the local SAFE branch as required under the SAFE notices. However, we cannot provide any assurances that all of our shareholders who are PRC residents will comply with our request to make or obtain any applicable registrations or approvals required by these SAFE notices. The failure or inability of our PRC resident shareholders to comply with the registration procedures set forth therein may subject us to fines and legal sanctions, restrict our cross-border investment activities, or limit our PRC subsidiaries’ ability to distribute dividends to us.
As it is uncertain how the SAFE notices will be interpreted or implemented, it is difficult to predict how these regulations will affect our business operations or future strategy. For example, we may be subject to more stringent review and approval process with respect to our foreign exchange activities, such as remittance of dividends and foreign-currency-denominated borrowings, which may adversely affect our results of operations and financial condition. In addition, if we decide to acquire a PRC company, we cannot assure our shareholders or the owners of such company, as the case may be, will be able to obtain the necessary approvals or complete the necessary filings and registrations required by the SAFE notices. This may restrict our ability to implement our acquisition strategy and could adversely affect our business and prospects.
Fluctuation in the value of the RMB may have a material adverse effect on your investment.
The value of the RMB against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the RMB to the U.S. dollar. Under the new policy, the RMB is permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. While the international reaction to the RMB revaluation has generally been positive, there remains significant international pressure on the PRC government to adopt an even more flexible currency policy, which could result in a further and more significant appreciation of the RMB against the U.S. dollar. Our revenues and costs are denominated in RMB. An appreciation of RMB against the U.S. dollar would also result in foreign currency translation losses for financial reporting purposes when we translate our RMB denominated financial assets into U.S. Dollars, as the U.S. Dollar is our reporting currency.
PRC regulations relating to the establishment of offshore special purpose companies by PRC residents, if applied to us, may subject the PRC resident shareholders of us or our parent company to personal liability and limit our ability to acquire. PRC companies or to inject capital into our PRC subsidiary, limit our PRC subsidiary's ability to distribute profits to us or otherwise materially adversely affect us.
In October 2005 SAFE issued a public notice, the Notice on Relevant Issues in the Foreign Exchange Control over Financing and Return Investment Through Special Purpose Companies by Residents Inside China, or the SAFE notice, which requires PRC residents, including both legal persons and natural persons, to register with the competent local SAFE branch before establishing or controlling any company outside of China, referred to as an "offshore special purpose company," for the purpose of overseas equity financing involving onshore assets or equity interests held by them. In addition any PRC resident that is the shareholder of an offshore special purpose company is required to amend its SAFE registration with the local SAFE branch with respect to that offshore special purpose company in connection with any increase or decrease of capital transfer of shares, merger, division, equity investment or creation of any security interest over any assets located in China. Moreover, if the offshore special purpose company was established and owned the onshore assets or equity interests before the implementation date of the SAFE notice, a retroactive SAFE registration is required to have been completed before March 31, 2006. If any PRC shareholder of any offshore special purpose company fails to make the required SAFE registration and amendment, the PRC subsidiaries of that offshore special purpose company may be prohibited from distributing their profits and the proceeds from any reduction in capital, share transfer or liquidation to the offshore special purpose company. Moreover, failure to comply with the SAFE registration and amendment requirements described above could result in liability under PRC laws for evasion of applicable foreign exchange restrictions. After the SAFE notice, an implementation rule on the SAFE notice was issued on May 29, 2007 which provides for implementation guidance and supplements the procedures as provided in the SAFE notice.
8
Due to lack of official interpretation of SAFE notice and implementation rules, some of the terms and provisions in the SAFE remain unclear and implementation by central SAFE and local SAFE branches of the SAFE notice has been inconsistent since its adoption. Based on the advice of our PRC counsel and after consultation with relevant SAFE officials, the PRC resident shareholders of our parent company, Longwei Petroleum Investment Holdings Limited, have completed their respective SAFE registrations pursuant to the SAFE notice. Moreover, because of uncertainty over how the SAFE notice and its implementation rules will be interpreted and implemented, and how or whether SAFE notice and implementation rules will apply it to us, we cannot predict how it will affect our business operations or future strategies. For example our present and prospective PRC subsidiaries’ ability to conduct foreign exchange activities, such as the remittance of dividends and foreign currency-denominated borrowings, may be subject to compliance with the SAFE notice by our or our parent company's PRC resident beneficial holders. In addition, such PRC residents may not always complete the necessary registration procedures required by the SAFE notice. We also have little control over either our present or prospective direct or indirect shareholders or the outcome of such registration procedures. A failure by our or our parent company's PRC resident beneficial holders or future PRC resident shareholders to comply with the SAFE notice, if SAFE requires it, could subject us to fines or legal sanctions, restrict our overseas or cross-border investment activities, limit our subsidiary's ability to make distributions or pay dividends or affect our ownership structure, which could adversely affect our business and prospects.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Appointment of New Officer
On June 23, 2010, the Company appointed Michael Toups as its Chief Financial Officer.
The following table sets forth the names, ages, and positions of the Company’s executive officers and directors as of June 30, 2010. Executive officers are elected annually by the Company’s Board of Directors. Each executive officer holds his office until he resigns, is removed by the Board, or his successor is elected and qualified. Directors are elected annually by the Company’s shareholders at the annual meeting. Each director holds his office until his successor is elected and qualified or his earlier resignation or removal.
|
Name
|
Age
|
Positions and Offices Held
|
||
|
Mr. Cai Yongjun
|
40
|
Chief Executive Officer and Director
|
||
|
Mr. Michael Toups
|
44
|
Chief Financial Officer
|
||
|
Mr. Xue Yongping
|
42
|
Secretary, Treasurer and Director
|
||
|
Mr. Douglas Cole
|
55
|
Director
|
||
|
Mr. Gerald DeCiccio
|
53
|
Director
|
||
|
Ms. Xiaoping Xue
|
41
|
Director
|
The following summarizes the occupation and business experience for the Company’s officers, directors, and key employees.
Cai Yongjun, Chief Executive Officer and Director
Mr. Cai has been the founder and the Chief Executive of Taiyuan Longwei, the Company's wholly-owned subsidiary, since October 1995. He has over 16 years experience in the trading, storage and handling of petroleum products. Mr. Cai acts as the general manager overseeing operations on a daily basis. From 1995 to 1999, Mr. Cai attended Shanxi University where he majored in Business Administration. Mr. Cai was selected as a director because of his experience in the oil and gas industry in general and the Company’s operations in particular. He has not served in any other directorships in the last five years. Mr. Cai has had no involvement in certain legal proceedings as defined by Item 401(f) of Regulation S-K.
Michael Toups, Chief Financial Officer
Mr. Toups was appointed Chief Financial Officer on June 23, 2010. Mr. Toups is an accounting and corporate finance executive with over 20 years of experience in senior management with specialties in business strategy, M&A and international trade. He has middle-market corporate finance experience across a variety of industries as both principal and advisor and has served in roles as the COO, CFO, and director of private and publicly traded companies. Mr. Toups expertise includes PCAOB audits, SEC reporting and Sarbanes-Oxley compliance. He is also well-versed in Chinese business practices and has directed strategic business planning for Asia-based companies for over 12 years. Most recently Mr. Toups served as Director of Asia Investment Banking, Midtown Partners & Co. from December 2007 to July 2010 and as the CFO and Director of Nork Lighting, a China-based manufacturer and the largest retailer of high-end residential lighting products in China from December 2007 to July 2010. From January 2001 to December 2007, he served as president and owner of Peak Crown, a personal services company for the import of products from Asia and business consulting services. Mr. Toups holds an MBA in Finance from the University of Notre Dame and a BBA in Finance from Texas Christian University.
9
Xue Yongping, Director, Secretary and Treasurer
Ms. Xue has been director, secretary and treasurer since November 1998 of Taiyuan Longwei, the Company's wholly-owned PRC subsidiary. From August 1994 until November 1998, she was the deputy manager for Taiyuan Hua Xin Trading Company, Ltd., where she served as the deputy general manager. Taiyuan Hua Xin Trading Company is a wholesale petroleum company engaged in the selling of diesel and gasoline to other wholesale users. From September 1991 to July 1994, Ms. Xue attended Shanxi Law School where she earned her law degree. Ms. Xue was selected as a director because of her experience in the oil and gas industry in general and the Company’s operations in particular, including her expertise in PRC law and contracts. She has not served in any other directorships in the last five years.
Douglas Cole, Director
Mr. Cole was appointed as a director of the Company on March 22, 2010. Mr. Cole joined the Board as an independent director and has also been appointed to serve on the Company’s Compensation, Nominating and Audit Committees. Prior to his appointment, and since September 2006, Mr. Cole has worked with Objective Equity LLC a boutique Investment Bank based in New York. Mr. Cole focuses most of his time on initial financing, corporate structure and M&A. From February 2003 to February 2006 Mr. Cole served as the Executive Vice Chairman, Chief Executive Officer and President of TWL Corporation (TWLP.OB) now based in Carrollton, Texas. TWL was a leading provider of integrated learning solutions for compliance, safety, emergency preparedness, continuing education and skill development in the workplace. During the initial phase Mr. Cole acquired similar companies in Australia, Norway, South Africa and the US. He acquired Primedia Workplace Learning from KKR in 2005. Since 1986, TWL Knowledge Group (formally Primedia) has met the training and education needs of more than eight million professionals in the industrial, healthcare, fire and emergency, government, law enforcement and private security markets. The company produces and delivers education and workplace skills training content to organizations via global satellite television, the Internet and traditional media such as DVD, CD ‐ ROM and PC ‐ based, quasi virtual reality simulation platform. Mr. Cole was selected as a director because of his experience in the US financial markets in general, including his expertise in emerging growth companies. He has not served in any other directorships in the last five years.
Gerald DeCiccio, Director
Mr. DeCiccio was appointed as a director of the Company on March 22, 2010. Mr. DeCicco joined the Board as an independent director and has also been appointed to serve on the Company’s Compensation, Nominating and Audit Committees. Mr. DeCiccio served as a director of Worldwide Energy & Manufacturing USA, Inc. from June1, 2009 until his resignation on February 18, 2010. On February 18, 2010, Mr. DeCiccio was appointed as Chief Financial Officer of Worldwide Energy & Manufacturing USA, Inc. Prior to that he was the Chief Financial Officer and a board member of GTC Telecom Corp. and its subsidiary, Perfexa Solutions, Inc. and Chief Financial Officer for National Telephone & Communications, Inc. In these roles, he managed the finance, accounting, SEC reporting, treasury, human resources, investor relations, and legal departments. Mr. DeCiccio also held senior financial roles at Newport Corporation and Parker Hannifin Corporation and was a Supervising Senior Accountant for Ernst and Young. He has also been a member of the Board of Directors and Audit Committee for Interplay Entertainment, Inc. and GT Data Corp. Mr. DeCiccio was selected as a director because of his experience in the US financial markets in general, including his expertise in accounting, auditing standards and compliance. In the past five years Mr. DeCiccio has served as director with the following companies: GTC Telecom Corp. and its subsidiary, Perfexa Solutions, Inc.; Worldwide Energy & Manufacturing USA, Inc., including audit committee; Interplay Entertainment, Inc.; and GT Data Corp.
Xiaoping Xue, Director
Ms. Xue was appointed as a director of the Company on March 22, 2010. Ms. Xue joined the Board as an independent director and has also been appointed to serve on the Company’s Compensation, Nominating and Audit Committees. Since 2003, Ms. Xue has worked as a self-employed economist and researcher in the field of International Trade. From August 2002 to January 2003, Ms. Xue worked at the Trade and Industry Bureau of Shanxi Province and From January 1996 to March 2002, she worked at the Beijing Military Region Business Administration Business Bureau. Ms. Xue received her degree from the Peking University School of Economics. Ms. Xue was selected as a director because of her experience in the oil and gas industry in general and the Company’s operations in particular, including her expertise in PRC economics and trade. She has not served in any other directorships in the last five years.
Family Relationships
None.
Conflicts of Interest
Certain potential conflicts of interest are inherent in the relationships between the Company’s officers and directors and the Company.
From time to time, one or more of the Company’s affiliates may form or hold an ownership interest in and/or manage other businesses both related and unrelated to the type of business that the Company own and operate. These persons expect to continue to form, hold an ownership interest in and/or manage additional other businesses which may compete with the Company’s business with respect to operations, including financing and marketing, management time and services and potential customers. These activities may give rise to conflicts between or among the interests of us and other businesses with which the Company’s affiliates are associated. The Company’s affiliates are in no way prohibited from undertaking such activities, and neither the Company nor the Company’s shareholders will have any right to require participation in such other activities.
10
Further, because The Company intend to transact business with some of the Company’s officers, directors and affiliates, as well as with firms in which some of the Company’s officers, directors or affiliates have a material interest, potential conflicts may arise between the respective interests of us and these related persons or entities. The Company believes that such transactions will be effected on terms at least as favorable to us as those available from unrelated third parties.
With respect to transactions involving real or apparent conflicts of interest, The Company have adopted policies and procedures which require that: (i) the fact of the relationship or interest giving rise to the potential conflict be disclosed or known to the directors who authorize or approve the transaction prior to such authorization or approval, (ii) the transaction be approved by a majority of the Company’s disinterested outside directors, and (iii) the transaction be fair and reasonable to us at the time it is authorized or approved by the Company’s directors.
The Company’s policies and procedures regarding transactions involving potential conflicts of interest are not in writing. The Company understands that it will be difficult to enforce the Company’s policies and procedures and will rely and trust the Company’s officers and directors to follow the Company’s policies and procedures. The Company will implement the Company’s policies and procedures by requiring the officer or director who is not in compliance with the Company’s policies and procedures to remove himself and the other officers and directors will decide how to implement the policies and procedures, accordingly.
Involvement in Certain Legal Proceedings
To the Company’s knowledge, during the past ten (10) years, none of the Company’s directors, executive officers, promoters, control persons, or nominees has been:
|
·
|
the subject of any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
|
|
·
|
convicted in a criminal proceeding or is subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
|
|
·
|
subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or
|
|
·
|
found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law
|
Director Independence
Our Board of Directors has determined that currently Douglas Cole, Gerald DeCiccio and Xue Xiaoping qualify as “independent” as the term is used in Item 407 of Regulation S-K as promulgated by the SEC and in the listing standards of The Nasdaq Stock Market, Inc. – Marketplace Rule 4200 and of Section 121 and Part 8 of the NYSE Amex LLC listing standards.
Board Leadership Structure and Role in Risk Oversight
Although we have not adopted a formal policy on whether the Chairman and Chief Executive Officer positions should be separate or combined, we have traditionally determined that it is in the best interests of the Company and its shareholders to partially combine these roles. Due to the small size of the Company, we believe it is currently most effective to have the Chairman and Chief Executive Officer positions partially combined.
Our Audit Committee is primarily responsible for overseeing our risk management processes on behalf of our Board of Directors. The Audit Committee receives and reviews periodic reports from management, auditors, legal counsel, and others, as considered appropriate regarding our company’s assessment of risks. In addition, the Audit Committee reports regularly to the full Board of Directors, which also considers our risk profile. The Audit Committee and the full Board of Directors focus on the most significant risks facing our Company and our Company’s general risk management strategy, and also ensure that risks undertaken by our Company are consistent with the Board’s appetite for risk. While the Board oversees our company’s risk management, management is responsible for day-to-day risk management processes. We believe this division of responsibilities is the most effective approach for addressing the risks facing our company and that our Board leadership structure supports this approach.
11
Meetings and Committees of the Board of Directors
Our board of directors held no formal meetings during the most recently completed fiscal year. All proceedings of the board of directors were conducted by resolutions consented to in writing by all the directors and filed with the minutes of the proceedings of the directors. Such resolutions consented to in writing by the directors entitled to vote on that resolution at a meeting of the directors are, according to the corporate laws of the State of Colorado and our bylaws, as valid and effective as if they had been passed at a meeting of the directors duly called and held.
Code of Ethics
On March 22, 2010, we adopted a Code of Ethics for our principal executive officers and senior management. The Code is designed to deter wrongdoing and promote honest and ethical conduct; full and fair disclosure in reports and documents submitted to the SEC; compliance with applicable governmental laws, rules and regulations; and the prompt internal reporting of violations of the code to appropriate persons by our senior management.
Audit Committee
We established an audit committee effective March 22, 2010 along with a financial expert on our audit committee. These new members are independent. Our audit committee consists of Douglas Cole, Gerald DeCiccio and Xue Xiaoping. Gerald DeCiccio qualifies as "audit committee financial expert," as such term is defined in Item 407(d)(5) of Regulation S-K.
The Audit Committee assists our board in monitoring:
|
·
|
our accounting, auditing, and financial reporting processes;
|
|
·
|
the integrity of our financial statements;
|
|
·
|
internal controls and procedures designed to promote our compliance with accounting standards and applicable laws and regulations;
|
|
·
|
and, the appointment and evaluation of the qualifications and independence of our independent auditors.
|
Gerald DeCiccio, Douglas Cole, and Xue Xiaoping, all of whom are independent directors under SEC rules and the rules of NYSE Amex, are currently serving as members of the Audit Committee. Mr. DeCiccio is our audit committee financial expert. Our board of directors has adopted a written audit committee charter.
Nominating Committee
We established a nominating committee effective March 22, 2010. These new members are independent. Our nominating committee consists of Douglas Cole, Gerald DeCiccio and Xue Xiaoping. The purpose of the nominating committee of the board of directors is to recommend to the Board changes in Board composition as well as make recommendations with respect to size and composition of the Board, recommend to the Board on the minimum qualifications and standards for director nominees and review qualifications of potential candidates for the Board. Our board of directors has adopted a written nominating committee charter.
Compensation Committee
We established a compensation committee effective March 22, 2010. These new members are independent. Our nominating committee consists of Douglas Cole, Gerald DeCiccio and Xue Xiaoping. The compensation committee of the board of directors is responsible for (i) determining the general compensation policies, (ii) establishing compensation plans, (iii) determining senior management compensation and (iv) administering our stock option plans. Our board of directors has adopted a written compensation committee charter.
Compliance With Section 16(A) Of The Exchange Act.
Section 16(a) of the Exchange Act requires the Company’s officers and directors, and persons who beneficially own more than 10% of a registered class of the Company’s equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission and are required to furnish copies to the Company. To the best of the Company’s knowledge, any reports required to be filed are timely filed for the fiscal years ended June 30, 2010 and 2009, respectively.
INDEMINIFICATION OF OFFICERS AND DIRECTORS
The Company’s directors and officers are indemnified as provided by the Colorado Statutes and the Company’s Bylaws. The Company has agreed to indemnify each of the Company’s directors and certain officers against certain liabilities, including liabilities under the Securities Act of 1933. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to the Company’s directors, officers and controlling persons pursuant to the provisions described above, or otherwise, The Company have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the Company’s payment of expenses incurred or paid by the Company’s director, officer or controlling person in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, The Company will, unless in the opinion of the Company’s counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
12
The Company has been advised that in the opinion of the Securities and Exchange Commission indemnification for liabilities arising under the Securities Act is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities is asserted by one of the Company’s directors, officers, or controlling persons in connection with the securities being registered, The Company will, unless in the opinion of the Company’s legal counsel the matter has been settled by controlling precedent, submit the question of whether such indemnification is against public policy to a court of appropriate jurisdiction. The Company will then be governed by the court’s decision.
Longwei Petroleum Investment Holding Limited Executive Compensation Summary
Summary Compensation Table
The following table shows the compensation awarded or paid to, or earned by the officers and directors of Longwei Petroleum Investment Holding Limited for the years ended June 30, 2010 and 2009, respectively.
|
Name and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($) *
|
Option
Awards
($)
|
Non-Equity Incentive Plan Compensation ($)
|
Non-Qualified Deferred Compensation Earnings
($)
|
All Other Compensation
($)
|
Totals
($)
|
||||||||||||||||
|
Cai Yongjun,
|
2009
|
$11,217
|
-
|
-
|
- |
-
|
-
|
-
|
$11,217
|
||||||||||||||||
|
Chief Executive
Officer, Director
|
2010
|
6,670
|
-
|
-
|
- |
-
|
-
|
-
|
6,670
|
||||||||||||||||
|
James Crane,
Chief Financial Officer, Principal Accounting
|
2009
|
-
|
-
|
24,750
|
- |
-
|
-
|
-
|
24,750
|
||||||||||||||||
|
Officer (1)
|
2010
|
110,000
|
-
|
213,500
|
- |
-
|
-
|
-
|
323,500
|
||||||||||||||||
|
Xue Yongping, Secretary and
|
2009
|
5,229
|
-
|
-
|
- |
-
|
-
|
-
|
5,229
|
||||||||||||||||
|
Director
|
2010
|
5,617
|
-
|
-
|
- |
-
|
-
|
-
|
5,617
|
||||||||||||||||
| Michael Toups | 2009 | - | - | - | - | - | - | - | - | ||||||||||||||||
| Chief Financial Officer (2) | 2010 | 4,000 | - | - | - | - | - | - | 4,000 | ||||||||||||||||
| Douglas Cole | 2009 | - | - | - | - | - | - | - | - | ||||||||||||||||
| Director (3) | 2010 | 2,500 | - | 15,180 | - | - | - | - | 17,680 | ||||||||||||||||
| Gerald DeCiccio | 2009 | - | - | - | - | - | - | - | - | ||||||||||||||||
| Director (4) | 2010 | 5,835 | - | 30,360 | - | - | - | - | 36,195 | ||||||||||||||||
| Xue Xiaoping | 2009 | - | - | - | - | - | - | - | - | ||||||||||||||||
| Director (5) | 2010 | 12,500 | - | - | - | - | - | - | 12,500 |
13
|
|
(1) Mr. Crane resigned as Chief Financial Officer on June 16, 2010. On June 30, 2009 Mr. Crane entered into a consulting agreement with the Company whereby he was awarded 25,000 common shares valued at $24,750. On October 26, 2009, Mr. Crane entered into a new consulting agreement with the Company whereby he was awarded 100,000 common shares valued at $214,000.
|
|
|
(2) Mr. Toups was appointed as Chief Financial Officer on June 23, 2010.
|
|
|
(3) Mr. Cole was appointed as a director on March 22, 2010. On February 16, 2010 Mr. Cole entered into a consulting agreement with the Company whereby he was awarded 6,000 common shares valued at $15,180.
|
|
|
(4) Mr. DeCiccio was appointed as a director on March 22, 2010. On February 16, 2010, Mr. DeCiccio entered into a consulting agreement with the Company whereby he was awarded 12,000 common shares valued at $30,360.
|
|
|
(5) Ms. Xue was appointed as a director on March 22, 2010.
|
|
*
|
Represent the aggregate grant date fair value computed in accordance with FASB ASC Topic 718.
|
Director Compensation
The Company’s directors will not receive a fee for attending each board of directors meeting or meeting of a committee of the board of directors. All directors will be reimbursed for their reasonable out-of-pocket expenses incurred in connection with attending board of director and committee meetings. We have entered into consulting agreements with two independent directors, Gerald DeCicco and Doug Cole, detailed below under “Employment Agreements.”
Certain Relationships and Related Transactions
The Company will present all possible transactions between us and the Company’s officers, directors or 5% shareholders, and the Company’s affiliates to the Board of Directors for their consideration and approval. Any such transaction will require approval by a majority of the disinterested directors and such transactions will be on terms no less favorable than those available to disinterested third parties. Except as disclosed herein, there are no other transactions required to be disclosed for related persons as defined in Item 404(a).
Employment Agreements
On February 16, 2010 the Company entered into consulting agreements with two of its independent directors, Gerald DeCiccio and Doug Cole. Pursuant to Mr. DeCiccio’s agreement, Mr. DeCiccio will receive $20,000 and 12,000 shares of the Company’s common stock annually. Additionally, Mr. DeCiccio will receive 6,000 shares of common stock each on June 1, 2010 and December 1, 2010. The term of Mr. DeCiccio’s agreement is until February 28, 2011. Pursuant to Mr. Cole’s agreement, Mr. Cole will receive $10,000 and 6,000 shares of common stock annually as well as 3000 shares of common stock each on June 1, 2010 and December 1, 2010. The term of Mr. Cole’s agreement is until March 15, 2011.
On June 18, 2010, the Company entered into a consulting agreement with its new Chief Financial Officer, Michael Toups. The agreement is for a twelve month term. Under the terms of the agreement, the Chief Financial Officer is to be compensated $10,000 per month. He is also to receive a share award of 60,000 shares of common stock valued at $126,600 under the following terms, 15,000 shares of the Company’s common stock shall vest and be issued on the last day of each calendar quarter for services rendered during that quarter, beginning September 30, 2010. Since the shares are not issued or do not vest until September 30, 2010, no charge to stock based compensation was recorded for the year ended June 30, 2010.
14
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
EXHIBIT INDEX
|
Exhibit Number
|
Description
|
|
|
2.1
|
Agreement for Share Exchange dated October 10, 2007, by and between Tabatha II, Inc. and Longwei Petroleum Investment Holding Limited and the Shareholders of Longwei Petroleum Investment Holding Limited (herein incorporated by reference from Current Report on Form 8-K filed with the Securities and Exchange Commission on October 15, 2007).
|
|
|
3.1
|
Articles of Incorporation (herein incorporated by reference from Registration Statement on Form 10-SB filed with the Securities and Exchange Commission on October 11, 2000).
|
|
|
3.2
|
Bylaws (herein incorporated by reference from Registration Statement on Form 10-SB filed with the Securities and Exchange Commission on October 22, 2000).
|
|
|
3.3
|
Amendment to Articles of Incorporation, indicating the name change to Longwei Petroleum Investment Holding Limited (herein incorporated by reference from Current Report on Form 8-K filed with the Securities and Exchange Commission on October 23, 2007).
|
|
|
3.4
|
Certificate of Designation for the Company’s Series A Convertible Preferred Stock (herein incorporated by reference to Exhibit 10.3 from Current Report on Form 8-K filed with the Securities and Exchange Commission on November 2, 2009).
|
|
|
4.1
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Form of Common Stock Purchase Warrant issued in the October 2009 Private Placement (herein incorporated by reference to Exhibit 10.4 from Form 8-K filed with the Securities and Exchange Commission on November 2, 2009).
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10.1
|
Consulting Agreement as of October 12, 2007, by and between Longwei Petroleum Investment Holding Limited and Etech Securities, Inc. (herein incorporated by reference from Current Report on Form 8-K filed with the Securities and Exchange Commission on October 23, 2007).
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|
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10.2
|
Consulting Agreement as of October 12, 2007, by and between Longwei Petroleum Investment Holding Limited and Ms. Yan Wang (herein incorporated by reference from Current Report on Form 8-K filed with the Securities and Exchange Commission on October 23, 2007).
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|
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10.3
|
Consulting Agreement as of October 12, 2007, by and between Longwei Petroleum Investment Holding Limited, the BVI company, and John Ballard (herein incorporated by reference from Current Report on Form 8-K filed with the Securities and Exchange Commission on October 23, 2007).
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10.4
|
Convertible Promissory Notes (herein incorporated by reference from Form S-1 filed with the Securities and Exchange Commission on December 26, 2007).
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10.5
|
Class A Common Stock Purchase Warrants (herein incorporated by reference from Form S-1 filed with the Securities and Exchange Commission on December 26, 2007).
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|
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10.6
|
Longwei Petroleum Investment Holding Limited Term Sheet (herein incorporated by reference from Form S-1 filed with the Securities and Exchange Commission on December 26, 2007).
|
15
|
10.7
|
Consulting Agreement as of June 30, 2009 by and between Longwei Petroleum Investment Holding Limited and James Crane (herein incorporated by reference from Form 8-K filed with the Securities and Exchange Commission on July 10, 2009).
|
|
|
10.8
|
Form of Securities Purchase Agreement, dated October 29, 2009 by and between Longwei Petroleum Investment Holding Limited and the investors signatory thereto (herein incorporated by reference to Exhibit 10.1 from Form 8-K filed with the Securities and Exchange Commission on November 2, 2009).
|
|
|
10.9
|
Form of Registration Rights Agreement, dated October 29, 2009 by and between Longwei Petroleum Investment Holding Limited and the investors signatory thereto (herein incorporated by reference to Exhibit 10.1 from Form 8-K filed with the Securities and Exchange Commission on November 2, 2009).
|
|
|
10.10
|
Form of Make Good Escrow Agreement, dated October 29, 2009 by and between Longwei Petroleum Investment Holding Limited and the investors signatory thereto (herein incorporated by reference to Exhibit 10.5 from Form 8-K filed with the Securities and Exchange Commission on November 2, 2009).
|
|
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10.11
|
Consulting Agreement as of October 26, 2009 by and between Longwei Petroleum Investment Holding Limited and James Crane (herein incorporated by reference from Form 8-K filed with the Securities and Exchange Commission on November 10, 2009).
|
|
|
10.12
|
Consulting Agreement as of February 16, 2010 by and between Longwei Petroleum Investment Holding Limited and Gerald DeCiccio (herein incorporated by reference from Form 10-Q filed with the Securities and Exchange Commission on May 17, 2010).
|
|
|
10.13
|
Consulting Agreement as of February 16, 2010 by and between Longwei Petroleum Investment Holding Limited and Douglas Cole (herein incorporated by reference from Form 10-Q filed with the Securities and Exchange Commission on May 17, 2010).
|
|
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10.14
|
Consulting Agreement as of June 18, 2010 by and between Longwei Petroleum Investment Holding Limited and Michael Toups (herein incorporated by reference from Form 8-K filed with the Securities and Exchange Commission on June 25, 2010).
|
|
|
14
|
Code of Ethics (herein incorporated by reference from Form 8-K filed with the Securities and Exchange Commission on March 24, 2010).
|
|
| 31.1 |
Certification of Chief Executive Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
| 31.2 |
Certification of Chief Financial Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
| 32.1 |
Certification of Chief Executive Officer, Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
| 32.2 |
Certification of Chief Financial Officer, Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
16
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
Principal Executive Officers of
Longwei Petroleum Investment Holding Limited
|
|||
|
Date: January 14, 2011
|
By:
|
/s/ Cai Yongjun
|
|
|
Cai Yongjun,
Chief Executive Office (Principal Executive Officer)
|
|||
|
Date: January 14, 2011
|
By:
|
/s/ Michael Toups
|
|
|
Michael Toups
Chief Financial Officer (Principal Financial and Accounting Officer)
|
|||
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the issuer and in the capacities and on the dates indicated.
|
SIGNATURE
|
TITLE
|
DATE
|
|||
|
By: /s/ Cai Yongjun
|
Chief Executive Officer, Director
|
January 14, 2011
|
|||
|
Cai Yongjun
|
(Principal Executive Officer)
|
||||
|
By: /s/ Michael Toups
|
Chief Financial Officer
|
January 14, 2011
|
|||
|
Michael Toups
|
(Principal Financial and Accounting Officer)
|
||||
|
By: /s/ Yongping Xue
|
Director
|
January 14, 2011
|
|||
|
Yongping Xue
|
Secretary and Treasurer
|
||||
|
By: /s/ Gerald DeCiccio
|
Director
|
January 14, 2011
|
|||
|
Gerald DeCiccio
|
|
By: /s/ Douglas Cole
|
Director
|
January 14, 2011
|
|||
|
Douglas Cole
|
|
By: /s/ Xue Xiaoping
|
Director
|
January 14, 2011
|
|||
|
Xue Xiaoping
|
17