Tarena Announces Findings of Independent Investigation; Update on Financial Statements Review and Nasdaq Listing
The Independent Investigation
As previously announced by the Company in its
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
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.
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
For further information, please contact: Investor Relations Contact, Tarena International, Inc., Email: firstname.lastname@example.org