Duoyuan Printing today announced that it received a notice from the NYSE Regulation, indicating that the NYSE Regulation has determined that the common stock of the Company should be suspended prior to the opening on April 4, 2011. Trading of the Company's stock will continue on the Over-the-Counter market following suspension.
In November 2010, the staff of the U.S. Securities and Exchange Commission notified the Company that, on October 7, 2010, the SEC initiated a formal investigation into whether the Company had engaged in fraud in the sale of securities, had filed materially false documents with the SEC, had failed to maintain adequate books and records, and had failed to maintain an adequate system of internal accounting controls, and whether the Company's principal officers had made false certifications regarding the Company's financial statements, and had engaged in deceit in dealings with the Company's external auditor. On November 10, 2010, the SEC served the Company a subpoena for documents relating to the Company's termination of Deloitte, the Company's revenues and costs generally, and the Company's relationship with Duoyuan Global Water, Inc. The Company is committed to cooperating with the SEC and is in the process of providing documents called for by the subpoena. In addition, the Company has voluntarily undertaken several cooperative steps above and beyond subpoena compliance. Among other things, the Company waived its rights under Chinese law, and has allowed Deloitte to provide information to the SEC about the Company's audit. There is no set deliverable date for the response to this SEC subpoena. It is not possible at this time to predict the outcome of the SEC investigation, including whether or when any proceedings might be initiated, when these matters may be resolved or what, if any, penalties or other remedies may be imposed.
Status of Internal Investigation
In late November, 2010, the Company retained Baker & McKenzie to conduct an internal investigation into the matters relating to the Company's termination of Deloitte, the matters raised by the class action lawsuit, and the matters raised by the SEC investigation. Soon thereafter, Baker retained PricewaterhouseCoopers Ltd. (PwC) as a forensic consultant to assist in the internal investigation. In order to maximize independence, day-to-day supervision of the internal investigation was delegated to the Audit Committee of the Board of the Company, in the person of Mr. Chui, who joined the Board and the Audit Committee following the decision to dismiss Deloitte, has an accounting background and is familiar with issues that arise in the context of audits and disagreements with audit firms.
Since December 2010, Baker and PwC have been collecting and reviewing documents and interviewing relevant employees and third parties. So far, thousands of pages of documents have been reviewed and more than twenty interviews conducted. Substantial progress has been made, but the investigation is not complete. Without a substantially completed internal investigation, the Company is unable to retain a new external auditor. At the time of the dismissal of Deloitte, the Company was in discussion with an auditing firm to replace Deloitte. That auditing firm and others have indicated to the Company that they would not accept an appointment as the Company's auditor until the internal investigation is substantially completed and comfort on the outstanding issues is offered.
Possibility of DelistingThe Company last filed an Annual Report on Form 10-K for the fiscal year ended June 30, 2009 and a Quarterly Report on Form 10-Q for the quarter ended March 31, 2010. Following the dismissal of Deloitte, the Company has been unable to fulfil its obligations to file its Annual Report on Form 10-K for the year ended June 30, 2010 by October 13, 2010.
Accordingly, the Company is not in compliance with its obligations to timely file reports for transition periods pursuant to Rule 13a-10 of the Securities Exchange Act of 1934. According to Section 802.01E of the New York Stock Exchange Listed Company Manual, the Company has an initial six-month period following the Filing Due Date to comply with the filing requirements subject to the NYSE monitoring the status of the Company's filing. On April 13, 2011 this initial six-month period is to expire. The Company does not expect to be able to meet this initial time requirement and the Company will need to formally request to the NYSE for an additional trading extension well in advance of that date. The Company intends to formally request such a trading extension.
Notwithstanding the events listed above, the Company remains in operation under the guidance of Xiqing Diao, the Company's CEO, and the balance of the management team.