China Tracker - Details for Duoyuan Printing (DYNP)

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 Duoyuan Printing
 Business Outlook

Recent Chain of Events:
2012-04-16 -- Last SEC Filing
2011-04-13 -- Delisting from NYSE
2010-09-08 -- CEO/CFO Appointment
2010-09-08 -- CEO Resignation
2010-09-06 -- CFO Resignation
2010-09-06 -- Auditor Dismissal
2010-05-11 -- Last Quarterly/Annual Report: Q2/FY2010 ended March 31, 2010

(Source: Trading China, 2012-09-30)

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.

(Source: PR Newswire, 2011-03-28)

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.

(Source: 8-K Filing, 2011-03-18)

Effective as of September 6, 2010, Deloitte Touche Tohmatsu was dismissed by the Audit Committee of Duoyuan Printing as the independent registered public accounting firm of the Company.

Deloitte requested that the Company provide permission to access original bank statements to complete its audit procedures to verify the identity of certain individuals and entities associated with third party distributors and vendors. As of the time of Deloitte’s dismissal, the Company had not granted such permission because it believed the method and scope of the request was overly broad for the purpose of verifying the identity of such individuals and entities.

Deloitte identified supporting documentation for approximately RMB24 million of expenses related to advertising and tradeshow costs, the authenticity of which could not be verified to Deloitte’s satisfaction. Deloitte received information regarding certain distributors and vendors that appeared inconsistent with certain information that the Company had provided.

Deloitte advised the Audit Committee that it was informed by the Chief Executive Officer and Chief Financial Officer of the Company that they felt they did not have access to the information on the open matters referred to above nor were they in a position to assist the investigation.

(Source: 8-K Filing, 2010-09-13)

Management resignations: Mr. James Zhang, Chairman of the Audit Committee tendered his resignation from the Board of Directors effective immediately over the disagreement with the Company and the Board for dismissing Deloitte as the independent registered public accounting firm of the Company. The Honorable Paula J. Dobriansky tendered her resignation from the Board effective immediately. Ms. Naoko Hatakeyama tendered her resignation from the Board effective immediately. Mr. Xiqing Diao tendered his resignation from the Board effective immediately in an effort to maintain a majority of independent directors on the Board to stay in compliance with relevant listing standards. Mr. William D. Suh tendered his resignation from the position of Chief Financial Officer of the Company effective immediately. Mr. Christopher Patrick Holbert tendered his resignation from the position of Chief Executive Officer of the Company effective September 8, 2010 18:00 p.m. Beijing Time.

(Source: 8-K Filing, 2010-09-13)

From the resignation letter of James Zhang, Chairman of DYP Audit Committee:

From Roughly one month ago, I got the phone call from Frank Li, the Audit Partner of Deloitte (DT) to express concerns to the Audit Committee over several financial irregularities and management control weakness. After hearing the full story, I immediately called an AC meeting and upon receiving unanimous approval from the AC as a well as support from the Chairman, the AC immediately engaged Latham Watkins, the US Law Firm, to handle the independent investigation not only to report back to the AC, but also as a part of the audit process requested by DT to give an opinion to the 2010 DY company financials. As our Chairman put it in the board Meeting just now that maybe due to the cross culture differences between US style work and maybe because of the second tier management don’t fully understand the US listing requirements, the investigation has not progressed in the last month. This delay could potentially render the company not filing its annual financial statements on time to the SEC.

In the past week, the Management has suggested to change the auditors of the company from DT to Frazer Frost (FF) who was the company prior auditors. This proposal has just been resolved in the full board meeting and Full AC meeting with voting taking place of 4 against 3 in favor and 2 against 1 in favor. As the AC chairman and independent Director of the company, I respect the company democratic decision process as stipulated by the company Memorandum and Articles of Association. However, as a qualified UK Chartered Accountant and a trained Professional, I have brought to the attention of the board the following potential risks related to the change of auditors. These risks can be summarized as follows:

FF has not yet signed engagement letter with the company which is a risk to the company. Change of auditors during the investigation process could potentially lead to further investigation from the SEC. To change from a Big4 audit firm to a non-Big4 could have very negative impact in the investment community in terms of corporate governance thus lead to potential share price drop and subsequent US class law suit. Even the Company US counsel has indicated in the meeting against change of auditors at this particular time frame.

(Source: 8-K Filing, 2010-09-13)

Management continues to see robust demand for printing equipment in China's domestic market, particularly in the multicolor segment. Duoyuan Printing expects continued steady year-over-year growth for the fourth quarter ending June 30, 2010 due to the increasing sales of both multicolor and single color printing products and Duoyuan Printing's focused marketing and promotion efforts across China. Based on information available as of May 11, 2010, Duoyuan Printing expects its total net revenues in the fourth quarter ending June 30, 2010 to be in the range of $32.7 million to $34.0 million, representing year-over-year growth in the range of 25% to 30%, respectively.

(Source: PR Newswire, 2010-05-10)

Our business is affected by seasonality in that typically the quarter ending March 31 is the weakest because most businesses are closed during the Chinese New Year holiday. Duoyuan Printing currently expects to generate revenues in an amount ranging from $20 million to $21 million for the third quarter ended March 31, 2010, representing a year-over-year increase in the range of 15% to 20%.

(Source: PR Newswire, 2010-02-10)
Printing & Packaging

READ: Score Cards Explained
DETAILS: Safety/Risk Model for DYNP
Current Price:  n/a
F10k Day (2009-11-06): -100.00%$7.77
2009 Close: -100.00%$8.05
2010 Close: -100.00%$2.93
2011 Close: -100.00%$0.25
High (2012-02-23): -100.00%$0.29
Low (2012-06-22): -100.00%$0.13
Market Capitalization: n/a
Total Shares: 31.58 mill
Float: n/a
Avg Volume: n/a
Last Quarter: 2010-03-31
Revenue (MRQ): 23.40 mill
Net Income (MRQ): 3.56 mill
all financial data provided without warranty