NASDAQ Hearings Panel has granted a stay of delisting of the Company's securities pending the Company's scheduled hearing to be held on August 25, 2011. The Company is working diligently to complete its 2010 and 1H 2011 filings as soon as possible and continuing its full cooperation with the Audit Committee's investigation. With these filings and completion of the investigation, Keyuan believes that it will regain compliance with the requirements for continued listing.
Keyuan Petrochemicals announced today that the audit committee has received initial findings of its independent investigation of the Company's 2010 sales and revenue. Deloitte Financial Advisory Services, King & Wood, Pillsbury Winthrop Shaw Pittman LLP and a petrochemicals industry expert, separately verified the accuracy of information related to the Company's 2010 sales.
On March 31, 2011, the Company's audit committee hired Pillsbury, Deloitte, and King and Wood to conduct an independent investigation of issues identified by the Company's former independent public accountant, KPMG. A team of lawyers and forensic accountants reviewed scores of documents at Keyuan's offices, visited select customer locations throughout China, and interviewed representatives of the customers, and senior officers and personnel of the Company. The independent investigators also consulted an industry expert, who has years of experience in the petrochemicals industry, to analyze Keyuan's production plants and operations.
Based on results from the independent investigation, the independent investigators made the following conclusions: Nothing has come to our attention to indicate that the Company has inappropriately accounted for the specific customer transactions we were able to test, other than the documentation issues notes above; the Company-arranged interviews with selected customers supported that the customers transacted business with the Company in 2010; in the documents that we have reviewed, we have found no documents reflecting any intent by the Company to misstate revenues; plant visit and document review by an expert in the petrochemical industry supports the finding that the plant is operating and producing petrochemicals at a quantity consistent with the revenues stated by the Company; and interviews with management and selected Company personnel were consistent with the above findings.
"We are pleased with the results of the independent investigation. The findings support our assertion throughout this process that we are an excellent company on solid financial footing with a clear and focused growth strategy. Having cooperated fully with examiners and regulators during this extensive review process, we will continue to focus on completing our 2010 and 1H 2011 audits."
Keyuan Petrochemicals today announced that it has not completed its 2010 consolidated financial statements by the March 31, 2011 deadline. "Keyuan transitioned to a "Big 4" accounting firm as our auditor in January 2011. The Company believes that this is an appropriate and necessary step given our desire to satisfy the heightened expectations of our investors. The internal accounting team has worked diligently to complete all necessary field work in a timely manner, but has not been able to complete preparation of the financial statements, and management therefore has not completed its review of the consolidated financial statements. In addition, the accounting review conducted to date has identified various concerns that have prompted the Company's Audit Committee to undertake an independent investigation, which must be concluded before the Company will be able to complete its preparation and review of its 2010 consolidated financial statements. The concerns were primarily related to unexplained issues of certain cash transactions and recorded sales. The audit committee has engaged Pillsbury Winthrop Shaw Pittman LLP as its independent legal counsel, and such counsel will engage a separate independent accounting firm to assist in the investigation. Management is fully cooperating with the audit committee and will furnish all necessary materials."
"Management believes that this comprehensive review by the independent investigation will solidify our internal reporting processes and provide more confidence to investors and shareholders, and further hopes that the issues raised will be resolved to the satisfaction of both the audit committee and the auditors. However, there can be no assurance that these matters will be satisfactory completed by April 15, 2011, or that we will be able to file the Form 10-K Annual Report by such date. The audit committee is working as quickly as possible to complete the investigation, but at this time we don't know the timing. As soon as the filings are made, a press release and conference will be held. As a result of the delay in the filing and investigation by the audit committee, the Company requested a trading halt from NASDAQ."