Zungui Haixi Corporation

Zungui Haixi Corporation

September 16, 2011 08:10 ET

Zungui Haixi's Special Committee Provides Update

TORONTO, ONTARIO--(Marketwire - Sept. 16, 2011) - Zungui Haixi Corporation (TSX VENTURE:ZUN) (the "Company"), a China-based manufacturer of sportswear and casual footwear, today announced that the Board of Directors of Zungui Haixi Corporation (the "Company") on August 28, 2011 appointed a committee of independent directors (the "Special Committee") to conduct an independent investigation into the issues pertaining to the current financial statements identified during the course of the audit work for the fiscal year ended June 30, 2011 conducted by the Company's independent auditor, Ernst & Young LLP ("EY"). The investigation is also intended to address any issues that arise as to prior period financial statements.

The Special Committee, composed of Patrick Ryan (Chair), Margaret Cornish and Elliott Wahle, has been given full authority and broad powers in connection with the investigation and related matters, including ongoing communications and cooperation with the Ontario Securities Commission, TSX Venture Exchange and other regulatory authorities.

As reported on August 22, 2011, EY has suspended procedures with respect to the audit of the Company's financial statements for the year ended June 30, 2011 and recommended that that the issues it raised be addressed by an independent investigation. The concerns raised by EY relate in part to inconsistencies in bank documents and the inability to obtain bank confirmations in a manner acceptable to the auditors. The bank balances are one of the largest items on the balance sheet. In addition, EY identified issues as to incorrect VAT invoices supporting purchases from certain of the Company's suppliers.

The Special Committee has retained Stikeman Elliott LLP as Canadian counsel and King and Wood as Chinese counsel. Stikeman Elliott has retained KPMG Forensic. These professional advisors have been selected to advise and to assist the Special Committee in the independent investigation it has been mandated to undertake by the Board. King and Wood has been in contact with the Company's bank in China, the Agricultural Bank of China, which is reviewing the documents in question.

The Special Committee has had a number of discussions and other communications with Yanda Cai, CEO and a director of the Company and whose family are the Company's principal shareholders, over the course of the last four weeks, seeking their cooperation and assistance. It is not clear whether such cooperation or the funding necessary for the Special Committee to undertake its investigation will be forthcoming and the Special Committee is considering alternative courses of action. The Board resolution appointing the Special Committee, which was unanimously passed by all of the directors, calls for full cooperation from all members of the Board and Management.

The Special Committee has been advised that Ontario Securities Commission Staff has an ongoing investigation in relation to the Company.

The Special Committee is not able at this time to provide guidance as to the expected timing of its work but will assess that continually and make further announcements as appropriate.

About Zungui Haixi

Zungui Haixi Corporation, through its wholly owned subsidiaries, is engaged in the manufacture and sale of athletic footwear, apparel and accessories, and also casual footwear, in the People's Republic of China. Both product lines are marketed under the ZUNGUI brand. Zungui Haixi distributes its products to consumers throughout China through an extensive network of retail outlets which exclusively carry ZUNGUI branded products. There are 62,080,400 common shares issued and outstanding. The corporate website is www.zunguihaixi.com.

Caution Regarding Forward-Looking Statements

Certain statements in this press release contain forward-looking information that involve risk and uncertainties. Statements other than statements of historical fact contained in this press release may be forward-looking statements within the meaning of certain securities laws, including, without limitation, statements involving management's expectations, intentions and beliefs concerning the domestic PRC sportswear industry, the competitive landscape in this industry and the general economy, statements regarding the future financial position or results of the Company, business strategies, proposed acquisitions, growth opportunities, budgets, litigation, projected costs and plans and objectives of or involving the Company. Such statements should be considered forward-looking statements, Wherever possible, words such as "may", "would", "could", "will", "anticipate", "believe", "plan", "expect", "intend", "estimate", "aim", "endeavour", "project", "continue" and similar expressions have been used to identify forward-looking statements.

These forward-looking statements reflect management's current beliefs and business judgement with respect to future events and are based on information currently available to management. Forward-looking statements involve significant known and unknown risks, uncertainties and assumptions, and you should not place undue reliance on these forward-looking statements. Although management believes its current beliefs and assumptions are reasonable, many factors could cause Zungui's actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including, without limitation, those listed in the "Risk Factors" section of the Company's other filings with Canadian securities regulatory authorities at www.sedar.com. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results, performance or achievements could vary materially from those expressed or implied by the forward-looking statements contained in this press release. The forward-looking statements contained in this press release are expressly qualified in their entirety by this cautionary statement. These forward-looking statements are made as of and speak as of the date of this press release and the Company does not intend to, or assume any obligation to, update or revise these forward-looking statements to reflect new information, events, results or circumstances or otherwise after the date on which such statement is made as to reflect the occurrence of unanticipated events, except as required by law, including securities laws.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Contact Information

  • Zungui Haixi Corporation
    Ms. Shelly Gobin
    Chief Financial Officer