Is China-Biotics Inc. (OTCMKTS:CHBT) A Fraud
China-Biotics Inc. (OTCMKTS:CHBT) is one of those companies in the OTC Markets that seemingly has a legitimate business, very good financials and a stock that is traded above the $2 mark for about a week now.
The day before the Fourth of July went very well for the stock of CHBT as it climbed 17% up. The price jumped from $2.11 at market open to $2.75 on a decent volume. The total number of shares that switched hands came at above 45 thousand which is a lot considering that the company’s average is only 7 thousand.
The peak of trades was in the end of the 3 hour trade session before Independance Day, when a total of around 15 thousand shares were traded. The trade value that was generated by the stock’s volume was $118 thousand which is the highest trade value that CHBT have had since 9 months.
CHBT is traded surprisingly low considering their alleged financials that are listed in the filings with the SEC. It is interesting that they are listed as a mining & quarrying company for nonmetallic minerals, but deals with probiotics. Even more intriguing is the fact that the reports they filed last month are for 2011.Let’s take a quick moment to see what they have in their quarterly report which covers the period ended December 31, 2011.
- cash: $121 million
- total assets: $238 million
- total liabilities: $45 million
- net income: $9 million
Seems pretty good doesn’t it? Yes, sure, until you find out about their shady practices. By shady practices we mean the fact that they have a history of filing false reports with the SEC according to their filings with the State Administration for Industry and Commerce (SAIC) of the People’s Republic of China. Below you can see the discrepancies between the two reports for their 2008 Filing Disclosure statements.
SAIC SEC
cash: $100 thousand $64.3 million
accounts receivable: $1 million $13.2 million
revenues: $500 thousand $42.3 million
gross profit: $200 thousand $30 million
net income (loss): ($1.2 million) $17.5 million
Ask yourself this question. Would a company lie to the SAIC in China, where white collar crime us punishable by death or to the SEC who can suspend them from trading? Yes, you got it right. The SEC indeed suspended their trading on October 7, 2011 and now the company is marked with the caveat emptor sign in the OTC Markets, but the suspension wasn’t for false reports. It was for not filing them in time. You do your math on how much you can trust them and be sure to do your own due diligence before deciding to invest in any stock traded in the OTC Markets, especially if its Chinese.
There were other winners in the 3 hour long trade session on July 3 like MyEcheck Inc (OTCMKTS:MYEC) who went 13% up and is now being traded at $0.0052, but probab;y the biggest winner of the day was Prince Mexico SA Inc (OTCMKTS:LUVE) who gained 42% and are now nested at $0.215.
