Will China Biotics (CHBT) Come Clean? – Up to Them

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As written in two previous stories, Citron Research has stated clearly that it believes China Bitoics is a fraud.  Well, it is not too late for the company to attempt to answer some questions on tomorrow’s conference call.  That would be a step in the right direction of full disclosure.  Investors should not have to fly half way around the world to get these simple questions answered.

  1. As recently as June 2010, you disclosed to investors that you were expanding your retail operations due to their profitability.  Previously you had stated in filings that stores had a “one year payback”.    So why are you now discontinuing your entire retail store operations?   If they were so profitable, what has changed in the past 3 months?
  2. If the stores were in fact profitable and had a one-year payback why did you not sell them to a 3rd party?
  3. What allowance have you made for non-recurring expenses to close the stores, canceling their leases, writedown of capitalized leasehold expenses, etc.?
  4. State precisely how many of your current stores are still operational as of today.  Please specify exactly how many are four-walled exclusive branded stores, which are booths or kiosks in larger stores.
  5. How many Walmarts are your products sold in, total?   Please include a list of locations.
  6. What will be the new blended margin under the new distribution network?
  7. Will the company submit a copy of each and every document presented at “investor day” in an 8-K,  or at least posted on the company website, so all investors might see the tax documents, bank statements, and lease agreements that were showed to participants at “investor day” ?
  8. Have you or your auditors been notified by the SEC yet regarding any complaint of non-public disclosure of material information (or potential violation of the SEC’s Reg FD) ?
  9. How does the average elderly Chinese retail purchase couple afford 5,000 – 6,000 yuan ($750 – $900 USD) for two one-year supplies of acidophilus pills – this being an average month’s salary for a middle class Chinese worker at your current retail price points ?
  10. Before any saleable product flowed from your new production plant, your stated capacity at your Pudong facility was 12 metric tons and 3.5 million capsules per month.  That would be $2.20 per capsule, or appx $2,100 per pound of production for your December, March, and June quarters.  Presumably the same is true for your September quarter.  With acidophilus capsules selling at 2c to 15c, how did you produce enough product to generate 23 million in revenues?
  11. What is the status of your pending tax liability for taxes owed on dividends paid ?  Please state the maximum amount you could be held liable for in back taxes to Chinese authorities?
  12. To clear up any confusion do you plan of reconciling the discrepancy between future SAIC and SEC documents?   Who provided the auditor with the information signed off in your most recent SAIC filings ?