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Greg Weston is a San Diego-based attorney specializing in complex antitrust and real estate litigation, including class actions. For the last ten years he has consistently beat the S&P 500 with a strategy of buying undervalued technology stocks combined with shorting companies whose weak... More
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  • Is China Yida (CNYD) the “China Media” Twin of CCME? 2 comments
    Apr 6, 2011 6:08 PM | about stocks: CCME, CNYD, CSKI, WATG, CHBT, DEER

    Really? Your business model is selling TV ads on trains?

    CCME’s business model was selling TV ads on monitors on buses. CNYD claims to have its fingers in several different lines of business, including selling “infomercial” time on trains. Now CCME’s auditor has resigned, questioning the accuracy of its bank statements, and its largest outside investor has filed a securities fraud suit against it. There are several other reports suggesting the whole company is a sham.

    Parallels Between CNYD and CCME:

    CCME: Chinese reverse merger stock

    CNYD: Chinese reverse merger stock

    CCME: Claims huge profits and growth selling ads on buses

    CNYD: Claims huge profits and growth selling ads on trains

    CCME: Recommended by disgraced Chinese stock promoter Ping Luo

    CNYD: Recommended by disgraced Chinese stock promoter Ping Luo


    CNYD’s Reported Results Seem Too Good To Be True

    CNYD, in the tourism and ad sales business, claims rapid growth and consistent super high margins, claiming total revenue of $54.5 million with net income of $25.5 million, a profit margin of 46%.

    By comparison, Microsoft, considered one of the highest-margin companies in the world, had 2010 revenue of $62.5 billion and net income of $18.8 billion, a profit margin of 30%. I invite my readers to find a single other media or tourism company with CNYD’s claimed profit margin of 46%. It just sounds too good to be true to me.

    In addition to unprecedented profit margins, CNYD also claims extremely rapid growth. In essence, a rapidly growing money-making machine. Yet why would such a cash-machine sell huge numbers of shares for peanuts to a penny-stock promoter if it was the real deal?


    Another Red Flag: CNYD’s Auditors Keep Changing

    From the most recent annual report:

    On May 20, 2010, the Company dismissed Kabani & Company, Inc. (“Kabani”) as our independent auditors and engaged BDO China Li Xin Da Hua CPA Co., Ltd. (BDO China), an Independent Registered Public Accounting Firm, to serve as our independent auditors.

    And then….

    On August 8, 2010, the Company accepted the resignation of BDO China Li Xin Da Hua CPA Co., Ltd (“BDO Li Xin Da Hua”), ceasing to act as our independent auditors and, on August 9, 2010 we engaged Friedman LLP (“Friedman”), an Independent Registered Public Accounting Firm, to serve as our independent auditors. The engagement of Friedman LLP was approved by our Audit Committee on August 9, 2010.

    What legitimate company feels the need to cycle through auditors so fast? One auditor is fired in May 2010, then a second auditor hired to replace them calls it quits 3 months later and a third auditing firm is hired.

    Opaque Corporate Structure With Insider Loans and Transactions with Penny-Stock Promoter Pope Investments

    The standard way Chinese penny-stock scams operate is: (1) sell cheap shares to penny stock promoters (2) report false results which are pumped up by the penny stock promoter (3) sell shares at high prices to gullible American investors (4) steal the money raised by the various sales via collusive transactions with insiders.

    There are signs of this type of activity with CNYD. For the first point, the company sold common stock and ultra-cheap warrants for a total of 20 million shares to Pope Investments for $13 million after fundraising costs, plus warrants to buy more at $1.05 a share. The same quarter this occurred (Q1 2008), the company reported earns of 17 cents per share, or after-tax earnings of 68 cents per share on an annual basis. Immediately before the transaction, the company also reported book value of about $2 a share.

    This transaction makes no sense to me if the company’s reported growth and earnings are legit. A company with book value of about 1.50 a share, and earnings of 68 cents a share, and rapidly growing revenues, does not sell a large part of itself to a foreign penny-stock company for $1 a share. Even at a low p/e of 8, the company was worth more than five times that amount.

    Not only do the numbers add up for me on this transaction, they don’t even come close.

    Here’s another strange aspect of the Pope Investment deal: in addition to selling shares to Pope that would be at a tiny fraction of a reasonable valuation if the numbers are accurate, the company also agreed to various penalties in the deal if earnings didn’t rapidly increase.

    The company’s reports are also full of large and poorly described purchases of property and insider transactions. When I have more time I may look at these in more detail. Personally, the similarity to CCME, rapid cycling of auditors, and the transaction with Pope Investments is all I needed to see to go short.

    Disclosure: Short CNYD and CCME



    Disclosure: I am short OTCPK:CCME, CNYD.
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  • jandccerny
    , contributor
    Comments (6) | Send Message
     
    Syntax Brillian’s Business Model
    I state without reservation that Syntax Brillian was formed as a result of a Taiwanese conspiracy to defraud the investors of the company. This is a tale of a Taiwanese conspiracy that used the US equities market to bilk investors. They filled the tub here and drained it in Taiwan. Vince Solitto, as CEO, proclaimed: “and I think they looked at that and said 'this could be one of those phony Chinese companies' like a Vizio or like Mag or Princeton Graphics or eMachines which are private companies in the US that basically move the profits back to Taiwan, go bankrupt and start over.” In My opinion I delclare: This is worse, this was a public company! The crime has gotten bolder!

     

    The sad part was that, in order to do what they did, the Taiwanese conspirators needed help (and got it) from entities and persons here in the US. Not only did the Taiwanese conspirators expect to bilk investors and make much more money than they ever would running a legitimate business, once this round was over they planned on coming back for more (the OIG stalking horse buyer). The goodwill and brand penetration of Olevia products (financed by shareholders) was to be swindled back to Taiwan. This left shareholders no chance to participate in or realize any profit. For the record, the OIG stalking horse buyer, pulled out of the deal which led to a harsh judgment for damages against them. In my opinion, the delicate and suspect alliance fell apart because it could not withstand the scrutiny of an examiner investigation. There was a selfish motive for submitting the bankruptcy petition in the manner in which it was filed.

     

    The latest on Chinese Reverse Mergers:
    All you have to do these days is type “Chinese Reverse Merger Fraud” into Google and you will be amazed at the quantity of companies coming out of the woodwork that are experiencing financial allegations of fraud – Syntax Brillian – is larger than 99% of the companies in terms of this method.
    Maybe it was before the SEC radar was up but SB has not gotten the notoriety that it deserves
    7 Apr 2011, 11:52 AM Reply Like
  • bigbarry
    , contributor
    Comments (314) | Send Message
     
    Pre-tax, the company's margins are even higher than CCME- 65-70% operating margin.

     

    Has there ever been a company w/ 65%+ operating margins. I don't know any. Google has long been considered among the highest op margins in the world at 50%.

     

    Who is their auditor? Is there a sign-off on internal controls?

     

    Looks very very fishy. I'll give it a little pound-pound-pound.
    8 Apr 2011, 11:38 AM Reply Like
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