China Marine Food: There's Something Fishy Going On [View instapost]
Here is the CFO's emailed response to the allegations, which was passed on by the company's IR firm.
* * *
"It's a formality in China to file the operating figures with SAIC on an annual basis. Since there won't be any anticipated influence or harm over those inaccurate historical figures with SAIC, we don’t believe it’s necessary to re-file the statements. That said, we will switch to another sizable agent firm to do the 2009 filing and will make sure the numbers so filed are consistent with our book record going forward.
1. SAIC is the authority who issues business license which is a must for an operating entity in China to renew on an annual basis. Such filing process is quite tedious as what you can expect in China and thus lots of entities will rely on their agent firms to get the licenses on their behalf at an small amount of service fee. In our case, we hired an agent firm to do the filings for us in the past without providing any audited figures. So even though someone can go ask SAIC to get the filed financial statements but in fact these figures are not audited, and that's why you cannot find any audited opinions associated with these figures. In other words, these numbers do not come from audited reports. All we concern is whether we can get the business license quickly and cost effectively.
2. Obviously there's no sophisticated verification system over the filed financial statements by SAIC, nor any cross checking with the tax bureaus. We can ensure our regular filings with the tax authorities are entirely consistent with the SEC filings (for all prior, current and future filings). This is also a must audit procedure to check over all these filings are consistent with the financial statements.
3. I personally realize such mismatch just a couple of months ago. I had immediately instructed my team to do the 2009 and future filings on our own to make sure accuracy and consistency. Since the 2009 filing has been done for a while, I would welcome anyone to go access these documents from SAIC so as to confirm our words.
4. Regarding the audit history, even though ZYCPA is a small local firm, in fact the 2 partners are possessed of extensive KPMG audit experience. The firm is well positioned to service those small to medium sized companies in terms of quality and up to standard audit service. Of course we also have an attempt to switch to a 2-tier audit firm well addressing our investors' concern, hopefully will be done in the second half of this year.
5. For reasons of capital raise, our current investors should well know about the recent projects like cold storage facilities and acquisition of drink business without doubts.
Long story short, we simply pay a small amount of fee to get the license renewal done without headache, like lots of other companies do in China. Going forward, we will do the filing with SAIC on our own to ensure consistency. There was a mistake without checking over what the agent filed on our behalf but definitely it's not a fraud."
Orient Paper: Investors Ought to Lower Expectations [View article]
Because the revenues from the new digital paper business and the new production capacity don't kick in until late in 2010, 2011 earnings are going to be double those of 2010. The dilution is done, next comes the payoff. I am modeling $1.04 of EPS for 2010 and $2.14 for 2011. Put a 10x multiple on that, and you get $21.
China Marine Food: There's Something Fishy Going On [View instapost]
* * *
"It's a formality in China to file the operating figures with SAIC on an annual basis. Since there won't be any anticipated influence or harm over those inaccurate historical figures with SAIC, we don’t believe it’s necessary to re-file the statements. That said, we will switch to another sizable agent firm to do the 2009 filing and will make sure the numbers so filed are consistent with our book record going forward.
1. SAIC is the authority who issues business license which is a must for an operating entity in China to renew on an annual basis. Such filing process is quite tedious as what you can expect in China and thus lots of entities will rely on their agent firms to get the licenses on their behalf at an small amount of service fee. In our case, we hired an agent firm to do the filings for us in the past without providing any audited figures. So even though someone can go ask SAIC to get the filed financial statements but in fact these figures are not audited, and that's why you cannot find any audited opinions associated with these figures. In other words, these numbers do not come from audited reports. All we concern is whether we can get the business license quickly and cost effectively.
2. Obviously there's no sophisticated verification system over the filed financial statements by SAIC, nor any cross checking with the tax bureaus. We can ensure our regular filings with the tax authorities are entirely consistent with the SEC filings (for all prior, current and future filings). This is also a must audit procedure to check over all these filings are consistent with the financial statements.
3. I personally realize such mismatch just a couple of months ago. I had immediately instructed my team to do the 2009 and future filings on our own to make sure accuracy and consistency. Since the 2009 filing has been done for a while, I would welcome anyone to go access these documents from SAIC so as to confirm our words.
4. Regarding the audit history, even though ZYCPA is a small local firm, in fact the 2 partners are possessed of extensive KPMG audit experience. The firm is well positioned to service those small to medium sized companies in terms of quality and up to standard audit service. Of course we also have an attempt to switch to a 2-tier audit firm well addressing our investors' concern, hopefully will be done in the second half of this year.
5. For reasons of capital raise, our current investors should well know about the recent projects like cold storage facilities and acquisition of drink business without doubts.
Long story short, we simply pay a small amount of fee to get the license renewal done without headache, like lots of other companies do in China. Going forward, we will do the filing with SAIC on our own to ensure consistency. There was a mistake without checking over what the agent filed on our behalf but definitely it's not a fraud."
Orient Paper: Investors Ought to Lower Expectations [View article]