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China Green Agriculture's Imaginary Fertilizer Production And Vanishing Cash

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The GeoTeam


  • 344 days of time-lapse surveillance of CGA's high-margin Jinong fertilizer factory, contributing 75% of CGA's gross profit, shows it only shipped around 10% of the volume CGA reports it sold.
  • 51 days of time-lapse surveillance of CGA's low-margin Gufeng factory found 24% to 34% less volume shipped compared to volume sold disclosed in SEC filings.
  • We interviewed current and former CGA employees, one of whom told us that CGA's Jinong factory exaggerated its production specifically for its stock listing in the U.S.
  • CGA's auditor, Kabani, signed off on $113 million of outrageous PP&E reclassifications and deferred marketing assets wiping out CGA's cash. Kabani was also auditor of the L&L Energy fraud.
  • In addition to potentially falsified sales volumes, CGA's PP&E reclassifications could constitute capex fraud that in and of itself could be enough to have the company halted and delisted.

Special Note:

Today, aware of the rising short interest in its stock and less than a day after our final attempt to confront management, CGA announced a one-time dividend of 10c per share ($3.3 million in aggregate), payable four months from now. We doubt that CGA has the capability or desire to actually pay this dividend. CGA's dividend announcement reminds us of China Media Express (OTCPK:CCME), which announced a dividend policy following a short seller's report calling the company a fraud. CCME never paid.

CGA's Backstory: Financials Challenged Since 2010

China Green Agriculture (NYSE:CGA) was taken public in December of 2007 via a reverse merger with a U.S. shell company supplied by Belmont Partners, touted as the "CarMax of shell corporations" by its CEO Joseph Meuse. Belmont and Meuse later settled SEC fraud charges, and Meuse was barred from the penny stock business.

In July 2010, "Alfred Little" published excerpts from a detailed due diligence report on China Green Agriculture that found CGA had exaggerated the sales of its key Jinong fertilizer factory, paid only a fraction of the Chinese taxes it claimed, overstated the purchase price of land-use rights by 4x, reported earnings of 5x to 6x what it disclosed in Chinese SAIC filings, and used a tiny auditor, Kabani & Co., whose only other substantial Chinese client at the time was L&L Energy (LLEN).

In January 2011, J Capital Research published the results of their own very thorough investigation that likewise concluded that CGA vastly inflated its fiscal 2010 sales by a factor of at least four times. J Capital believed that its findings were:

"... very serious and merit delisting [of CGA] from the NYSE. In fact, it should be embarrassing to such a prestigious exchange as the NYSE to host such an irregular company. We wonder whether an excess of entrepreneurial spirit

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Analyst’s Disclosure: The author is short CGA. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it. The author has no business relationship with any company whose stock is mentioned in this article.

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