Value Microcaps Motherboard

[jtomm]

CAGC - Serious Red Flag

Not trying to bash anyone's stock here. I posted on this one once before and just wanted to say it with a little more emphasis this time and then I'll be through.

This company's filings have something that you should simply never, never, ever see: the company claims the person who is second in command is working for no salary, no stock options, no bonuses, no compensation of any kind, owns no shares in the company, no possible way to gain from the company whatsoever. Do a Ctrl+F search for lijun here:

http://www.sec.gov/Archives/edgar/data/1166389/000120445907000424/agritech10k.htm

(You can then scroll down a couple pages to see the section that says she also owns no stock)

That would, of course, be patently absurd.

-When any of us holds a particular company's stock, it's tempting to want to make excuses for them when we see something that doesn't look right, or to think up wild "could be" scenarios. I would urge you to resist doing this. You should never see a SEC filing that says the CFO/Controller is working for free. Ever. No excuses or "explanations" from the company are acceptable.

Technically, I don't think it's even legal to work for no compensation. She's a volunteer, not an employee.

I'm gonna belabor things a little further, because I've written before about how tempting it is to want to make excuses for a company when you hold its stock (I've done it in the past).

Consider the absurdity of this no-way-to-gain claim from all three points of view: the CEO, the CFO herself, and the auditor. Put yourself in each of their shoes.

If you were the CEO, would you ever, under any circumstances, place the welfare of your company in the hands of someone who had nothing to gain from its success? How would you know she's even working in your best interest? How do you know she's not a spy from another firm, trying to put you out of business? How did you as CEO recruit someone to work for free? What was that job interview like? Wouldn't you be worried that she might steal from you to make at least some money? Wouldn't you be worried she'd leave on a moment's notice for a better job, and you'd have to scramble for a replacement? Wouldn't you instead want her to be well compensated? Whose interests does she really represent? Does anyone work for free? Seriously? In the real world?

Now to the CFO herself. Why in the world would she work for free? Nothing better to do? Just out of the goodness of her heart? If you were the CFO, would you work for free? Under any circumstances? The documents say nothing about the CEO and CFO being related individuals. If she were being paid even by the related company, that would have to be disclosed. Nothing. Not being paid by anyone, and not related to anyone. Just working for free. No ownership, no options, no salary, nothing. No way to benefit financially. The filing further says that company determined her compensation based on a ". . . level of compensation paid to similarly situated executives in comparably sized companies." That is an obviously false statement.

And that brings us to the auditors -- the same auditors by the way who brought Bodisen Biotech public (another Chinese fertilizer company which proved to be a scam), an account from which they recently resigned. Again, rather than try to make excuses for the company, put yourself in the shoes of the auditor. If you were a legitimate auditor, would you ever sign off on a document that said the second in command was working for free and had no way to benefit financially from the company? Would you ever sign off on a document that said that level of compensation ($0) is similar to executives in comparably sized companies? If you were a legitimate auditor, wouldn't you demand that the company put in writing how this person is being compensated? Or at the very least a lengthy explanation as to the extremely unusual circumstance as to why this person is working for free? Like maybe the CEO gave her a kidney or something, some sort of an explanation? Nothing.

There are many other red flags with this company, but this one alone should be enough.