China-Biotics, Inc. (CHBT)

[Rayhuh]

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Interpretation of the evidence
21-Sep-10 01:57 am The company disclosed three pieces of very critical evidence during the Investor Day. I would like to interpret it as following.

1) Two sample bank statements showing the balances as reported to the SEC on June 30, 2010.

It's a formal bank statement, with official chop of a major state owned bank of China. It showed the beginning of the quarter-end balance, transactions during this quarter (three months), and month end balance. At the end, there was signature of the bank officials certified the statement.

Along with the bank statement, there were hundreds of transactions with tracking numbers to the accounting journals and invoices. These journals and invoices will link to the detailed sales made and sales contracts and pricing.

As an auditor myself, I think such evidence is powerful enough to show the company has real cash sitting in the bank.

Also, I looked into these transactions. It's all very small amount of money (a couple of thousand RMB) from hundreds of very different resources, each having a unique merchant code as it is in U.S.A. These merchants "might" lie for you from time to time, but there is absolutely no way for hundreds of merchants lied for you for the same time.

I hired my private investigator to back track the company's statement in Mar 2010. There number was also correct.

2) Proof of Tax Paid, which is certified by Shanghai State Tax Bureau and Local Tax Bureau. This is actually the single most definitive document showing that the business is legitimate. There are two form of tax authorities in China: State Level (Federal Tax) and Local Level (State tax).

Again, you will pay a penalty of maximum RMB 20,000 (USD 3000) for filing a wrong SAIC filings. But if you dare to forge this document, and show it to the public, the Chinese government will have your head chopped off.

3) Quarterly Tax Payment Documents with a) Official Quarterly Tax Deduction Statement certified by Agriculture Bank of China-->"Payment made"; b) Payment Receipt by the State and Local Tax authorities recognizing that "Taxes Received"; c)bank statement from Agricultural Bank of China showing the quarterly end payment made-->"Amount Deduced from CHBT's bank account".

The consecutive four quarterly tax paid is the same as it is report to SEC of U.S.A.

Any businesses in China will make the tax payment to state and local tax bureaus THROUGH Agriculture Bank of China, another major state-owned bank.

Again, you can have one person lied for you at certain time. But how could you have all the people coordinately lied for you at the same time and for all times, especially these are very powerful authorities.

It is equivalent to have Citibank, Federal Tax, and NY State Tax to lie for you at the same time for consecutively four quarters.

I also have my private investigator to check the past tax information. It's correct too.

4) Lease Contract, Rental paid, for outlets...Honestly, I just skipped these documents. I don't care nothing whether this company is selling through "outlets" or "stores". It made no difference to me. As long as the company could sell and sell well, who cares?

My conclusion is that:

It's impossible that a company could have major state-owned bank, tax bureaus, customers, distributors, and suppliers to lie for it at the same time for all time in a coordinated manner!