China-Biotics: Record Earnings Don't Negate Five Unresolved Issues

Matt Berry submits:

China-Biotics reported record sales Wednesday. It finished the day with a 5% loss on heavier than usual volume.

CEO Jinan Song made a statement on behalf of the company: "We are pleased to report a solid third quarter as our successful strategic shift from retail to bulk products continues to show positive results." And what a shift that was. China-Biotics claimed it grew revenue by 39% -- despite having closed 95 retail outlets in the quarter ending September 2010. There are only 15 outlets remaining in operation. Miraculously, bulk sales saved the day, increasing 142%.

Investors were unimpressed as five serious issues have been left unresolved.

1. Last summer, China-Biotics claimed to have more than 100 retail outlets and published a list of addresses.

• Official websites by the real tenants of many of these locations were found, proving that the addresses in question were not China-Biotics retail outlets. (See here.)

• Photos by investigators in China verified that a majority of the China-Biotics retail outlets were "missing." (See here.)

The company later changed its introduction to the list of outlets, stating that there had been an error and that these addresses merely represented places where its products could b! e found. To this

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