have you looked at WATG’s SAIC statements in relation to SEC filings and are there any red flags in this regard?

1. I’m not sure how many there are, but I believe a lot.

2. Different AIC branches operate differently. For instance, I initially focused on CHBT because I liked the quality of data I received from the Shanghai AIC office, and I’m skeptical they can bribe the Shanghai office to provide fake data in the future.

3. Fuzhou provides impeccable AIC filings.

4. You can hire counsel or credit agencies to get AIC filings from them.

How many different AIC branches are there in China? Would there be any loopholes that could be exploited accross the different branches? What do you know about the Fuzhou AIC branch? Do they have a website or contact information that can be used to get filings for the relevant company that’s under their jurisdiction? Thoughts or any sort of primer on this topic would be greatly appreciated.

But as an aside, from my research, VIEs should still have matching AIC and SEC financial statements. Just because they are not audited doesn’t mean that the companies just submit fake numbers to their own government. For instance, Beijing Wowjoint’s AIC filings show a legitimate business on par with its SEC filings. BWOW looks like a real business, based on AIC filings. And yet it’s a VIE. How is Beijing Wowjoint different from other reverse mergers / SPACs? Its SPAC was headed by one of the members of the same SPAC that purchased TXIC. I believe TXIC is real. TXIC is the only SPAC / reverse merger that I am long.

I will add that Geo-investing has done a tremendous job with their research into the AIC/SEC financial statements issue.

2. For SPRD, a lot of the cash is or has historically been at the Cayman Islands parent. It may also be at other subsidiaries, but mostly at the parent. They did an IPO and didn’t necessarily bring all their cash to their two operating PRC subsidiaries.

As for fictitious bank accounts, it’s not far-fetched. If I were to say to you: “Hey Ryan, if you can find a way to get your chinese custodian bank to provide fake cash balances to your auditor and have him sign off on it, I’ll give you 75 million dollars of new equity capital for your bogus business, what would you do?” You know what I’d do? I’d figure out a way for my chinese custodian bank to give them those fake cash balances. I want $75 million just as much as Song Jin’an does.

Anyways, Deloitte and Ernst & Young are not auditing CHBT. The far more far-fetched notion is that demand for probiotics protein powder is growing at 40% a year and earns its maker 40% EBITDA margins. That’s far less believable than auditors signing off on fake cash balances.

As for “vast opportunity” in the US-listed Chinese reverse merger sector, there’s “vast opportunity” the same way there was “vast opportunity” in Triple-B subprime bonds in 2008. Good luck finding the ones that aren’t zeros. The fraud is much more vast than the opportunity is.

1. Your article lacked any reference to the difference between VIE(Variable Interest Entities) and FIE (Foreign Invested Entities) which my personal due diligence suggests has an impact on the importance of the SAIC filings relation to the SEC filings and ultimately the utility of a direct comparison of the two. Could you clarify whether or not CHBT and SPRD are VIE or FIE and how you derived that? I’m trying to figure out how to make this determination myself. (a reference for more info on VIE vs. FIE:http://geoinvesting.com/forums/m/yaf_postst2967_The-SEC-vs-SAIC-Fact-Finding-Mission.aspx)

2. What procedures do the accounting firms auditing CHBT and SPRD use to account for their cash and cash equivalents holdings. With CHBT and SPRD there is a large discrepancy in the cash and cash equivalents between the SAIC and SEC fillings. It is my understanding having talked to friends at Deloitte and Ernst & Young that typically an accounting firm is giving authorization to contact the custodian bank of the company being audited in order to cross reference company books with bank accounts. If these accounting firms are indeed using this procedure your accusation of fraud would presume fictitious bank accounts, which would be a little far fetched in my opinion. I am not long either of these particular companies and believe that there is fraud in the US-listed Chinese reverse merger sector, however I also think there is vast opportunity. I look forward to your response.