GEO Investing

Shares of GEBD have fallen from around $1.00 to $0.12 (Bid) since its RTO transaction in March of 2008, probably due in part to stagnating sales and the lack of any meaningful IR. Furthermore, the following comment from the 2010 third quarter 10Q indicates that growth initiatives are not a priority:

We believe that our cash flow generated from operations will be sufficient to sustain operations for at least the next 12 months. There is no identifiable expansion plan as of September 30, 2010, but from time to time, we may identify new expansion opportunities for which there will be a need for use of cash.

Additional reasons to be weary of this story and why shares have been depressed:

  • High Debt to equity to equity: 1.34 (We generally prefer to invest in companies with a debt to equity ratio of less than 20%).
    • Short-term debt: $29.6 million  (includes a large note payable)
    • Long-term debt:  $2.8 million
  • Weak internal controls

Some investors may view the fact that the GEBD has some bank debt on its balance sheet to as an a testament to the reliability of its financial statements.  Bank loans are also secured by Machineries of the Company Land and buildings of the Company.

The maturity dates for the bank loans are summarized as follows:

Bank loan balances
Drawn down As of September As of December
Name of bank currency Due date 30, 2010 31, 2009
China Construction Bank RMB May 2010 $ $ 1,467,527
Industrial and Commercial Bank of China RMB Jan 2010 146,753
Industrial and Commercial Bank of China RMB Oct 2010 440,257
Bank of Communication RMB Jul 2010 733,764
Bank of Communication RMB Aug 2010 733,763
DBS Bank (Hong Kong) Limited RMB Nov 2012 1,010,730 1,301,899
DBS Bank (Hong Kong) Limited RMB Mar 2011 169,055 118,058
DBS Bank (Hong Kong) Limited RMB Mar 2012 166,878
DBS Bank (Hong Kong) Limited RMB Apr 2011 629,010
DBS Bank (Hong Kong) Limited RMB Sep 2011 351,537 541,777
DBS Bank (Hong Kong) Limited RMB Aug 2013 1,336,680
Hang Seng Bank Limited HKD Feb 2015 888,214 1,010,665
Hang Seng Bank Limited HKD Mar 2015 897,084 1,024,073
China Merchants Bank RMB Feb 2010 1,320,774
China Merchants Bank RMB Apr 2011 672,510
China Merchants Bank RMB Mar 2011 1,494,467
Shanghai Pudong Development Bank RMB Dec 2010 1,494,467 1,467,527
Bank of China RMB Jan 2011 1,494,467
Bank of Communication RMB Jul 2011 1,494,467
China Construction Bank RMB Jul 2011 1,494,467
$ 12,798,145 $ 11,102,725

The GeoTeam® continually attempts to identify catalysts that can affect change in company’s fortunes for the better or worse.

A couple recent events have prompted us to track (but not yet endorse) GEBD:

1. It looks like GEBD ownership has changed hands

  • On December 30, 2010, the Company entered into an Asset Purchase and Sale Agreement with Chung A. Tsan Guy whereby the Company sold its subsidiary Great East Bottles & Drinks (BVI) Inc. in exchange for Mr. Chung surrendering31,498,000 shares of common stock of the Company.
  • Pursuant to a private Stock Purchase Agreement dated January 25, 2011, between Chung A. Tsan Guy and Chan Ka Wai, Mr. Chung sold 6,099,400 shares of common stock of the Registrant to Mr. Wai for a total purchase price of $548,964 or $0.09 per share.  According to this transaction, a change of control of the company has occurred.
  • On January 28, 2011 the following individuals were appointed to the Board of Directors of the Company: Chan
    Wing Hing, Kwong Kwan Yin Roy, Yau Wai Hung. Also on January 28, 2011, Yau Wai Hung was appointed as Chief Executive Officer of the Company. Additionally, on January 28, 2011, Mr. Stetson Chung submitted his resignation as Chief Executive Officer and Mr. Danny Poon also resigned as Chief Financial Officer of the Company.

2. The company recently consummated an acquisition:

  • On October 26. 2010, the Company entered into an Acquisition Agreement with Water Scientific Holdings Limited (“Water Scientific”) and the shareholder of Water Scientific whereby the Company acquired 100% of Water Scientific in exchange for 500,000 shares of common stock of the Company.

We will keep a close vigil on developments to this story and consider pulling SAIC filings.

Eastern Environment Sols (OTC BB:EESC) is another stock in this industry.