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||–|
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.