China-Biotics: Your Next 5x Investment 141 comments September 29, 2010 includes: BIDU, CHBT.

PK, CTRP, EDU, JOBS , LWAY, MATK Most investors would agree that if you are going to invest in China, the best pl ace to focus is on investments that serve domestic consumption. If you can find a company that looks poised to dominate a particular domestic consumption sector , you probably have a winner. The only problem is that the easily indentified wi nners that came public through IPOs already trade at ridiculous prices. Companie s like Baidu (BIDU), Ctrip (CTRP), New Oriental Education (EDU), and 51jobs (JOB S) trade at prices between 32x 75x 2010E earnings. Thus it is an amazing opportunity when you find a company that (i) is the market leading player in China, (ii) is replacing costly foreign exports, (iii) will e asily grow sales and EPS 40-50% per annum over the next three to four years, yet (iv) trades at 6x current year estimated earnings (and only 2x ex-cash). ChinaBiotics (CHBT) provides exactly such an opportunity. China-Biotics is Chinas leading producer of probiotics. Probiotics are healthful bacteria which help improve digestion and boost the immune system. Probiotics ar e usually provided as an additive to foods like yoghurt (think Activia or Actime l) and baby formula, and also taken in powder form (think Baby-Dophilus) or pill form. The industry is growing quite fast worldwide (estimates I have heard are 17-18% in advanced economies but faster in China). China-Biotics started as a re tail business, selling probiotic pills and powders as food supplements in superm arkets and its own retail outlets. Recently it has expanded and built a new giga ntic 150 ton bulk production facility (the largest facility in China) in Qingpu which it will use to supply food additives in bulk form to Chinese companies in the dairy, baked goods, and animal feed industries. As we heard from several large dairy customers at its investor day, China-Biotic s is the only company in China that can produce bulk probiotics of the same qual ity as Danisco and Chr. Hansen, two Danish companies who have a dominant positio n in the industry. In fact most of Chinas large dairy companies have sourced prob iotics exclusively from these two companies, but now China-Biotics is changing t hat. Growth opportunities abound for this company. It recently announced that it will expand its bulk facility to 300 tons per annum capacity next year and it w ill also build a probiotic animal feed facility in the Yangling province. My con servative projected income statement is below: click to enlarge images

Below I show the multiples of leading Chinese domestic consumption stocks, probi otics industry stocks, and China-Biotics. If CHBT were to trade in line with its probiotics industry peers, it would trade in the $40 - $50 per share range TODA Y, and CHBT is growing faster than any other company in its industry.

Why So Cheap? I think everyone would agree that if China-Biotics checks out, then it is clearl y massively undervalued. The reason that China-Biotics is so deeply undervalued is that it has recently been attacked by short sellers. Even though China-Biotics is a company of such high quality that it could have e asily have come public through an IPO, it rather came public through a reverse-m

erger. Companies that come public through IPOs typically have a strong instituti onal shareholder base and major investment banks publishing high quality researc h on them. As such they trade at higher valuations. Companies coming public thro ugh reverse mergers typically do not have the solid institutional investor base, because the large institutions were never sold the stock. Because they never ga ve the big banks business, they have difficulty getting the major investment ban ks to cover them. So they trade at lower valuations. Short sellers have recently discovered that Chinese reverse mergers are very eas y to manipulate downwards, because they have typically a rather weak shareholder base that is not well informed and easily swayed by market rumors. In a short a ttack, the short sellers generally make up some allegations of fraud that sound believable enough (until you scratch under the surface) and are difficult for th e non-Chinese speaking to refute. They then enlist a hoard of bogeymen to domina te the message boards so that any voice of reason is crowded out of the discussi on. In the last three months, many Chinese companies have come under attack, includi ng CHBT. It seems the only requirements are (i) the company came public through a reverse-merger or SPAC, (ii) the stock price at the time of the short attack w as above about $7, and (iii) the company trades on a major US exchange. I was su rprised that the shorts went after CHBT because it is such a high quality compan y. This attack has provided me with the best buying opportunity I have had all y ear. I realize that anyone interested in the stock will want to understand the short position as well, so below I show how the short arguments do not add up. SAIC Filings vs. Tax Filings and Bank Statements One of the major arguments short sellers have used to discredit Chinese companie s is that their SAIC filings do not match their SEC filings. For those who are n ot informed, the SAIC is like the chamber of commerce. All Chinese companies hav e to file with the SAIC each year to renew their business license and the financ ials filed by each company are accessible by the public. The penalty for misfiling, if ever caught, is RMB 50,000 (about $7500). No one i n China takes these filings seriously. Firms typically underreport their sales, profitability and cash for competitive reasons and also so that they dont get sha ken down for favors from corrupt politicians. I have a good friend who is a mana ging director of a US funded China private equity fund. I asked him about the SA IC filings. He said when his fund does due diligence, they do not even look at t he SAIC filings because everyone for the most part files junk. We look at the tax filings and the bank statements and try to follow the cash. If you underreport t o the tax authorities, the penalty will severe and harsh. Tax statements matter, but the SAIC filings do not. Being no different from most other Chinese companies, CHBT also underreported to the SAIC. I am not saying that is right, but it is local convention and does no t say anything about the validity of CHBT. The short attack on CHBT to no surpri se started with a post on the SAIC filings. The 2007 and 2008 SAIC filings in En glish for Shanghai Shining, the retail subsidiary of CHBT, are shown here. As one can see from the comparison below, the SAIC filings appear to show a comp any with very little cash and sales, and a negative equity position. The SEC fil ings show just the opposite. Every company in this industry has decent margins s o it would be strange for CHBT to show anything else.

Tax filings and bank statements are the conclusive evidence. A company will not have the cash if it is not making the money it claims. Further, it would be very odd for a company to pay more taxes than it should, so tax statements further v alidate profitability. For this reason, CHBT showed investors the bank statement s and tax payments on its investor day. We were shown the bank statements from t he three main bank accounts, which accounted for $140m of the $159.7m in June. T he rest, the CFO said, were in a bunch of smaller accounts in RMB, HKD, and USD. We were also shown the tax statements where we could see that Shanghai Shining had paid almost $10m in taxes in the four quarters ending March 2010. This is mo re than the $5.3m CHBT paid in cash income taxes in its SEC filings. The differe nce is probably net VAT payments. All tax statements were chopped (meaning marke d with the official seal) by the tax authorities. For more information on the st atements see this article here. The short attack claimed that CHBT was a fraud because it had virtually no sales and no cash according to its SAIC filings. This could not be further from the t ruth. China-Biotics raised $25m from Pope Asset Management on December 12, 2007 and a further $75m from Roth Capital on September 29, 2009. The company began bu ilding the new plant in 2008. If the company had no cash in 2008 and was making losses there would have been no money to build the facility until October 2009. I visited the new plant on November 16, 2009. As you can see from the pictures b elow, construction could not have started in October 2009.

For those still not convinced, I would like to point out that the 2007 SAIC fili ngs dont even balance, which is further evidence that they are not real financial statements. The cash balance decreased by 701k RMB while the cash flow statemen t showed an increase in cash of 701k RMB. The bottom line is that the SEC filings, the tax statements, the bank statements , and the physical evidence from construction of the Qingpu facility indicate th at CHBT has earned the profits it claims, generated substantial cash from operat ions, and possesses all the cash it claims. Retail Outlets The companys retail sales from its outlets were only 8% of sales in the latest qu arter, so this is not a big point, but the shorts have claimed the retail stores do not exist. At the investor day, CHBT showed in a presentation the physical a ddresses of the 103 outlets it had at June 30, 2010. It explained that 64 of the se outlets were 4-walled stores and 39 were counters in stores (shop-in-shops). In addition, the company provided a pack of all the leases for viewing at the in vestor day. Further the company explained that the addresses provided on its web site were simply a representative list of the 4-wall stores, retail counters, an d store shelves supplied by distributors, not an exhaustive list of the companys own stores. I find the short arguments regarding retail stores about as absurd as the SAIC c laims. The shorts said, for example, that only 2 4-walled retail stores existed, yet we saw 4 stores at the investor day and I saw another store in November 200 9. Why should I not believe there are many more? Weve also seen all the addresses in a presentation and the leases at the investor day. On top of that given that the cash balances and the tax filings all add up, it is very clear that the ret ail sales add up. Conclusion China-Biotics represents a very attractive buying opportunity to own Chinas leadi

ng probiotics manufacturer. The company has strong growth prospects and will inc rease earnings substantially in the coming years. The stock is incredibly underv alued. China-Biotics is worth 4-5x its current price today based on where compar able companies in its industry are trading, yet CHBT is the fastest growing comp any in its industry. Through spurious and misleading arguments, short sellers ha ve put pressure on CHBT, but conclusive evidence exists to refute their claims. For the informed buyer, China-Biotics represents an incredible investment opport unity. If you are interested to find out more about China-Biotics, I recommend you read articles by Jason Nevader here and by me here. Disclosure: Author is long CHBT This article is tagged with: Long & Short Ideas, Long Ideas ==== Ryan HoComments (27) good analysis. i am however very cautious about investing in the food industry i n china. i will only be convinced if there s stringent quality standards/control s in place to ensure consumers health is not compromised. furthermore, i am not sure whether the product competitive edge will last long. any potential for a f oreign powerhouse team-up? your views pls. 29 Sep 2010, 03:56 AM0 Sean WrightComments (24) Ryan, if the GMP and TUV certifications are not enough, i can also tell you about the clean rooms and the workers packaging product clothed in plastic wrap. This is v ery high tech stuff. They would not be selling to the leading dairy companies if the product was not first class. it is not easy to manufacture, the margins are high, and the industry is, to quote the chairman, "not as competitive as people think." You should read further articles by me and Jason Nevader. Best, Sean 29 Sep 2010, 10:25 AM0 China InvestorComments (147) Trying to prove quality by association with the "leading dairy companies" isn t convincing when the "leading dairy companies" themselves sell milk tainted with melamine. Having said that, there are good opportunities in the food industry in China, particularly SIAF. 15 Oct 2010, 12:14 PM0 china_bullyComments (17) Sean, Great presentation. Never have any of the shorts, including John Bird / waldo mushman, offered ANY e vidence that fraud exists. It is clear the short sellers are organized but John Bird / waldo mushman is an amature and should never have been a threat. The man behind the mask Chinese Company Analyst is John Bird / walso mushman and he is a talented con artist, nothing more. CB CB 29 Sep 2010, 04:52 AM5 Special KComments (55) I love this quote: "No one in China takes these filings seriously. Firms typical

ly underreport their sales, profitability and cash for competitive reasons and a lso so that they dont get shaken down for favors from corrupt politicians." Right, so they decide to GO PUBLIC, where they have to report sales and profits on a quarterly basis with significant detail, but for their SAIC reports they li e to keep these sales and profits under wraps. I guess they figure that none of their competitors or the local politicians know how to use the Internet or know anyone who speaks English. 29 Sep 2010, 09:11 AM7 Momonthego1Comments (17) Another excellent piece Sean! I just can t believe the number of people who are buying the short argument. CHBT makes Chinese dairy farms more valuable because the farmers can add a valuable ingredient at a very reasonable price. Farm land is scarce in China and this product will help increase profits for the farmers a nd profits for CHBT. I see this company as a huge home run! 29 Sep 2010, 09:12 A M3 Momonthego1Comments (17) One more thing Sean. Out of 75 Chinese companies listed in the U.S., fewer than 5 of their SAIC filings balance with their SEC filings. It s like saying your dr iver s license should balance with your tax return. It s not likely to happen an d it s a common practice not to report good information to SAIC. That s the way things are and if you have any experience doing business in China or with Chines e companies, you would know this. That s a credibility issue with the short sell ers argument. 29 Sep 2010, 09:15 AM6 Waldo MushmanComments (322) Sean, like all the apologists tries to minimize the retail issue. "Forget the la st 5 years and what was reported then, just look ahead." CHBT has represented th e retail outlets as the source of over $25mm in net profits over the last severa l years. This is a photo tour of those outlets. www.therealchbt.com/ CHBT now claims that this mighty retail engine has no value and they are unable to extract any value from the chain. They intend to shut down the chain. Recentl y CHBT has claimed that these are not the "retail outlets" but rather retailers serviced by distributors. There are 64 full sized stores that CHBT will not rele ase a list of addresses for. The SAIC filings for virtually every one of the companies listed on the HK excha nge match. The massive inflation of numbers (Its always inflated never diminishe d) only occurs in the RTO sector. Every one of the Chinese companies that has bl own up in the last year has wildly divirgent SAIC/SEC numbers. How difficult cou ld it possibly be to have reports that match in China to the reports filed in th e US? I can produce literally thousands of Chinese companies where that is the c ase, but Sean and other accolytes have manufactured lame excuses to justify assu ming this vast risk. CHBT is a fraud. It will be delisted. Any investor so blind as to overlook histo rical misrepresentations and systematic reporting fantasies deserves the losses those activities predict. John 29 Sep 2010, 09:53 AM12 Emerging Markets InvestorComments (141) Shorts visited several addresses of the selected sample locations listed where p eople can find China-Biotics products. They found a bunch of addresses where the y could not find a retail presence at all. Instead of contacting the Company for an explanation, they claimed the Company is a fraud.

As a long investor, I went to the Investor Day and spent a week in Shanghai doin g my own due diligence. I asked management about the addresses, and they were pr ompt in getting me a response. All of the addresses were accounted for as severa l of them are really there and several of them had the address numbers transpose d when putting it on the website. The Company has fixed its website and I have p roof of that those locations exist. As you can see from viewing my Photobucket albums, I have posted images of 9 of the locations that the shorts questioned. Let s see if the shorts update their b log postings to the truth. I doubt it since they are only interested in spreadin g lies and creating fear. s897.photobucket.com/h... 30 Sep 2010, 03:54 PM0 Michael BryantComments (1287) Sounds like a Muddy Water s style scheme. 30 Sep 2010, 04:14 PM0 beachcm65Comments (11) Thanks for the informative back and forth. Having overseen operations in China for five years for my last employer I am sym pathetic to a point - there are real and numerous cultural and language obstacle s to overcome, especially in young, rapidly growing enterprises trying to naviga te the US market. Too many in the US don t appreciate that. However, CHBT management has clearly brought a lot of negative sentiment on them selves, with blunder after blunder. Sean/Jason, encourage management to persevere - don t stop halfway! I see 25 sto res on therealchbt where there is no product. You ve explained 9, but what about the rest? Don t put the onus on the investors to be investigators - just clear up the misunderstanding and move on. 30 Sep 2010, 08:46 PM0 Emerging Markets InvestorComments (141) I only looked into the addresses that the shorts said didn t exist and got all o f that corrected. It was a pain in the ass, but worthwhile to show that the shor ts have no credibility. The other addresses are of real locations of supermarket s. I could have a photographer go and double check for the products at each supe rmarket, but at some point, who cares? They sell their products at thousands of points of sales. I spoke with 3 of 27 distributors who represent 773 supermarket s and 300 pharmacies. I am more than satisfied with my level of due diligence. I t is time to move on. 30 Sep 2010, 09:01 PM0 beachcm65Comments (11) Thanks Jason for the clarification about which stores you visited. Perhaps I didn t make my point clearly. The company made the decision to wade in to this debate by publishing a list of addresses; they should just finish the jo b and get it right and stop relying on investors to defend them. It s not so har d is it? It shouldn t take more than a week of some low-level staff person s tim e. Goodness - how much time did they put into their investor day! And what good has Grayling done for them in all this? Sorry to vent - thanks for what you re doing to create clarity. Best of luck to you. 30 Sep 2010, 10:30 PM0 Arrow HendrickComments (74) What I find disingenuous is that when the company published the list of addresse s, even Jason thought that these were the retail stores. Here are just a few of

his quotes: Jason Nevader --- "OK, here are the addresses of the retail stores..." Jason Nevader --- "... I have the list of all of the addresses of the retail sto res..." Jason Nevader --- "As promised, here are the list of retail stores: ..." Jason Nevader --- "Sure, check out the stores. You have a list of every store no w..." seekingalpha.com/user/... The stores were checked and many turned out to be shelf space in supermarkets. S o Jason changes his tune and acts as if we should have known that "Shining Brand Retail Outlet" meant shelf space... despite promotional material from the compa ny like this: static.seekingalpha.co... It s fairly obvious that something is fishy about the claim that 64 of the retai l outlets pictured above existed as of 6/30/2010. Some have been shut down since that date they say. Fine. How many still exist? S urely they didn t close 50 plus "Shining Brand Retail Outlets" in the last few m onths (to date around 10 have been identified by the longs, shorts, and the comp any). Why is the company so reluctant to release where their current stores are locate d? Have you ever heard of a retailer making it this difficult to locate stores w here they are selling their product to the public? It s absurd! As has been repeated ad nauseum, the retail stores (and as we now know rented sh elf space) represented 25% of their revenue in 2009. That is not a trivial number Jason. Creating clarity, egitimate concern could then easily d the stock would as is be no a long investor in the company, would mean demanding this l addressed by the company by posting the 64 addresses. They verified independently. This would lay to rest the issue an doubt soar.

Yet, this still has not been done. What are you and the company trying to hide? Disclosure: No Position in CHBT 1 Oct 2010, 02:51 AM0 Nathan MComments (13) I am a long and think the stock is at a great discount right now, but I have to agree that they should handle this issue better. It wouldn t take much time or e ffort to do a "virtual picture tour" of the outlets, sort of like the shorts hav e done. Their list of addresses on the web site has caused more trouble than it has solved since it was done so incompetently. I will assume it was done with go od intentions, but since it wasn t a list of the branded retail outlets and sinc e addresses were improperly copied it hasn t helped the long s case. The people that went to investor day are satisfied I f the market a virtual picture tour would squash all mediately. The minimal amount of labor it would take e rise in share price and increase in credibility in am sure, but for the rest o of the fraud talk almost im would certainly be worth th the market. If Jason, Sean,

and others who went to the investor day could convince the company to do this, it would certainly be worth the time and effort. All it would take is a person w ith a digital camera and some time, and then you guys can post these articles wi thout hearing the same story from the shorts again and again. 1 Oct 2010, 12:53 PM0 Waldo MushmanComments (322) The delivery man could just take pictures as he made the daily route dropping of f cases and cases of the yeast. The camera must have broken after they shared sn appy photo s of four stores. Or maybe the other 60 are super secret locations th at must be held from public view at all costs. The four that were OK to show had recently been declassified and were no longer hush hush. Maybe if its such a struggle to make a copy of their own location list, they mig ht just rip out the phone book page that shows all the locations with the phone numbers. I can t seem to find those listings online, so I am sure they must have it somewhere else. Maybe they could get the list of their stores from the distributors. We are told the address list they put up on the website was compiled by CHBT staff polling distributors in the middle of the night for a sample set of outlets. Maybe the d istributors know where to find the company stores? John 1 Oct 2010, 01:51 PM0 Emerging Markets InvestorComments (141) I will admit that when I saw the list of addresses posted on the website, I thou ght that was the list of addresses of the Company retail outlets. All of my comm ents you quoted were right after the addresses were posted to the website. Howev er, after speaking with the Company, I was told they decided to post a represent ative list of where their product could be found, including distributor location s. I was told they closed a large number of Company retail outlets this quarter and posting the list of Company retail outlets as of 6/30 would just cause confu sion since many of them have closed due to their announced plans at the last ana lyst call to move in favor of using distributors. 1 Oct 2010, 03:00 PM0 Arrow HendrickComments (74) The biggest source of confusion for this stock is that the company refuses to pr ovide the addresses publicly of these 4 wall branded stores. This should be a simple task. i.e. "As of June 30th, 2010 CHBT operated 64 Shini ng Brand Retail 4-wall stores. During the last quarter we closed X stores and op ened Y stores as part of our previously announced consolidation plans. Hence, we currently operate [64-X+Y] stores that can be found at the following addresses: " Then list the locations. Citron Research originally asked for the locations over a month ago and there st ill hasn t been a coherent response from the company despite the stock getting c rushed in the market. This should be a concern to investors. 1 Oct 2010, 03:26 P M0 Arrow HendrickComments (74) I might add, given the utter confusion over this issue, the company should immed iately post a list of the 64 addresses you and Sean were shown. It is completely unfair to the average retail investor that you, Sean and others in attendance were given this key bit of material information by the management of a publicly traded company. Most retail investors who own the stock had neith

er the time nor the money to attend the investor day presentation. Seems to be i n direct violation of Reg FD when this presentation could have easily been put o n the companies website. And to avoid any confusion they could color in red any addresses that have been closed since 6/30/2010 and note this fact. It would then be easy enough to verify that locations did exist there just a few months back. 1 Oct 2010, 03:44 PM0 Emerging Markets InvestorComments (141) The Company did exactly what you requested in every quarterly SEC filings. Last quarter it said: "As of June 30, 2010, we have 27 distributors for retail produc ts, and we are operating 103 retail outlets in China (as of June 30, 2009, we ha d 107 retail outlets). During the quarter ended June 30, 2010, we added 1 distri butor for retail products and closed 8 retail outlets, as we believe selling ret ail products through our distribution network is a more efficient way to grow ou r retail market." In about 5 weeks, we will get the same disclosure as of September 30, 2010. Why must the Company be forced to answer anonymous blogs? 1 Oct 2010, 03:45 PM0 Arrow HendrickComments (74) You re (intentionally?) leaving out the most important point: "Hence, we currently operate [64-X+Y] stores that can be found at the following addresses: " Then list the locations." 1 Oct 2010, 03:48 PM2 Emerging Markets InvestorComments (141) Gotcha. OK, let me see if I can get you what you need. 1 Oct 2010, 05:56 PM0 Arrow HendrickComments (74) Thank you. I m looking forward to seeing all the relevant addresses. 1 Oct 2010, 06:43 PM1 Arrow HendrickComments (74) Jason, Any progress getting the 64 addresses? Thanks again. 4 Oct 2010, 04:09 PM1 Emerging Markets InvestorComments (141) I am working on it. My contacts are busy getting ready for the Jefferies Healthc are conference on Wednesday in London and the one-on-one meetings they have sche duled with institutional investors. finance.yahoo.com/news... 4 Oct 2010, 05:01 PM0 Arrow HendrickComments (74) Thanks. The 64 addresses will begin to lay this issue to rest once and for all. 7 Oct 2010, 03:12 PM1 Arrow HendrickComments (74) Just checking in. Any news on getting the addresses you were shown on Investor D ay? As more and more time passes, it still strikes me as all the more unfair (as wel

l as a potential violation of Reg FD) that you, Sean, a handful of investors tha t had the time and money to fly to China were shown this material information ye t CHBT still hasn t posted it on their website for all investors to see. 12 Oct 2010, 05:28 PM2 China InvestorComments (147) Happens all the time, and not just in the financial industry. People with more m oney get better access. Just gotta find your own strengths! 12 Oct 2010, 05:37 P M0 Arrow HendrickComments (74) I ve got no opinion on CCME, but interesting that they also hosted an investor s day in September while facing accusations of fraud and a low share price. In stark contrast to CHBT they posted a full video of the event: www.ccme.tv/en/vedio_v... and their presentation: www.ccme.tv/UpFile/PPT... CHBT doesn t even need to go to these lengths. All it has to do is post a list o f address of their retail stores. Why is it so hard for the company to post the locations? These are venues they are selling their product to the public, no? Jason, any luck getting that list? Any opinion on why this is taking so long? It has now been a month and a half since Citron Research challenged the company to list the addresses of their retail locations. And still nothing from the comp any. 14 Oct 2010, 03:32 PM1 Emerging Markets InvestorComments (141) Hi Arrow Hendrick, Sorry for not getting back to you sooner. Thanks for your patience. I asked abou t making the list of 64 addresses of the stores and 39 addresses of the counters publicly available that make up the 103 retail outlets that were open as of 6/3 0/10. I was told that making this list public would cause more harm than good be cause the Company continued with their retail outlet consolidation at a much fas ter pace in Q2 than Q1. If investors visited the addresses as of 6/30/10, we wou ld find a bunch of stores that have recently closed. We would also miss out seei ng stores that recently opened. For example, during our Investor Day tour, we vi sited two stores that opened in July/August that replaced several locations that closed. In order to continue to serve customers from closed stores, a new store was opened to serve displaced customers. Given the large number of Q2 retail outlet closures and new openings, a 6/30/10 address list would be meaningless and could not be independently verified. There fore, at the Investor Day, they provided the retail outlet leases to show invest ors that the stores did in fact exist as of 6/30/10. This was well received by i nvestors who attended the Investor Day and wanted verification that the Company has been truthful in their disclosures. Therefore, I think the best course of action would be to be patient and wait for the Q2 update ending September 30, 2010 (to be released in around 3 weeks) and see how many outlets were closed and how many were open to get to the updated co unt. At that point, it would be great to see the list of addresses and a photo t our of retail outlets as of 9/30/10. I will ask again after Q2 is announced.

Jason 15 Oct 2010, 12:29 AM0 Waldo MushmanComments (322) Apparently they don t know how many they have open today. Is that a real tough i ssue. Again the Evader strikes with a pocket full of mumbles suggesting that som e nebulous date is more or less relevant that today. You just keep on checking buddy there are no stores. Take a look in the phone bo ok. Try the internet. Hire a private investigator. Ask an employee. Ask a distri butor. The stores don t exist. Today is October 15 2010. How many stores does CHBT have open this morning selli ng the spice to the masses? John 15 Oct 2010, 01:24 AM2 panzerepsilonComments (17) Well John answered his own question and found at least 12 of them himself: messages.finance.yahoo... Nice job! 18 Oct 2010, 09:53 AM0 Nathan MComments (13) Jason, could you get them to commit to doing a photo tour at a certain date in t he future? I understand the situation, but if they delay and then delay further it won t help things along at all. Thank you. 15 Oct 2010, 11:14 AM0 Emerging Markets InvestorComments (141) Hey Nathan, Once the consolidation is complete, it would be great if management did a photo tour of their current retail outlets. Since I don t work at CHBT and am simply a long-term investor, I can only make suggestions. Just so you know, I have no concerns about the retail outlets (I went to Shangha i and saw 4 outlets in person and know of a few others). Once you see the Qingpu plant in person, your thought is screw the stores, just close them down and put all your efforts into the bulk business. The bulk business generated $10 millio n in revenue last quarter and grew 170% year over year, while the retail outlets only generated $1.95 million and was down 9% year over year. I will pass along your thoughts that you would find it comforting to see a photo tour. I just hope it doesn t push the stock price up over $14.16 per share befo re December 11th. I would really like to see the convertible debt repaid. Gettin g the convertible debt repaid saves us from having to issue 2,083,333 additional shares on December 11th, which would suck given the next 5 years of growth. Jason 15 Oct 2010, 02:03 PM0 Arrow HendrickComments (74) Thanks for replying Jason. Given that around 8 four wall retail stores have been identified, how many of th e remaining 56 stores would you guess were closed in the last quarter? Did they give any idea as to how many were opened? Most importantly, how large would these numbers have to be for you to begin to d oubt the authenticity of management s past claims of 64 retail stores as of 6/30

/2010? For example, if in three weeks they claim to have closed 56 retail stores last q uarter, opened 10 new stores, and then provide a list of 18 locations... you d b e concerned, right? Finally, I would still appreciate the list of the locations you were shown on In vestor Day if there is anyway you can get it from management. Contacts I have in Shanghai could easily go to a few of these locations and quickly ascertain if t here were in fact a Shining Brand Retail Outlet open just a few months back. Thanks again. 15 Oct 2010, 11:28 AM2 Mike RenaldiComments (134) I would not encourage giving out the addresses to the shorts. They will most lik ely attempt to disrupt the stores. They have multi millions at stake in their sh ort positions and would go to great lengths to disrupt the company so they can c over. If they can sabotage the stores they would imho if they haven t already. S tock lemon was involved in a company I was invested and they disrupted company s eminars. The company reported a bad quarter, the stock tanked and they covered i n 2 days cheap. I discourage anyone from giving out the information. 15 Oct 2010 , 11:37 AM1 Reason10Comments (24) You make a good point and I am glad you mentioned it. I have often considered th is scenario and would not put it past the folks who shorted this stock. 15 Oct 2 010, 11:47 AM1 Arrow HendrickComments (74) MikeI have no position in CHBT. I am not short the stock. If the stores were proven to exist I d likely be long. Roth has downgraded the stock to a sell because of lack of transparency over the retail store issue. Posting the addresses publicly would dispel this concern an d most likely have them reinstating their buy rating. Shorts would be covering l eft and right. And as has been pointed out, these are locations where they are selling their pr oduct to the public. Therefore, doesn t it strike you as odd that they are keepi ng the addresses a secret? 15 Oct 2010, 12:08 PM3 Mike RenaldiComments (134) I am sorry you feel the company is keeping secrets. They are not. You had your c hance at Investor Day. The company should not be responding to investors who are attempting to sabatoge its business. Roth has downgraded the stock because they have huge interest in this stock and the downgrade is highly likely to be for personal gains or for the interest for their clients. I won t even guess their reasons. With the shorts in jeopardy of getting into serious financial troubles they are becoming desperate. Remember their is no limit in how much a short can lose... t he stock price can climb indefinitely. Notice the increase in negative comments as the stock price has taken off the last 16 trading days. The company needs to defend itself from engaging with the shorts and conduct bus iness as usual. GL 15 Oct 2010, 12:50 PM0

Emerging Markets InvestorComments (141) If I had to guess, I would say half were closed. Here is my explanation: In Q1 o f FY2009, the company said that 18% of retail sales came from retail outlets, wh ich equates to $2.132 million. In Q1 of FY2010, the company said that 13% of ret ail sales came from retail outlets, which equates to $1.945 million. The sales f rom the retail outlets declined 8.8%, while the number of outlets declined from 107 to 103 year over year. In addition, the operating costs have increased with lease costs and labor costs on the rise in Shanghai. When I went to Shanghai and visited the stores, I noticed that the prices of the CHBT Shining products were much cheaper in the supermarkets and pharmacies. Shining has been around since 1999. If I was a customer of their products, I would rather buy it in big box st ore vs. a CHBT store to save money. For example, at an Auchan supermarket, I bou ght two boxes of Shining Protein Powder for 99 RMB (they had a 2 for 1 special g oing on). In the retail store, they were charging 288 RMB for one box! Where wou ld you buy your CHBT products? Therefore, given the poor revenue performance and higher costs, it made sense to consolidate the retail outlets. In addition, wit h bulk sales increasing 170% year over year in Q1 to $10 million, it makes sense to concentrate management resources to a new line of business that has the pote ntial to triple revenues in 2 years. I don t know how many were opened, except I know of at least the 2 that I saw on Investor Day. I would imagine that they would want to keep enough stores to con tinue holding seminars to explain the benefits of probiotics in various communit ies. However, they don t need 103 retail outlets to do this effectively. Management could close all their stores and I would believe that they had 64 ret ail stores as of 6/30/10. The reason is because I saw their leases with my own e yes, I saw the addresses and date opened and I am aware of around 10 different r etail stores that I saw in person or in photos. I don t think the Company has an y reason to lie about their stores. Regarding the list, I don t have a copy of it. Given that the 6/30/10 list is ir relevant now (just like the 3/31/10 list), perhaps we will get a 9/30/10 list th at is worth looking at. We are only a few weeks away, let s see what the company reports and go from there. 15 Oct 2010, 02:25 PM1 Andrew ShapiroComments (674) Jason you wrote: "I don t know how many were opened, except I know of at least the 2 t hat I saw on Investor Day" Please confirm - Were you or were you not personally in China on Investor Day? 1 5 Oct 2010, 03:49 PM0 Mike RenaldiComments (134) Mr. Shapiro Do you have a position in CHBT? Long or Short? Thank you! 15 Oct 2010, 03:57 PM0 Emerging Markets InvestorComments (141) I was there personally. Here is my report from my trip: seekingalpha.com/artic... As you can see, I am photographed in the R&D facility in Qingpu. 15 Oct 2010, 04 :34 PM1

Andrew ShapiroComments (674) You are being a bit evasive and did not directly answer my question. I appreciate you have made an earlier trip to China. But it should not be diffic ult to answer my particular question. And the question is of importance as you h ave made many many statements that give these poor followers of yours the impres sion you were in fact at THE INVESTOR DAY in China, and you are posting comments saying what you say you witnessed on INVESTOR DAY. Again you wrote: "I don t know how many were opened, except I know of at least t he 2 that I saw on Investor Day " You either were personally in China on Investor Day or you weren t. Jason Nevader please confirm - Were you or were you not personally in the countr y of China on Investor Day? 15 Oct 2010, 06:46 PM0 Emerging Markets InvestorComments (141) My apologies for not understanding your question. I was personally at the Investor Day. I arrived in Shanghai on Friday, September 17th, I had dinner with the CFO on Saturday, September 18th across the street f rom the Hyatt on the Bund hotel I stayed at, I attended the Investor Day on Mond ay, September 20th, I met privately with the CEO after the Investor Day, and lef t Shanghai on Friday, September 24th. 15 Oct 2010, 07:38 PM1 Arrow HendrickComments (74) Jason, Per your last comment you are clearly on good terms with the management. Given t he effort you ve put in defending the company, I find it hard to believe they re fuse to give you the addresses of the 64 locations they had already provided to you at the investor day. If they released this information publicly, not only could anyone see them with their "own eyes", but we could also have them checked out to verify a store exis ts or recently closed. You write: "I am aware of around 10 different retail stores that I saw in person or in photos" That s a far cry from 64... especially when 2 of the 10 you saw were OPENED sinc e 6/30. Does this discrepancy not strike you as odd? Baidu.com lists nearly all the stores you personally saw? Where are the remaining 50+? I ll repeat, never before have I witnessed a company that keeps retail locations where it is selling its product to the public so closely guarded. 15 Oct 2010, 08:16 PM2 Emerging Markets InvestorComments (141) I actually don t even want to see the 64 addresses as of 6/30/10 anymore. I woul dn t know what to do with the old addresses at this point. I wanted to see the 6 4 addresses after the short attack, but after I heard that the retail outlet con solidation picked up aggressively in Q2, I am more interested in seeing the curr ent addresses of stores as of 9/30/10 that are still selling products. Why are you so intent on this issue? You claim to have no position in CHBT. Ther e are thousands of stocks to choose from, just pick another stock that makes you more comfortable. 15 Oct 2010, 08:51 PM2

Arrow HendrickComments (74) Well, that s quite a digression. Needless to say Im disappointed Jason. You ve done a 180 and gone from actively trying to shed some light on the bigges t dark cloud hanging over this company to willful ignorance. You state: "I actually don t even want to see the 64 addresses as of 6/30/10 any more. I wouldn t know what to do with the old addresses at this point." Ill tell you what to do with them, verify if a store exists or was recently close d at these locations. They claim 64 stores existed. Less than 10 have been identified despite this bei ng the focal point of the criticism against the company. Every Citron Report ask s "WHERE ARE THE STORES?" yet you and the company are unable to produce more tha n 10 locations in what s approaching 2 months. Even the lead underwriter on thei r financing, Roth Capital, has dropped their rating to a sell over the issue. Bu t you would rather move on than look into the most obvious red flag. Speaking of moving on, I won t be complying with your request that I "pick anoth er stock that makes you more comfortable" and leave CHBT to you and Sean. First, this train wreck is too fascinating. You ve got a management team that up until 2 months ago claimed to have over 100 "Shining Brand Retail Outlets" pres ented to investors as standalone stores. See their material here: static.seekingalpha.co... In response to Citron s claim that the vast majority of retail outlets don t exi st, they post a list of addresses that even you think are the retail stores. But then the company edits its website to say these were only a sample of locations where you can find their products. Red flag? We then find out that almost 40% of their "Shining Brand Retail Outlets" were ac tually shelf space. Red flag? How about the remaining 64 locations? Well here are 8 of them. Move along, nothin g to see here. Second, you and Sean take a see-no-evil to your long investments. As Sean would say about the stores, "who cares." I don t, its your money. But this crosses a line when you begin aggressively pumping the stock on Seeking Alpha/Yahoo Finance trying to get retail investors to buy into the stock. Look at the title of the article: China-Biotics: Your Next 5x Investment . Quintuple yo ur money? Really? Pathetic given the obvious red flags. If you want me to go away have the company post the addresses. It s as simple as that. 18 Oct 2010, 12:19 PM2 Andrew ShapiroComments (674) Jason, you couldn t be both in the US and in China at the same time. Your public assertion of being in China on Investor Day and recounting for all here and in your other posts what you saw on Investor Day has spurred someone [probably shor t] to provide me information, supposedly directly from you, that completely cont radicts your presence at Investor Day and, by connection to your statements of w hat YOU saw at Investor Day, much of what you have been sharing with us all. According to a supposed e-mail from you, you couldn t go to China as you were bu sy IN THE US with your relatives the weekend of Sept 17-20th. So I know you post

ed here: "I was personally at the Investor Day. I arrived in Shanghai on Friday, September 17th, I had dinner with the CFO on Saturday, September 18th across th e street from the Hyatt on the Bund hotel I stayed at, I attended the Investor D ay on Monday, September 20th, I met privately with the CEO after the Investor Da y, and left Shanghai on Friday, September 24th" I don t know who to believe anymore. This battle between you and shorts gets wei rder every day. 18 Oct 2010, 12:40 PM0 Mike RenaldiComments (134) Andrew you have to be kidding me. A professional such as yourself spreading hear say publicly? You question Jasen yet you don t question Citron and other people attempting to destroy this company in order to make money? What about Roth attem pting to do the same? And you question the author of this article and not Andrew Left and the big players who drove down this stock by throwing millions at the stock and the options knowing that this activity of driving down a stock is ILLE GAL? You my friend should be questioning the illegal activity that is going on w ith the mass amount of shorting and options manipulation going on. What brought you to this stock and why are you questioning the author? Are you i nvolved in the collective shorting? Has someone paid you to question the authors credibility. Something stinks with you imho 18 Oct 2010, 01:05 PM2 Emerging Markets InvestorComments (141) Hi Andrew, To clear up any confusion regarding my trip to Shanghai and the attending the In vestor Day in person, here is a link that shows: 1) My VISA to China 2) Stamps in my passport showing that I arrived on Sept. 17th and departed on Se pt. 24th. 3) A photo of me on the R&D tour at the Qinqpu facility with other investors. I am the guy on the right holding a box of Shining probiotic protein powder that I bought earlier in the day. 4) My hotel receipt from the Hyatt on the Bund that shows the dates I was in Sha nghai. www.scribd.com/full/39... I hope we can move past this now. Jason 18 Oct 2010, 03:20 PM2 Mike RenaldiComments (134) Instead of asking these questions to the people sabotaging the company, the stoc k price, and the shareholders this guy questions your credibility. Its hard to believe the professionals engage in these fraudulent smear campaigns to make a quick buck. Sad, very sad. 18 Oct 2010, 04:14 PM1 Andrew ShapiroComments (674) I have not and am not smearing anyone. As Jason and I both know, given mation he previously put in an e-mail to someone, I had reasonable and e reason to initially raise my questions of Jason s presence in China. plain the contradicting items if wants but I thank him for clearing up sistency that I dug up in my due diligence. 19 Oct 2010, 02:15 AM2 the infor legitimat He can ex the incon

Mike RenaldiComments (134) Fair response. Because I am a small time investor I am not in the loop as far as hedge fund managers, investment managers etc seem to be. Obviously they work

with Citron and others in order to work stock prices up and down. This individua l that emailed you most likely one of those? It takes big money to work the opti ons and short the stock to manipulate it down. And it takes professionals as the y have the access to big money, other big money investors, and smear groups such as Citron. Easy money when you manipulate and cheat. Any diligence and informat ion into that emailer would be fair to share publicly. 19 Oct 2010, 08:19 AM1 Andrew ShapiroComments (674) The e-mailer did not lie to me. JASON sent this person an e-mail and told this p erson he was NOT going to Investor Day in china but staying in US entertaining r elatives. That is why my questioning was legitimate and very reasonable. 19 Oct 2010, 01:05 PM1 Emerging Markets InvestorComments (141) Andrew is correct. It is not Andrew s fault. I did email a person that I was not going to attend the Investor Day. I was being asked about my plans from lots of people (both long and short). I suspected this person was perhaps short CHBT, a nd decided not to be forthright with somebody that I could not completely trust. It seems I was correct since he forwarded my emails to other people. To clear up any confusion, I posted proof of my trip on the Internet: www.scribd.com/full/39... I also posted a complete report from the Investor Day: seekingalpha.com/artic... 19 Oct 2010, 02:27 PM1 Waldo MushmanComments (322) Were you the only attendee that CHBT paid the hotel bill for or did they do that for everyone? John 19 Oct 2010, 02:54 PM1 Emerging Markets InvestorComments (141) I paid the hotel bill myself with my own credit card. 19 Oct 2010, 03:43 PM2 pstockComments (30) I paid my hotel bill, traveling, and everything else. Are you also interested to see these expense receipts? 20 Oct 2010, 02:01 AM0 panzerepsilonComments (17) Well we know there is more than 12 still open: messages.finance.yahoo... 18 Oct 2010, 09:54 AM1 Reason10Comments (24) How unfair? They said they had 103 locations in their last 10Q filing. And thats what they showed. Nothing more. Kudo s to CHBT 12 Oct 2010, 05:42 PM0 jcreuterComments (13) Sean. Thanks for going to China and personally witnessing the actual truth. I am sure none of the shorts have ever been to China but still broadcast that there is no manufacturing plant or any retail outlets. They love to make suggestions a nd hope others believe them.a big scare tactic. This is so hilarious! 29 Sep 2010 , 10:16 AM4 bogus07Comments (31) Excellent article to supplement your detailed Investor Day report. Your revenue projections seem however very low to me. Even lower than Nevader s already conse

rvative model. For FY2012 for example you project sales of 167.6m and eps= 2.21. Can you pls. show how you get that estimate? Mgmt has said they try to achieve 100% capacity for Phase 1 by Mar 2012 (end FY 12) and to start Phase 2 in Mar 2011 just like they started Phase 1 this year. S o if we assume a rampup to 100% runrate of Phase 1 (or 130mt total annual produc tion) and 60% runrate of Phase 2 by end of FY 2012 (or 75mt total annual product ion) and assuming an constant ASP of $665/kg for both Phases (which is very cons ervative since Phase 2 has higher selling prices and Dr Ma from the R&D of Compa ny has hinted at ASP s of $745/kg for Phase 1 on Investor Day as per your notes) , I get: (130+75) x 0.665= 136MM for bulk sales in FY 12. Even if we assume 2012 retail sales to be flat vs. FY 1 1 (=73MM acc. to Nevader s model) , we should get total sales of 136+73= 209MM a s a minimum for FY 2012. Assuming a net margin of 34% (same as in 2010 vs. 39% i n Q1 of 2011), I get an eps of $3.04. If I use the ASP suggested by Dr Ma and sa me net margin, I get an eps of $3.4. So your estimate of $2.21 seems quite low. 29 Sep 2010, 10:59 AM1 Sean WrightComments (24) Hi Bogus07, You are probably right about my estimates being too low. My personal view is tha t I like to use conservative estimates so that I am not disappointed. Jason Neva der is WAY smarter than I am, and I cannot really argue with his model. Best, Sean 29 Sep 2010, 12:53 PM1 CroydonComments (19) Sean, Many thanks for your excellent presentation. Since CB is the only real Chinese p layer in the probiotics arena and they are now wisely focusing on B to B, I thin k your projections are actually conservative. This will be the last buying opportunity for smart, forward-thinking investors. All they have to do is visit their local supermarkets or watch TV commercials to know that western countries are now including pro-biotic products in their dail y diet. This is a major growth sector and CB is poised to service it. Thank you for explaining how short-sellers operate. This stock was the first exp erience for me to witness it first hand. Guess integrity doesn t mean anything to them as they have watched too many dest ructive video games. They ll do anything for money. They cannot explain why they persist with their negative comments since they don t own the stock - so it becomes quite clear what their time invested here reall y means. If they are for real why they don t they tell us where they invest? Since I happened to buy in at a low price and have already gained in my position , I can just tell the other folks here to hang in there - don t be frightened this company is for real. 29 Sep 2010, 11:33 AM1 Isaac SilbermannComments (11) Sean, Your point about the retail stores is completely off-point. If this company is l ying about the retail stores, then it is very likely lying about a host of other things. I personally did on the ground retail checks based on the addresses pro vided. One of the locations that I visited, which was posted to CHBT s site is n ot a retail location of ANY kind. 655 Yishan Road, Xuhui District is a RESIDENTI

AL community with NO RETAIL locations. This is not a site they chose to simply e xit, this is not a new residential complex that displaced retail stores. CHBT cl early lied about this location as they are lying about the majority of locations . My findings are documented here: seekingalpha.com/insta... If you actually took the time when you were in Shanghai to visit the locations p osted to CHBT s website, or even the ones which they showed you leases instead o f just looking at documents provided by the company, which could have been forge d, you would find that this company is being intentionally misleading in its SEC filings and disclosures to investors. Instead you chose to simply follow the co mpany around and were showed exactly what they wanted you to see. Your due dilig ence is cursory and through your posts you are helping to advance a fraud which is stealing investors hard-earned money. Shame on you Sean! 29 Sep 2010, 01:24 PM9 Nathan MComments (13) The short s main argument about stores is based on the list of locations that CH BT posted on their web site. www.chn-biotics.com/c4... It says: "The following is a list of sample locations where you can find our pro ducts." It does not say it is a list of their retail outlets. The shorts set up a fallacious straw man argument, which is that CHBT claims those are a list of r etail outlets, then goes on to "prove" their argument by checking those location s. It seems that list was hastily thrown up on the website, while the investor day was the real and important response to the short attack. The list had some of th e addresses transposed(a 6 instead of an 8, easy mistake to make), so some of th e locations that were checked do not have stores there because they are not the proper address. messages.finance.yahoo... There has been absolutely no credible evidence given that shows CHBT to be a fra ud. However, the company is in China and their communication with investors has been less than perfect. I would assume that is mostly because of language differ ences. Before investor day they should have put a picture tour of some of their stores on their website instead of a poorly copied list of locations. The good thing is that less than perfect investor relations and communication ar e relatively easy to fix, and the underlying business is growing at an incredibl e rate and is highly undervalued. 29 Sep 2010, 02:14 PM3 Isaac SilbermannComments (11) Travis the CFO speaks English quite well, as anyone who attended investor day kn ows. I do not believe that anything can be attributed to communication problems here. 29 Sep 2010, 02:36 PM3 Waldo MushmanComments (322) The original address page gave the following description.... "In March 2006, the first retail store was opened in Shanghai. Currently, the Co mpany also has a large retail network in the Shanghai area. The following is the recent retail operation locations." www.citronresearch.com... CHBT dropped that phrasing once they realized what they had done. The list still includes the incontrovertible proof that CHBT has lied to the investors and the public. There is not any definition of retail outlet wide enough to include a p arking lot or a bike repair shop. They have claimed numerous addresses that sell

the product and it is proven they do not. And to maintain the deception, they n ow claim 64 "stores" that they will not post addresses for. John 29 Sep 2010, 04:21 PM2 Emerging Markets InvestorComments (141) Why didn t you ask the Company about what you found at 655 Yishan Road? I did. T hey told me that the address is actually 645 Yishan Road, which is a Hualian Sup ermart. It is a small store, so recently, they moved the products to a bigger Hu alian Supermart that has a better location. They have updated their website acco rdingly. Keep in mind that with thousands of points of sale serviced by distribu tors, it is impossible to keep a current list of retail locations up-to-date. However, nice job on finding China-Biotics products at the other 4 locations lis ted. 30 Sep 2010, 03:56 PM1 luhenComments (45) Massaging numbers is an old gambit in the West as it is in the East.Big companie s do IT,small companies do IT...So,just where is objective evalution of this pro mising outfit??? Who pretends to know?Let him stand up and deliver !!!! 29 Sep 2 010, 01:31 PM0 China InvestorComments (147) "everyone for the most part files junk" "Being no different from most other Chinese companies, CHBT also underreported t o the SAIC" So the excuse is the one I used in 5th grade? "Well everyone else did it?" Accounting for business risks is hard enough. No need to look at companies with questionable reporting. There are enough good, undervalued companies with solid reporting. 29 Sep 2010, 01:32 PM3 Nathan MComments (13) This is an excellent and well written article Sean. Great job! 29 Sep 2010, 01:5 6 PM1 johnny incaComments (260) I like the author s work, and it is very comprehensive, however the following st atement should be listed as a personal opinion, and not a statement of fact, as no basis is provided for it.: "Even though China-Biotics is a company of such high quality that it could have easily have come public through an IPO, it rather came public through a reversemerger." 29 Sep 2010, 04:00 PM1 rlinehanComments (12) No basis was provided because the issue is well known and, indeed, THE problem r e CHBT, which youve seem to have discerned but obviously REFUSE to accept. Try googling reverse merger and china-biotics. What youll get are REAMS of entries, A LL deeply troubling, which is what the comments relate to on this site and YOU o bviously miss. You mean YOU didnt know? Well, THATs what good ol Sean and Jason are after, NOT to h elp you. Have you tried reading the companys [which is really a shell] last 10Q [US governme nt required quarterly report]? How bout Item 2, where we read that the company is :

the combined business of China-Biotics, Inc. (the Company) and its wholly-owned dir ect subsidiaries, Sinosmart Group Inc. (SGI), Growing State Limited (GSL), and King Treasure Group Limited (KTG) and SGIs wholly-owned subsidiary, Shanghai Shining Bio technology Co. Ltd. (Shining), and GSLs wholly-owned subsidiary, Growing Bioenginee ring (Shanghai) Co. Ltd. (GBS). You caught ALL those names, right? ALL for a company that has a CLAIMED market cap of only $208 million and ONLY 513 employees. AND you caught the fact that the TWO major producing firms are shells within shells within THE shell. All for 513 empl oyees! Try googling some of those names, starting with Sinosmart. What you get, inter alia, is the following: bvioffshoreibc.blogspo... Which reads: In a Form 8-K filed with the Securities and Exchange Commission on the 23rd of Ma rch 2006, China Biotics, Inc. (CHBT.OB) informed that it had acquired Sinosmart Group Inc. This company is organized in the BVI [British Virgin Islands, an offs hore TAX DODGE], and it owns 100% of a Shanghai based producer of probiotic diet ary supplements. At the closing of the acquisition, in exchange for all of the e quity of Sinosmart, China Biotics issued 15,980,000 shares of common stock. The transaction resulted in outstanding 17,080,000 shares of common stock which Chin a-Biotics now has. Sinosmart was incorporated in the BVI on the 13th of February 2004 in accordance with the British Virgin Islands IBC Act. On the 11th of August 2005, Sinosmart e ntered an agreement to acquire 100% of the equity of Shanghai Shining Biotechnol ogy Co. Ltd. for a total cash consideration of $2.27 million. Company net sales for 2005 was $14.42 million, at the end of the financial year total stockholders equity was $4.83 million. Just before the acquisition of Sinosmart, the British Virgin Islands company [Chin a-Biotics?], led by Chinamerica Fund, LP, had completed a private placement for U S $5.07 million. Then try all the rest. The picture is REAL BAD. Wanna know why CHBT doesnt know where its stores are? It OWNS none and is too divorce d from and OBVIOUSLY TOO disinterested in -- retail operations to be able to answe r such simple question, which it CLEARLY failed to do on its web site. Guess you, and others who seek alpha from this sight wouldnt know what comprehensive ," still less due diligence means. Youre not playing your retirement money with this advice, are you? PLEASE don t! 29 Sep 2010, 10:33 PM2 PeakOilerComments (89) Who in their right mind would invest in a Chinese company that makes an easily c ommoditized product and fabricates a great deal of their historical financial re cords??? Look, you don t need to short this thing, but please, at the very least stay far, far away from this rubbish. BreX and Enron come to mind. 29 Sep 2010, 04:15 PM5

Emerging Markets InvestorComments (141) Probiotics are not commodity ingredients. There are only a few players in the ma rket, including Danisco and Chr Hansen. 29 Sep 2010, 07:19 PM3 ksh1970Comments (2) Sean, What is your take on the current opinion and involvement of Roth in CHBT? Thank you, Kevin 29 Sep 2010, 04:17 PM0 Emerging Markets InvestorComments (141) Great article! You might enjoy reading my account of my trip to Shanghai during the China-Biotics Investor Day: seekingalpha.com/insta... 29 Sep 2010, 07:21 PM3 Michael BryantComments (1287) Yup, China-Biotics (CHBT) looks cheap at a P/E of 10 and a forward P/E of 4. 29 Sep 2010, 10:35 PM2 Waldo MushmanComments (322) Over drinks this evening I was retelling a story of a folly of my earlier days. I was going to purchase a diamond for about 1/4 the price I knew it was worth. O f course the deal was a total loss but I remember well the feeling of certainty I had. I knew I was right for the very simple reason I wanted it to be true. My personal situation vetoed several clear warnings that a rational mind would have heeded. The ability I had to delude myself is not far from what I watch on these China s tocks every day. Delusional might be the description the longs would place on my unflinching certainty but I have the comfort of realizing there isn t much upsi de in this stock. They have announced great earnings, done the dog and pony show , widely promoted the radiant future, and the price languishes. From the short s ide what do I have to fear? The negatives continue to pile up with litigation, l oss of analyst support, major holders backing away, and the short sellers stayin g up late to drill holes in the side of what I perceive as a sinking ship. Along with others, I intend standing on this company s air hose. When adequate r ational people understand the fraud being committed, the market will accurately value this hoax. Do all the PE s you want, but the world will be listening to so me very discordant harmony, for a long time. John 30 Sep 2010, 01:43 AM3 Peter CooperComments (785) Sounds a long shot. Dubai, on the other hand, looks a oil-rich recovery play, th ough is not for the fainthearted. Just look at the $1.75 billion in bond issues yesterday, Dubai is back in business: www.arabianmoney.net/b.../ 30 Sep 2010, 03 :05 AM0 Momonthego1Comments (17) BUFFETT IS STARTING TO INVEST IN CHINA! CHBT IS EXACTLY THE KIND OF STOCK WARREN WOULD LOVE! 30 Sep 2010, 09:02 AM1 rlinehanComments (12) Buffett s been in China for a least 7 YEARS and throughout has resisted the "cha rms" of stinker stocks like CHBT and its murky predecessors. If you want CHBT, it s ALL yours (and Jason s and Sean s and Youarenotajediyet s )! 30 Sep 2010, 09:40 AM2

AtkinsComments (207) I have no opinion on CHBT because the industry is outside my box of knowlege. Ho wever, I fully agree with the author s point about investing in Chinese companie s that focus upon the domestic market. Lots of homework and, frankly, guesswork involved, but the potential reward is high. You ll hit some home runs but also w hiff on more than a few. It s part of the "fun" of playing this market and also buying under-the radar small/micro-caps. 30 Sep 2010, 12:21 PM0 Michael BryantComments (1287) One thing, don t invest/trade for "fun." If you do, you will likely loose money. 30 Sep 2010, 01:49 PM0 vgrimesComments (115) another guy who can t spell lose . great. 30 Sep 2010, 05:21 PM0 AtkinsComments (207) I try to keep a glimmer of "fun" in the equation because investing in micro-caps/small caps is taxing and a sure-fire blood pressure raiser. Thinking of it as "fun" keeps my blood pressure stable. No more, no less. 1 Oct 2010, 04:50 PM0 Dean MComments (318) Great company, I hear they have a groundbreaking process for making food additiv es out of lead. 30 Sep 2010, 09:55 PM2 James MayComments (85) Lets see... It turns out their retail business is at least 90% smaller than they previously claimed, they are changing documentation of their of store addresses after people attempt to visit them, they are earning 1/10th of the interest tha t they should be based on claimed cash, and their Chinese filings, and SEC filin gs do not come close to adding up. There are no legal ramifications for Chinese businesses who defraud American investors while not misrepresenting themselves t o Chinese authorities.It should also be mentioned that they are a reverse merger with a questionable auditor, two traits of almost all stock frauds. There are a lot of ways to potentially hit a home run with very high risk. This is not one of them. 1 Oct 2010, 06:52 AM3 Emerging Markets InvestorComments (141) Their retail business is perfectly fine and doing well as distributions now repr esent over 90% of retail sales, they are earning what everybody else in China ea rns on cash (0.36%) check the rates yourself, their SEC filings match their bank statements and China tax filings as seen at the Investor Day, and BDO is a top 10 accountant. 1 Oct 2010, 03:05 PM2 James MayComments (85) Most CHBT store addresses have been verified to not be actual CHBT locations. No kiosks have been located. I encourage anyone interested in CHBT to read: www.citronresearch.com/ chinesecompanyanalyst.com/ www.therealchbt.com/ Interest income for the quarter ending June 30th 2010 was 87,876. Cash and cash equivalents was 159,753,695. This works out to an annualized rate of just over . 22%. Most Chinese companies are earning well over 1%. The numbers that don t add up are SEC and SAIC filings. A fraudulent company would provide fraudulent docu ments at an investor day. BDO Seidman is a large reputable audit firm. BDO Limit

ed which audits CHBT is currently the signatory to 10 companies listed in the U. S. including Orient Paper, and is not inspected by the PCAOB. 1 Oct 2010, 04:37 PM3 Emerging Markets InvestorComments (141) Sorry buddy. Sean already debunked the interest income claims in this article: seekingalpha.com/artic... The SAIC filing issue is also debunked at: seekingalpha.com/artic... 1 Oct 2010, 05:59 PM1 James MayComments (85) 1) The company states that it has made a deliberate choice to earn significantly less interest than its peers. This strikes me as odd given the relatively risk free nature of deposits. It is also holding $75M in USD raised from Roth Capital on September 29, 2009. Given that the RMB is widely considered to be undervalue d compared to the Dollar, and interest yields on RMB deposits are significantly higher then USD deposits, why would a competent, legitimate, and intelligent man agement team of a company doing business in China keep 46.9% of cash and cash eq uivalents in U.S. dollars? It also should be noted that the after investing 75M in China Biotics, Roth Capital lowered their rating on CHBT from buy to sell and moved the price target down from $20 to $8. The company claims to have $159,753 ,695 in cash and cash equivalents, and total assets of $244,427,047. More than 6 5% of company assets are reported to be cash and cash equivalents. 2) Everyone agrees that SAIC filings and SEC filings do not come close to adding up. The question is does this matter. It appears that most legitimate U.S. list ed Chinese companies do have SAIC filings that are reasonably comparable to SEC filings. Anyone who has or is considering positions in CHBT should seriously consider the track record of their auditor and take at look at: seekingalpha.com/artic... If the company has not engaged in any fraudulent activity, it should assign the responsibility of spreading unfounded to Citron Research explicitly. Citron has stated that it will sue CHBT proactively under this scenario. It China Biotics c an successfully defend its self in an American court, the stock will take off. If the company has not engaged in fraudulent activity, it should hire a big four audit firm. Upon completion of a successful audit, the stock would take off. To those who put a great deal of confidence in the investor day presentation, it should be considered that there is a prevalent industry in China of hiring fake business associates to impress investors. See: www.cnn.com/2010/BUSIN.... Disclosure: Short CHBT calls. 2 Oct 2010, 11:25 AM3 cberrlComment (1) well--CHBT has been selling new shares also=earnings dilution. Plus there have b een many shady Chinese firms not giving accurate accounting (FUQI) is one I lost a small amount on. FUQI was #1 stock in IBD "top 100" and was up to 30 or so now 6 13 Oct 2010, 05: 03 PM1 BuddhaHeadComments (61) Hmmm? Where did you see CHBT selling additional shares? They are suppose to have a $20 million stock buy-back plan in place. Doesn t compute what you are saying .---Unless you are talking about the $75 million IPO a while back when they were interested in buying a foreign probiotic company. 14 Oct 2010, 08:08 AM0

BuddhaHeadComments (61) Re SAIC and SEC filings, the following is excerpted from China Green Agriculture (CGA) recent public announcement. They, like CHBT, have been attacked by the sh orts with the same issues. Note that CGA cites Roth Capital s note on this subje ct.----" SEC Filing and SAIC Filing It is well documented that reports filed with the PRC State Administration for I ndustry and Commerce ("SAIC") often do not reflect the comprehensive income and financial condition of a company. You may further refer to Roth Capital s Indust ry note on Comparing PRC filings and SEC filings - Primer, released on July 12, 2010; Robert Hsu s Briefing #222 on Reasons Behind Discrepancies in SAIC vs. SEC Filings, released on July 28, 2010; and a recent article written by Maj Soueida n, President at Geoinvesting on The SEC vs. SAIC Fact Finding Mission, released on August 25, 2010. The reason is that SAIC is a general registry of companies. It is not a tax authority with which tax returns are filed or tax payments made. Oftentimes, Chinese companies access SAIC filings to learn more about their com petitors to gain a commercial advantage. As a result, many companies have unders tated their financial results in such filings. As discussed in the above cited s tudies, individuals knowledgeable about China do not rely on SAIC filings as a b asis for determining a company s financial position. Rather, they rely on a comp any s tax filings and payments to the authorized PRC governmental authorities. A s discussed above, the revenues reported in these tax filings and tax payments m ade are completely consistent with the Company s GAAP SEC financials." The full article by CGA is at: www.prnewswire.com/new... Positions: Long CHBT and CGA 13 Oct 2010, 05:47 PM0 BuddhaHeadComments (61) For those of you interested in more views on who the fraud is or isn t, take a l ook at this Red Chip response to the Barrons article that helped catalyze the cu rrent paranoia: www.redchip.com/files/... Maybe our expert China analysts aren t so expert after all. Just after some gl ory and short profits? 13 Oct 2010, 09:53 PM0 johnny incaComments (260) both CHBT and CCME had parabolic level recoveries late this week. I sold my CCME in the mid 10 s a week ago and though I was a genious. The price action in these stocks continues to be extremely interesting. 16 Oct 2 010, 12:15 PM0 James MayComments (85) Sean and Jason, Are you currently, or have you been engaged in securities lending of CHBT shares ? 16 Oct 2010, 01:05 PM0 BuddhaHeadComments (61) For those who are long on CHBT, here s an interesting article about the market for Probiotics in Asia. I ve excerpted a couple of paragraphs that caught my ey e, but the full article is at: blog.euromonitor.com/2... From Euromonitor International dated Sept 16th, 2010 titled "Probiotics - rising dairy consumption and lactose intolerance create opportunity in Asia-Pacific ":

"In 2009, China finally overtook Japan as the heaviest consumer of probiotic cul tures, reaching over 10,000 tonnes. Euromonitor International predicts that by 2 014 this will have risen to almost 18,000 tonnes, accounting for nearly 30% of g lobal consumption." "Apart from China, which racked up a colossal 284% volume increase, Asia- Pacifi c s most dynamic markets over the 2004-2009 review period were Indonesia and Mal aysia, where probiotic culture volumes soared by around 60%. "The vexatious reality of lactose intolerance affects around 75% of the global p opulation. People whose bodies produce insufficient quantities of the enzyme lac tase have trouble digesting lactose (the sugar found in milk) and they are there fore considered lactose intolerant." "There are varying degrees of lactose intolerance, with genetics the determining factor. Only around 3% of people of white Western European heritage suffer from this problem, compared with an estimated 90% of East Asians (including Han Chin ese and Japanese people) and Southeast Asians. The peoples of Asian countries wi th a long history of dairy farming, for example in India and Mongolia, are much less affected." "Good news for sluggish probiotic supplements" "The high prevalence of lactose intolerance in Asia-Pacific is not just going to spur on probiotic yoghurt and food sales, but also those of probiotic supplemen ts. Although Asia-Pacific already constitutes the second biggest regional market for these products, accounting for over one quarter of the world s US$2 billion retail value sales, it put in the weakest growth performance of all regions ove r the review period a mere 9% way below the global growth rate of 63%." "At some point in the future, Asia-Pacific s rapidly rising dairy consumption (e specially that of milk, which is among the most difficult dairy product to diges t for lactose- intolerant people) is expected to boost the performance of probio tic supplements in the region." "Probiotic supplements can help alleviate the discomfort of lactose intolerance because the live bacteria contained in them help to break down the excess lactos e in the upper intestinal tract of humans. This creates plenty of opportunities for dietary supplement manufacturers, including with regard to the development o f specialist products." Enjoy the read! 16 Oct 2010, 07:41 PM1 BuddhaHeadComments (61) Ooops, should have added the bottom line summary from the Euromonitor article: "Strong growth predicted for emerging economies Euromonitor International anticipates buoyant dairy sector growth for several As ian- Pacific countries with highly lactose-intolerant populations. For example, dairy value sales in Vietnam are forecast to increase by 39% over the 2009-2014 period, while China s should increase by 28% and those of Laos and Cambodia by 4 6%. The long-term growth potential of these markets is immense. To illustrate, 2009 retail volume per capita consumption of pro/pre biotic drinking yoghurt in China amounted to just 0.6 litres, compared to 3.3 litres in Japan and 1.4 litres in Thailand. As for Vietnam, the category only really managed to gain a foothold in 2007, and per capita consumption remains below 0.1kg.

Laos and Cambodia are even more underdeveloped. In 2009, overall yoghurt retail value sales amounted to less than US$6 million for both countries combined, and pro/pre biotic yoghurts do not yet exist as a distinct category. As for probiotic supplements, appreciable markets are confined to Japan, South K orea, Taiwan, China, Indonesia and Singapore. Much of the rest of the Asia-Pacif ic region needs substantial development and investment from forward-looking comp anies which are not afraid to help unlock its considerable potential." 16 Oct 20 10, 07:46 PM1 BuddhaHeadComments (61) In reading some of the comments, it seemed like some critics implied that maybe the accountancy was poor and maybe CHBT ought to change accountant/auditors to o ne of the big 10. In looking at the list of CPA firms, the following list from Accounting Majors.com is supplied--top 10 from list of top100:

#1 Deloitte & Touche - Big 4, 107 U.S. offices #2 Ernst & Young - Big 4, 95 U.S. offices #3 PricewaterhouseCoopers - Big 4, 99 U.S. offices #4 KPMG - Big 4, 95 U.S. offices #5 Grant Thornton - 48 U.S. offices #6 McGladrey & Pullen - 103 U.S. offices #7 BDO Seidman - 35 U.S. offices #8 Mayer Hoffman McCann - Offices in: CA, AZ, UT, CO, KS, MN, WI, IL, MO, OH, TN , GA, FL, MD, PA, and NY. #9 Crowe, Chizek and Co. - Offices in: IN, IL, OH, KY, TN, MI, and FL #10 BKD - Baird Kurtz & Dobson - Offices in: TX, IL, MO, IN, OH, KY, CO, KS, OK, AR, NE It appears to me that BDO is ranked #7. There is also an announcement that BDO a nd Grant Thornton#5) are merging. So BDO is not some fly-by-night outfit from China. It is a pretty signficant CPA firm and with the merger with Grant Thornton, should be close if not one of the top 4 accounting firms worldwide. BDO Limited is the Hong Kong member firm of BDO International Limited, a global accountancy network with over 1,100 offices in 110 countries and 46,000 people p roviding advisory services throughout the world. You need to decide if CHBT auditors are up to snuff. 16 Oct 2010, 08:16 PM1 James MayComments (85) It appears that BDOSeidman may have questions as to whether BDO Limited is up to snuff. twitter.com/BDOSeidman 16 Oct 2010, 10:55 PM0 CSMhaterComments (380) BuddaHead: Interesting information regarding the market for probiotics in Asia. Regarding top100 list: Could you clarify what exactly the "top 100" is referring to? This is a website "for accounting majors and other college students interested in accounting." accountingmajors.com/ So is this actually a list of top 100 accounting firms rated on their quality of audits? (which is one of the issues people have with CHBT) Or is this a list of top 100 accounting firms to work for? (which is what it see

ms, in relation to the site it was found on) And the full name of the list is "Top 100 Accounting Firms in the U.S." www.accountingmajors.c... BDO Seidman is the U.S. member firm of BDO International Limited, which really d oes not help out your argument for BDO Limited Hong Kong. Regarding BDO Limited being a member firm of BDO International Limited: you do realize that BDO Limited is really more of an independent branch of this firm? From BDO International Limited s website they state "Each of BDO International Limited, Brussels Worldwide Services BVBA and the mem ber firms of the BDO network is a separate legal entity and has no liability for another such entity s acts or omissions. Nothing in the arrangements or rules o f BDO shall constitute or imply an agency relationship or a partnership between BDO International Limited, Brussels Worldwide Services BVBA and/or the member fi rms of the BDO network." www.bdointernational.c... Basically, they re covering their backside and saying if one of the member firms screw up, you can t hold BDO International Limited accountable. Not exactly wha t I would call a ringing endorsement. James May: Regarding the link you pasted: What exactly are we supposed to be looking for? I did not see anything relating specifically to BDO Limited. I saw the twitter in regards to The Network releasi ng information about the Quarterly Corporate Fraud Index and the decrease in the amount of fraud incidents reported. Nothing in there specifically about BDO Lim ited. However, I did see the link to the article you just happened to write on S eekingAlpha (a little bit self-serving, one would think). My point in all this, If you can find a reliable article/link stating BDO Limited (Hong Kong) is in th e top 10 of a list of international accounting firms rated for their quality, th at gives a lot more credibility and weight to your argument. Similarly, if you can find a reliable article/link stating BDO Limited (Hong Kon g) has been found to be an accounting firm with numerous and serious quality iss ues, that gives a lot more weight and credibility to your argument. 17 Oct 2010, 01:46 AM2 CSMhaterComments (380) James May: Sorry. I just read the article you wrote and the comments. So, you re trying to use your own article as support for you argument about BDO Limited? Not quite as effective or credible as one would think. Essentially stating "I said it, so it must be true." doesn t quite cut it. 17 Oct 2010, 02:35 AM0 James MayComments (85) Investors should make their own judgments as to whether BDO Seidman seeks to dis tance its self from BDO Limited and CHBT. Your point that BDO Limited and BDO Se idman are different firms is important. For further clarification on this matter see: seekingalpha.com/artic... 17 Oct 2010, 08:54 AM0 James MayComments (85) Basically a good comment. I think the link to my article demonstrates a desire o n the part of BDOSeidman to publicly distance its self from BDO Limited, and CHB

T. 17 Oct 2010, 03:46 AM0 BuddhaHeadComments (61) Re CPA firms, rankings are based on U.S sales size. Implicit is bigger the bette r. Quality is anyone s guess. ie Arthur Anderson was Enron s CPA. After that fia sco Anderson ceased to exist, but before the scandal, they were rated very well. Basically the same listing is found here: goingconcern.com/2010/.../ from "Accounting Today". May not be true, but I think most companies gravitate to CPA firms they can afford and give them some form o f financial security. Re BDO being separate independent firms in the BDO network , you will find a similar structure with other CPA firms and for that matter oth er companies operating in foreign countries. And yes, to some degree protect the ir backside financially, but certainly not reputation. For example, this is dire ctly from the #1 listed CPA firm, Deloitte: "About UsDeloitte is the brand under which tens of thousands of dedicated professi onals in independent firms throughout the world collaborate to provide audit, co nsulting, financial advisory, risk management, and tax services to selected clie nts. These firms are members of Deloitte Touche Tohmatsu Limited (DTTL), a UK pr ivate company limited by guarantee. Each member firm provides services in a part icular geographic area and is subject to the laws and professional regulations o f the particular country or countries in which it operates. DTTL does not itself provide services to clients. DTTL and each DTTL member firm are separate and di stinct legal entities, which cannot obligate each other. DTTL and each DTTL memb er firm are liable only for their own acts or omissions and not those of each ot her. Each DTTL member firm is structured differently in accordance with national laws, regulations, customary practice, and other factors, and may secure the pr ovision of professional services in its territory through subsidiaries, affiliat es, and/or other entities." I read in one of the Alpha articles that maybe moving up to a top ten auditor mi ght improve their accounting image.I am not trying to defend CHBT s choice of au ditors, only trying to point out that BDO is not a cottage industry auditor. Mov ing up to Deloitte may not improve their accounting quality. I personally think we re arguing the wrong things. The decision to buy a company s stock should focus on business and transparency to see how well the business is run and the future profitability for that business. If it looks bad, the shor ters have a good case. But if in due course they use half truths to argue their case, I think it is a disservice to us investors. Same is true with the longs wh o exaggerate earnings and potential to increase stock prices. Enough said. 17 Oc t 2010, 08:38 AM0 BuddhaHeadComments (61) HI again fellow investors. I choose to leave traders out of the loop because I a m not of that ilk. First a little background so you know where I am coming from and why I say what I say. I am a third generation Japanese American. I am a reti red electronics engineer. (Hughes) I have been living half my time in China half and half in the U.S. for the last 6 years. My wife is Chinese. We do this because we like both cultures and can t decide wheth er or not we should stay in one place or the other. What I ve noticed is that the change in China is going supersonic. Every year we go to China, we find change. New buildings pop up almost overnight, old buildin gs disappear. Companies come and go. Food choices expand and change dailly.Shenz hen, where I live is a bustling city of about 12-15 million souls. It was a smal l fishing village 30 years ago. The official count is about 9 million, but if yo u know the Chinese way of counting population, it is based on citizenship of tha t city. Here, there are millions of migrant workers manning the factories that m anufacture things, they are not in the headcount. Businesses change daily and in

my small microcosm of exposure to China, it is probably replicated in the whole country. Remember that in less than one generation, China has gone from a Chine se socialist model to a new socialist model with Chinese colors. (most people call it capitalism). Somewhere in the Chinese DNA was a dormant business entrepreneu r. Deng Xiaping unleashed this energy when he took the famous southern tour an d proclaimed: I don t care what color the cat is, as long as it catches mice The C hinese have taken this to heart. Businesses are exploding. Let me cite my own experience. My wife was running a small business selling airp ort lighting equipment when I met her 6 years ago. It had 5 people if you counte d all the relatives that worked there. The only full-time paid person was an e ngineer. I worked as an engineer but my salary was zilch. Her son wasn t interes ted in the business and she was distressed that she had no one to pass on the bu siness. Her son and wife with funding from an in-law decided to go in the fashi on clothing business because of our daughters background with a degree from Bei jing University in apparel design. Well, six months later, spending down about $ 500,000, they were bankrupt. They switch to survivor mode and come to work for m y wife s company. She turns over control of the company to her son. In 6 years, the company has grown from a mom and pop operation to a small company with over 100 employees. His company represents Siemens in their product line of airport l ighting equipment. He has become very successful. I cite this as an example of w hat is happening every day here. Change is everywhere. With that success, his family is now part of the growing middle-class. Their chi ldren enjoy the milk of that success. Guess what? Yogurt is part of their daily diet. It wasn t when they were kids. You can go to the local supermarket and fin d a full section of the refrigerated portion full of yogurt. In the medicinal or pharmaceutical section you ll find health supplements, including probiotic tabl ets (sorry to say no CHBT tablets here). Chinese are hypochondriacs! Most older people, and many young people, exercise everyday. They eat foods that are suppos e to be beneficial to their health, ie herbs, spices, snakes, insects, and other food products deemed healthful . I think the growing middle-class looks at the western lifestyle as their model for success. Yum Brands(KFC, Pizza Hut), McDon alds is boominng. If or son s family is a sampling of the new Chinese middle-class, probiotics is a winner in my opinion. You know it has potential because even the government de partment of health is touting the benefits of probiotics, especially in the food chain area. (cows, pigs, chickens, fishfood supplementation with probiotics). In less than one generation, China s middle class is greater than America s (albei t with a lower income level) Yes there are crooks in business here, but the U.S. Certainly is not a shining e xample of honest capitalism. We kept telling the Chinese how to run their banks and how our reserve ratios and better business practices were needed to keep Chi na solvent. Look who s having the last laugh. Our current plan of action by our government seems to be debasing our currency so it is worthless. Old strategy to pay back loans with worthless money. China is using it s foreign reserves to bu y things of value before that happens, ie commodities, foreign businesses, domes tic infrastructure, and education. The Chinese are a very proud people and their nationalism shows almost everyday. They feel they have a destiny to fulfill. Th e genie is out of the bottle and no turning back. Sometimes intuition is a metric not contained in stock analysis, but maybe it sh ould. If you could see what I see happening here, it is like America was after W WII. I would like to think America is due for a revival, but with the squabbling like we re doing here in this dialogue, I wonder. I get frustrated when both po litical parties, that vie for the will of the people seem to slander each othe r that the goal becomes sub-optimized. That philosophy seems to make its way int o our daily life. Yes, viewing pro and cons are good for us investors but the ne

gativeness seems to weigh us down every time. If you have a negative view of China and it s business potentials, don t invest here. Invest in America. You have the free-will to do so. I personally think you ll miss the boat, and yes the waters are treacherous, but that s my view. 17 Oc t 2010, 03:58 PM1 Michael BryantComments (1287) Well, Warren Buffet said the 20th century was for America. The 21st century for China. And yup, China is like 50 of so years from present-day America. There WIL L be bumps in the road, but over the long haul, China should outperform. 17 Oct 2010, 06:17 PM1 CSMhaterComments (380) BuddhaHead: I agree (and think most long-term investors) that the growth of China s economy offers great potential rewards. I don t think that is what s being debated here. What is being questioned is whether or not CHBT is being honest with their state d revenue, and to a lesser degree if the auditing firm is really doing a good jo b of verifying that revenue. I agree, too, that obviously, (or maybe not so obvious to some) one of the first things to look at when investing in a company s stock is understanding the busi ness model and the future profitability. So in that respect, I think you previou s comment/article link is very relevant as to the potential market for probiotic s in Asia. I respectfully disagree with you that the quality of the auditor is not a releve nt point to be argued. Part of the of process of due diligence should be looking at the quality of the auditing firm; or for that matter, how may auditing firms a company goes through in the past 4-5 years. If a certain auditing firm has be en found to be negligent in their audits and has been reprimanded by the PCAOB n umerous times, then a person has to wonder how accurate are the numbers stated i n the SEC. I m not saying that s the case with BDO Limited (Hong Kong). I m just stating if that were the case, then it would be a red flag to warrant further i nvestigating. More particular to CHBT: 1) You have a firm - CitronResearch - flat out calling CHBT a fraud, and is so c onfident they dare anyone to sue them; that s putting your money where your mout h is! 2a) There s the question about how many stores CHBT may or may not have. It s be en argued the stores/outlet/retail space CHBT has is only a small percentage of their business. However, it raises the question of, if they re possibly lying ab out what is supposed to be a small amount of their business, what else are they lying about? How can a person be confident the revenue they state is true? (Whic h ties back into the quality of the auditor) - 18% of FY 2009 retail sales is not that insignificant for the retail portion. - Why lie about such a small percentage of the business in the first place? Henc e, the furor surrounding the ability to verify something as little as the locati on of the physical stores. 2b) The definition of retail outlet keeps changing from "stores", to "stores-wit hin-stores", to "shelf space". I could be lenient with the definition of "storewithin-store"; however, shelf space is beyond stretching it - especially since t he SEC filing states "dedicated Shining outlets." - Even if you accept "shelf space" as a "dedicated Shining outlet" or "Shining b randed outlet", then 111 (actually down to 64 now, correct?), that s not a big m

arket penetration. - Supposedly, someone else "verified" the existence of 12 stores, is this in add ition to the 10 store that have been verified so far? So, we possibly have the v erification of 22 stores out of 64? - Somewhat odd this person suddenly "finds" these stores while CHBT and/or other more vocal supporters were not, especially after they covered their short posit ion. (Not accusing anyone of anything, just pointing out the very fortuitous tim ing now that CHBT s price seem to be trending back upward and the fact this pers on had been extremely vocal in their belief CHBT was a fraud). 2c) It s been argued that CHBT is having a hard time giving an updated list of t he locations because there s such a rapid change in closing and opening of store s. - Are they opening and closing them on a DAILY basis? Are they trying to say tha t as soon as they were to put out an "updated list", that it would immediately b e "outdated"? - That seems odd in light of the fact the people at the Investors Day event were shown "a pack of all the leases". - If CHBT is supplying these "branded outlets" with their product, how difficult can it really be to come up with the list of stores? (It s a wonder the deliver y trucks aren t just driving around in circles all day! - being confused as to w here to go!) 3) There s the question of whether or not one of the most vocal supporters of th is company was actually at the Investor Day event. IF it turns out he was not th ere, this immediately put into question the credibility of anything he states, o r has stated regarding CHBT. - Speaking with only 3 of 27 distributors (11% ??) doesn t really seem like a de ep level of due diligence. 4) Perhaps you could clarify for me what the "Cash Advance to Director" of $3,11 3,900 was for. [page 38 of FY 2009 10-K SEC filing] - Personally, I don t think it should be acceptable for a company to be used as a "loan bank" for a director/executive of a company. Maybe it is a cultural diff erence in the way companies conduct business in China. Again, your clarification on this small matter (well actually, to me, $3.113 million is not really all th at small) would be appreciated. Does all of this mean CHBT is a fraud? Can t say. However, to me, they are red f lags that make this company a very risky investment. - To that end, why would you want to invest your own money in a company that may be using it to line the pockets of the executives/directors in an illegitimate way? Must admit, I initially thought this might a good company to invest long-term. H aving done just this preliminary DD, not convinced so much anymore. Disclosure: NO POSITION. 18 Oct 2010, 04:15 PM1 panzerepsilonComments (17) Glad to see photo of the remaining stores coming in: messages.finance.yahoo... 18 Oct 2010, 09:56 AM0 BuddhaHeadComments (61) From the Yahoo Message Board by pstock85: WHO are the LAWYERS that sued CHBT? 28-Oct-10 07:17 pm www.nytimes.com/2006/0...... bitterqueen.typepad.co......

======================... On September 24, Brower Piven, A Professional Corporation announces that a class action lawsuit has been commenced in the United States District Court for the C entral District of California on behalf of purchasers of the securities of China -Biotics, Inc.... Who is Brower? Brower was a former partner of Milberg LLP from 2005 to 2006. In June 2006, he l eft Milberg and hooked up with class-action attorney Charles Piven to form Browe r Piven. Brower works in New York and Piven in Baltimore. Who is Milberg LLP? In May 2006 and September 2007 the plaintiffs class action firm -- in an incarn ation known as Milberg Weiss Bershad & Schulman, LLP -- and several of its partn ers were indicted on federal charges for an alleged decades-long conspiracy purs uant to which serial plaintiffs were paid kickbacks to file securities fraud sui ts against publicly-traded companies. Some heavy-weight former partners, includi ng Mel Weiss and Bill Lerach, pleaded guilty and were imprisoned for their roles in the scheme, and the firm -- once dubbed the "meanest law firm" in America -avoided prosecution by paying a $75 million fine and hiring a compliance monito r. Another former Milberg partner, Paul D. Young, who worked on the firm s lawsuit against Tyco which settled for over $3 billion, was sued by New York City in Nov ember 2006 for alleged criminal nuisance involving the operation of El Mirage, a gay S&M sex club, out of the basement of a property he owned as reported by Rog er Parloff for Fortune Magazine. Sentiment : Strong Buy 2 Nov 2010, 02:14 AM0 CSMhaterComments (380) BuddhaHead: Hmmm... In your previous comments you imply looking at the quality of the auditor is not a relevant point to be argued. I believe your comment stated: "[You] personally believe we re arguing the wrong things. The decision to buy a company s stock should focus on business and transparency...But if in due course they use half truths to argue their case, [you] think it is a disservice to us investors." But then you try and bring up the past history and "quality" of a law firm that is filing a lawsuit on behalf of investors. I don t know. Seems like someone is trying to apply a double-standard. Okay, so Brower was a former partner of Milberg which has a questionable past. H owever, nothing in your comment indicates any wrongdoing by Brower himself. Nor is there anything in your comment indicating wrongdoing by Piven himself. So, no t quite seeing the relevance. Please clarify how this proves whether CHBT is, or is not, legitimate, and not a fraud. I might have been wrong when I stated in a different comment about how you try a

nd stick to facts. FYI, the links didn t work. 2 Nov 2010, 02:02 PM0 BuddhaHeadComments (61) Re links, hmmm? I tried them yesterday and they worked, tried just now and you a re right, they don t work? Re law firm, seems like you have a double standard al so. Tainting a company by using half truths and lies and having ambulance chasi ng law firms try to further imply wrong doing is also bad for us investors. Whe n is it wrong to bring out bad history info about those presenting bad facts? Law firms seeking lead plaintiffs apparently don t have a plaintiff to begin w ith. So why do they file a class action suit on our (investors) behalf? I find it hard to see the truth ab out a company s business when so many distortions and claims seem to hit the fan . I think it important that we investors have good info and transparency without the distortion from those seeking financial gains from headlining panic and f ear to move stock prices. 2 Nov 2010, 06:29 PM0 BuddhaHeadComments (61) Re links, try: messages.finance.yahoo... I copied and pasted the links on my comment but for some reason they don t work. The above URL has the same links but they work. I just tried them again. ----?? 2 Nov 2010, 06:39 PM0 BuddhaHeadComments (61) Try this link for the whole enchalada --the links are there and they work (as o f 5 minutes ago) and there is a bunch more info discussing the class action law suits for those interested in this area of discussion: messages.finance.yahoo... 2 Nov 2010, 06:50 PM0 Waldo MushmanComments (322) Your point is lost on me. You and pstock somehow equate smearing people who aren t even remotely involved with the current litigation as showing how trivial thi s class action lawsuit is. How do you think that an ex-associate in a 200 man la w firm that you probably never met, owning a gay bar has something to do with a case filed 4 years after leaving the previous firm? The name of the filing attorney is of small consequence. A strong case could be presented by Ted Bundy and have the potential to cripple a company. What is of c onsequence is whether other attorneys pile on. If you have several additional la wsuits it speaks volumes to the opinion of the lead attorney. Class action playe rs aren t going to waste their time and money supporting a lead counsel they don t think has a good chance of winning. Your angst concerning truth should be allayed by the presentation of fraud charg es in a court room. As you are certainly aware the US legal system imposes rathe r stringent evidence rules and whatever is charged must be proven. Your quest fo r untempered truth should be delighted that 4 or 5 law firms are providing CHBT the opportunity to exonerate themselves in a court of law. Do you think that CHBT will allow the Federal Court to see the addresses of all 64 stores? John 2 Nov 2010, 07:33 PM1 pstockComments (30)

August 29, 2010 CO Attorney Gary Lozow Gets Public Censure For Role In Milberg Weiss Kickback Sc heme In Denver, CO "veteran criminal defense attorney Gary Lozow of Isaacson Rosenbau m has stipulated to a public censure issued by the disciplinary office of the Co lorado Supreme Court for acting as an intermediary in law firm Milberg Weiss pl aintiff kickback scheme" as reported by Matt Masich for Law Week Colorado. In May 2006 and September 2007 the plaintiffs class action firm -- in an incarn ation known as Milberg Weiss Bershad & Schulman, LLP -- and several of its partn ers were indicted on federal charges for an alleged decades-long conspiracy purs uant to which serial plaintiffs were paid kickbacks to file securities fraud sui ts against publicly-traded companies. Some heavy-weight former partners, includi ng Mel Weiss and Bill Lerach, pleaded guilty and were imprisoned for their roles in the scheme, and the firm -- once dubbed the "meanest law firm" in America -avoided prosecution by paying a $75 million fine and hiring a compliance monito r. Speaking on the integrity of the remaining partners at the firm -- now practicin g by the moniker Milberg LLP -- partner Ariana Tadler previously stated: "The la wyers that stayed were not implicated or involved in the indictment, and we are going to work just as aggressively as we always have to do the best for our clie nts." And yet notwithstanding their innocence the question still begged is wheth er some of those remaining partners had suspicions about the scheme prior to the indictment and what, if any, steps they took to address the problem. Indeed, Bi ll Lerach recently said that his conduct was an "industry practice." After all, what did everyone think was happening when the same individuals repeatedly were serving as plaintiffs in dozens of lawsuits? In 1995, Congress enacted the Priva te Securities Litigation Reform Act specifically for the purpose of curbing the abuses for which Milberg Weiss and several of its partners were indicted, and su rely this legislation raised a red flag even among the innocents at the firm. Milberg LLP has made the news a couple of times in recent weeks. U.S. District J udge Robert P. Patterson Jr. sanctioned the firm and its co-counsel pursuant to Rule 11 with a public reprimand after allegations from two "confidential sources " in a lawsuit against Sony Corporation subsequently were not supported by the w itnesses deposition testimony, and U.S. District Judge Richard M. Berman rebuke d the firm in a ruling on its request for additional attorneys fees in the secu rities fraud case In re Nortel Networks Corp. Securities Litigation because of, among other issues, improper staffing. 2 Nov 2010, 08:41 PM0 pstockComments (30) your scumbag lawyers will lost the case because the company has hired a VERY pow erful lawyer--Goldman Sachs in the law industry . It will be a case like Goldman Sachs Vs. Roth Capital. The chance for the criminals like you to win is zero. 2 Nov 2010, 08:43 PM0 Waldo MushmanComments (322) It is lost on your paid positioning but I will make a small attempt to enlighten you. 1. The lead attorney is Laurence Rosen who has never worked for Milberg Weiss. 2. The second class action suit is filed in NY by Curtis Trinko with Saxena Whit e as co-counsel, not Brower Piven. 3. SarBox was passed in large part to reduce the burden of frivolous security co mplaints by the plaintiffs attorneys. Currently there is a set of 5 threshold le gal issues that are normally pled prior to discovery (Causation, damages, scient er, misrepresentation, and reliance...I think). If the judge does not dismiss th

e complaint the game is very tough for the defendant. The company will now be co mpelled to make disclosures as requested by the plaintiffs. That effort can be b oth expensive and uncomfortable. It is not unusual to see a settlement at this s tage and the plaintiff s attorney s will make a determination how much is enough . Or they continue the discovery and the fight. CHBT cannot withstand discovery of something as basic as the store addresses. Th ey won t win this case if they don t win it immediately with a motion to dismiss . John 3 Nov 2010, 12:12 AM1 pstockComments (30) whoever this lawyer doesn t matter because all of these so-called stupid and rid iculous lawsuits will be dismissed. Further investigation on behalf of the company has been conducted into you and y our scumbags friends. It will turn out to be the company suing scumbags like you , understand? 3 Nov 2010, 09:41 AM0 Waldo MushmanComments (322) Very much like Citron s attitude, I would welcome the invite. I feel very confid ent that a Texas judge would find the inability to locate your retail locations as telling as I do. And now after sliming everyone you can find you are retreating to the super ween ie out "whoever this lawyer doesn t matter". pstocks, you are genuinely one of t he most repugnant voices on these public boards. John 3 Nov 2010, 09:51 AM1 pstockComments (30) You are a piker. You don t have money to buy or hire a judge. You never made rea l month from the stock market for yourself. Let s assume the "texas judge" would start review the lawsuit...and he fuond sto ck price is from $15 to $18...what a joke. I know you are defending your pride on this stock. But I am sorry you picked a w rong one. Although you have failed sexual activities with your partners, you should not tr y to compensate from elsewhere. The end result is you will meet with more fraust ration and you will eventually be unable to get up. -- Not a joke to you 3 Nov 2 010, 04:31 PM0 pstockComments (30) Also, you CANNOT use these lawsuits to forever prevent the stock price from hiki ng--it s an old and stale tactics 3 Nov 2010, 09:48 AM0 BuddhaHeadComments (61) You are correct the above legal firms have pending litigation. But that means Wi kiinvest is wrong: "Brower Piven Encourages Investors Who Have Losses in Excess of $250,000 From Investment in China-Biotics, Inc. to Inquire About the Lead Pla intiff Position in Securities Fraud Class Action Lawsuit Before the November 16, 2010 Lead Plaintiff Deadline " Also if you look at the history of Brower, he wa s with Milberg Weiss when 4 partners were sent to jail for their kickback scheme . Obviously Mr Brower was unaware of their criminal actions. Re Brower Piven giv ing DD for financial malfeasance before filing a suit, that s a laugh. Please go to: www.marketwire.com/mw/... There are pages upon pages of suits from Brower Piven that look like form lette rs . Looks like Mr Brower hasn t changed his MO. The truth will eventually come out in the form of how the stock performs. In the

last few weeks, looks like the shorts ramblings are looking weaker by the day . You are entitled to your opinion (and facts) and so are other investors. To de mean them by half truths and inuendos is really bad. Have a good day guys---With yesterday s stock performance, I am having a great day! 3 Nov 2010, 07:23 PM0 Waldo MushmanComments (322) I am still missing the point you and pstock are attempting to make by sliming th e attorney. It will be difficult to find anyone in the stands cheering for any a ttorney. Do you think a class action lawsuit has less merit if a tacky attorney pursues it? Milberg and Lerach won hundreds. And conversely, if you think highly of the attorney, the case has more merit? Continuing to focus on Brower Piven reflects how ill informed you are. If they d on t have a case filed they are merely beaters trying to drive some doves from t he bushes. I would also suggest using PACER for your legal research rather than reading and relying on PR wire service feeds. You have developed a completely wr ong headed opinion lacking any knowledge. I doubt that you could find a law libr ary...much less a law. You have as little basis for criticizing attorneys as you have for criticizing forensic auditors. You don t know diddley but you are chee rfully eager to broad brush any opposing opinion with the putrid ooze you consid er insight. Maybe you ought to read the complaint. It can t help but improve your chances of getting something right. John 3 Nov 2010, 10:02 PM2 CSMhaterComments (380) BuddhaHead: 1) You keep harping on the supposed guilt of Brower. However, you own statements indicate he was innocent of any wrongdoing. 4 of the partners went to jail, but he didn t. Again, please clarify how this proves he was guilty of anything. - To imply he must have known something was going on seems a little bit like the pot calling the kettle black. With all the allegations, red flags and pending l awsuits surrounding CHBT, one could argue YOU must know something is not quite r ight with CHBT. Yet you have bought their stock. Or are you trying to say since nothing has been proven and are only allegations, how could you know? Well, then it would seem the same could be said regarding Mr. Brower and the other partner s before they went to jail while he did not. 2) I Honestly am not sure what you are trying to get at with your comment about Wikiinvest being wrong. Again, I am still not seeing the relevance to China-Biotic s innocence, or guilt , of fraud. I m not following your logic. - No offense, but you seem to adding 1+1 and getting 3. 3a) You are obviously misunderstanding DD with a law firm s belief they have a g ood chance to win a case. - As someone (who happened to have been a lawyer) pointed out in a different art icle, lawyers fees are paid out from any proceeds won - if they win the case an d win any money. So law firms are not going to take on a case and bear the signi ficant expenses if it does not have a good chance to win. 3b) The Private Securities Litigation Reform Act of 1995 was designed to reduce the number of "frivolous" security lawsuits filed in federal courts. (Apologies to Waldo if he already mentioned this) - Basically, investors can NOT proceed with a case unless they already have fact s in-hand which strongly suggest deliberate fraud.

- So again, who s spinning the half-truths? 4) Your comment about the "truth" eventually coming out in the form of the stock price. Seriously? Again, are you really that naive as to how Wall Street operat es? Have you not heard of the phrase: "Perception becomes reality."? - Just because a stock s price goes up (or down) does not necessarily indicate w hether a company has committed fraud or not. - Perfect recent example, Goldman Sachs (perhaps you re familiar with their role in the financial meltdown?) was charged with fraud by the SEC back in April, an d subsequently fined $550.0 Million; yet their stock is trading currently around $162 per share. So according to your argument, Goldman Sachs did nothing wrong, and has been completely exonerated - due to its stock s price? Um, okay. (Or maybe you really believe Goldman Sachs did nothing wrong) 4 Nov 20 10, 01:31 AM0 CSMhaterComments (380) BuddhaHead: I see no double-standard on my part. I simply pointed out what appeared to be th e case with you. However, if you wish to discuss the law firm: 1a) You still have not stated what wrongdoing was conducted by Brower himself, o r Piven himself. - Are you trying to prove "guilt by association"? Seems like a stretch. Nothing in your comment states they themselves were indicted of any charges. 1b) More to the point, you still have not clarified how the law firm of Brower P iven is relevant to the innocence, or guilt, of CHBT. 2a) Clarify how a law firm filing a lawsuit on behalf of investors is "presentin g bad facts". 2b) I m sure you cannot be that naive as to how the legal system works. A law fi rm must initially have a plaintiff in order to file any type of lawsuit. They wo uld not be allowed to file any type of lawsuit and NOT have any plaintiffs. Do y ou think the lawyers would go before a judge wanting to file a suit and basicall y state "We do not currently have any plaintiffs yet, but we will." Really? Plea se, use some common sense. I thought people were a little smarter than that. So who s spinning the half-truths here? (I m continually amused at how some people will eat up any half-baked explanatio n.) - Brower Piven already has plaintiffs, but is encouraging other investors who ha ve lost significant money from the allegations of fraud to join the suit and are trying to determine who will be the lead plaintiff based upon which unlucky inv estor lost the most money. - As I m sure you may, or may not, know the burden of proof generally lies with the accuser/plaintiff. My point, these law firms (Brower Piven in particular) would not be filing a law suit if they did not think they had a good chance of proving financial malfeasan ce on CHBT s part. As Waldo stated, I would think you would be glad that CHBT will be able to prove no wrongdoing in a court of law (however, that is not the same as innocence). 2 Nov 2010, 09:59 PM0 Andrew ShapiroComments (674) Citron Research wrote a small piece today with a list of questions for CHBT mana gement on tomorrow s conference call. I doubt its representative will be allowed on the call. But perhaps an objective participant might find the questions usef

ul and be allowed to ask them. Here s the link to their suggested questions: www.citronresearch.com.../ 8 Nov 2010, 05:09 PM1 Andrew ShapiroComments (674) Curious to know the answers to the questions posed in above post. Is there an ne wer article where yesterday s CHBT earnings are being debated? 10 Nov 2010, 09:3 4 AM1 Arrow HendrickComments (74) Article dedicated to the call, no. But Jason Nevader and I have begun to discuss their replies in the comment secti on of this article: seekingalpha.com/artic... The admission that only seven 4-wall retail outlets are currently being operated by the company is to me a clear sign that many of the 100+ "retail outlets" (64 of which were 4-wall stores as of 6/30/10) never existed in the first place. 10 Nov 2010, 01:07 PM2 Andrew ShapiroComments (674) 64 to only 7 is a huge drop in just 3 months. Did all those leases simply expire in that short window or where was lease termi nation expenses for so many stores? What did the leases shown at Investor Day say? How many were said to be open at Investor Day or was that after September 30? 10 Nov 2010, 03:25 PM2 CSMhaterComments (380) The list of "stores" was always stated effective 6/30/2010, with the "disclaimer " there was numerous stores being opened and closed. 64 to 7 stores? That s including the supposed "numerous" stores that were being opened to service "displaced customers"? I guess that would explain why only 9 l ocations were every really confirmed with photos. Hmm... Curious and even more curious. To paraphrase Shakespeare: Methinks there s something rotten in the state of Chi na-Biotics. 11 Nov 2010, 02:35 AM1 Arrow HendrickComments (74) Yes, red flags abound. At the CHBT Investor Day on Sept 20th they told those present that they had 64 f our-wall stores operating at the end of the last quarter. From accounts I ve rea d people were allowed to see leases but not photograph them. We now know from the 10Q that 10 days later (Sept 30th) only 7 four-wall stores were being run by the company. How many of the stores were closed in the last 10 days of the quarter? Was there any indication that essentially the entire 4 wall store base had been or was ab out to be closed? How many of these 7 locations were opened during the quarter a s they also claimed to be opening new stores during the Q to consolidate? Second, according to the conference call the company incurred one-time expenses

of 4,500,000 RMB ($675,000) closing the stores accounted for in selling expense (lease termination, severance, etc). But they state they also reaped savings of 5,000,000 RMB ($750,000) by not having to run the closed stores. So surprisingly , despite what should be large onetime costs, netting the two figures expenses w ere down both Y/Y and Q/Q. Figures below: Selling expense: Q309 = $2,733,234 Q210 = $3,058,378 Q310 = $2,559,158 Will companywide selling expense now be $1.88 mil [$2.55 mil minus $675k] going forward? And in order to save $750,000 [30% of total selling expenses companywide for quarter] I m guessing that most of the stores were closed very early in the rter. Yet at the investor day, 10 days before the quarter ends, they make no tion that only 7 stores remain open? Instead they stress 64 stores were open t quarter and show the leases? Draw your own conclusions. Lastly, take a look at this rough transcript from the call. It s telling: -----Caller: When you close a store, what do you do with the people? Dont you have to give them severance? And what about the leases? Dont you have to pay the rest of the lease that you signed? So that is a higher expense, not a lower expense. CHBT: Mr Jinans answer is that basically the closing of the stores will definitel y help us save on the rental cost and the maintenance cost. The rental cost and maintenance cost to running a store is quite high for running such a large numbe r of store base. And even though we had to pay some of the penalty and severance to close those stores but still it is cheaper compared with maintaining those s tores. Thats why what you see is an offsetting fact and the selling expense is ac tually down year-over-year. Even though we are having higher onetime cost... Caller: Man, I wish it would work that way over here in the United States 11 Nov 2010, 12:26 PM2 pstockComments (30) They started closing stores in the early month of the year. It took them more th an 6 month to do so. Given all the stores were leased and employment could be ea sily terminated without incurring any expenses--China DOES NOT have labor union, I considered such speed of closure to be normal. On the investor day, they said by the end of June 30, there were 64 fall wall st ores (including counters in the super markets). The lease showed the payment sch edule, the contract and terms itself. I didn t exam the lease carefully because I know the short sellers be a bunch of disbarred lawyers and losers. They will attack the company from the legal side. As an investor, I would more focus on the fundamentals. 10 Nov 2010, 05:37 PM0 CSMhaterComments (380) I m not sure I follow your logic. 1) You "didn t [examine] the lease carefully because [you] know the short seller s be a bunch of disbarred lawyers and losers."? the qua men las

- Huh? If you were wanting to disprove the short s argument about the stores not existing, why would you NOT WANT TO examine the leases closely to provide as mu ch information as possible? Surely you must know the best way to refute any argu ment is by providing as much factual information as possible. - How do you know the short sellers are a "bunch of disbarred lawyers and losers "? It seems you are trying to debate your side of the argument by making persona l attacks on those questioning the existence of China-Biotics stores. You do un derstand that engaging in this behavior actually makes you appear less credible? 2) Focusing on the "fundamentals" is not quite so easy when there are questions about the revenue sources, in this case the existence of stores. - To clarify, if the company is purposely misleading investors about the number of stores they have, or had, then what else are they being untruthful about? 11 Nov 2010, 02:18 PM3 RobWagnerComments (20) And now we know, clearly! 1 Jul, 11:17 AM0 RobWagnerComments (20) Such as the lack of assets and cash, not to mention revenues and earnings? 1 Jul , 10:59 AM0 RobWagnerComments (20) Such as lack of assets and cash, not to mention revenues and earnings? 1 Jul, 11 :16 AM0