Related Parties: Advanced Battery Tech, the Fu Family, 15 W. 39th Street (ABAT, CHDA, CLTT)

The latest 13F filing from from one of our favorite Swiss money managers, Sustainable Asset Management (SAM), first discussed here, has finally come out, and they have liquidated most of their Advanced Battery Technologies (ABAT) position, previously mentioned here, selling 3mm shares during the first quarter, leaving them with 440,000 shares. There have been plenty of reports and articles exposing ABAT, some by Variant View are available here and by Prescience with Kerrisdale here.

ABAT, which was unable to file its March 2011 quarter ending 10Q on time, has long had a related party known as China Lithium Tech (CLTT). Amazingly, as of the last 13F filing, SAM, which seems to love Chinese reverse merger garbage, had managed not to get suckered into buying CLTT shares.

CLTT, like ABAT, has its headquarters in that well known center of battery technology, the Garment Center in New York City. Yes, both firms share an office in an area well known to Project Runway fans, but quite far away from China.

Two Chinese reverse merger battery companies sharing an office in NYC is odd enough, but CLTT and ABAT also share other ties. In the section entitled Related Party Transactions, in CLTT‘s most recent 10Q, grab it here, the company states:

A significant portion of the Company’s raw materials were purchased from Heilongjiang Zhongqiang Power Tech Co., Ltd (Heilongjiang ZQPT), which is a subsidiary of Advanced Battery Technologies, Inc (ABAT). One of the Company’s directors, Mr. Qiang Fu, is an immediate family member of the CEO of ABAT, which has exclusive control over the business of Heilongjiang ZQPT. In the nine-month period ended March 31, 2011, purchases from Heilongjiang ZQPT totaled $4,310,784, or 55.49% of the total purchase for the nine-month period. As of March 31, 2011, the total amount due to Heilongjiang ZQPT was $753,314, or 57.43% of the total accounts payable. As of June 30, 2010, the total amount due to Heilongjiang ZQPT was $1,593,055, or 86.93% of the total accounts payable.

As of June 30, 2010, there are two supply contacts outstanding between the Company and Heilongjiang ZQPT, one dated February 24, 2010 and the other dated March 22, 2010. The February 24 contact contains the parties’ agreement to purchase and sell 3000 units of a specified 72 volt battery for 27,000 RMB per unit. Delivery will be scheduled by Beijing Guoqiang by notice not less than 25 days before delivery. Heilongjiang ZQPT shall pay transportation costs. Title transfers ex factory, and national testing standards will apply. The March 22 contract has identical terms, but contemplates the purchase and sale of 60,000 units of a 3.2 volt battery at 105 RMB per unit.

However, in ABAT‘s 10Q, available here, the entire Related Party Transactions section says nothing about CLTT, and only mentions the rather nice house that the company leases from Mr. Zhiguo Fu in the USA.

In July 2009, the Company signed a lease agreement with the Chairman of the Company, Mr Zhiguo Fu, to lease a house owned by Mr. Fu for the purpose of accommodating the frequent travel lodging needs for the Company’s employees in China traveling to the U.S. The monthly rent is $4,000 and the lease will expire in three years.

If it was not enough that CLTT and ABAT share offices, it turns out that a third Chinese reverse merger company, powerhouse China Digital Animation Development, Inc. (CHDA) shares that same Garment Center office, too. CHDA also shares a phone number with CLTT, 1-212-391-2688, and CHDA CEO Qiang Fu is a director of CLTT and an immediate relative of ABAT‘s Zhiguo Fu.

Qiang owns 9.1mm shares of CHDA, over 44% of the company, and 5mm shares, or 23%, of CLTT. Zhiguo Fu owns 8.85mm shares, over 11.5% of ABAT, and a small amount, 52,000 shares of CHDA.

CLTT started life as a shell called Physicians Insurance Services, Ltd. (PISV), CHDA started out as Maui General Stores (MAUG).

One more similarity, an American, John McFadden serves on the board of both ABAT and CHDA, and is the Chairman of the Audit Committee for each.

Is it time for ABAT execs and Board Members to become more intimately familiar with Sarbanes-Oxley Section 302 (read about it here)?

The content contained in this blog represents only the opinions of the author. The author may hold either long or short positions in securities of various companies discussed in the blog. This commentary in no way constitutes investment advice, and should never be relied on in making an investment decision, ever. This blog is not a solicitation of business: all inquiries will be ignored. The content herein is intended solely for the entertainment of the reader, and the author.
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