CMC operated in the PRC engaging in the wholesale distribution, research and development, and manufacturing of prescription and over-the-counter medicines, and sales of medical technology. In February 2006, Konzern entered into a reverse merger with an existing shell company in the US. Konzern remained the only operating subsidiary of the US corporation, which was renamed CMC. CMC acquired LifeTech in October 2009 and in March 2010 applied to be listed on NASDAQ.
In March 2011, CMC announced that it had withdrawn its application for listing on the NASDAQ and disclosed that it had discovered “accounting and reporting errors” in its financial statements as a result of “improper activities” at its primary operating subsidiary Konzern and at its operating subsidiary LifeTech. Investors were told that CMC’s previously filed financial results for the fiscal years 2008 and 2009, as well as for interim reporting periods in 2008, 2009, and 2010, “should no longer be relied upon,” and that those financial statements would be restated after an internal investigation. In July 2011, CMC announced that its internal investigation revealed additional “accounting and reporting errors” in its previously issued financial statements for the fiscal years 2006 and 2007, as well as interim reporting periods during those years. Indeed, there were significant differences between CMC’s filings with the SEC and the financial results reported by CMC’s subsidiaries to the SAIC. For example, in 2006, CMC reported US$24m in revenues, US$6m in Income from Operations, and US$5m in Net Income to the SEC. However, CMC reported revenues of US$16m a net loss of US$18,000 from operations, and only US$10,000 in Net Income to the SAIC.
RoPA 105% in 3Q2010 (95th percentile)
US District Court: Legal Document, 10 May 2012
China Medicine: Annual Report 2006