CSNG | Is China Ginseng Holdings Inc. A $0.40 Stock?

CSNGThe reality show Appalachian Outlaws, which captured the attention of stoners and couch surfers, depicts how hunting for the rare root known as ginseng is not only very profitable, but in high demand by certain Chinese businessmen who won’t take unfilled orders lightly.  That may have been a factor in mid-February when shares of China Ginseng Holdings Inc. (OTCQB: CSNG) became a penny stock phenomenon when its shares rose over 400% to 0.0505 around the time when KCG Americas LLC reported owning 9.86% of the Company.  Without any news to follow on and the mistrust financials reporting from China has earned, if the 8-K filed last week is even half true, CSNG stock could be in for a wild ride upwards to 10X its current level.

 

CSNG Chart

 

For over a decade now, China Ginseng Holdings and their numerous subsidiaries have been in the business of ginseng.  Starting back in 2004, the Company went from farming the highly sought after root to buying it for the resale market to support their Jilin Ganzhi Ginseng Produce Co., a company they acquired in 2005, which manufactures ginseng drinks.  Two months after the acquisition, they formed Jilin Huamei Beverage Co. Limited which operates as a sales department for the Company’s canned ginseng juice and wine.

With the focus being that of ginseng, it’s troublesome to see that, broken down into two reportable farming segments: (1) the cultivation and harvest of Ginseng for the production of Ginseng beverages and (2) the retail sales of cosmetics and health supplements, all of the Q1 revenues, $167,362, came from the cosmetics/supplements segment.  Compared to the same period the year prior, $2,482,696 from ginseng and $68,485 from the cosmetics/supplements segment, it would appear that the root which creates such a ruckus in West Virginia is no longer the money tree that China Ginseng Holdings had long been focused on.

Here’s where it starts to get interesting…

Per the 10-K filing, 28.21 million shares were beneficially owned by investors listed. In September, 2014, a 13-G was filed showing KGC America LLC a beneficial owner of 7,746,500 shares of CSNG stock (17.45% of the outstanding shares reported for the period ended March 31, 2014.)  Since then, 3 amendments have been filed, each showing a decrease in KGC America’s ownership which, as per the most recent, had them owning just 83,109.

KGC America LLC has involvement with a number of reputable ETF’s and other specialty funds with some of Wall Street’s big players.  They also have/had links to some very familiar penny stocks like NOHO Inc. (DRNK), American Locker Group Inc. (ALGI), Force Minerals Corp. (FORC) and DC Brands International Inc. (HRDN).

Does this mean anything?  Who knows but the last 8-K filed by China Ginseng Holdings just might.

Filed on Friday, July 24, 15 minutes before the end of the week’s trading session, the Company reported that:

On July 21, 2015, in connection with a security purchase agreement between China Ginseng Holdings, Inc. and an investor, a PPM to sell a Series A Convertible Debenture for a price of $1,600,000 was closed.  The Debenture was stated to be convertible into 4,000,000 shares of CSNG stock at a price of $0.40 per share.  Within the “Certain Adjustments” portion of the debt agreement, it looks like that $0.40 price is set in stone which makes the view from $0.02 look pretty high up.

 

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