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Charles & Colvard Ltd. Message Board

  • watchthedownside watchthedownside Dec 2, 2010 3:04 PM Flag

    FROST PLLC was CTHR's accountant until Feb. 2010

    ...and they just merged with Moore Frazier et al. (who was RINO's accountant) addition, Moore Frazier et al. was only RINO's accountant for just two years before the problems became public......RINO's prior accountant was Jimmy Cheung & Co., CPA (not a joke look at the end of RINO's 2009 10K).....just to clear that part up.....whether CTHR will now ultimately switch to a new accountant who knows, but they obviously should think about it because of Moore Frazier's tainted name.

    Further, I calculate $1,169,000 in adjusted free cash flow for CTHR for the LTM ended Sept. 30 2010 versus $840,000 of net income. So earnings quality is high for the last reported year.

    Conversely, for RINO, adjusted free cash flow for the year 2009 was $31 million versus $56 million in claimed net income (terrible earnings quality of 55%). Further, the discrepancy for RINO was inventory-related (on the cash flow statement, not the balance sheet). Anyone who ever read "Sloan's Accrual Anomaly" will understand that low quality of earnings due to large inventory snafu's is a true red flag. While RINO's ultimate problem was falsified contracts, the writing was on the wall early enough.

    In summary CTHR has no red flags as it relates to earnings quality and there is no connection with RINO's issues.

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