China America Holdings (OTC BB:CAAH) Seeks Input from GeoInvesting

We were retained and compensated by China America Holdings (OTC BB:CAAH)  to prepare an industry/market analysis and offer suggestions on how to maximize shareholder value. We were not retained to express an investment opinion on CAAH. Our intention is to educate investors, who may have an interest in CAAH, on the opportunities and potential road blocks.   

Through its 56.08% ownership in AoHong, CAAH:

• Repackages bulk quantities of liquid coolants into smaller packaging for resale and distribution. (Approximately 45.6% of its net revenues)
• Custom mixes various raw materials in accordance with customer specifications into a new product. (Approximately 16.9% of net revenues)
• Distributes bulk quantities of liquid coolants directly to customers who in turn resell the product. (Approximately 37.5% of its net revenues)

CAAH sells to industries that directly benefit from China's long-term growth outlook.

a distributor of assorted liquid coolants which are utilized in a variety of applications, primarily as refrigerants in air conditioning systems for automobiles, residential and commercial air conditioning systems, and a manufacturer of steel non-refillable cylinders.

Revenues increased 40.2% in the company's December fiscal 2010 first quarter . After a string of quarterly losses, the company was able to offer a glimmer of hope and turn a slight profit, after adjusting for non-operating items.

**(Company recently changed its fiscal year to Sept.)

Comments are bullish:

2010 First Quarter Filing:

Our increase in net revenues of approximately 40.1% for the three months ended December 31, 2009 over the same period of fiscal 2008 is indicative of the current economic recovery. Our outlook is to continue our cost savings efforts and increased efficiency in our operations during this volatile economy. Our revenues have historically increased during our peak season, which is from March through July. Due to the seasonality associated with our business, we expect the trend of increasing revenues to continue through the second quarter of fiscal 2010.

January 14, 2010 Release:

Mr. Shaoyin Wang, CEO of China America Holdings, stated, "The 2009 transition period was a very challenging time for our business as we experienced increased competitive pressures due to the global downturn. Management responded by taking immediate decisive actions through reduced pricing in an effort to maintain our existing clients and attract additional customers to accelerate our business as conditions in China and the world continue to improve. With a number of competitors having exited the business and our company remaining in a relatively strong financial condition, we believe that we have successfully navigated through this difficult period in China and the worst of the global recession. We are confident that we now emerge from this period as one of the leaders in our industry, poised for a strong re-acceleration of growth with improved market conditions. We look forward to realizing rewards for the difficult measures taken in this past year which we believe will help to create significant positive momentum in fiscal 2010 and beyond.

Long-term Strategic moves that the company expects will drive revenues:

1. On July 28, 2010 CAAH purchased land use rights that will enable it to construct a new refrigerant repackaging, mixing, and distribution facility capable of processing up to 20,000 metric tons of environmentally friendly refrigerants annually. When completed, the facility is expected to add $50.0 million in annual revenues. The company plans to utilize debt for the transaction.

2. The company is considering purchasing the remaining 44.0% of its interest in AoHong.

Points to ponder:

• Margins are small.
• The company has 170 million shares outstanding and 60 million warrants with exercise prices ranging from $0.10 to $0.55, giving it limited ability to raise equity capital.
• CAAH would be an ideal reverse split candidate and we will suggest this to management.
• Will China's monetary/fiscal tightening policy negatively impact business?
• The market sentiment has drastically turned negative for the China space, which could create serious head winds for penny stocks.
• CAAH has to satisfy various debt obligations.
• CAAH debt to controlling equity is 106%, or 44.1% including non-controlling equity.
• Phase one of the new facility will not be operational until the fourth quarter of 2011.
• With a share count of 170 million, how will the company purchase its interest in AoHong without diluting shareholder interests?
• After a attaining profitability in the 2010 first quarter, the company's operations reverted back to a loss in its second quarter despite a 36.7% increase in revenues to $8.56 million.
• Investors may deem CAAH to have a favorable risk/reward opportunity only if the company can put together a string of profitable quarters and significantly improve its capital structure.

We have laid out a road map for the company to follow to improve its capital structure, but we can not guarantee management's willingness to adhere to our suggestions. We believe that if CAAH does not address our concerns its stock will continut to face long-term challenges. See the outlook and liquidity section of question and answer session that supplements this article to gain an understanding of some of the hurdles that CAAH faces.

Please see our:

• Q&A with management, where CAAH issued revenue guidance of $50 million for 2010; $75 million for 2011; $90 million for 2012.
• An Industry analysis report