Can You Believe A $200,000,000 OTCBB Shell Deal?
The Acquisition of BEIJING MINGHE-HAN SCIENCE AND TECHNOLOGY CO., LTD. By JUPITER ENTERPRISES, INC. Creates a $200,000,000 Industrial Powerhouse???

The story of Jupiter Enterprises, Inc. ("JPEN") appears pretty straightforward. On November 28, 2001 JPEN entered into an agreement to acquire a Chinese company, Beijing Minghe-Han Science and Technology Co., Ltd. ("MHST") in a typical reverse merger into a public shell transaction.

The terms are pretty straightforward as well. The holders of JPEN will retain their 3.042M shares and issue 10M new shares to the holders of MHST, resulting in an approximate 23% - 77% ownership split. As a result of gaining a controlling interest in JPEN, the officers and directors of MHST are to replace the officers and directors of JPEN.

Where the story gets really interesting, inspiring further inquiry by Sleuth, is when on December 4, 2001, JPEN announces a 3 for 1 forward split. The split will simultaneously increase the number of outstanding shares from just over 13M to over 39M, and reduce the cost-basis of the JPEN holders stock by a factor of 3.

The Facts of the JPEN Case:

A BRIEF HISTORY

Jupiter Enterprises, Inc. ("JPEN") was incorporated on March 12, 1999 in the state of Nevada.

JPEN remains a development stage enterprise, limiting its activities to the formation and raising of equity capital and remaining current with its filings with the Securities and Exchange Commission, until merging with MHST on November 28, 2001.

Pursuant to the Agreement and Plan of Reorganization between JPEN and MHST and the shareholders of MHST, JPEN acquired 100% of the shares of MHST, in exchange for an aggregate of 10,000,000 shares of JPEN's common stock. As a result, MHST becomes a wholly-owned subsidiary of JPEN.

Simultaneously with the Agreement between the parties, and effective November 28, 2001, the officers and directors of Jupiter resigned, and Yin Mingshan, the Chairman of MingHe-Han, became the Chairman and Chief Executive Officer of Jupiter and Michael Harrop became a director and the President and Secretary of Jupiter. Alexander Chen was also appointed Director and Treasurer.

DESCRIPTION OF BUSINESS (From JPEN Press Release of 11/29/01)

MHST was the first company to import and utilize lightweight steel building fabrication systems in the Chinese building and construction industry. MHST has designed, fabricated, and built over 1,000,000 square meters of commercial, office and warehouse buildings including the 60,000 square meter Daewoo plant in Shandong Province and the 90,0000 square meter Fujian Automobile Plant in Fujian Province.

MHST is ISO 9002 certified for the production, installation and servicing of steel structures, grid structures and arch structures.

PLAN OF OPERATIONS (From JPEN Press Release of 11/29/01)

MHST plans to design and fabricate approximately 250,000 square meters of light and heavy industrial buildings per year, over the next five years, as part of the Beijing Olympics Factory Relocation Program. MingHe-Han also plans to bid on additional infrastructure and facility contracts that may be awarded as part of the Chinese $20 billion dollar Beijing Olympics infrastructure investment commitment.

CAPITALIZATION

03/30/99 Shares issued for cash: 2,000,000 shares @ $0.005 per share for $10,000
05/27/99 Shares issued for cash: 840,000 shares @ $0.03 per share for $25,200
06/20/00 Shares issued for cash: 202,000 shares @ $0.03 per share for $6,060

Pre-merger total: 3,042,000 shares issued for $41,260 (average price of approximately $.003 per share)

11/28/01 Shares issued for 100% of MHST stock: 10,000,000 shares

Post merger total: 13,042,000 shares

12/10/01 3 for 1 forward stock split

Post split total: 39,126,000 shares

SUMMARY BALANCE SHEET DATA (9/30/01)

TOTAL ASSETS $1,000

TOTAL LIABILITIES $19,302

TOTAL STOCKHOLDERS' EQUITY $ (18,113)

RECENT ANNOUNCMENTS:

Friday January 25, 11:43 am Eastern Time

Jupiter Enterprises, Inc. - U.S. Log Home Manufacturer's Paving Path to 2008 Olympics

Preliminary Delivery & Financing Agreements Signed to Build Beijing Olympia Villa's for Jupiter Enterprises, Inc.

VANCOUVER, British Columbia--(BUSINESS WIRE)--Jan. 25, 2002-- Jupiter Enterprises, Inc. (OTCBB:JPEN) announced today that it has signed preliminary agreements with Precision Craft Log Homes in Idaho and Original Log Homes in North Carolina for the delivery of phase one, 200 log homes, for the Olympia Villa's real estate development located in the Shunyi district of Beijing, China. Both manufacturers are able to arrange export financing.

The total development will consist of 1100 high-tech log homes ranging in size from 2000 - 4000 square feet. A portion of the development is being offered in conjunction with the district of Shunyi to house international athletes participating in the 2008 Beijing Olympic Games. Jupiter recently entered into a joint-venture partnership ("JVP") with the development arm of the District of Shunyi in the city of Beijing to develop the project.

Michael Harrop, chairman of Jupiter Enterprises, Inc. was noted saying "Jupiter is moving aggressively forward in it's role developing projects integral to the 2008 Olympic's master plan." He adds "We were all very pleased that our CEO, Yin Mingshen, made significant in-roads with tow of America's finest log home manufacturers." Precision Craft is the largest manufacturer of log homes in the U.S. and Original Log Homes has experience bringing log homes into Asian markets.

Groundbreaking estimated to begin in early spring 2002, and phase one delivery of 200 log homes and primary clubhouse area is anticipated to be in early July 2002.

Wednesday January 9, 8:59 am Eastern Time

Jupiter Enterprises, Inc. To Build Olympia Villas in Beijing, China

VANCOUVER, British Columbia--(BUSINESS WIRE)--Jan. 9, 2002--Jupiter Enterprises, Inc. (OTCBB:JPEN) announces that its wholly-owned subsidiary, MingHe-Han S & T Co., Ltd., Beijing, Peoples' Republic of China, has agreed to act as General Contractor to construct 1100 high-tech log homes, a portion of which will be offered to house athletes from around the globe participating in the 2008 Olympic games. MingHe-Han has entered into this agreement with Beijing Shunyi Dalong Chengxiang Construction and Development Corporation, the real estate development arm of the District Government of Shunyi, Beijing City. Groundbreaking is scheduled to begin in early spring 2002.

MingHe-Han is currently negotiating details for Phase One of the construction project, which will include development of 200 log homes and the primary clubhouse area. Each log home will average 3500 square feet and will include high-speed internet access and international style interiors. The Olympia Villas project is being built in the District of Shunyi, Beijing City. The District will be host to 46 gold medal Olympic events. The Olympia Villas project directly adjoins the Wenyu River, where many of the Olympic water sports events will be held.

"This is an important step in Jupiter's development" comments chairman of Jupiter Enterprises, Inc., Michael Harrop, "We hope that this is only the first of many construction projects that we will be taking part in as the City of Beijing prepares for the 2008 Olympics. Participating with the district of Shunyi, which will host a number of Olympic venues, offers Jupiter a good position from which to access the many building projects needed for the Games. We are honored to have been selected to partner directly with the district of Shunyi, directed by Mayor Zhou."

Tuesday December 11, 9:15 am Eastern Time

Jupiter Enterprises, Inc. Common Stock Commences To Trade on Post-Split Basis Today

VANCOUVER, British Columbia--(BUSINESS WIRE)--Dec. 11, 2001--Jupiter Enterprises, Inc. (OTCBB: JPEN), which recently acquired a 100% interest in Beijing MingHe-Han Science and Technology Co., Ltd., a private Chinese steel fabrication corporation ("MingHe-Han"), announces that the previously announced 3-for-1 forward-split of its outstanding common stock became effective at 5:00 p.m., E.S.T. on December 10, 2001. Shares of the Company's common stock will commence to trade on a post-split basis today. There is no change in the number of shares the Company is authorized to issue or the par value per share. The Company's common stock will continue to trade on the OTC Bulletin Board under the symbol "JPEN".

The Company's independent transfer agent will be mailing certificates representing the additional shares to shareholders of record as of the effective date/time.

SLEUTH'S TAKE ON THE FACTS

So what do we know about this new JPEN:

1) We know that the owners of the former JPEN shell now own 9,126,000 shares (post merger and post split) of JPEN common valued at nearly $48,000,000 ($5.25 per share * 9.126M shares).

2) We know that they paid $41,260 for their shares and if they were able to sell every share at this price they would gross nearly $50 million on their initial investment of $41,260 and their return on investment would be 116,000%. That number is not a misprint. It is correct, one hundred and sixteen thousand percent on $41,260 invested in 1999 (less than three years ago).

3) We know that 8.52M of those shares have been held for more than two years and are potentially sellable under rule 144K which provides for a "virtual" registration of shares through the removal of the restrictive legend and the total cost of those shares was only $35,200.

4) We know that another 606,000 shares (with a cost basis of $6,060) which were issued in June 2000, have been held for over 1 year and are potentially sellable under rule 144 with proper disclosure.

5) We know from a reading of the 8K filed on December 14, disclosing the transaction, that the owners of the former JPEN were not required to execute lock-up agreements restricting their shares beyond the normal 1934 act restrictions.

6) Although no MHST financial information was disclosed, we do know that its owners agreed to merge with an empty JPEN shell in return for only 77% of the combined entity. By implication, the distribution of ownership places an upper limit on either the value of MHST or the wisdom of its owners (or both).

7) We "know" (depends on how much credence one wants to put in JPEN's press releases) from the January 9, 2002 press release that MHST will act as General Contractor to build 200 Phase One (subject to continued negotiation) high-tech, log homes of approximately 3,500 square feet in Beijing City. The release also says that MHST is to build 1,100 such homes in preparation for the 2008 Olympics.

SLEUTH'S BOTTOM LINE

Let's, for a moment, put the best possible light on the deal. I mean 1,100 Olympic Village log homes in Beijing City, over the next 5 or 6 years is real business. Eleven hundred homes @ $350K per home is $400 million in General Contractor revenue over the next 5 years. That's $80 million per year.

But look at US homebuilders, that are General Contractors ("GC") (and real estate developers and architects) to get a sense of what value should be placed on $80 million per year in GC revenue.

Hovnanian Enterprises, Inc. (NYSE: HOV) had revenues of $1.7 billion and earnings of $64 million for twelve months ending 10/31/01. At its present price of $21.48 per share (very near its 52 week high of $22.03), HOV has a market capitalization of $595 million.

Toll Brothers, Inc. (NYSE: TOL) had revenues of $2.23 billion and spectacular earnings of $214 million for twelve months ending 10/31/01. At its present share price of $45.45, TOL has a market cap of $1.56 billion.

Back to shining the best light. Assume that MHST is 1 / 10th the size of HOV attributing $170 million in trailing twelve month revenues and $6 million in trailing earnings to MHST. If that assumption is true, then JPEN should have a corresponding market value of just under $60 million. With nearly 40 million shares of JPEN outstanding, a $60 million market cap translates into $1.50 per share.

As I see it, that $1.50 per share is the best case present value of JPEN shares.

On a worst case basis, just imagine how you would act if you were lucky enough to have been able to buy some of those 9.126 million shares @ $.001. Just imagine how aggressive a seller you would be @ $5 per share or @ $4 per share or @ $3 per share or @ $.50 per share. You get my drift.

Barring MHST consisting of some remarkable intrinsic value, you can bet I'd be turning my old JPEN stock into good old US dollars as quickly as I could say SELL, SELL, SELL.

DISCLAIMER:

I do not guarantee in any way that I am providing all of the information that may be available and relevant to any investment decisions you may make. I recommend that you do your own due diligence before buying or selling any security.

At any time I may and frequently will hold a position in any of the securities profiled in Sleuth's Case. I will not report when a position is initiated or covered. Each investor must make that decision based on his/her judgment of the market.

To contact Sleuth directly, send inquiries to:

otcbb_sleuth@excite.com

From the Ashes, The Phoenix?
Converge Global, Inc., Flying From $.08 to $1.09 In Two Weeks

Rewind the clock to January 11. Converge Global, Inc. (CVRG) trades 100 shares @ $.08. That’s right 100 shares, not 100K shares but 100 shares. On a dollar volume basis that’s 8 bucks. After the trade, the seller owes the broker because the commission is more than the $8 proceeds of the sale.

A quick glance at CVRG’s trading history reveals that January 11 is no fluke. In fact on December 31, CVRG trades a mere 500 shares @ $.08 and then trades only those infamous 100 shares on Jan. 11 until the fireworks begin on Jan. 18th. CVRG opens @ $.21 (up 162.5% from its previous close) on the 18th, trades as high as $.69, closes @ $.48 on over 500,000 shares and sets a new bullish tone for the stock.

Which is exactly what piques the curiosity of yours truly, so lets have a look.

The Facts of the CVRG Case:

A BRIEF HISTORY (From 10K filed on 4/16/01)

The corporation was incorporated under the laws of the State of Utah, on October 4, 1985, under the name of Mormon Mint, Inc. In 1998, the Company changed its name to Capital Placement Specialists, Inc. as it began to seek new business opportunities.

Pursuant to an Acquisition Agreement, dated January 5, 1999, Bekam Investments, Ltd. ("Bekam") acquired 100% of the common shares of the Company at that time; or 2,340,100 shares. Bekam subsequently spun off the Company by distributing the shares to select investors of Bekam. The Company then changed its name to Converge Global, Inc. ("Converge" or the "Company").

DESCRIPTION OF BUSINESS (From 10K filed on 4/16/01)

The Company's business has been focused in the electronic commerce ("e- commerce") industry, developing specialty websites catering to niche market segments, as well as building a market that provides complete e-commerce solutions to other businesses. While the Company plans to continue to operate DigitalMen.com in the near term, we have discontinued development of our other web site projects, LiquidationBid.com, DesiTV.com, and Machmail.com. Due to the recent downturn in the web site and internet industry, we are now pursuing other opportunities in the technology sector. We have not yet identified any specific opportunities, but such opportunities could include our own development of or acquisitions of or some other type of relationship with third party companies in the hardware and software industries. We will also consider other applications in the Internet industry.

PLAN OF OPERATIONS (From 10Q filed on 11/19/01)

With the winding down of continued development of LiquidationBid.com, DesiTV.com, and Machmail.com, the Company's cash requirements for the next twelve months have decreased from approximately $40,000 per month last year to approximately $15,000 per month currently. With a $250,000 line of credit granted by a director (see "Liquidity and Capital Resources"), the Company should be able to continue its operations for the next twelve months. However, due to the downturn in the website development and e-commerce industry, the Company has begun to seek candidates in other industries for potential merger, acquisition, or joint venture (collectively, a "business combination"). The Company is targeting other technology companies for a potential business combination, but will consider any candidate with the potential for or actual revenue generation… Should the Company fail to locate and complete a business combination, the Company believes that it will not generate any revenues and it will be forced to curtail its growth, cut back by reducing the number of employees or even cease operations altogether.

CAPITALIZATION
From inception through Dec. 31, 1996 (total outstanding 2,079,000): 2,079,000 shares issued in exchange for services valued at $88,060.00 or $.0424 per share
Year ending Dec. 31, 1997(total outstanding 2,340,100):
261,100 shares issued in exchange for services valued at $26,110 or $.10 per share
Year ending Dec. 31, 1998 (total outstanding 2,340,100):
Year ending Dec. 31, 1999 (total outstanding 8,918,100):
78,000 shares issued in exchange for services valued at $780 or $.01 per share
2,000,000 shares issued to officers and directors via option exercise for $2,000 or $.001 per share
2,500,000 shares issued to an investment group for $25,000 or $.01 per share
2,000,000 shares issued to an investment group via option exercise for $200,000 or $.10 per share
Year ending Dec. 31, 2000 (total outstanding 8,918,100 for $370,050 or $.0415 per share):

SUMMARY BALANCE SHEET DATA (9/30/01)

Cash $12,286
Fixed assets $ 197,906
TOTAL ASSETS $210,192

Current liabilities:
Accrued Expenses $ 209,074
Loans Payable $ 192,764
TOTAL LIABILITIES $401,838

MINORITY INTEREST $276,481

TOTAL STOCKHOLDERS’ EQUITY $ (468,127)

SUMMARY STATEMENT OF OPERATIONS (Quarter ending 9/30/01)

Sales $0
Cost of Goods Sold $0
Gross Profit $0

Operating expenses $ 25,494
LOSS FROM OPERATIONS $(25,461)

EMPLOYEES

As of the April 16, 2001, the Company employs four full-time employees and no part-time employees.

RECENT ANNOUNCMENTS:

Friday January 18, 9:01 am Eastern Time
SOURCE: Converge Global, Inc.

Converge Global, Inc. Signs Letter of Intent to Acquire TeleWrx, Inc.

SANTA MONICA, Calif.--(BUSINESS WIRE)--Jan. 18, 2002--Converge Global, Inc. (OTCBB:CVRG) has signed a Letter of Intent that could result in TeleWrx, Inc., a Florida corporation, becoming a wholly owned subsidiary.

Converge Global has completed preliminary due diligence and the parties have agreed to work toward closing the transaction within the next few weeks.

Mr. Imran Husain of Converge Global said, ``We are very fortunate to have come to an understanding with TeleWrx, Inc. and its President Michael Brown. We believe that TeleWrx, Inc., as part of a public company, with additional financing, has the potential for very dynamic growth.''

TeleWrx is a communications company specializing in the sales and marketing of telecommunications products and services through the utilization of network marketing. The Company offers residential and small business long-distance, Internet dialup (56K), calling cards, toll-free service and wireless services including WAP (wireless application protocol) devices.

Home-based businesses have enjoyed explosive growth and experts predict that this growth will be fueled by the expanding markets and new technology in the telecommunications industry. TeleWrx has negotiated partnership agreements with telecommunication and technology industry leaders in order to offer its agents and consumers cutting edge services at the most competitive prices.

The terms of the transaction are subject to final negotiation. Even though the parties have spent considerable time and effort to review the potential transaction and the basic terms for its completion have been agreed to, there are still important due diligence items to be reviewed by both parties. Therefore there can be no assurance that this transaction will be completed in a timely manner, if at all. Additionally, the terms and conditions of the final agreement could vary substantially from those contemplated in the Letter of Intent.

SLEUTH’S TAKE ON THE FACTS

The easy part of the CVRG story to understand is the pre-January 18th part. At that point the Company is just one more failed dot-com that basically exists as a public shell looking for its next opportunity. And the pre-January 18th trading pattern is rational and consistent with that reality. The reality being that CVRG is a public shell, with no operating business and approximately 8,000,000 shares of stock outstanding. At $.08 per share that equates to a $640,000 market capitalization, a slight premium over the market price of public shells but within reason. And its trading volume (or lack there of) makes sense as well.

It’s when the really big news (did I say that?) comes out on January 18th that all hell breaks loose. And what is this really big news? Well there it is in plain black and white:

Converge Global, Inc. Signs Letter of Intent to Acquire TeleWrx, Inc.

Then, WHAM, within 7 days CVRG is worth 1200% more than before the announcement. OK, lets give the benefit of the doubt to CVRG and drill into the announcement for the substance of the deal.

CVRG PR: Converge Global, Inc. has signed a Letter of Intent that could result in TeleWrx, Inc., a Florida corporation, becoming a wholly owned subsidiary.

SLEUTH’S TAKE: Letter of Intent that could result in is the key phrase. It means just what it says, Letter of Intent that could result in, and that between now and consummation of the deal, many things could blow up, and CVRG goes back to being nothing but an empty shell searching for its next opportunity.

CVRG PR: Converge Global has completed preliminary due diligence and the parties have agreed to work toward closing the transaction within the next few weeks.

SLEUTH’S TAKE: I suppose investors are supposed to take comfort from CVRG having completed preliminary due diligence and that the parties have agreed to work toward closing the transaction.

CVRG PR: "TeleWrx is a communications company specializing in the sales and marketing of telecommunications products and services through the utilization of network marketing."

SLEUTH’S TAKE: I guess by utilizing network marketing, TeleWrx is the Amway of telecommunications services.

CVRG PR: The terms of the transaction are subject to final negotiation. Even though the parties have spent considerable time and effort to review the potential transaction and the basic terms for its completion have been agreed to, there are still important due diligence items to be reviewed by both parties. Therefore there can be no assurance that this transaction will be completed in a timely manner, if at all. Additionally, the terms and conditions of the final agreement could vary substantially from those contemplated in the Letter of Intent.

SLEUTH’S TAKE: This paragraph is as telling for what it says as for what it doesn’t say. It explicitly re-enforces the uncertainty surrounding the deal by using phrases like, there are still important due diligence items to be reviewed by both parties and the terms and conditions of the final agreement could vary substantially from those contemplated in the Letter of Intent. On the plus side it says that the parties have spent considerable time and effort to review the potential transaction and the basic terms for its completion have been agreed to. But by failing to disclose the basic terms of the deal and any financial information about TeleWrx, CVRG makes it impossible for investors to attempt to rationally value the deal (even if one assumes the successful completion of the deal).

SLEUTH’S BOTTOM LINE

I started by asking, From the Ashes, the Phoenix? In other words, is CVRG the story of a failed dot-com that crashes and burns, and re-emerges as the beautiful phoenix from the ashes, as the stock price suggests?

At this point in time, you can put me down as an extreme doubter.

We know that before the announced deal (which may or may not happen) the stock was worth $.08 per share. We also know, that the deal faces at least what might be called normal deal risk. By implication, should the deal fail, a stock price of $.08 per share may not be far behind.

But what if the deal closes successfully. Well, then we have no idea how many shares are to be issued to the holders of TeleWrx, how much revenue it has, how much profit it has (if any), or how the deal is to be financed, if necessary? We do know that over the years CVRG has sold nearly 9,000,000 shares of stock to insiders for an average price of just over $.04 per share and that those sales occurred over two years ago. Most, if not all, of those shares are eligible for sale under rule 144K which provides for sales of restricted shares without disclosure. My instincts tell me that the failure to disclose more information about the deal is a deliberate ploy designed to feed the frenzy.

The facts of this case clearly suggest to me that when the terms of the deal (once again assuming it closes) are disclosed, investors will be disappointed; rationality will re-appear, and CVRG will once again return to a low double-digit penny stock.

DISCLAIMER:

I do not guarantee in any way that I am providing all of the information that may be available and relevant to any investment decisions you may make. I recommend that you do your own due diligence before buying or selling any security.

At any time I may and frequently will hold a position in any of the securities profiled in Sleuth's Case. I will not report when a position is initiated or covered. Each investor must make that decision based on his/her judgment of the market.

To contact Sleuth directly, send inquiries to:

otcbb_sleuth@excite.com

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CARA--A Rocket Ship Dragging a Checkered Past, a Mountain of Debt, and Near Financial Insolvency

A mere 14 trading days ago (December 28, 2001) CARACO PHARMACEUTICAL LABORATORIES, LTD. experienced what had been a very typical trading day, closing at $.97 per share on a measly 5,000 shares of trading volume. This trading pattern being right in line and consistent with CARA's previous 90 days or so, during which CARA traded between $.68 and $.97 on daily trading volumes of between 200 and 48,000 shares.

But what has happened since has been nothing short of spectacular. On Friday, January 18th, CARA traded up to $4.27 and closed at $4.24 per share (up $.64 on the day) on over 250,000 shares (which is consistent with CARA's average trading volume since Dec. 28th of approx. 220K shares per day).

This kind of trading activity in an OTCBB stock is exactly what attracts the attention of Sleuth. So lets have a look inside CARA to see what's going on here.

THE FACTS OF THE CARA CASE:

A Brief History 

Caraco Pharmaceutical Laboratories, Ltd. ("Caraco" or the "Corporation") is a corporation organized under Michigan law in 1984, to engage in the business of developing, manufacturing and marketing generic drugs for the ethical (prescription) and over-the-counter (non-prescription or "OTC") markets.

In 1990 CARA borrows approximately $9.1 million from the Economic Development Corporation of the City of Detroit (the "EDC"), for use in funding the direct costs of acquiring land and constructing thereon the Corporation's pharmaceutical manufacturing facility and executive offices. The facility is completed in 1992.

From 1993 to 1996, Caraco's efforts are spent developing its marketing and sales capabilities, building sales and product acquisition relationships with pharmaceutical purchasers, distributors and suppliers, and obtaining adequate financing with which to fund its operations.

In 1997, in connection with CARA's default on its EDC loan, the balance of the loan (approx. $8.88M) is restructured. CARA receives a moratorium from all payments until Feb. 1999. However, all interest on the loan continues to accrue.

Also in 1997, an Indian specialty pharmaceutical company, Sun Pharmaceutical Industries Ltd. ("Sun Pharma") purchases 5,300,000 shares of CARA for $7.5M. Sun Pharma will also receive 544,000 shares of CARA for up to 25 products that Sun Pharma will sell to CARA over the next five years.

In 1998, Sun Pharma agrees to lend CARA up to $5.3 million at an annual interest rate of 10%. As of December 31, 1998, CARA borrows $300,000 of the $5.3 million. CARA also raises $1,161,000 through the private sale of 1,319,317 common shares (approx. $.88 per share). Accrued interest on the EDC loan as of Dec. 31, 1998 is $510,000.

In 1999, CARA once again defaults on its EDC loan and attempts to renegotiate its terms again (accrued interest as of Dec. 31, 1999 is up to $2,732,050). CARA borrows the remaining $5M from the Sun Pharma $5.3M credit line and obtains a new $2M line from Sun Pharma and borrows $850,000 against the $2M line. Sun Pharma earns 3,626,666 shares of CARA in return for selling CARA 6.67 products. CARA also raises $396,000.00 000 through the private sale of 412,362 common shares (approx. $.96 per share).

 In 2000, while continuing to renegotiate its EDC loan, CARA pays $2.3M to the EDC and accounts for it as a reduction of principle to $6.58M (accrued interest as of Dec. 31, 2000 is up to $3,441,011). Sun Pharma "assists" (guarantees) CARA in obtaining line of credit loans from ICICI Bank Limited and The Bank of Nova Scotia, each in the amount of up to $5.0 million, of which CARA borrows $5M and $3.85M respectively. CARA repays Sun Pharma $200,000 of the $850,000 CARA borrowed in 1999. Sun Pharma begins selling CARA 2 additional products and has received a total of 4,714,682 shares for 8.67 products through Dec. 31, 2000 (increasing Sun Pharma's stake to approx. 48% of CARA). In July 2000, CARA receives a warning letter from the FDA relating to deviations and/or deficiencies in the "current good manufacturing practices" ("cGMP"). The area of concern relates to record-keeping systems, testing standards, staff training and proficiency and quality systems.

In 2001, while continuing to renegotiate its EDC loan, CARA pays $.9M to the EDC and accounts for it as a reduction of principle to $5.68M (accrued interest as of Sept. 30, 2001 is up to $4,042,430). CARA borrows another $300,000 from Sun Pharma and extends its credit line with The Bank of Nova Scotia up to $10M, then borrows an additional $5.45M against the line increasing its outstanding debt to the bank to $9.3M. In March and April of 2001 CARA underwent FDA inspections and is in substantial compliance with cGMP. Subsequent to the inspection of the facility, the FDA has granted its approval of three products for manufacture and sale.

SUMMARY BALANCE SHEET DATA (Sept. 30, 2001):
CASH AND CASH EQUIVALENTS $80,684

TOTAL CURRENT ASSETS $3,426,792
NET PROPERTY, PLANT & EQUIPMENT $6,782,472

TOTAL ASSETS $10,209,264

TOTAL CURRENT LIABILITIES $11,679,358
TOTAL LONG-TERM LIABILITIES $20,835,000

TOTAL LIABILITIES $32,514,358

TOTAL STOCKHOLDERS' DEFICIT $(22,305,094)

OPERATING RESULTS (NINE MONTHS ENDED Sept. 30, 2001)
Sales $ 3,372,686
Gross Profit $ 468,495

Selling, General &Administration $ 2,155,051
Research & Development $ 1,934,456
Net Interest expense $ 1,510,843

NET LOSS $ 5,131,857
EPS $(.024)

EMPLOYEES

As of December 31, 2000, the Corporation had 58 full-time employees, of which 13 are engaged in research and development, 9 in quality assurance, 2 in quality control, 6 in administration, 3 in sales and marketing, 3 in materials management, 3 in facility management, and 19 in manufacturing.

RECENT ANNOUNCEMENTS:

Monday January 14, 8:29 am Eastern Time

Caraco Expects Record Sales for December 2001

DETROIT, Jan. 14 /PRNewswire-FirstCall/ -- Caraco Pharmaceutical Laboratories, Ltd. (OTC Bulletin Board: CARA) expects to post record sales for December 2001, Narendra N. Borkar, Chief Executive Officer, announced today.

For the first time since the Company's inception and based on preliminary unaudited results, net sales are expected to cross the million-dollar mark and reach $1,031,000 for the month of December 2001, compared to $230,000 for December 2000.

Mr. Borkar said, ``The robust sales rise was attributable primarily to the strong growth of the existing product line and the introduction of three new drugs during the year, after correcting Good Manufacturing Practices (cGMP) deficiencies.'' The Company's FDA cGMP standing was restored in April 2001.

Mr. Borkar added, ``The Company's focus on new-product development and augmenting manufacturing activity to achieve sustainable growth in sales will continue. Over the last six months, the Company has received four generic- drug approvals from the FDA and a fifth generic drug has just been granted approvable status. The Company has an additional five generic drugs pending FDA approval and expects approvals for the majority of these by the year-end.

The Company receives technologies for the development of new generic products from Sun Pharmaceuticals Industries Limited (Sun) of Mumbai (formerly Bombay). Sun is a major shareholder in Caraco and is currently ranked as India's fifth largest specialty pharmaceutical company. Recently, Forbes Global ranked Sun on its list of Best 200 Small Global Companies (with revenues under $500 million). Sun is one of the three pharmaceutical companies from India to appear in this listing.

Detroit-based Caraco Pharmaceutical Laboratories, Ltd., develops, manufactures and distributes generic and private-label prescription drugs to the nation's largest wholesalers and distributors, drugstore chains and healthcare systems.

Monday January 7, 8:32 am Eastern Time

Caraco Pharmaceutical Receives First FDA Drug Approval of 2002

Five Drugs Pending FDA Approval

DETROIT, Jan. 7 /PRNewswire/ -- Caraco Pharmaceutical Laboratories, Ltd. (OTC Bulletin Board: CARA) has received approval from the Food and Drug Administration (FDA) to manufacture and market oxaprozin tablets. Oxaprozin is the generic form of G.D. Searle's Daypro. The total U.S. market for oxaprozin is estimated at $168 million. The drug is used in the treatment of rheumatoid disease.

Caraco Pharma last month received a letter of approvability from the FDA to produce metformin hydrochloride, which is the generic form of Bristol Myers Squibb's Glucophage, a drug of choice for the treatment of diabetes. In 2001, the Company also received FDA approval to manufacture and market three additional generic drugs: carbamazepine (chewable), a generic form of Novartis' Tegretol; clonazepam, a generic form of Roche's Klonopin; and flurbiprofen, a generic form of Pharmacia's Ansaid.

Narendra N. Borkar, Chief Executive Officer, said Caraco has five additional drugs pending FDA approval and expects to receive approvals for the majority of these by yearend.

Caraco has an extensive R&D Center at its Detroit headquarters complex and receives R&D support from Sun Pharmaceutical Industries Ltd., India's fifth largest pharmaceutical firm, headquartered in Bombay. Sun is a Caraco stockholder and has agreed to supply Caraco with technology for upwards of 25 generic drugs. To date, Caraco has received technology for 10 products.

Wednesday January 2, 11:09 am Eastern Time

Caraco Pharmaceutical Receives Preliminary Drug Approval From FDA

Five Drugs Pending FDA Approval

DETROIT, Jan. 2 /PRNewswire/ -- Caraco Pharmaceutical Laboratories, Ltd. (OTC Bulletin Board: CARA) has received notice from the Food and Drug Administration (FDA) that its application to manufacture and market metformin hydrochloride tablets is approvable.

Metformin hydrochloride, which is used in the treatment of diabetes, is the generic form of Bristol Myers Squibb's Glucophage. The total U.S. market for metformin hydrochloride is estimated at $1.8 billion.

Caraco Pharmaceutical last year received FDA approvals to manufacture and market three generic drugs, carbamazepine (chewable form) clonazepam, and flurbiprofen. The Company's drug formulary comprises 12 drugs.

Narendra N. Borkar, Chief Executive Officer, said Caraco has five additional drugs pending FDA approval and expects to receive approvals for the majority of these by yearend.

Caraco has an extensive R&D Center at its Detroit headquarters complex and receives R&D support from Sun Pharmaceutical Industries Ltd., a specialty pharmaceutical firm in India. Sun is a Caraco stockholder and has agreed to supply Caraco with technology for 25 generic drugs. To date, Caraco has received technology for nine products.

Detroit-based Caraco Pharmaceutical Laboratories, Ltd., develops, manufactures and distributes generic and private-label prescription drugs to the nation's largest wholesalers and distributors, drugstore chains and healthcare systems.

Sleuth's Take On The Facts

First, my apology for reliving so much of CARA's history in what is supposed to be a Brief History, but the essence of the CARA story compelled it. You see, CARA's three most recent announcements, all released since its run began on Dec. 29, are fairly impressive. And one suspects are what's driving the stock. But investors are behaving as if CARA's history began on Jan. 2, 2002 and are ignoring its previous 12 years of operation and its effect on present franchise value.

If one takes the long view of CARA, what we see here is a Company that has spent the last 12 years trying to gain a toe hold in the generic drug trade. And since 1990, when the EDC of Detroit lent CARA $9.1M, and then 1997, when Sun Pharma got heavily involved financially, CARA has had a deep pocketed partner at its side. So unlike most OTCBB companies, CARA can't blame its failures on inadequate financing.

A consistent operating pattern has emerged over the past 12 years in which CARA borrows money to operate, loses it, then borrows some more. Prior to 2002, the only things of note CARA has done (besides consistently losing money) is to default on its EDC loan, get a reprimand from the FDA "relating to deviations and/or deficiencies" in its "record-keeping systems, testing standards, staff training and proficiency and quality systems", and to persuade Sun Pharama to continue to pour more and more money (approx. $30M - including loan guarantees - as of Sept. 30, 2001) into what looks like the black-hole of CARA.

In fact, the only way to understand the CARA story, is to intimately understand CARA's near 5 year relationship with Sun Pharma. Plain and simple, Sun Pharma's financial lifeline is and has been the only thing that stands between CARA and bankruptcy. As of Sept. 30, 2001, Sun Pharma owned nearly half (approx. 48%) of CARA. It also has outstanding direct loans to CARA totaling $6.25M and has guaranteed on behalf of CARA another $14.3M in outstanding term loans from ICICI Bank of India and the Bank of Nova Scotia. Plus, as part of the restructured EDC loan, the EDC was granted a continuing security interest in all of CARA's assets. Which places the EDC obligations of $5.68M principle and $4M in accrued interest in front of Sun Pharma in the financial pecking order.

Sleuth's Bottom Line:

The critical question investors need to ask is:

"Where will Sun Pharma's best interest take the CARA relationship from here and why should Sun Pharma care about CARA's other common shareholders?"

Investors can take comfort, that bankruptcy seems unlikely, because CARA's bankruptcy would be a financial disaster for Sun Pharma, wiping out $15M from its balance sheet and triggering the repayment of $14.3M in off balance sheet (the Enron method of accounting) guaranteed loans.

Assuming, Sun Pharma really believes in CARA, the most likely outcome of the relationship, is the acquisition of CARA by Sun Pharama. This is probably the best outcome that CARA shareholders can realistically expect. The bad news for investors though is, "why would Sun Pharma pay $5 per share for the CARA shares it doesn't already own, when it could pay $1?"

Because of all of CARA's debt an acquisition price of $1 per share would cost Sun Pharma over $40M:

$9.68M to EDC
$14.3M to ICICI Bank of India and the Bank of Nova Scotia
$11M to the other CARA common stock holders
$6.25M in forgiven debt to Sun Pharma

The bottom line is, in an acquisition transaction, which is the best CARA shareholders can expect, Sun Pharma's interest departs from the interest of other shareholders. Sun Pharma's interest is best served by paying as little as possible for CARA's other outstanding shares, while CARA's other shareholders best interest is served by Sun Pharma paying as much as possible. Unfortunately for CARA shareholders not named Sun Pharma, they can't win a struggle with Sun Pharma over control of CARA, because Sun Pharma is the only shareholder keeping CARA alive, while the rest are merely along for the ride.

With Sun Pharma's support, CARA is worth somewhere in the neighborhood of $1 to $1.50 per share (approximate price Sun Pharama paid for its CARA holdings). Without Sun Pharma's support, CARA is worth NOTHING. Time will tell which direction Sun Pharma decides to take CARA.

Disclaimer:

I do not guarantee in any way that I am providing all of the information that may be available and relevant to any investment decisions you may make. I recommend that you do your own due diligence before buying or selling any security.

At any time I may and frequently will hold a position in any of the securities profiled in Sleuth's Case. I will not report when a position is initiated or covered. Each investor must make that decision based on his/her judgment of the market.

To contact Sleuth directly, send inquiries to:

otcbb_sleuth@excite.com