China Armco Metals Inc. (CNAM)

[viking86]

Thanks for the two news alerts, good news indeed.

Not sure how long it will take Apollo to begin the mining but they are making good progress with this Phase 2 drilling phase at Mount Oscar. Metallurgical test results of this phase should be available by the end of Q1, 2011. Seems also that the mine may produce other minerals besides iron ores. With a 19% ownership, that's extra revenue for CNAM besides securing the iron ore supply for the long term.

Again thanks for your contributions and Welcome on Board!


The company has attracted two strategic Chinese investors which are keen to see Apollo develop
iron ore projects that have the potential to provide a source of iron ore and other minerals to the
growing Chinese market.

[registeredfororpyct]

kinda old news but didnt see this posted anywhere yet, update from appolo minerals whom cnam owns a significant stake in plus rights to alot of free mineral ore

1/25
http://clients.weblink.com.au/clients/apollominerals/article.asp?asx=AON&view=2621574

things are looking good i think they'll be mining soon

[registeredfororpyct]

Reportedly, China’s Shagang announced to raise the domestic steel prices for the first half of February.

The company has decided to increase RMB50/ton for steel wire, wire rod, rebar, round bar and big coils.

Moreover, the prices of hot rolled coil and heavy thickness steel plate have also hike by RMB350/ton and RMB300/ton respectively.

The above prices will become effective since February 1st, 2011

[littlejohn]

CNAM may have some metal sales other than just scrap iron in the tons of scrap sold mentioned in your posts...

Hard to think China scrappers would be paying more than US for products coming in locally...

Paying 100 to 150 per ton for scrap iron and turning for 30% or more mark up might be more believable for their local buys for their plant...

Copper, aluminum, brass, and so forth along with scrap iron may be making up the tonnage numbers and sales numbers being put out by the company...

Otherwise the numbers would be hard to consider as accurate on tonnage sales to me...But maybe only to me..LJ

[viking86]

nice catch Dave. Interesting to see the CFO spend a good portion of his annual salary for this buy. Reminds me of Jacky Lam at CCME when he bought his first batch of CCME shares that costed about 1/3 of his salary. Now we see why Jacky did it.

[southacresdave]

CNAM Nice little insider buying today. http://yahoo.brand.edgar-online.com/default.aspx?cik=1410711

[GorillaGorilla]

Update from Apollo minerals - unfortunately written in Klingon. If anyone can read Klingon please be kind enough to translate.

rich

--------------------

Update I received from Apollo Minerals

I asked if they had a clearer time line on when the drilling report will be released. I asked for an example---say "mid Feb"?? Here is their reply (This is from a representitive of Apollo Minerals, not CNAM).

"Thank you for your query. We are currently awaiting the final head assays from this drilling program. Once these are available we will be finalizing the intervals to be composited for DTR tests. These might take a month until results are available. We do not currently intend to report head assays until we have the DTR results as head assays alone can tend to be misleading. So, your comment of "by mid-February" would be our hoped for position.

Regards
Andy Border
Apollo Minerals

http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_C/threadview?m=tm&bn=102178&tid=20170&mid=20170&tof=5&frt=2

[viking86]

Alcoa posts postive Q4 results and sees higher demand and prices in aluminium for 2011. Bodes well for CNAM !

The company expects business to continue to improve, forecasting a 12 percent increase in global aluminum demand this year.

Alcoa said sales will improve in most of its markets, as the global aluminum supply shrinks. That should support higher prices. It also expects higher costs for energy and currency exchange rates.

http://finance.yahoo.com/news/Alcoa-posts-4Q-profit-as-apf-1351275758.html?x=0&sec=topStories&pos=4&asset=&ccode=

[viking86]

If their average price (especially if they bought in Oct and Nov) is low than they can make almost $100 profit per ton sold in 1rst Q

a $100 profit on $500/ton sold means a net margin of 20%. Let's take a stinkin' low estimate of 10% average net margin for 2011 for the scrap metal biz. At 50% capacity of 850 tons/yr at $500/ton, we get a profit estimate of :

0.5x 850 x 500 x 0.1 = 21.2MM

Add 100MM rev from the ore trading biz at a stinkin' low NM of 5%, we get an additional profit of :

100 x 0.05 = 5 MM

Total est. 2011 earnings = $26.2MM

fd = 17.6MM

eps = $1.49E

At $4/sh, that's a forward PE of 2.7 !!

Since I am expecting 2010 eps of about 0.11, 2011 could be a damn good year with eps growth of (1.49-0.11)0.11 = 1255%

Are we allowed to dream a little?

[southacresdave]

Continuation of previous post:

In the 2nd Q they processed and sold 10K tons of scrap for $3.9M (that comes out to selling it for $390/ton, and probably purchasing it in the $350 range).

In the 3rd Q they processed and sold 26K tons of scrap for $9.7M (that comes out to selling it for $370/ton, and probably purchasing it in the $350 range or less).

At the end of 2nd Q (Sept 30th), they stated in their 10Q they had $8.5M in scrap inventory. That's scrap they never sold in 3rd Q. That equates out to 24.3K tons (because they would price their inventory at their estimated $350 purchase price).

In late December they state they sold 25k tons for $12M (or $480/ton). In late Nov and esp December prices went up fast!

That means they sold all of their Sept 30th inventory plus a little more. (It also means they sold it for a great profit margin).

In the 3rd Q 10Q they state "In addition, we have taken advantage of current low prices of raw scrap metal to build up approximately $8.5 million of scrap metal inventory in anticipation of price increases in the fourth quarter of 2010 and, depending on the effects of government imposed energy restrictions, in 2011."

They nailed that! Now if they continued to build up their inventory levels in October, November, early December than they have a nice profit just waiting to be sold now that shredded scrap is going for $510/ton and predicted to go up. If their average price (especially if they bought in Oct and Nov) is low than they can make almost $100 profit per ton sold in 1rst Q!!

Hopefully management had the foresight to buy hand over fist. I doubt it, but crazier things have happened.

[southacresdave]

The company has a long ways to go to truly rejuvenate interest in the stock long-term. It's not just starting from scratch, but from a negative perception (ex. there are a LOT of investors on iHub that cringe if you even mention the stock). But the last 3 pr's have been clear, concise, and positive (but not overly). We now have a benchmark (ie. we generally know what they were able to do in the 4th Q even with all the energy restrictions) and can gauge 1rst Q by it.

I still think the stock will be $8 by May's CC call for 1rst Q. Not because I drank some funky Kool-aid, but because in the last 10Q report they mention that they were building up scrap supplies for what they felt was an approaching price increase. They nailed that prediction. Hopefully they had a lot of scrap inventory lying around on their 32 acres (that had been purchased in Oct/Nov/early Dec) cause the profit margin (with shredded scrap going for over $500+/ton now) on that is probably 20%+.

[viking86]

I ma starting to like what HCI is doing. If they keep that steady flow of news coming, it should really help the stock. This is what I just posted on CGS board on this. Thanks for sharing the info with IR :)

CNAM: Actually I have to reverse the negative remark about CNAM's IR quality I made earlier today that certainly applied to the old IR company.

HCI has made an impact here since it came on board in Nov. as the new company's IR with its steady flow of small PR's keeping investors on the ball. Today's PR, just like the one a few weeks ago, is nothing earth shattering but removes one by one the clouds that hang over this stock like production status (is their new scrap plant finally producing? are they getting any new contracts ?...), power restrictions (finally no more excuses).

This reminds me of Yong's PR that came out yesterday re. cash flow and A/R having improved, small but very effective news that keeps negative momentum from building up. Just wishing that other stocks with big short interest like NEP, TSTC, UTA... learn from these guys.

[southacresdave]

Value1008..CNAM..I do have to say that I've found Ted to be one of the best IR people I've dealt with in getting back to me. I already received a short response back from him:

"Thank you David. We look forward to a successful Q1."

My original e-mail from about an hour ago:

Hi Ted--

I appreciated the press release today on CNAM reminding people that the company was under severe power restrictions for the 3rd and 4th Q (and now are lifted from them. As are all the steel customers CNAM sells to too). It's not earth shattering company news, but it is nice that you are keeping us well informed of what is going on.

If this pr is followed up later with actual solid production numbers showing the ramping up of operations for the recycling business, then I will owe you a beer (at minimum) next time I'm in California! That is the kind of step-by-step story telling that could easily make CNAM a $10 stock.

Again, nice job on keeping us informed. I look forward to the next announcement.

[value1008]

Good work, Dave.

[southacresdave]

CNAM...Investor Relations...I sent Ted Haberfield another e-mail today telling him I appreciated the update. The new Investor Relations firm has done a good job IMO. It wasn't earth-shattering news, but it is a good reminder to everyone that CNAM's problems aren't all of their fault (though there are those who will question that, I being one of them somedays).

The other point I brought up is that I am expecting a press release like today's (i.e one that highlights "potential" again versus actual "completion") to be followed up later this quarter with an update on monthly production numbers SHOWING the ramping up of recycling production. That kind of step-by-step story telling will continue to build confidence in this stock.

Dave

[viking86]

up 20% in PM upon news:

China Armco Metals' Recycling Facility Returns to Full Time Operations With Ending of Government Restrictions

Press Release Source: China Armco Metals, Inc. On Thursday January 6, 2011, 7:00 am
SAN MATEO, CA--(Marketwire - 01/06/11) - January 6th - China Armco Metals, Inc. (AMEX:CNAM - News) ("China Armco" or the "Company"), a distributor of imported metal ore and metal recycler with a new state-of-the-art scrap metal recycling facility in China, today announced it has received confirmation that local government imposed power restrictions for energy intensive industries and steel producers will be lifted in January 2011. With the announcement, the Company's scrap metal recycling business can return to full operations.

The central government imposed energy restrictions in at least 18 provinces beginning in September 2010 in an effort to meet the energy consumption and emissions targets set by the National 11th Five Year Plan (2006-2010), which significantly impacted output in the steel industry and the operations at China Armco.

"We are pleased to receive news that the power rationing will be phased out," said Mr.Kexuan Yao, the Company's Chairman and Chief Executive Officer. "These restrictions temporarily affected our operations in the third and fourth quarters of 2010, and we are encouraged to be operating on a full time basis. We will now be able to rapidly accelerate our growth in this area of great potential."

China consumes over 500 million tons of steel annually and is the largest in the world. 100 million tons of scrap steel are utilized in this production per year and currently Chinese producers only meet 60% of this demand annually. The Company's recycling operations, which can process up to one million tons of metal scrap per year, is expected to contribute substantially to the company's revenues.

[castboy]

TO all longs lets make the shorts burn with today news.I smell a 52 week high in the next month.I have been holding 5500 shrs since 4/2010 I want my money back dam it.

[southacresdave]

Viking...."escape from the internet"?? Oh, I like that idea!

At least the high volume means we are churning through the float and setting ourselves up for a move higher on the next positive press release. It would be nice for the stock to close above $4.20 resistance but compared to the $3 early last week I'm not complaining at all.

[viking86]

just got back from a 10-day vacation last night with very limited Internet connections, sorry for the late reply.

Really thrilled at the big move in both price and volume on Dec 30 ($1 and 3m+ shares move wow!!).

Today seems to be another strong day, already 30K volume and 4% up in PM as I am typing.

not sure if this is sustainable. But if Company guides soon for a strong 2011, I can see the SP breakout ST to above $5 as LT investors all know this stock can easily do 0.5B rev and $2 eps in just a year or two.

For 2011 my "dream" is: 200M rev and eps of 0.8, or a double from current level. They have guided for 12M recycling rev in Q4, so a runrate rev of 48M for the year. With all the startup and power supply problems now behind us, I am shooting for 100M recycling plus a 100M trading rev for 2011. The 100M recycling rev actually represents only 100/470= 21% of their annual capacity at current $470/ton prices, a very modest target indeed. I have become very wary of this company's predictions as they really need to learn the #1 rule of IR = UPOD (Under Promise Over Deliver). Everything they have promised so far stinks. Hopefully that will change with the new IR. But they really need a new top-tier auditor too.

HAPPY 2011 TO ALL !

[value1008]

I think it had to do with manganese ore, not iron ore.

[southacresdave]

Viking..CNAM..so what do you make of the volume/price? Obviously it's part of the China metal push (though I didn't know iron was a "rare metal" lol). Not complaining though.

I thought the price at $3 was undervalued for the potential. I think it's about appropriate now. I will dream of $8 tonight and my hitting the sell button :0)

[dougthebug0]

Intense buying pressure at close! wow 5.00 tomorrow

[BigOnChina]

They're going to log a major revenue number in the fourth quarter! I expect margins to be a little lower but overall this is what us long term holders have been waiting for!

[blhawk31]

Looks like it may be another good day today, already up another 11% in premarket....

[kuwlness]

Chart looks ready to start moving back up, took a starer position today, Chart:

[viking86]

Dave: well said. I can only agree.

[southacresdave]

I've talked to the new Investor Relations/Ted Haberfield a couple times (and wrote him several e-mails, which I've gotten short responses to) not necessarily asking for details on how business is going (what's he really going to tell me?), but to emphasize how destructive management's outlandish revenue projections were in 2010. CDII encouraged them to put out pr's that were projected on the most optimistic scenario and not the "underpromise/over perform" type that Wall Street loves. This company needs to back up what they say or else no one will trust them.

On that note: I'm glad to see in the last 2 pr's where they have kept us updated, showed some optimism, but kept their bull$#%^ to a minimum!

[viking86]

Stock reacted nicely to news, bouncing off MA20. Five new scrap metal customers is indeed big news. That indicates a strong demand heading into the new year, as they have hinted upon during the Q2 CC. With the $17.1MM rev from ore trading until Nov 30, we now have $29.1MM in the bag for the quarter. I hope we can do total 35MM+ for Q4, compared to 18.7MM last q and 31.7MM in Q4 last year.

[viking86]

China Armco Metals Provides Update on Metal Recycling Business

China Armco Metals, Inc. (NYSE Amex: CNAM) ("China Armco" or the "Company"), a distributor of imported metal ore and metal recycler with a new state-of-the-art scrap metal recycling facility in China, today announced it expects the Company to produce and sell approximately 25,500 tons of recycled steel with an aggregate value of approximately $12 million in the fourth quarter of 2010.
China Armco's fourth quarter orders to sell 25,500 tons of recycled steel are from 5 customers. The central government recently announced that the power rationing for energy intensive industries and steel producers will be phased out and the Company is optimistic about being able to be operating on a full time basis in the near term.

"We are encouraged by recent actions by the central government to relax the power restrictions," remarked Mr.Kexuan Yao, the Company's Chairman and Chief Executive Officer. "Recycled steel produced through our state-of-the-art production facility, which uses less electricity and emits less air pollution than steel produced through traditional iron ore processing, is poised to benefit from the central government's new policies. We are working diligently to secure additional scrap metal in order to service the pent up demand for recycled steel in China."

About China Armco Metals, Inc.

China Armco Metals, Inc. is engaged in the sale and distribution of metal ore and non-ferrous metals throughout the PRC and has entered the recycling business with the recent launch of operations of a 80,000 ton per year shredder and recycler of metals located on 32 acres of land. China Armco maintains customers throughout China which includes the fastest growing steel producing mills and foundries in the PRC. Raw materials are acquired from a global group of suppliers located diverse countries, including, but not limited to, India, Hong Kong, Nigeria, Brazil, Turkey and the Philippines. China Armco's product lines include ferrous and non-ferrous ore, iron ore, chrome ore, nickel ore, magnesium, copper ore, manganese ore and steel billet. The recycling facility is expected to be capable of recycling one million metric tons of scrap metal per year which will position China Armco as one of the 10 largest recyclers of scrap metal in China. China Armco estimates the recycled metal market in China as 70 million metric tons. For more information about China Armco, please visit http://www.armcometals.com.

[GorillaGorilla]

Reads like for the quarter up to 30th Nov. Otherwise you'd say 17M in Nov.

rich

[viking86]

no, so far in Q4 through Nov 30.

[bradford86]

you think that's just the month of november?

or so far Q4?

that's the question

EDIT:

seems like so far through Q4

[viking86]

CNAM shipped $17.1MM iron ores through Nov 30:

SAN MATEO, CA--(Marketwire - 12/15/10) - China Armco Metals, Inc. (AMEX:CNAM - News) ("China Armco" or the "Company"), a distributor of imported metal ore and metal recycler with a new state of the art scrap metal recycling facility in China, today provided an update on its trading business.

Through November 30, 2010, China Armco has secured and shipped three orders to deliver iron ore to trading firms serving iron and steel producers in China. The orders include a combined volume of 112,000 tons with an aggregate value of approximately $17.1 million.

"We are seeing a steady progress in our trading business," said Mr. Kexuan Yao, Chairman and CEO of China Armco. "With iron prices stabilizing in recent months, steady industrial production growth in China, and the ending of current power conservation plans enacted by the government for the steel industry, we are cautiously optimistic about the recovery. Our diverse and stable supply of metal ores and non-ferrous metals from 10 international suppliers, our more than 10 years of experience and strong relationships with over 150 customers in China position us well to capitalize on the long term secular growth of the Chinese steel industry."

[viking86]

wow nice candle today. Full stoch at below 10 too:

[viking86]

HCI: HC International now officially announced as new IR. Excellent move. Hopefully they'll get a new auditor soon.

http://finance.yahoo.com/news/China-Armco-Metals-Retains-HC-iw-1616931877.html?x=0&.v=1

[pickinstocks]

Must admit I hadn't clicked on the link. But now I will :) I will get back on topic after this, but here is a link to my share price estimate.

http://investorshub.advfn.com/boards/read_msg.aspx?message_id=52530842

Here is another post I made with some DD

One that I love, that's seemingly getting zero attention is China Advanced Construction Materials (CADC). This company grew revenues 44% from 2008 to 2009 and grew net income by 100%. With China's alleged push to focus on being more green, it seems that CADC's business consisting of ready-mix concrete is in a great position to benefit from this. Not to mention goverment backing, as they have been given $7+ million in high speed rail contracts. In a recent press release their CFO blatantly stated that "companies stuck in the commodity building materials business model of just a couple years ago will not be able to compete in the new, high-tech, eco-conscious building materials paradigm rapidly evolving in Asia." This is perfect for China ACM, as their business model is not only built around what looks to be the future of China, but it is built around a segment of the concrete industry that has been showing 27% growth over the last 10 years and is expected to continue. Furthermore, in China 40% of their of concrete work is ready mix, 60% is on site. In so called "developed countries" this ratio is 80-20. Room for improvement and expansion of ready-mix in China? I think so!

When it comes to future earnings, as far as I can tell, this company currently has the means of cranking out around 60 million in revenue for 2010. While this may not seem like overly extreme growth from the 39 million in revenue of last year, the fact that their three business segments sales, manufacturing, and technical services produce margins of 10%, 40%-60%, and 90% respectively makes this number look more appealing. All my calculations were done by taking numbers in their July 2010 presentation on their website and using a fully diluted share count of ~18 million. I get an estimated EPS to be $1 per share give or take. That means right now CADC is trading around 3.5X forward earnings.

K, from now on I'll post to the proper board :)

[viking86]

yes, the link in my post actually referred to CADC.

[pickinstocks]

A little OT but another company directly benefitting from this HSR buildout is CADC which I have a decent chunk of my portfolio in.

[viking86]

Since the purpose of any Message Board is to foster idea and info exchanges to help every reader make his own investment decisions, bad or good, I have decided to reprint here the PM I sent to Glenn. Havent made a decision yet how to proceed with my CNAM position but this does reflect my thoughts as of now:


Hi Glenn: Thanks for the reassurance. What made me mad is not the 2nd guidance cut to "we dunno" but the 140MM guidance and the Q2 CC. By Sep 10 they damn knew what to expect from Q3, or at least they should as Mgmt if they had any competence. Still they guided for a skyhigh 140MM, thus leading investors to set wrong expectations on Q3 Q4 performance. They live and work in China so they should know their own gvmt much better than us. If you are not sure then dont guide skyhigh. Guide low and shoot high. You cannot blame everything on gvmt and say, we didnt know that we were going to get more blackouts in Q4. How come no other company known to the CGS board has similar extreme misguidance issues due to power issues?

By Sep 10 when they issued the 140MM guidance, Q3 was almost over and they didnt know that rev was going to come in below 19M? Still they were guiding for 57M+? That's absolutely ridiculous. Looks to me the CFO doesnot know how to add 1 to 1. JMHO

[bradford86]

i was asked to post this here too (from CGS board):

CNAM - you can't hold this against them:

One of these was the illegal removal of the restrictive legend of CEO Yao's personal 1.3M restricted shares that Yao illegally authorized in conjunction with his private $5M loan from Crisnic.

Crisnic did illegal things, not China armco

if you ask me, their revised guidance for the 2nd half of 2010 was very reasonable... but what are you going to do when the chinese government decides to step in and micromanage everything and pretty much slow down everything 90% in the 2nd half of the yar by imposing power restrictions that for the most part cause major traffic jams throughout the country because companies switch to diesel generators.

hate on them all you want, but in terms of discounted future cash flows, the picture hasn't changed much over the last 365 days, the last half a year, the last quarter, or the last month

i'm kind of hoping that we see ridiculously low prices (even though this is a core position of mine, I'd like to double up at a predefined price that i'm not going to publicize for fear of competition on the bid)... i don't think worden would be disappointed either... lol.. this is going to be really easy money in the next 1-2 years from these prices. i'm in fantasy land.

[bradford86]

hey steve,

i firmly believe at this point that CNAM is hugely undervalued. it may become more undervalued.. at which point it is prudent to acquire more and lower your cost basis.

hope this helps

-glen

[littlejohn]

Only familiar with the East to West cross-country high speed rail project under construction so the people can cross the country much faster...

Can't imagine how much concrete went into setting up the line...

And the special steel for rails has to be a large amount too...

Travel in a zip...LJ

[viking86]

last time i looked, massive HSR (High Speed Rail) projects planned for the next 10+ years that will triple to quadruple total HSR miles in China, who already is the world's #1 in HSR, to some crazy number like 50K miles.

http://investorshub.advfn.com/boards/read_msg.aspx?message_id=55974334&txt2find=HSR

[littlejohn]

The great China speed rail build out is scheduled to end about March,2011...

The current completion phase is the one that should be using the steel for rails...

How will China replace what has to be a rather large project in 2011....

Simple glance into a bigger picture...LJ

[viking86]

Being a guy who calls a spade a spade, I just posted this reply to Fernando on the CGS board re. CNAM fyi:

http://investorshub.advfn.com/boards/read_msg.aspx?message_id=56740992

[littlejohn]

Good thing the China economy is rolling OK...LJ

[viking86]

CNAM: 10Q out. Ouch!

Rev 18.7MM, yoy= -32%
Gross profit 913.5K
GAAP Net Inc (399,694)
GAAP eps= (0.03)
non GAAP = (0.025), yoy= 20% on 51% fd dilution

http://yahoo.brand.edgar-online.com/DisplayFiling.aspx?dcn=0001448788-10-000202

[Steveshue]

Just think of all the people who lost money on your BS. Does it make you feel warm inside, that some 75 year old just got wiped out because you were too lazy to read a lawsuit.

Your lack of intelligence is only matched by your arrogance. I would love to see you actually step up to the plate and disclose the fraud that CNAM finally admitted today. Then you would earn my respect. Not that you care and not like you would ever really earn it.

http://sec.gov/Archives/edgar/data/1410711/000144878810000202/cnam10-q.htm

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), we carried out an evaluation, with the participation of our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of our disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were not effective at September 30, 2010 to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. In their evaluation, management determined that our disclosure controls and procedures were not effective as a result of the deficiency regarding policies and procedures pertaining to non-sale dispositions of securities by our management in the absence of consultation with our counsel. This control weakness resulted in the removal of a restrictive legend on 1.3 million shares of restricted stock owned by Kexuan Yao, our CEO, based on an incorrect June 25, 2010 legal opinion that was not obtained from our SEC counsel. We relied on this opinion in June 2010 when we requested the removal of the restrictive legend on the 1.3 million shares of stock owned by Mr. Yao

[Steveshue]

Maybe you will read the LAWSUITS now and realize that the internal control deficiencies detailed, were nothing but a warning of the impending doom.

I hope you didn't lose you shirt on this, I really was trying to warn you.

Peace

[Steveshue]

Wonderful From the 10Q For Period Ending 9/30/2010


Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), we carried out an evaluation, with the participation of our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of our disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were not effective at September 30, 2010 to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. In their evaluation, management determined that our disclosure controls and procedures were not effective as a result of the deficiency regarding policies and procedures pertaining to non-sale dispositions of securities by our management in the absence of consultation with our counsel. This control weakness resulted in the removal of a restrictive legend on 1.3 million shares of restricted stock owned by Kexuan Yao, our CEO, based on an incorrect June 25, 2010 legal opinion that was not obtained from our SEC counsel. We relied on this opinion in June 2010 when we requested the removal of the restrictive legend on the 1.3 million shares of stock owned by Mr. Yao