China Security Signs $43 Million in New Contracts During the Fourth Quarter
Monday January 8, 9:01 am ET


SHENZHEN, China, Jan. 8 /Xinhua-PRNewswire-FirstCall/ -- China Security & Surveillance Technology, Inc. ("China Security") (OTC Bulletin Board: CSCT - News), a leading provider of digital surveillance technology in China, announced today that it signed 58 new contracts during the fourth quarter, which ended December 31, with a total aggregate contract value of approximately $43 million. Recent contract wins cover installations for various projects, customers and initiatives located throughout China. The company expects to recognize the majority of the revenue from these contracts during the first quarter of 2007. The revenues generated from these contracts are exclusive of revenue contributions from the Company's wholly owned subsidiary, Cheng Feng.

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

Nice news out this AM from CSCT. The $43MM contract wins are up sequentially from Q3's announced total wins of $32MM, plus the avg size of the wins are also up: 740k/win vs 627k/win.

Company earned 0.34 eps in Q3, although some of that was deferred from Q2. YTD numbers for CSCT: 0.70 eps (9 mos only) and 66MM in revs.

There is some seasonality here, as Q1 and Q2 tend to have lower order activity than other quarters.....but carryover from Q4 orders into Q1 will be significant. Q4 sales and eps probably won't be as strong as Q3 was, but Q1 will be a monster quarter...and so should FY07, imho.

Bob, all true.....unless traders are thinking that this really means that the Fed can't drop rates....which will then usher in the expected recession??

Who knows? This is one of the reasons that commodities can be so frustrating to trade, and if you think commodities are frustrating, how about the companies that depend upon them for earnings (esp miners and exploration cos)?

Looks like Yahoo Finance has finally come around in a few areas. They've added message boards for OTC:BB stocks, and they also added an "alert" feature on portfolios that shows when a stock has crossed above or below their user-defined limit prices.

Michael, I think Fidelity's execution is as good as Ameritrade's (or Zecco for that matter.) I always use limit orders, except in rare instances, so the speed of execution doesn't matter as much to me. Fido's commissions on <$1.00 stocks bugs me, but sometimes I have to eat it and trade with them anyway (UTVG being one example.)

Fidelity does have a decent trading platform if one qualifies as an active trader; I don't use it very much because in the past I found that i couldn't get level II quotes on AMEX, NYSE, or OTC:BB stocks from it.....(I use ABWatley's Ultimate Trader for quotes and alerts.)
http://www.abwatley.com/index.php?NAV=Products&PROD=UT

Sandman, I encountered the same problem with Ameritrade regarding UTVG. Another poster who was an old member of Waterhouse was able to place a buy order last year with no problem. I have other accounts at Fidelity and Zecco that have accepted buy orders for UTVG.

I would recommend that you open up another account at a different broker....but hang on to Ameritrade. Its good to have multiple on-line accounts for just this reason.

Agreed. I think this shake-out will continue to weed out the weak hands. The stock had a tremendous move up from its bottom around 3, so some backing and filling was inevitable.

Even though this appeared to have been a tax-loss selling candidate last year, it may be that there were more traders sitting on gains from the 3-3.50 area who chose to lock in today?

Curlews, I agree with you on IEAM. I think this dip below 4 was a "headfake" and I added some more today as well.

Len, the problem is that the SEC appears to be slow at updating the symbol change for Universal Travel. UTVG is the proper symbol, but the SEC doesn't have it yet. They don't even show TMHN, which was the former symbol! The paid services are usually MUCH faster and better at this.....

FWIW, Yahoo finance shows the SEC filing under "news". Its not the full filing, but it is data from Edgar Online Pro.

Len, I use 10kwizard, and have no trouble pulling up UTVG's filings under the UTVG symbol.

If you are using Edgar, you can find their filings using the text search function:

http://searchwww.sec.gov/EDGARFSClient/jsp/EDGAR_MainAccess.jsp

Type in "universal travel group" (including the " "). You'll see a list of filings for Tam of Henderson.


Most recent 10Q:
http://www.sec.gov/Archives/edgar/data/1336644/000119380506002685/0001193805-06-002685.txt

I'm not sure what you mean by "...the numbers that TAM of Henderson reports are inconsistant with the numbers in the PR's for Universal Travel." I don't see any inconsistency in the sales and net income figures as reported in the PR and 10Q.

R59, BBC held their annual shareholders' meeting yesterday. I've been reading some of the posts on the Yahoo thread from a few who actually attended the meeting, and they were sounding pretty confident that the company would be able to satisfy the AMEX issues.

Its all pure speculation at this point, but the stock is so heavily shorted that perhaps its seeing some shorts covering. I have yet to see the company address the "early shareholders" issues, and the massive Form 144 sales have increased the supply by a huge amount. I still have some questions about the early r/m and full disclosure from the company regarding exactly who all these early shareholders were.

Bob, I'll take a stab at sorting out the UTVG share ownership/amount issue. My understanding is that there are 30.45MM shares (fully diluted), with around 2.45MM shares that are now freely tradeable.

Timeline:

(A) June 20, 2006: Xiao Jun acquires 8MM shares (of 10.45MM then issued and outstanding....see below for more detail):

Item 5.02 Departure of Directors or Principal Officers, Election of Directors;
Appointment of Principal Officers

On June 20, 2006, Mr. Xiao Jun ("Jun") and Marcus Luna, Esq., authorized
representative of the selling majority shareholder (the "Seller") of Tam of
Henderson, Inc. (the "Company") consummated Jun's purchase of shares of capital
stock of the Company in accordance with the terms and conditions of that certain
Share Purchase Agreement, dated as of June 2, 2006, by and between Jun and the
Seller (the "Purchase Agreement"). Pursuant to the Purchase Agreement, Jun
acquired 8,000,000 shares of the Company's common stock, par value $.001 per
share (the "Common Stock") for an aggregate purchase price of $435,000.00 (the
"Stock Transaction"). After giving effect to the Stock Transaction, Jun holds an
aggregate of 8,000,000 shares of the 10,450,000 shares of the Company's Common
Stock issued and outstanding, constituting, in the aggregate, approximately 77%
of the issued and outstanding shares of Common Stock of the Company, effecting a
change in the controlling interest of the Company.

The funds with which Jun purchased the 8,000,000 shares were personal
funds of Jun.

(B) June 26, 2006 R/M completed between Tam of Henderson and Full Power Enterprises Global (the owner of YZL "Yu Zhi Lu Aviation Service....the actual company). 20MM new shares issued by TMHN to holders of Full Power:

"Prior to the completion of the Merger Transaction on July 12, 2006,
Jiangping Jiang, Jiangxia Jiang, Luoluo Gao, Jingbo Zhang, Liangzhen Jin, Simple
(Hong Kong) Investment & Management Company Limited, First Capital Limited,
Value Global International Limited and China US Bridge Capital were the
shareholders of FPEG (the "FPEG Shareholders"). In addition, Jiangping Jiang is
the sole director of FPEG.

2. The Merger Transaction

Pursuant to the Merger Agreement, MST merged with FPEG, with FPEG as the
survivor of the merger. As a result of the Merger Transaction, FPEG became a
wholly owned subsidiary of the Registrant, which, in turn, made the Registrant
the indirect owner of the Chinese subsidiary company YZL.

3. The Merger Consideration

Under the Merger Agreement, in exchange of surrendering their shares in
FPEG, the FPEG Shareholders received stock consideration. The stock
consideration consisted of 20,000,000 newly issued shares of the Registrant's
common stock, which were divided proportionally among the FPEG Shareholders in
accordance with their respective ownership interests in FPEG immediately before
the completion Merger Transaction.

Here are the owners of the 20MM shares:

SCHEDULE A

FPEG SHAREHOLDERS



--------------------------------------------------------------------------------------------------------------------
Name of FPEG Shareholders FPEG Common Stock Ownership % Shares of TMHN to be received
--------------------------------------------------------------------------------------------------------------------

Jiangping Jiang 59% 11,800,000 shares
--------------------------------------------------------------------------------------------------------------------
Jiangxia Jiang 6% 1,200,000 shares
--------------------------------------------------------------------------------------------------------------------
Luoluo Gao 5% 1,000,000 shares
--------------------------------------------------------------------------------------------------------------------
Jingbo Zhang 5% 1,000,000 shares
--------------------------------------------------------------------------------------------------------------------
Liangzhen Jin 5% 1,000,000 shares
--------------------------------------------------------------------------------------------------------------------
Simple (HK) Investment & Management
Co., Ltd 5% 1,000,000 shares
--------------------------------------------------------------------------------------------------------------------
First Capital Limited 5% 1,000,000 shares
--------------------------------------------------------------------------------------------------------------------
China US Bridge Capital Limited 4% 800,000 shares
--------------------------------------------------------------------------------------------------------------------
Value Global International Ltd 6% 1,200,000 shares
--------------------------------------------------------------------------------------------------------------------


Summary:

FPEG shareholders (listed above): 20MM
Xiao Jun: 8MM
Affiliate shares: 2.45MM
=======================================
Total FDS: 30.45MM

Any sales done by directors or management would have to involve a Form 4. The 2.45MM shares became freely tradeable as of their 2 year anniversary of being issued (Sept 30, 2004):

"TAM OF HENDERSON COMMON STOCK

On January 15, 2004, the Company issued 8,000,000 (post-split) shares of its
$0.001 par value common stock for cash.

On September 30, 2004, the Company completed a public offering of shares of
common stock of the Company pursuant to Regulation D, Rule 504 of the Securities
Act of 1933, as amended, whereby it sold 2,450,000 (post-split) shares of the
Common Stock of the Company for cash of $12,250 to 46 unaffiliated shareholders
of record

On September 30, 2004, the Company effectuated a two-for-one forward stock
split.

As of March 15, 2006, there were 10,450,000 shares of Common Stock issued and
outstanding, held by approximately 47 shareholders of record. There are no
outstanding stock options or warrants. TAM has 70,000,000 shares, par value
$0.001, authorized.

MikeS, is UPG the "battery and fulfillment" segment of ZNCM? If so, the rest of the company looks like a money loser from operations...

 
 A summary of the segment financial  information  reported to the chief operating 
 decision maker is as follows: 
  
                       Three months ended September 30, 2006 
                       ------------------------------------- 
  
                                             Facsimile  
                                             and 
                                 Battery and Business 
                                 Fulfillment Center      Adjustment  Consolidated 
                                 ----------- ----------  ----------  ------------ 
 Revenue                         $23,770,977 $  413,750  $        -  $24,184,727 
 Depreciation and amortization        34,156     36,078           -       70,234 
 Segment profit (loss)               808,426     10,175    (105,991)     712,610 
 Segment assets                   31,530,897    365,676   1,348,110   33,244,683 
 Capital expenditures by segment      28,875     22,826           -       51,701 
  
                       Three months ended September 30, 2005 
                       ------------------------------------- 
                                             Facsimile  
                                             and 
                                 Battery and Business 
                                 Fulfillment Center      Adjustment  Consolidated 
                                 ----------- ----------  ----------  ------------ 
 Revenue                         $22,111,952 $ 455,924   $       -   $22,567,876 
 Depreciation and amortization        15,164    38,128         465        53,757 
 Segment profit (loss)               868,673   (17,463)    (94,462)      756,748 
 Segment assets                   24,399,302   419,020     607,938    25,426,260 
 Capital expenditures by segment      53,149    49,294           -       102,443 
  
                       Nine months ended September 30, 2006 
                       ------------------------------------ 
                                             Facsimile  
                                             and 
                                 Battery and Business 
                                 Fulfillment Center      Adjustment  Consolidated 
                                 ----------- ----------- ----------  ------------ 
 Revenue                         $68,016,953 $1,321,706  $       -   $69,338,659 
 Depreciation and amortization       115,215    107,864        246       223,325 
 Segment profit (loss)             2,287,104   (116,035)  (376,609)    1,794,460 
 Segment assets                   31,530,897    365,676  1,348,110    33,244,683 
 Capital expenditures by segment      83,724    112,260          -       195,983 
  
                       Nine months ended September 30, 2005 
                       ------------------------------------ 
                                             Facsimile  
                                             and 
                                 Battery and Business 
                                 Fulfillment Center      Adjustment  Consolidated 
                                 ----------- ----------- ----------  ------------ 
 Revenue                         $59,960,761 $1,391,429  $       -    $61,352,190 
 Depreciation and amortization        83,281    129,662      1,396        214,339 
 Segment income (loss)             1,890,782   (100,888)  (307,265)     1,482,629 
 Segment assets                   24,399,302    419,020    607,938     25,426,260 
 Capital expenditures by segment     120,972    119,049          -        240,021 
  
  
 

Well, the relentless selling continues. I'm going on the assumption that this is tax-loss selling or one of the affiliates selling some "free" stock.

Anybody here with a higher cost basis selling for tax reasons?

Pappy, the action on UTVG is probably related to tax-loss selling or perhaps an "affiliate" with free trading shares getting out to book some y/e income.

I haven't seen anything in the filings to indicate a 144 filer dumping stock, but that could come in the next week or so. We'll see.

This action reminds me of the same wild dumping of CEDA earlier this year with no regard to fundamentals. UTVG has solid cash flow from ops, and a very low PE. Its in a very attractive growth industry (travel to China and Macau). If CEDA is worth 10x FY06 estimates, then so is UTVG.

FWIW, I've been a buyer today.

Very interesting post on the yahoo BBC thread:
http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_B/threadview?m=te&bn=26869&tid=...

Talked to one of early investors
I talked to one of early investors in China who claimed to have over 100k shares. He claimed he bought these shares in 2003. According to him, Karen Wang and Bo Chen don't own all the shares under their or their dependents name. Part of their shares belong to early investors. When early investors bought their shares, they got transfer agreements. Therefore, even though there are only 19 names were reported, the actual number of shareholders is about 2000. Bodisen has tried to buy back some shares from early investors with limited success. Although many early investors have sold their shares to several acquisiton companies (a main one was from Shanghai and CHNG is also buying BBC shares) at 6 RMB/share for the BII shares(equivalent to $3.3/share for BBC share), there are still many shares owned by early investors. NYGG is still working on unlocking restricted shares for early investors and they have helped over dozen early investors in the past month.
I asked him if he wanted to sell at the current price and he said No. He said he had been to Bodisen's facility and met with Bo Chen. He said the business looks good and he wants more for his shares. He also said Bo Chen travelled to XinJiang monthly and was upbeat with the potential in XinJiang.
In summary, I am not sure how much he said is true, but BBC will have a lot explanation to do with the early investor issue. The good thing is that BBC seems to have solid business and expansion in XinJiang seems real. Personally, I am not too concerned about how many shares are owned by early investors as long as the TSO does not change.

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

I would urge all VMCers to avoid the stock at present. The messy shareholder ownership situation needs to be sorted out before any accurate valuation can be made here.

mandjb, I don't closely follow CAMT, but it seems that the analyst following the company dropped the eps estimates for next year and the current quarter:

http://finance.yahoo.com/q/ae?s=CAMT

The earnings ytd are minimally taxed.

UTVG correction. I said the company earned 0.04 in Q3, but that was untaxed. They actually earned 0.032, taxed at 15% and fully diluted (30,450,000 shares).

I think the company might earn closer to 0.04 for Q4 in what could be a heavier part of the travel season...

UTVG could be an interesting spec play at current levels (0.45 - 0.55). The stock is a Chinese travel company that had a pretty decent eps last quarter, earning around 0.04 (taxed at 15%, and fully diluted.)

My guess is that we are witnessing some tax-loss selling, but who knows. I haven't seen any Form 144 related selling. There was a bit of a momentum-fueled run up in late October, and perhaps there are some that are throwing in the towel.

There is no "smart-money" institution(s) involved here, ala CXTI, AOBO, etc so it is definitely a trade and not a long-term hold for me.

Interesting play at these levels...0.46 to 0.50. I'm guessing that there are some individuals looking for the tax-loss at present and just want out. Chart looks terrible, but the fundamentals aren't bad here for a Chinese OTC. They have zero institutional sponsorship, and that's a big strike, but this could be a decent trade. Good time to start accumulating imho.

Anyone familiar with the group behind the 13G filing today? I don't see Corriente Advisors listed anywhere in the IEAM filings, yet they claim that they were formerly a 5% holder in the stock...

(a) Name of Person Filing

This statement is filed by and on behalf of Corriente Advisors, LLC and Mark L. Hart III.
Corriente Advisors serves as an investment adviser and/or manager to other persons. Corriente Advisors may be deemed to beneficially own shares owned and/or held by and/or for the account and/or benefit of other persons. Mr. Hart is the manager of Corriente Advisors. Mr. Hart may be deemed to beneficially own shares owned and/or held by and/or for the account and/or benefit of Corriente Advisors.



Item 5. Ownership of 5% or Less of a Class.

If this statement is being filed to report the fact that as of the date hereof the reporting person has ceased to be the beneficial owner of more than five percent of the class of securities, check the following x.

Digi, re CXTI. They have been taking the hit upfront for past contract announcements and don't amortize the fee over the life of the contract. Doesn't seem like the accounting reflects the reality of what is happening, but so be it.

Prior to this year, the company was issuing shares to these consultants, which impacted the income statement two ways: one, by bumping up the fds count and two, recognizing a non-cash stock expense. Now, its just a cash expense item, so current shareholders aren't being diluted as much and there isn't a constant source of supply from consultants trying to get their cash by selling stock.

This practice does hit cash flow, but CXTI has roughly 22.5MM in cash on its balance sheet as of the end last quarter and should be able to weather this. They chose not to pay off the convertible debt holders in September, presumably to conserve cash for these upfront payments and to invest in the start-up phases for new projects. They must have known about these pending deals, and there should be even more announcements next year.

Backlog increase adds to what is a very large existing backlog and should attract attention. Updated backlog of 201MM + is still greater than CXTI's entire market cap, even after the substantial rise in the stock price today.

The issue is will ISAC decide to recognize all of those deferred tax assets as capable of being used. If you are confident in the sales and earnings growth here, then you would expect the auditors (and the CFO) to agree that the tax benefits will ultimately be used to offset profitable operations. When that will occur is anyone's guess. It seems that they have begun doing that right now:

"6. Income Taxes


As of September 30, 2006 and 2005, the Company has net operating loss carry forwards for income tax reporting purposes of approximately $34,706,000 and $41,200,000 respectively, which represent deferred tax assets of approximately $13,633,000 and $15,908,000 respectively. These net operating losses begin to expire in 2014. The Company evaluates these net operating losses and the related valuation allowances both quarterly and annually. As a result of the income the Company generated in 2005 and 2004 and based on its net income for the first nine months of 2006 and projected future taxable income, the Company began recognizing income tax benefits on an interim basis for the first time during 2006. The estimated income tax benefit was approximately $341,000 and $991,000 (before the alternative minimum tax expense of $21,000 and $121,500) for the three and nine months ended September 30, 2006 respectively. Prior to 2006, the Company did not recognize an income tax basis on an interim basis.

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

The company has recognized that its ability to generate consistent profits has improved, and thus it will need to recognize those deferred tax assets that aren't fully considered an "asset" yet by the company. The company is slowly decreasing its valuation allowance via the tax benefit. This results in an increase to the deferred tax asset on the BS. Once the valuation allowance has been exhausted (which could be accelerated at any time), then the deferred tax asset will have to be depleted through charging tax to the income statement.

You are correct that the company won't have to pay taxes on a cash basis for many quarters to come. Cash flow will be helped, but the income statement will show lower net income, because they are using a statutory rate to reduce the deferred tax asset.

This is one of the pitfalls of using net income (and PE multiples), imho. It may be a minor point to some, but I think we've seen firsthand what happens when a company transitions into a higher tax bracket. ISAC will be hit harder by the fact that its net income reflects tax benefits on top of untaxed net. I think the market has figured it out, however...pretax income is a better performance measure here, imo, and that has fallen y/y, even after adjusting for the non-cash option expense.

R59, ISAC.ob net is inflated by a tax benefit. Back that out, and then apply a pf tax rate, and the numbers look much less impressive. I wouldn't say that this has a "true" PE of 6.

Given that they are recognizing a tax benefit this year, could imply that the income statement will show a tax rate in FY07

There is a lawsuit filed against Gryphon Partners by the SEC, alleging illegal short selling associated with PIPEs. The story was discussed today and earlier on TheStreet.com, but the complete complaint is here:

http://www.sec.gov/litigation/complaints/2006/comp19942.pdf

Makes for interesting reading. Read pps 8-13 for a nice description of how illegal short selling works.

R59, it sounds like the previous accounting firm for IEAM left a lot to be desired:

Industrial Enterprises of America Announces New Independent Auditor
Friday December 8, 3:59 pm ET


NEW YORK, Dec. 8, 2006 (PRIME NEWSWIRE) -- Industrial Enterprises of America, Inc. (OTC BB:IEAM.OB - News), a specialty automotive aftermarket supplier, today announced that the Company has retained De Joya Griffith & Company, LLC as the Company's independent auditors, effective immediately.
ADVERTISEMENT


De Joya Griffith & Company, LLC will be replacing Beckstead and Watts, LLP (B&W) as Industrial Enterprises of America's independent auditors. B&W's report on the financial statements with respect to the fiscal years ended June 30, 2005 and 2006 contained no adverse opinion. There have been no disagreements with any of the Company's independent auditors to the knowledge of the Company's Board of Directors.

Additional information relating to the change in the Company's independent auditors can be found in a Current Report on Form 8-K which the Company is filing today with the Securities and Exchange Commission.

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

The company was late in its last filing, and the CEO was adamant on the CC that that wouldn't happen again. I agree that they should have shown at least an alternate income statement regarding the additional warrants, but the company did disclose a fd share count number of 13.5MM for Q1:

"Before auditor final review IEAM earned net income of $2.5 million for the quarter before non-cash charges associated with derivatives booked in fiscal 2006 compared to a net loss of $300 thousand during the same period of fiscal 2005. Based on 13.5 million fully diluted shares (treasury method), this translated into a net income of $0.19 per share. This is after accounting expenses of approximately 2 cents per share related to various restatements of previous financials caused by the change in accounting treatment previously disclosed. The non-cash charges associated with the derivatives booked in fiscal 2006 will continue throughout the year. The 10-Q with full financial details is expected to be filed Monday.

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

If you strip away the non-operating, one-time gains, and assume that at least 500k of int exp were cash charges, then yes, the quarter looks like a small loss. However, from listening to the call, it sounds like there was a complete management overhaul at one of the subs that necessitated virtually shutting down the business. I think margins took a big hit that shouldn't be repeated, plus it sounds like Q1 is a seasonally weak quarter anyway.

I think the company has a lot to prove, especially given that cash flow from ops is still negative for the quarter. However, one could argue that there are some items in there that could legitimately belong in "financing ops" and aren't truly operating in nature.

The stock buyback announcement was a bit over the top, given their current cash position and cash flow. The stock is still in the "prove it" class to a lot of potential investors.

KIK, I looked at yahoo's profile for IEAM too, and went to that scammy site. However, I think these sites are probably a better representation of the company and its biz:

http://www.pittpenn.com/
http://unifide.com/index2.php

Couldn't find one yet for EMC packaging...

Wade, there were some operating income eps numbers discussed on the Q1 07 call for IEAM. Was it your understanding from your discussion with the CEO that he was using 14MM fd shares when he put out those guidance numbers?

I listened to the call, and was surprised that no one asked the obvious question about share counts.

One of the things that investors should remember is that there is some seasonality in this biz. Looks like Q4 is the big quarter, and if they are able to raise prices a bit and manage their costs efficiently, they might be able to put up some decent numbers on an operating basis. Of course, those are before ongoing int exp (not the non-cash derivative charges) and taxes.

Don't forget that those are untaxed earnings, so any discussion of "forward PE" should be discounted, IMHO.

I certainly agree with the cash machine observation, and that has probably attracted some value hunters here. If there are warts here, it hasn't shown up in their cash flow statement yet.

I guess the big question with CPNE is figuring out the appropriate margin of safety. I think CPNE is close to FV in the 1.60 - 1.80 range, but my valuation approach uses PF tax rates closer to 35%, and also uses a low forward multiple (10x) based upon the business sector they are in.

Can the market ignore the issues I've raised? Absolutely! That's what makes a market.

Jking, don't forget this:

"On November 20, 2006, the former NJJ stockholders amended the August 24, 2006 purchase agreement pursuant to which Tricell acquired the stock of NJJ and its subsidiary, N2J Limited. Pursuant to the agreement, the four NJJ stockholders received 90,000,000 shares of stock and an additional 120,000,000 shares were held by the Company in escrow. The Company has the obligation to purchase the shares from the former NJJ stockholders based on a formula of 70% of N2J net profit before income taxes, with a maximum payment of $24 million, and any shares not purchased by the Company pursuant to the formula would be delivered to the former NJJ stockholders. The amendment provided that any shares not purchased from the former NJJ stockholders are to be returned to the Company for no additional consideration. As a result of this amendment, the Company's liability to the former NJJ stockholders is limited to 70% of N2J's net profit before taxes from August 25, 2006 through August 24, 2007. Since the amendment was not is effect on September 30, 2006, the entire $24 million is reflected as a current liability. If that amendment had been in effect on September 30, 2006, the amount due to the former NJJ stockholders would have been $2.2 million.

MSGI, have you looked into what CPNE is selling? They've done a great job of turning things around, but how sustainable is this?

CONSUMER LOYALTY GROUP, INC.

Consumer Loyalty Group provides "how to" programs that help customers to
establish home based business opportunities. Consumer Loyalty Group's suite of
products includes the following programs:

- A real estate investment program that instructs consumers how to purchase,
manage and sell real property. This program also provides its customers
with access to thousands of distressed property listings.

- An online supplier program that informs consumers how to establish a home
based e-commerce business. The program includes instruction on how to set
up an e-commerce website and run a successful e-commerce business,
including access to a domain name registration system, a credit card
merchant processing account and marketing support. This program also
provides the customer with access to over 30,000 brand name electronics at
wholesale prices for product resale as part of their e-commerce business.

- A software tutoring program provides customers with instruction on how to
use basic software programs including Microsoft Word, Excel, Power Point
and other commonly used programs.

- A health program that provides users with discounted access to a network of
over 500,000 physicians, healthcare facilities and pharmacies. The program
coverage includes savings for health, vision and dental services.
----------------

Here's the website:
http://www.consumerloyalty.com/programs.html

Seems like they are selling a series of home-based businesses. How many people actually do well with this??

They also are selling how-to real estate investment programs, which I doubt will do well over the next year or two. I checked the website, but it doesn't seem to open for me:
www.InvestingInSuccess.com

I'd beware of this one, but they seem to have some momentum at present.

CSCT.ob (formerly CSSTF.ob) news before the bell today:
http://biz.yahoo.com/prnews/061129/lnw003.html?.v=40

China Security & Surveillance Technology, Inc. Raises $10.0 Million in Proceeds in a Private Transaction
Wednesday November 29, 9:05 am ET


SHENZHEN, China, Nov. 29 /PRNewswire-FirstCall/ -- China Security & Surveillance Technology, Inc., "China Security" (OTC Bulletin Board: CSCT - News), a leading provider of digital surveillance technology in China, announced today that it has completed a private placement with 3 funds associated with JLF Asset Management raising $10.0 million in gross proceeds in exchange for 1,538,462 shares.

China Security is obligated to file a registration statement to cover the 1,538,462 shares on or before April 30, 2007 and use its best efforts to cause such registration statement to be declared effective on or before December 31, 2007. China Security also granted the investors piggyback registration rights with respect to these shares. As part of the agreement, investors committed not to sell their shares on or before November 26, 2007 regardless if the registration statement becomes effective prior to that date. JLF Asset Management is not requiring a make good provision as has been the case in prior capital raises. China Security plans on using the proceeds to bolster the Company's working capital position.

"We are pleased to raise additional capital as these proceeds will augment our existing organic growth while providing us the opportunity to identify additional complementary acquisitions, commented Mr. Tu Guo Shen, Chief Executive Officer of China Security. "Our institutional sponsorship continues to increase and we are pleased to welcome new investors to our shareholder base."

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


The more I follow this story, the more I think that CSST is trying to follow the path that AOBO did. They have added significant institutional support and will most likely be looking to move off the OTC:BB exchange soon. I would expect some to sell on this news, since it is dilutive (the shares were issued at 6.50, and the current price is 9.50-10.00), but I think that it will have a long-term beneficial impact.

JLF has taken significant positions in a number of Chinese stocks. Some of their holdings that the board may be familiar with:

AOB, CXTI, SEED, CNCA, among others.

They have a decent following from other institutions on the Street, and have a pretty good investment track record. Their interest will help put CSST on the map, IMHO.

R59, re CHID. They haven't filed any 8k's regarding this transaction, and this deal is not close to being completed yet. Its a privately held company, and those are very difficult to audit, esp in China.

What is also very clear is that the battery shell and 3G power biz is really struggling. Until they actually exchange (dump?) these business, that's what CHID shareholders own stakes in.

Will they complete the deal? Who knows? Given where the share price is trading, I'd want to get more shares now for my $45MM if I were selling my business to CHID.

CHID management doesn't impress me.

R59, re ORXT. This was one of my mistakes. I sold after the Q2 report. The company mentioned that its margins would continue to be under pressure, although they rebounded in Q3, doing better then I expected. Pretax margins in Q2 were around 8%, but that rose to 11.5% in Q3 (still lower than the year ago 15% pretax margins.) Now the company indicates that its margins rebounded due to inventory adjustment pressures that abated during the quarter. Q4 is expected to be similar to Q3.

However, I'm surprised that the stock still has traction after a Q3 report that was underwhelming in terms of eps growth. I have them as having a TTM eps of 0.22, so with the stock at 2.95, the stock trades at a 13-14x multiple.

Another stock in the same China telecom/cellphone sector which has languished for lack of PR efforts is TBYH. TTM eps of 0.39, stock trades at 1.55 (PE < 4x). TBYH is a handset designer to some of the same cellphone companies that ORXT has relationships with (CECT the primary one.)

TBYH has a tough comp coming up in Q3, and hasn't released any PRs in several months. The stock has been under some selling pressure as investors are getting a bit frustrated by the lack of information put out by the company....(understandable!)

TBYH is in the process of getting new chipset providers since their former provider, Skyworks, is no longer in that line of business. The company has indicated that it has the resources to meet current demands, and has stepped up production with its new designs (with Via):

"We have withheld the development of other three new model series because we believe one of our chipset platform providers may shift its business focus from baseband digital signaling business to other products.

"We have been actively looking for new partners since June 2006 and started cooperation with VIA Technologies Inc. Ltd. to develop mobile handsets for china market.

"Solutions based on VIA solutions have been completed in October and products will be sold in November 2006."

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TBYH has much better margins and cash flow ytd than ORXT, however, their revenue stream seems lumpier and bit less predictable. They may not grow net income at a huge rate over the next 6 mos, but rev growth seems to be strong at 25-30%. Story seems very similar to ORXT, with sales growth very strong but margins under pressure. ORXT just a bit better known, so it trades at a higher multiple.

Mike, if N2J doesn't generate the expected net income, then the new agreement stipulates that the company doesn't have to buy the shares back AND gets to cancel them:

Here are the original terms:

"Tricell has an obligation to use 70% of the profits from N2J's operations for the year following the closing to purchase up to 120 million of these shares from the selling stockholders, for a maximum of $24 million.

The key change in the amendment:

"On November 20, 2006, the former NJJ stockholders amended the August 24, 2006 purchase agreement pursuant to which the Company acquired the stock of NJJ. Pursuant to the amendment, any shares of common stock which are not purchased by the Company under the formula set forth in the purchase agreement are cancelled. As a result of this amendment, the Company’s liability to the former NJJ stockholders is limited to 70% of N2J’s net profit from August 25, 2006 through August 24, 2007. If that amendment had been in effect on September 30, 2006, the amount due to the former NJJ stockholders would have been $2,203,903, rather than $24,000,000.

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TCLL has always been committed to paying the N2J shareholders 70% of N2J's net profits from August 25, 2006 - Aug 24, 2007. That never changed. What HAS changed is that if the company doesn't buy back all of the 120MM shares, the remainder are cancelled.

Again, why issue the escrow shares if they will either be a) bought back by the company or b) cancelled? A year from now, those shares won't exist either way, yes?

Its confusing to say the least. Given the new amendment, they should just cancel the escrow shares and pay cash in installments as agreed previously. Why involve TCLL shares?? Plus, two of the four major shareholders in N2J are already major shareholders in TCLL....they are the CEO (Reed) and CFO (Pursell). I would hope that they aren't structuring a deal that hurts themselves as TCLL shareholders in the long run, because most of their personal stake in this deal is tied up in TCLL stock.

Tsquare and Beigledog, it doesn't really matter if the company issues a PR regarding a share buyback....the proof would be in the cash flow statement. Lots of companies authorize share buybacks of $xxxx but never actually follow through.

Besides, I doubt they will be buying back shares over and above what they have already agreed to. They are obligated to buy back up to 120MM shares using a maximum of $24MM. That's a pretty substantial commitment!

I still don't understand why they issued the 120MM shares in the first place if they were just going to be retired anyway. Why not just pay the N2J shareholders in cash over time?

ETLT filed an S-8 this morning, registering 4.4MM new shares. Some (800k) were previously issued to consultants, but the bulk is stock issued to employees.

Not sure of the accounting treatment, but wouldn't this be a hit to expenses in Q4? I remember that CKGT did the same thing during its Q2 (issuing an S-8, registering stock paid to employees) and absorbed a hit to net income.

Ever wonder why the stock doesn't ever fully reach its potential??

Jan, in theory, stock splits (reverse or forward) have no impact on intrinsic values. However, because reverse splits have a negative aura about them, stocks tend to trade down when this news is released. I'd say that with the stock at 0.20, most of the "bad" news is probably priced in here, but who knows??

If the reverse split is done with the sole purpose of achieving a listing on a larger exchange (AMEX has the lowest price requirement, depending upon the standard used) then I think investors would view it positively. On the other hand, if the reverse split is done with the view to print more shares, then it is not a good thing for current investors.

With the involvement of Barron Partners, I'd say that the reverse split is being done to accommodate the wishes of future institutional investors with the hope and expectation that the company will apply for listing on AMEX. Why else would they bring in independent directors?

Pappy, I nibbled a little bit yesterday when UTVG was down in the low 0.70s. BTW - you can't trade this one on Ameritrade. They will only do it if you have the physical certificate LOL. Put my trades through Fidelity, even though the commissions aren't great for stocks <1.00.

BTW - They've got some of the same affiliates involved as CHID, so beware of the wild swings. Its probably a good trading stock, but I wouldn't look to hold long-term without some kind of institutional involvement. At least they put out PRs and have made a commitment to hold CCs.

Joe, I think you are seeing an ill-informed sell the news reaction....hopefully, this will shake the weaker shareholders out. The way this deal is structured with NJJ (and Barrons), it would appear to me that 0.20 is a very important price level. I was pretty surprised that the price fell below that, and I was trying to buy as much as I could below 0.20. I got a few shares in the 0.19 - 0.195 region, but the rest of my bids were ignored. Decided to hit the ask at 0.205 to get some more cheapies, and will now sit back and watch the action.

I agree Mike. But here's the confusing part of this aquistion:

"On November 20, 2006, the former NJJ stockholders amended the August 24, 2006 purchase agreement pursuant to which Tricell acquired the stock of NJJ and its subsidiary, N2J Limited. Pursuant to the agreement, the four NJJ stockholders received 90,000,000 shares of stock and an additional 120,000,000 shares were held by the Company in escrow.

How should we treat these escrow shares? Are they really part of the fd share count?

The Company has the obligation to purchase the shares from the former NJJ stockholders based on a formula of 70% of N2J net profit before income taxes, with a maximum payment of $24 million, and any shares not purchased by the Company pursuant to the formula would be delivered to the former NJJ stockholders.

BIG CHANGE: The amendment provided that any shares not purchased from the former NJJ stockholders are to be returned to the Company for no additional consideration.

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The way I read this, the shares held in escrow (120MM) have a maximum value of 24MM (0.20/share) for the former NJJ shareholders. However, it could cost the company LESS to repurchase the shares if the pretax income contribution from NJJ is less than expected.

Why even use the shares? If all of the 120MM shares in escrow are going to be repurchased (or retired at no cost), why not just pay for the acquisition in cash.....? The shares don't appear to impact the fds count, if I read this correctly.

Looks like they earned about 0.01 in the quarter, if the non-cash derivative expense is backed out, and using a fds count of 227MM shares. Unfortunately, the fds count is confusing to say the least, as there are out-of-the money warrants, escrowed shares, etc.

Lets not forget that Pursell and Reed (major shareholders in NJJ) are also big shareholders in TCLL. They benefit much more than any of us if this deal is well received by the market. I think this is just another quick sell the news reaction, which appears bad if one just quickly looks at net income on the income statement.