New Energy Systems Group (fka NEWN)

[ChaTea]

Weeblewobble, I’ve read your posts over the past year and have found you to be a good guy (which is why, a number of times previously, I wished you well on your future investments), so I don’t like having this sort of exchange with you.

The company has stated that they entered into a 4 year contract with these 8 consultants in August of 2009. According to a conversation I had with Ken Lin and Jack Yu regarding these individuals, 6 of the consultants were contracted to perform financial consulting services (the details of the work they perform can be found on page 18 of the 2010 10K), while the remaining 2 consultants were contracted to perform branding strategy consulting services.

After these consultants were hired, New Energy went through two major acquisitions which grew the company considerably without taking on any debt in the process. And, since the company did not use any underwriters or banks to facilitate these acquisitions, it seems to me that the company initially got a good bang for the buck on the work that these 6 financial consultants initially performed.

I understand from your posts that you believe that the Kim Fai deal stinks and that you think that the company has probably just acquired a company which it was had control of anyway. If, on the other hand, the company did not commit this fraudulent act, and instead bought a company legally with the assistance of these 6 financial consultants, then I believe that this adds to the argument that the price they paid appears to have been fair.

The company has alluded to the fact that they may be acquiring another company sometime this year (the shelf filing and the LOC that Jack Yu is backing with his own stock would seem to indicate that this is a possibility – the company was also, in all likelihood, assisted in these two actions by their financial consultants). And, since the company is still contracted with those 6 financial consultants, it would appear that their consultants will be helping out in the deal. Therefore, I believe that this deal, although initially expensive, has been good for the company so far.

My reason for bringing up GE was not to say that New Energy and GE are similar companies, but was to make the point that no company is required, as far as I understand, to provide the names of all the companies that they enter into contracts with (whether they be consultants, cleaning service providers, or transportation service providers) in their company filings. I guess I could have picked any company for this example, but I thought that GE would be an easy one to check to see whether this is true or not.

I don’t know why the company won’t say who these consultants are, but my experience is that most companies are careful to not disclose information that they are not required to. Take the financial consultants, for example. Maybe the reason why New Energy’s management hasn’t disclosed this information yet is because these consultants are actively involved in deciding which direction the company will take with respects to its future investment activities and at this time they want to keep the names unknown to the rest of the investing world. Maybe they don’t want other companies to know who they are for competitive reasons. Again, I don’t know.

However, to think that these 8 consultants are actually insiders in the company (company management) just doesn’t make much sense to me. Could they be? Of course they could! But I am not seeing anything which would indicate that they are.

Weeblewobble, I think that if I were to look at any company, anywhere in the world (where I am proficient enough with the language) I’d be able to find red flags with their operations as well. The thing is, with New Energy, the red flags that have been brought up so far appear to me to be just nonsense which is intentionally being spread and made more important than it really is in an effort to spread fear and help to drive down the company’s share price. Of course, while this is happening, those who are shorting the stock engage in potentially illegal activities to their benefit.

Myself and others have covered GeoInvesting ad nauseum, so I don’t need to talk about all the things that have been mentioned before about the company and the way it conducts its business (the alleged $25,000 dollar seminar to learn about how to kill Chinese equities, the fact that none of the key contributors appears to be qualified to research stocks in general [Chinese ones in particular], etc, etc, etc) and the other red flags that have been brought up previously regarding this company. One new thing did stand out: a site has been created that, using GeoInvesting’s own postings, appears to show that whitetiger is possibly involved in fraud himself: http://www.hitpieceresearch.com/ . The author’s concluding paragraph is very telling: “Ultimately we believe these “hit piece” providers have no desire to do either of the above [speak to co. first for explanation/ report co. to the authorities] prior to trading on the information as they wouldn’t profit as handsomely from such actions. In the end, we ask ourselves how is what is happening in this situation any different from the Galleon case which is highly publicized in our media today?”