carbon trading business the only way forward..

IMHO m2ms carbon trading business is the only way forward. That is, provided they can actually pull it off and meet their 1st year projections. Personally I'm not really that interested in any of their other investments. Sure penetration into China via any business venture is always attractive however in m2ms case its penetration into the CCT market that would be the most prosperous. I haven't looked into the detail of their other businesses however on the surface they dont look that appealing to me. They appear to be real cash burners IMO and the China MOU negotiations and DD seem to be dragging out far too long and is not only costing money but resources as well. Besides the China project, whilst still sounds appealing but on very limited info, requires "significant funding in the first 2 years for build and working capital...breakeven EBIT within 2 years" whereas CCT projects require limited funding with immediate return.

"Significant management time and costs continue to be incurred in sourcing, evaluating and progressing further investment opportunities."

I read m2ms Half Yearly in detail this morning and have highlighted the following:

"As announced during the reporting period, the Group has entered into agreements and business activities regarding the carbon industry and forecasts income and operating cash to meet future cash requirements. These forecasts depend on project developers who are funded by the group successfully concluding externally specified requirements of international standards setting bodies (in particular, the Voluntary Carbon Associations standard) and generating significant revenues from March 2010."

The key question for me here is: Who are the project developers? This is a vital factor in the success or failure of this company IMHO. I suspect Kirk Roberts still has some involvement here but hopefully there are other consultants less cowboy and more diplomatic by nature involved. I will be contacting the company this week in an attempt to find out.

"The Groups abilities to continue as a going concern depends on its ability to generate positive net cash flows from the carbon business activities or failing timely receipts from these activities, accessing further capital to support operations."

Well we're all aware that m2m is an extremely high risk punt BUT equally high reward and even our newest director Mr Lebbon would have to agree with the potential rewards given his interests in the business. Not only does he hold 252m ordinary shares but he was also prepared to risk throwing a further $1.25m into the kitty. Sure its secured but tell that to the BNB note holders!

"Mr Lebbon through Noble Investments Pty Ltd (Noble), an entity controlled by Mr Lebbon, has agreed to provide a 26 month secured funding facility (to 28 February 2010) of $1.25 million in the form of a loan and convertible notes. At the time of this report the Company has drawn-down $1,250,000.00 ($1,250,000 at the 31st December 2009) of this facility. At the November 2008 Annual General Meeting, shareholders resolved that approval be given for Noble Investments Pty Ltd to convert the facility to equity at an issue price of A$0.024 a share on or before 28 February 2010".

"The Company and Noble have agreed to a variation to the terms of repayment and/or conversion of the funding facility whereby, unless converted all or in part to equity, the drawn-down sum of $1,250,000, together with any interest then due, is to be repaid in accordance with the following terms on or before:"

I don't recall any announcement where Mr Lebbon has converted any of this facility into ordinary shares? Well 28th Feb has now passed and this option has therefore expired with the exception that part of the facility is in the form of convertible notes. Not too sure how to interpret this? Wouldn't it have been more profitable for him to convert to ordinary shares? Especially if they do pull of the CCT business has the SP appreciates? Maybe we could see a 3B over the next couple of days in relation to this???

However what does give me some level of confidence is that the extension on the facility has only been extended until the 31st March.

"in December 2009, the Group negotiated a further extension of the term of the convertible note facility, of $1.2 million, disclosed as a current liability (2009: $1.2 million) with progressive repayment over the 2010 calendar year with the first payment at the end of Q1 for $350,000 and three subsequent payments of $300,000 on the two succeeding quarter ends and in November;"

Can they meet the 31/3 payment? Are they saying that they are on track with the CCT projected income?

IMO it's a little concerning that all of this facility has now been spent. Especially when they need further cash for...

"initiatives currently under development regarding the Sipme Vietnam business include expansion of its core business, extension of its distributor arrangements and extending the scope of services offered;
as previously reported, some working capital support will be required in the initial stages but all material capital expenditure has been made ;the Group continues to negotiate its China memorandum of understanding (MoU);

Its also worth noting that the Auditors report contained a "Qualified Auditors Opinion/Conclusion" which is actually quite different to what the title implies. That is, a qualified report can actually resemble a fail in part even though the financials are compliant with AASB and the Corporations Act. In m2m's case the Auditors have a material concern about 1st the $457K Investments figure within non-current assets and whether is it the true recoverable value (I'm not too concerned about this) and 2nd the inadequate accounting for its sub-subsidiaries (again not too concerned but am rather surprised given the all the directors have solid accounting backgrounds!). The auditor's concerns are further emphasised under the Emphasis of Matter - Material Uncertainty Regarding Continuation As A Going Concern which draws our attention back to the bottom line here...the carbon credits trading business is THE ONLY WAY FORWARD!

"Management has prepared cashflow forecasts based on the carbon business, the operational and market plans for the Sipme Vietnam and Bluefish businesses and modest support of further transaction prospecting, including the China MoU. The Board believes that these cash forecasts provide a sound mechanism to manage future cash requirements and that initiatives will be sufficient to return to positive cash flows and build future growth and value."

On another note did anyone see the 8.5m on offer at 0.2c in pre-open this morning? Well I wanted some of those but as I expected they were pulled before open. Definitely games being played with this one and I'm keen to hang around to see what happens. The reward far exceeds risk IMHO especially given 1,000,000 units only requires an outlay of $3,000.