As usual, let me make a couple of points clear: I have no...

As usual, let me make a couple of points clear: I have no factual evidence that Anthony Dunlop or any NBS director has breached the corporations act or any listing rule. For all I know, Dunlop and NBS directors are outstanding corporate citizens, and NBSs accounts and asx releases are perfectly in order. And for all I know, NBS is a company in great shape and has a very promising future.

However, as a market participant and observer, I am permitted to voice reasonable opinion about NBS and related parties, even if this is a negative opinion. Furthermore, I am permitted speculate about (what I take to be) oddities in NBS ASX releases. This is all Im doing here. I should also add that, while I may be mistaken, Im not saying anything that I know to be false.

Keeping the above in mind, if I were a NBS shareholder or trader, I would nevertheless be sweating over a number of disclosures in today's announcement.

(1) Despite being announced nearly two years ago, and despite numerous market updates that the project is going well, the China contract is presently in a pre-pilot stage. Indeed, until successful pilot testing is completed (probably in the middle of 2012), NBS doesn't even have the right to participate in the contract. This is all the more surprising since NBS magically booked around $45mill in revenue from the China contract on June 30, 2009. (At the time, Anthony Dunlop was a director of both CITP and TPID, and CITP was NBS's China counterparty i.e., the entity it was invoicing). In any event, whatever the circumstances are around that mysterious China revenue in FY09, and despite telling a number of analysts that the China contract was now locked into a 90 day billing cycle, no additional revenue was ever booked from China. Evidently, SOMETHING went wrong. However, consistent with NBS's very unusual interpretation of listing rule 3.1, none of the China problems over the last 12 months have ever been announced to the market.

(2) If NBS fails the pilot, then it is hard to avoid the conclusion that NBS will cease to participate in the China contract (or at least the genuine aspects of the contract).

(3) I'm guessing that the "new marking and scanning equipment developed my Nexbis" (para 6.1) is in fact the old marking and scanning equipment developed by suretrace/tpid/saddington/tda-tech/uki. NBS have never had any in-house marking/tagging technology, and it simply defies reasonable belief that they have suddenly developed this technology on their own. Thus, given that they tried and failed to buy Dunlop's UKI only a few months ago, I'm guessing that part of what NBS purchased with its $34.5mill was the TPID/UKI tech platform. Paragraph 3.3 in today's announcement states that the deed of assignment was to acquire the contract rights "amongst other things." I'm guessing that the "other thing" purchased was the UKI/TPID tech platform. If I'm right about this, a key question investors/traders should be asking themselves is whether or not this tech platform is a lemon. It has been passed from company to company for many years now, and while plenty of capital has been raised in relation to it, as far as I'm aware, it has never generated any genuine revenue.

NBS have now paid roughly $65mill for the Nexcode tech platform (which NBS actually developed themselves via sapio) + the contract rights to Malaysia. They now look to have paid another $35mill for the TPID/UKI tech platform + contract rights to China. It should be a big red flag to NBS investors that both of its key contracts (Malaysia and China) have been "purchased" from opaque intermediaries who have 'high level connections' within government. Normally, key national security contracts are won via a competitive bidding process with large, fully vetted tenderers (of which NBS is not). And normally the agency conducting the bidding process is a transparent and official government counterparty not some quasi-private entity that can buy and sell the rights to the contract.

(4) It is not clear to me that NBS has sufficient cash to ensure that it meets basic "going concern" criteria. On June 30, NBS had $10.2mill. Of this $10.2, $2mill was held in escrow for the TD purchase. Since June 30, a further $2mill would have had to have been paid to TD, so that leaves $6.2mill. On top of this, employee expenses and other operating costs would likely have totalled at least $1mill since June 30, so that leaves us with $5.2mill. And in today's announcement, we learn that NBS has to pay a capital contribution to the Project Entity today. NBS doesn't disclose how much its capital contribution is to the JV, but even if it is less than $1mill, it is highly likely that NBS only has a around $4-5mill in cash right now. This is barely enough to meet its trustdefender obligations over the next 6 months, let alone pay employee expenses etc.

(5) It now seems highly likely that there will be no cash coming from China until the middle of next year at the earliest (or never if the pilot fails). So if NBS is going to survive this current FY, it will require an urgent infusion of cash from Malaysia. Will the Malaysian govt (which NBS admittedly has very close connections with via its chairman) throw the company a bone before the lights go out?

My guess is that because of NBS's unusual interpretation of listing rule 3.1 (and because the ASX simply isn't up to the task of properly monitoring a company like NBS), the average NBS punter has no idea about the high level of risk (and highly uncertain/ambiguous reward) facing NBS at present.