China Security & Surveillance Technology, Inc. (CSR)

Q3 2009 Earnings Call Transcript

The second quarter reporting period is fast approaching as we enter the month of October. Since the last earnings season ended with Wal-Mart's report on August 13th, the S&P 500 is up 4.73%. From our Interactive Earnings Report Database, we grabbed all stocks that reported last earnings season and calculated their performance since their last earnings report. This performance is calculated from the close on the first trading day following their earnings reports, so it does not include the big initial one-day moves.

As shown below, YRCW is up the most since its last earnings report with a gain of 231%. YRCW is followed by GCI (+161%), UAUA (+147%), BPOP (+146%), and ATPG (+136%). There aren't many big names on the list of winners, but the stocks that did make the list did something to grab investors' attentions. ARRY has done the worst since its last report with a decline of 43.5%.

China Security & Surveillance Technology, Inc. (NYSE:CSR)

Sep. 29, 2009 $7.07

52-week range: $2.47 (Mar. 12, 2009) - $14.20 (Sep. 29, 2008)

China Green Agriculture (CGA). Closing Price Aug. 3, 2009 was $13.19

4:14 PM, Jul 28, 2009 --

• NYSE down 35.99 (0.6%) to 6,328.67.
• DJIA down 11.8 (0.1%) to 9,097.
• S&P 500 down 2.6 (0.3%) to 979.62.
• Nasdaq up 7.6 (0.4%) to 1,976.

GLOBAL SENTIMENT

Q2 2009 Earnings Call Transcript

Many of the institutional clients of The Applied Finance Group, Ltd. (AFG) tend to focus on large cap stocks and benchmark themselves against the S&P 500 Index, which is why many of the buy ideas from ValueExpectations.com usually come from the large cap index. Earlier in the week we highlighted companies from our buy/sell list both from large and small cap, as well as from growth and value style universes. We thought it would be a good follow up for some of the investors we work with who focus on small and mid cap stocks, to provide a more thorough list of companies from the Russell 2000 Index.

Below is a summary of 20 companies to watch from the Russell 2000 Index. The table highlights the 2 companies from each sector (ex. Financials) that have the most attractive Value Score (above 80) and are currently rated Neutral or higher by AFG’s buy/sell criteria. Factors used to derive an AFG recommendation include: Expected change in Economic Margins, Intrinsic Value, and Management Quality. Many classify stocks with market capitalization under $250 million as micro caps, therefore only those companies within the index that met that market cap minimum were considered for the list.

We are now more or less two thirds of the way through earnings season. This seems like a good time to revisit a screen we first ran about a month ago.

Using the data we generate as we scan over 7200 stocks and ETFs at Alert HQ, we assembled a screen that is composed of stocks with the following characteristics:

This is the 4th Quarter 2008 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out the Hedge Fund 13F filings preface.

Next up is Chase Coleman's Tiger Global. Chase Coleman is yet another 'Tiger Cub,' or manager who learned their trade under the watch of Julian Robertson while at Tiger Management. We've already covered many of the 'Tiger Cub' funds' portfolios including Stephen Mandel's Lone Pine Capital, Andreas Halvorsen's Viking Global, Lee Ainslie's Maverick Capital, Chris Shumway's Shumway Capital Partners, and John Griffin's Blue Ridge Capital. And, late last year, many of these managers gathered at a 'Tiger Cub' hedge fund manager panel, where they laid out investment theses for the future.

While yes I am short term bearish on the markets, one area of massive strength lately has been the Chinese stock exchange, SSEC. Although it is beginning to show some negative divergences (RSI/TRIX above), it has successfully broke through it’s 200 MA and should be on everybody’s radar who wants exposure to this region. A pullback near its 200 MA would be an area that I would start to add some of these stocks to my portfolio. Note the series of higher highs and higher lows.

By Louis Basenese

It’s time to make a big bet and begin investing in China.

I know. It’s not exactly a popular stance. And the smart money is doing exactly the opposite. Or so it appears…

This is the Third Quarter 2008 edition of our ongoing hedge fund tracking series. Before reading this update, make sure you check out the preface to the series we're doing on Hedge Fund 13F's here.

The other funds we've already covered include:

Q3 2008 Earnings Call

October 28, 2008 8:00 am ET

Most bullies like to pick on smaller guys who often can do little to resist their sheer size and brute strength. The market is no exception and its bullies are the hedge funds and professional traders who typically "gang up" against smallcap stocks.

Yet, as in life, so it is in the market in that it is not the size of the dog in the fight but the size of the fight that is in the dog that counts most. Some of these hedge funds and professional traders may be long overdue for a bloody nose or black eye, and when they pick on the wrong smallcap, this is exactly what happens.

Q2 2008 Earnings Call Transcript

• • •

Internet

• Social networking website 51.com plans to list in the U.S. by the end of next year, creating a company worth between US$2 billion and US$3 billion. One of the largest social networking sites on the mainland, 51.com has 120 million registered users, of whom 50 million log in at least once a month. Co-founded by Zhang Jiangfu in 2003 in Fujian as 10770.com, the site changed its name to 51.com after chief executive and co-founder Pang Shengdong bought it in 2005. The headquarters were moved to Shanghai. The company uses 50 gigabytes of bandwidth to support its site and plans to increase that to 60 gigabytes by year-end.
• Sohu.com (SOHU) says it will list its games business in the U.S. after reporting a sevenfold increase in second-quarter profit. With sales of online games and advertising soaring, Beijing-based Sohu is taking advantage of growing investor appetite for the mainland internet industry. Boasting 253 million internet users, the mainland has passed the U.S. as the largest Web market in the world. Sohu reported net income of US$40.2 million in the second quarter, compared with US$5.7 million a year earlier.
• Online education provider China Distance Education Holdings (DL) raised US$61.25 million through an initial public offering, lower than its planned US$115 million offering. Share prices closed its first day of trading at US$6.63, below its US$7.0 offering price. Citigroup and Merrill Lynch were the joint bookrunning managers. The Company runs a network of 14 websites that offer professional certification training and test preparation courses in many industries including law, accounting, and healthcare as well as websites for online language learning.

Investments

• Nokia (NOK) is more than doubling the size of its direct venture investment fund with an injection of $150 million, with a view to putting some of the money to use in China and India. Menlo Park, California-based Nokia Growth Partners was set up in 2004 to directly manage $100 million of Nokia's money. Its investments have included Bitboys, a Finnish developer of graphics chips that was bought by ATI in 2006 for US$44.5 million, and Global Locate, a U.S. maker of GPS chips that was bought by Broadcom Corp. (BRCM) for at least US$146 million last year. Qualcomm (QCOM) has a venture fund with a broad portfolio, much like Nokia Growth Partners. Research in Motion (RIMM), which makes the BlackBerry, announced in May that it had set up a $150 million fund with outside partners to invest in companies creating software for BlackBerrys and other mobile devices. In March, Apple (AAPL) said it would set up a $100 million "iFund" for the development of iPhone and iPod Touch applications.

Mobile/Wireless

• Telegent Systems announced that it has been selected by Shenzhen ZTE Mobile Telecom to provide its free-to-air mobile TV solution for selected ZTE mobile handsets sold worldwide. Under the agreement, Telegent will be the exclusive supplier for the free-to-air mobile TV feature for a period of two years. Solution enables consumers worldwide to receive local TV broadcasts.  Telegent’s mobile TV solution enables consumers to receive all local broadcast channels no matter where they are, providing consumers with a compelling, free and easy-to-use method of watching the same news, sports and other programming that they receive on their TV sets at home.

Telecommunications

• The state parent of China Telecom (CHA) plans to invest up to 80 billion yuan (US$12 billion) to expand and upgrade a newly acquired mobile network over the next three years, said the listed firm's president, Shang Bing. China Telecom's parent agreed in June to pay 66.2 billion yuan (US$10 billion) for the Unicom group's CDMA web, a long-underperforming network once regarded as a cheaper alternative to China Mobile's (CHL) Global System for Mobile Communications. The company also agreed to fork over 43.8 billion yuan (US$6.4 billion) for Unicom's CDMA customers and business, as part of a government-led shake-up of the world's largest telecoms industry.
• China Mobile has recently won regulatory approval from the Ministry of Industry and Information Technology of China for its second-phase TD-SCDMA construction solution. The solution is aimed at 28 major Chinese cities except the previous eight cities. China Mobile has been in contact with telecommunications equipment providers. A telecom equipment provider disclosed that the solution included about 30,000 base stations. However, a top China Mobile executive did not confirm the number. China Mobile actually invested 15 billion yuan (US$2.2 billion) in the eight-city TD-SCDMA solution, Wang Jianyu, president of China Mobile, said in an interview. By now it has built 14,688 base stations, and it plans to add to 18,000 at the end of 2008. The new solution is predicted to have a total investment of more than 30 billion yuan (US$4.4 billion).
• China Mobile is to decrease the number of mobile phone console games on its telecoms platform by about 66%, citing a report. In early July 2008, the biggest mobile telecoms operator in China sent an announcement to its game providers, saying that from August 1, the number of A- Band C-class console games on its mobile console game platform called Mybox would be decreased to 40, 30 and 20 at most, compared to 130, 100 and 80 presently. The number of ordinary games and games of low credit would be pressed from 60 and 30 to not more than six and two. The plan was made after China Mobile executives' visit to Europe, where they found many telecoms operators offer a small quantity of high-quality games for players to download.
• Chinese telecoms are ordered to freeze network construction work to avoid traffic disruption during the Olympic Games. Chinese telecommunications operators have been ordered not to install new phone lines during the Olympics to avoid disrupting network traffic. The paper said the operators aren't allowed to carry out network construction work, upgrades and new connections from July 20 to Sept. 20 in the cities hosting Olympic events. A similar ban applies to other Chinese cities that aren't hosting the Games, during the period from Aug. 1 to 25. The arrangement will affect major operators such as China Mobile, China Unicom (CHU), China Telecom, and China Netcom (CN).

Media, Entertainment and Gaming

• Giant Interactive (GA) is reportedly talking about acquiring a domestic online game operator for US$500 million. The person in the know reveals that Giant Interactive is likely to become China's largest online game services provider after the acquisition. Currently, there are a few online game operators in China that are worth USD 500 million each. Most of them have debuted on the stock market. Thus, 9you Information Technology (Shanghai) Co., Ltd., which has put off its listing in Japan due to a lawsuit with T3 Entertainment, a major South Korean MMO developer and publisher, is the most likely target of Shi Yuzhu, boss of Giant Interactive. Though 9you has nearly 50 million yuan (US$7.3 million) of cash flow each month, VCs are anxious to cash in and quit because its IPO is delayed indefinitely. They may be interested in Giant Interactive's offer. On the other hand, Giant Interactive hopes to enrich its product range, so that it is able to resist lager risks. Giant Interactive remarked on July 30, 2008, that there was no such an acquisition, while 9you has no response to the news.
• Beijing Gehua CATV Network announced that it is considering setting up a new subsidiary in charge of data business. According to Beijing Gehua's filing, the new data business subsidiary will also be in charge of a broadband joint venture, in which the new data subsidiary will have a 51 percent stake. Industry sources say the broadband JV, with a registered capital of 30 million yuan (US$4.4 million), will be jointly established by LGI China Holdings, BV (Bejing Gehua's joint venture with the world's biggest international cable group Liberty Global Inc) and PRCVP Beijing Broadband L.P. The three sides have signed the relevant contracts on the cooperation. The move is seen as the company's efforts to reduce risks in broadband investment, which is not the company's core business.

Hardware

• China Security & Surveillance Technology (CSR), a provider of digital surveillance technology in China, has announced its intention to acquire three Chinese security and surveillance companies. Letters of intent have been signed with Shenzhen Coson Electronic (Coson), DIT Digital [DIT] and Shenzhen Skyrise Technology (Skyrise) for 100 percent ownership of each business. The total amount of consideration payable for all three acquisitions will be approximately 268 million yuan (US$39.1 million), with consideration to be paid in cash and restricted common stock. The number of China Security's shares to be included in the equity portion of the purchase price for each acquisition will be subject to the achievement of certain net income performance targets over a three year period. All three transactions are expected to be accretive to earnings upon closing and are expected to close within 2008.

Semiconductor

• Semiconductor Manufacturing International Corp. (SMI) says its second-quarter loss widened sharply as it has yet to fully convert its dynamic random access memory [DRAM] manufacturing capacity into higher-margin logic wafer production. Its net loss totaled US$45.62 million for the June quarter, compared with a US$2.1 million loss in the year-earlier period. Sales declined 8.5 percent to US$342.9 million. Gross margin was 6.1 percent. The Shanghai-based company has reached an agreement with customers to exit the low-margin dram business in the first quarter, leading to an impairment loss of US$105.8 million.

Government contracts are very important for the security industry, but ultimately most of them – even the largest  – should mostly serve as beta-tests and reference sites for what should be a much larger industrial/commercial and institutional market.  Over the long term, we believe commercial/industrial contracts are steadier and involve greater recurring revenues.  But, of course, during economic slowdowns it might just be a big help to depend on those Government contracts. 

On the heels of a follow-up report by the Security Industry Association (which very conservatively projects Chinese security industry spending by 30% to $11 billion in 2008), we have contacted three independent sources just back from viewing Chinese commercial and government security installations to check just which companies appear to lead the Chinese market. Our sources remind us that the government-sponsored China Public Security Guide estimates the 2008 market at over $26 billion – bigger than the SIA study, but to us clearly less independent.  Our sources are convinced that China Security & Surveillance (CSR) has major advantages in the mid-sized China security surveillance market and should be a company to watch closely.

We have done background work on a number of Chinese security companies. While we find two of the companies, a leader in fire systems and the other, a leader in geospatial surveillance software, interesting in their own right, they are both much smaller than our focus in this blog – China Surveillance & Security (CSR) – China’s leading domestic security surveillance company, and our Chinese researches reiterate that this is the company to watch.

• UBS swings to loss. UBS (UBS) reported a Q1 net loss of 11.535 billion Swiss francs ($11B). It said markets remain challenging, but that it would not need to raise more capital. UBS plans to cut about 5,500 jobs by mid-2009, including a 26% reduction in the size of its fixed-income unit. UBS said it is selling $15B in Alt-A mortgage-backed assets to BlackRock (BLK). Shares fell 4.3% in early Zurich trading.
• Miller: Microsoft isn't finished. Legg Mason's (LM) Bill Miller thinks Microsoft (MSFT) will come back to the table with another offer for Yahoo (YHOO). "I'm more puzzled by Microsoft's not going up to $37 than Yahoo's wanting to walk away," he said. Legg Mason is Yahoo's second largest stakeholder. Other shareholders were less generous in their assesment of Yahoo chief Jerry Yang, who said yesterday he's still open to a higher offer from Microsoft. Yahoo shares fell 15% yesterday to $24.37. Microsoft was up down 0.55% to $29.08.
• Microsoft, AOL talking. Sources say Microsoft (MSFT) is in preliminary talks with Time Warner (TWX) about buying AOL after abandoning its $47.5B Yahoo (YHOO) bid. Meanwhile Yahoo continues to negotiate with AOL about a possible merger.
• Vodafone customers to get iPhone option. Vodafone (VOD) will sell Apple's (AAPL) iPhone in ten markets: Australia, the Czech Republic, Egypt, Greece, Italy, India, Portugal, New Zealand, South Africa and Turkey. Media reports say Telecom Italia (TI) will bring the iPhone to Italy later this year.
• BofA to stay the course with Countrywide. Sources say Bank of America (BAC) plans to acquire Countrywide (CFC) without trying to reduce its $4.1B.
• Drug failure sparks layoffs at Merck. Merck (MRK) said it will reduce its U.S. sales force by 1,200 in order to trim costs. The move comes on the heels of a surprise rejection of Merck's experimental cholesterol drug Cordaptive. The move mirrors an identical set of layoffs at Wyeth (WY).
• Navistar lands Army deal. Navistar (NAVZ.PK) was awarded a $1.28B contract from the U.S Army for trucks to support rebuilding efforts in Afghanistan and Iraq. The three-year contract is for 7,072 medium tactical vehicles and parts.
• Sprint spinoff. Three years into its $35B takeover of Nextel, Sprint (S) is now mulling selling or spinning-off the troubled unit. Complicating the issue is yesterday's news that Deutsche Telecom (DT) is thinking of making a bid for Sprint. A divestment of Nextel would be a dramatic acknowledgement of the acquisition's failure.
• Bernanke pushes homeowner help. Fed Chairman Ben Bernanke urged the government and mortgage lenders to double down with their assistance to homeowners facing foreclosures. "Conditions in mortgage markets remain quite difficult, and mortgage delinquencies have climbed steeply," he said. "Realistic public- and private-sector policies must take into account the fact that traditional foreclosure-avoidance strategies may not always work well in the current environment." The Treasury meets today with banking executives to discuss a voluntary program that would speed up the ability of homeowners to modify their mortgages. Attendees include CFC, BAC, JPM, FNM and FRE.
• Crude oil should reach $150-200 a barrel over the next couple years, Goldman analysts say. Oil hit a new high of $121/barrel in overnight trading.
• AMD broadens case against Intel. AMD (AMD) filed an expanded list of antitrust allegations against Intel (INTC) that singles out Intel dealings with Dell (DELL), International Business Machines (IBM) and Hewlett-Packard (HPQ). AMD says it can document Intel "pays people not to deal with AMD."

Earnings: Monday After Close

• Anadarko Petroleum (APC): Q1 EPS of $1.55 beats consensus of $1.22. Revenue of $2.98B vs. consensus of $3.13B.
• Banco Santander (SAN): Q1 EPS of $0.95 vs. consensus of $0.91.
• China Security & Surveillance (CSR): Q1 EPS of $0.32 in-line. Revenue of $71.8M vs. consensus of $66.65M. Sees Q2 EPS of $0.36-0.38, in-line, and revenue of $85-87M vs. consensus of $81M.
• DivX (DIVX): Q1 EPS of $0.18 beats consensus of $0.14. Revenue of $25M in-line. Sees 2008 EPS of $0.52-0.58, up from $0.44-0.52 vs. consensus of $0.47. Sees Q2 EPS of $0.09-0.11 vs. consensus of $0.07.
• Drugstore.com (DSCM): Q1 EPS of -$0.03 just misses consensus of -$0.02. Revenue of $120.6M in-line.
• Kindred Healthcare (KND): Q1 EPS of $0.39 beats consensus of $0.26. Revenue of $1.06B vs. consensus of $1.03B. Sees Q2 EPS of $0.29-0.34, in-line. Sees full-year EPS of $1.40-1.50 vs. consensus of $1.34.
• McKesson (MCK): FQ4 EPS of $1.05 beats consensus of $1.00. Revenue of $26.2B vs. consensus of $26.83B. Sees full-year 2009 EPS of $3.75-3.90, better than consensus of $3.78.
• Principal Financial (PFG): Q1 EPS of $0.92 misses consensus of $0.98. Revenue of $2.64B vs. consensus of $2.87B.
• Virgin Mobile (VM): Q1 EPS of $0.07 just misses consensus of $0.08. Revenue of $304M vs. consensus of $317M. Sees Q2 EPS of -$0.01 to $0.03, short of consensus of $0.15, and revenue of $285-295M vs. consensus of $321M.
• Weight Watchers (WTW): Q1 EPS of $0.72 misses consensus of $0.75. Revenue of $437M vs. consensus of $444M. WTW raised the bottom end of its full-year EPS guidance by $0.05 to $2.85-$3.00, better than consensus of $2.90.

Earnings: Tuesday Before Open

• Aqua America (WTR): Q1 EPS of $0.11 misses consensus of $0.15. Revenue of $139M vs. consensus $146M.
• Barrick Gold (ABX): Q1 EPS of $0.62 beats consensus of $0.60. Revenue of $1.96B vs. consensus of $2.24B.
• Cleveland Cliffs (CLF): Q1 EPS of $0.60 misses consensus of $1.00. Revenue of $494M vs. consensus of $507M.
• Covidien (COV): FQ2 EPS of $0.66 beats consensus of $0.59. Revenue of $2.43B vs. consensus of $2.37B.
• Domtar (UFS): Q1 EPS of $0.05 beats consensus of $0.04. Revenue of $1.66B in-line.
• D. R. Horton (DHI): FQ2 EPS of -$4.14 misses consensus of -$0.43. Revenue of $1.62B vs. consensus $1.36B.
• Emerson Electric (EMR): FQ2 EPS of $0.69 misses consensus of $0.71. Revenue of $6.02B vs. consensus of $6.1B. raises full-year EPS outlook to $3.00-3.10 vs. consensus of $3.01.
• Estee Lauder (EL): FQ3 EPS of $0.46 just misses consensus of $0.47. Revenue of $1.88B in-line. Sees full-year EPS of $2.34-$2.40 in-line.
• Fannie Mae (FNM): Q1 EPS of -$2.57 misses consensus of -$0.81. Revenue of $3.78B vs. consensus of $1.26B. Fannie reduced its dividend to $0.25, and said it plans to raise $6 billion.
• Fuel-Tech (FTEK): Q1 EPS of $0.07 misses consensus of $0.09. Revenue of $20.5M vs. consensus of $22.3M. Sees full-year revenue of $88-93M vs. consensus of $92.7M.
• Great Atlantic & Pacific Tea (GAP): FQ4 EPS of -$1.40 misses consensus of -$0.65. Revenue of $2.2B in-line.
• James River Coal (JRCC): Q1 EPS of -$0.78 misses consensus of -$0.50. Revenue of $138M vs. consensus of $140M.
• Joy Global (JOYG): lowers full-year EPS guidance to $2.96-3.22 from $3.15-3.45 vs. consensus of $3.41.
• Lazard (LAZ): Q1 EPS of $0.14 misses consensus of $0.48. Revenue of $350M vs. consensus $450M.
• Legg Mason (LM): FQ4 EPS of -$1.81 misses consensus of -$0.27. Revenue of $1.07B vs. consensus of $1.12B.
• MetroPCS (PCS): Q1 EPS of $0.11 misses consensus of $0.14. Revenue of $662M in-line.
• MGM Mirage (MGM): Q1 EPS of $0.40 misses consensus of $0.43. Revenue of $2.06B vs. consensus of $1.9B.
• Molson Coors (TAP): Q1 EPS of $0.32 beats consensus of $0.28. Revenue of $1.36B vs. consensus of $1.31B.
• NYSE Euronext (NYX): Q1 EPS of $0.91 beats consensus of $0.83. Q1 revenue of $1.29B vs. consensus of $891M.
• R.R. Donnelley (RRD): Q1 EPS of $0.69 in-line. Revenue of $2.99B in-line. Sees full-year EPS of $3.08-3.15 vs. consensus of $3.13.
• Qwest (Q): Q1 EPS of $0.09 just misses consensus of $0.10. Revenue of $3.39B in-line.
• Saint Joe Co. (JOE): Q1 EPS of $0.40 beats consensus of $0.18. Q1 revenue of $117M vs. consensus $81M.
• Sara Lee (SLE): FQ3 EPS of $0.30 beats consensus of $0.24. Revenue of $3.2B vs. consensus $3.29B. Sees FQ3 EPS of $1.13-1.17, better than consensus of $1.00.
• Spectrum Brands (SPC): FQ2 EPS of -$0.14 beats consensus of -$0.23. Revenue of $647M vs. consensus $454M.
• Tenet Healthcare (THC): Q1 EPS of $0.04 beats consensus of $0.01. Revenue of $2.37B in-line.
• Teva Pharmaceutical (TEVA): Q1 EPS of $0.64 just beats consensus of $0.63. Revenue of $2.57B in-line.
• Vulcan Materials (VMC): Q1 EPS of $0.13 misses consensus of $0.56. Revenue of $817M vs. consensus of $905M. Sees full-year EPS of $3.85-4.35, short of consensus of $4.46.
• Vornado (VNO): Q1 EPS of $2.47 beats consensus of $2.36. Revenue of $653M vs. consensus of $744M.
• World Wrestling (WWE): Q1 EPS of $0.27 beats consensus of $0.26. Revenue of $163M vs. consensus $132M.

Today's Markets

• In Asia, the Hang Seng gained 0.3% to 26,262. Shanghai fell 0.73% to 3,733.5. BSE Sensex was down 0.67% to 17,373. Nikkei was closed.
• European markets fell Tuesday. FTSE -0.93% to 6,157. CAC -0.82% to 5,022. DAX -1.05% to 6,978.
• U.S. futures are down just before the open. Dow -0.51% to 12,900. S&P -0.59% to 1,400. Nasdaq -0.34% to 1,973.5.
• Gold is up 0.26% to $876. Oil is up 0.33% to $120.36 after hitting an overnight high of just under $121.

On China Security & Surveillance (CSR), I just wanted to give a brief impression of the recent transaction involving Whitehorse Technology Ltd., a company owned by its CEO. In the transaction, Whitehorse sold Exchangeable Senior Notes due 2012 to an unnamed third party investor (not affiliated with CSR) for $50 million. The Notes are backed by a pledge of 8,750,000 shares of CSR owned by Whitehorse.

In total, Whitehorse and the CEO, Tu Guo Shen own about 13,800,000 shares of CSR stock, or about 32.8% of the current fully diluted outstanding shares of 42,381,000.