It seems to me that the market still can't decide if NBS is a...

It seems to me that the market still can't decide if NBS is a complete fraud or a legitimate business.

My research leads me to think that the truth is somewhere in-between. Certainly, there are highly suspicious aspects to NBS business, which the company looks like it is trying to hide. For example, why is CITP (NBS's China counterparty) controlled by Saddington, a British Virgin Islands front company? Why involve a BVI company at all in the JV? Is the motivation for Saddington tax avoidance, anonymity of directors, or both? And why does NBS management claim, on the one hand, that their Chinese counterparty is the Chinese government, and other hand claim that they have no idea who controls CITP? How can these guys not know the true identities of who they are doing business with???

Furthermore, how did an obscure company like TPID, with links to the porn industry, and with a market cap of less than $500k, come to win a supposed $1.5bill China contract? Why was there no competitive tender for such an important national contract? The Chinese govt has a reputation for corruption ( http://www.carnegieendowment.org/publications/index.cfm?fa=view&id=19628 ), and the AQSIQ is arguably the most corrupt Chinese govt agency. This makes me wonder whether the only reason this contract is in the hands of unproven entities like TPID, Saddington, and NBS is that these parties have agreed to help line the pockets of certain Chinese govt officials. If this is the case, what are the chances that this contract will continue over its full five year term, or that NBS will be paid in full??

Also, as a former shareholder of NBS, I was terrified to discover that management kept the news of serious problems with the Malaysian contract hidden from the market for months. Management's behaviour on this issue, combined with Dykes's reputation from the old ETC days (e.g dumping his shares on market after a positive announcement), makes me think that these guys don't take their continuous disclosure obligations seriously at all (and ASIC and the ASX are in such a mess at the moment that it is 'open season' for abuses of continuous disclosure, especially for small companies). Indeed, my instinct tells me that if these guys can hide bad news from the market and get away with it, then they will. Thus, there might be a major material problem with the China contract right now, and shareholders wouldn't necessarily be told of it.

(Another major continuous disclosure breach that NBS management are still perpetrating is that they haven't officially changed their earlier profit and revenue forecasts).

Having said all of the above, there is little doubt in my mind that NBS has received the payments it says it has from its Chinese counterparty and there are Lodge partner analysts who swear that they have seen NBS ID cards being printed in an anonymous office building in Beijing. So, while the circumstances surrounding the contract might be dodgy, there is evidently real things happening on the ground, and real cash is coming from somewhere (albeit very late).

Furthermore, I've spoke to an analyst who has seen a product demonstration of Nexcode, and according to this (non-expert) analyst, the technology (plus NBS head office environment) looks legitimate.

Based on all the info at my disposal, my gut tells me that NBS has a legitimate, workable technology, backed by legitimate software engineers etc. However, my gut also tells me that the technology has never been seriously stress tested, and its potential has probably been massively exaggerated by management.

I think a key test for whether or not NBS can convince the market that it has a legitimate business (and thus a future), will be for the company to win a decent sized COMPETITIVE tender (such as Vietnam). Up to date, the two contract that NBS has won were both by 'negotiation', which is code for "having contacts in the right places." But the Malaysia fiasco shows that having contacts in high places doesn't count for much in the long term.

Another issue to keep an eye on is NBS US patent application. It should receive a final notification in the next few months. If its US patent is rejected, then that will be a fairly good indicator that the company doesn't have a very promising future. On the other hand, if NBS was to receive its US patent, then that would be a major positive.

I maintain my long term sell recommendation, not withstanding short term trading opportunities.