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Friday, April 07, 2006

China Expert Technology (CXTI) wins a small contract

CXTI issued this press release today.

A short term contract worth $274K from today (it already started) until Oct 2006. This is with the Ning Bo City, Yinzhou District Government in the Zhejiang province of China.

The contract is for design and planning of an e-government system, so that means this is an early phase of a much larger project. Of course the overall project could fall through, but CXTI has a good success record so far.

Here's why this is a very significant deal: If you look at Note 17 in the recently issued 10-K statement (page F-25), you'll see this:
For the years ended December 31, 2005, 2004 and 2003, the Company’s major customers are two local government bodies in Fujian Province of the PRC which accounted for 100%, 100% and 99% of the Company’s total revenue in relation to the provision of consultancy and system integration for establishment of e-government information system and network.
Getting a contract in Zhejiang province means less customer concentration and less risk. From the press release:
We are extremely excited that the Yinzhou District Government has chosen us to design and plan for its e-government system as it is the first contract that we signed with a municipal government outside the Fujian Province. This is a major milestone for the Company in capturing e-government opportunities in other provinces in China. To cope with our future business development and the increase of our e-government projects, we have already enlarged our workforce. With the successful implementation of our projects in Fujian Province and the execution of our market strategy, we are confident that we can continuously expand our business to other areas in China.
One thing I like about a short contract up front is that it provides some cash early in the overall cycle. Hopefully, there will be cash coming in from contracts already running to limit the need for raising capital.

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