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10-Q for Q1

Period ending March 31, 2007
32 million shares on April 30, 2007

Balance Sheet

Cash is up to $21 million from $10 million
AR is down to $31 million from $34 million
Cost and est earnings in excess of billings is way up to $3.9 million from $782K
Prepayments are down to $12 million from $19 million

AP increased to $1.2 million from $253K
Amount due a former officer increased to $2.2 million from $1.8 million

Additional paid-in capital actually dropped by a million. That's odd.


Income Statement

Revenue is down to $13.2 million from $15.1 million yoy.

Let's check out the quarterly revenue variation (page 28):
Q1 2005: $8.7 million
Q2 2005: $8.3 million
Q3 2005: $9.0 million
Q4 2005: $9.5 million
Q1 2006: $15 million (wow, why the big just here?)
Q2 2006: $14 million
Q3 2006: $19 million
Q4 2006: $17 million
Q1 2007: $13 million

The decrease in revenue is mainly because several projects were substantially completed last year, namely Jinjiang (3^rd and 4^th Phases), Dehua (4^th Phase) and Nan’an (1^st Phase). Although the Company commenced two new projects during the period, namely Licheng and Shishi, the contributions to revenue were limited during the start off period.

	3 months ended March 31
	2007	2006 (restated)
Revenue	100%	100%
Cost of Revenue	43.06%	48.47%
Gross Profit	56.94%	51.53%
Advertising and marketing expenses	21.90%	16.32%
General and administrative expenses	2.12%	14.29%
Change in fair value and amortization of stock based prepaid expenses	(6.63%)	0.83%
Interest expenses and finance costs	--	1.72%
Change in fair value of derivatives	--	1.13%
Income before income tax	39.68%	17.31%
Income tax expenses	5.52%	7.71%
Net Income	34.16%	9.60%

Ok, so the things that jump out here are:
1) The big jump in advertising and marketing expense. It went up in absolute amount as revenue went down. Not surprising in the sense that the two are very independent of each other. They spell out the various commission payments.
2) The big drop in G&A expense. This was due to a lack of stock issued to employees and a lack of liquidated damages to investors.
3) The increase in gross margin (due to less subcontracted work).



Cash Flow Statement

The drop in AR was offset by the increase in costs and est earnings in excess of billings.
The $6.7 million drop in prepayments dominated the operating cash flow.
The rest was net income.
Operations generated $10.7 million, largely because of the pipeline effect of contracts and work... finally.

Capex was $128K vs $2.2 million depreciation.
No other investment.

Finance was entirely the advance and repayment from/to a former officer.

Prepayments:
$7.9 million contract costs
$4.2 million consultant fees

1.5 million convertible debentures
4.1 million dilutive warrants
2.2 million anti-dilutive warrants
6.5 million total warrants

Subsequent to Q1, all the debentures have converted: 1.4 million shares. Not sure if these are counted as part of the 32 million (probably yes). I'm still OK with assuming 45 million totally diluted shares.

CXTI won a major contract outside of Fujian: $42.4 million in Xi'an City in Shaanxi, the same city I covered when I looked at CHLN. This is a major western city. Work starts in Sept 07 and should end in Mar 2010.

There's $257 million in outstanding contracts, up from $228 million at year end 2006.