More Evidence of VIMCs Falsified

Government Contracts

WWW.TRINITYRESEARCHGROUP.COM

DECEMBER 21, 2014

EVIDENCE OF VIMCS FALSIFIED GOVERNMENT CONTRACTS

DECEMBER 21, 2014

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PAGE 2 / 9

EVIDENCE OF VIMCS FALSIFIED GOVERNMENT CONTRACTS

DECEMBER 21, 2014

A REVIEW OF VIMCS GUTTING, PUMPING, AND DUMPING

In our first report1 on Vimicro International Corporation (VIMC), we revealed how insiders
transferred out of VIMC and into their privately owned companies in excess of $600 million of
value derived largely from government grants intended to benefit VIMC exclusively. We named
the private vehicle (and its affiliates) to which all of VIMCs intrinsic value was transferred
EmbezzleCo and illustrated the transfer process in Exhibit 6 of our first report. Below it is
again for easy reference.
Exhibit 1: Flow Chart of Asset Transfers disclosed in 2010-2013 20-F Filings
VIMC
(public company
owned by US
investors)

PRC Government

Jiangsu Province

Shanghai City

Shenzhen City

Qingdao

Funding

Land

Vimicro Wuxi

Vimicro Shanghai

Land
Vimicro Shenzhen

Most
Valuable
Businesses
+
Land
+
Funding

EmbezzleCo
(private company
owned by insiders)

Funding
Vimicro Qingdao

As detailed in our first report, these assets, which rightfully belonged to VIMC investors, were
transferred at nominal cost to insiders starting in December of 2010 and ending in April of 2013.
Insiders gutted VIMC, transferring into EmbezzleCo the highly profitable Vimicro Wuxi (which
is planning an estimated $146 million IPO in China, where VIMC shareholders cannot lay legal
claim to it), lucrative real estate assets now worth an estimated $538 million, and millions of
dollars of government funding commitments. Shareholders were left holding the VIMC of today,
an unprofitable cash-burning shell.
As we analyzed in the last section of our first report, VIMC is propped by financials
manufactured through the use of related parties, such as the joint venture Zhongtianxin. These
related parties generate fake sales for VIMC that pile up as accounts receivable on the balance
sheet without being fully collected, which leads to a severe net cash burn to support the VIMC
illusion (refer to Exhibits 18 and 19 of our first report).

https://www.scribd.com/doc/249223451/VIMC-Investors-Hold-a-Worthless-Bag

PAGE 3 / 9

EVIDENCE OF VIMCS FALSIFIED GOVERNMENT CONTRACTS

DECEMBER 21, 2014

We believe these related parties, organized after the 2011-2014 transfer of value from
shareholders, were set up mainly to provide insiders the opportunity to pump and dump VIMCs
share price by announcing a flurry of highly promotional press releases of purported contract
wins.
This entire four-year process, which we consider the worst case of embezzlement we have ever
seen, culminated in the heaviest insider selling in VIMCs history and is illustrated below in
Exhibit 2. The blue line tracks the stock price throughout this period, the black stars denote the
timing of the aforementioned promotional press releases, and the red bars show the timing and
considerable size of insider sales.
Exhibit 2: VIMC Share Price, Insider Selling, and Key Milestones
8,000,000
10.00

7,000,000

Price per ADS ($)

Dec. 2010 April 2013:

VIMC insiders transfer
over $600 million of
value to themselves via
related party transactions

6.00

5,000,000
4,000,000
3,000,000

4.00

Insider Sales ($)

6,000,000

8.00

2,000,000
2.00
1,000,000
-

Sep-14

Nov-14

Jul-14

May-14

Jan-14

Mar-14

Nov-13

Sep-13

Jul-13

May-13

Mar-13

Jan-13

Sep-12

Nov-12

Jul-12

Mar-12

May-12

Jan-12

Nov-11

Jul-11

Sep-11

May-11

Mar-11

Jan-11

Press release announcing government deal

As you can see, the tale of the tape overlaid with the timing of significant corporate events paints
a picture worth thousands of words.
After over a decade of operations, and right after the EmbezzleCo transfers, insiders would have
you believe that VIMC suddenly won dozens of government contracts that promised almost $200
million in future revenue for VIMC. Shouldnt insiders want to buy, and not sell, on that
incredible turn in fortune? Why, then, would insiders sell so much of their holdings during such
an exciting time in VIMCs history?
The purpose of this report is to reveal why: because the vast majority of the nearly $200 million
of future revenue does not exist.

PAGE 4 / 9

EVIDENCE OF VIMCS FALSIFIED GOVERNMENT CONTRACTS

DECEMBER 21, 2014

INSIDERS NEVER BUY, ONLY SELL

First, we note a couple of telling facts. There have been zero insider buys since VIMCs IPO.
Exhibit 3: VIMCs Historical Insider Transactions (All Sales)
Ticker

Transaction Detail

-Type

Insider

Relation

Min Trade DMax Trade Type

VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC
VIMC

CHENG GORDON
CHAN TAK HING DAVID
VIMICRO SHANGHAI CORP
LUCAS DONALD L & LYGIA
VIMICRO SHANGHAI CORP
VIMICRO SHANGHAI CORP
VIMICRO SHENZHEN CORP
VIMICRO BEIJING CORP
ZHU JUN
YU QING
ZHANG YUNDONG
RWI VENTURES I LP
VIMICRO SHENZHEN CORP
CHENG GORDON
VIMICRO SHENZHEN CORP
VIMICRO SHENZHEN CORP
VIMICRO SHANGHAI CORP
ZHU JUN
ZHANG XIAOSONG
YU QING
CHENG GORDON
ZHU JUN
ZHU JUN
ZHU JUN
ZHU JUN
ZHU JUN
ZHU JUN
ZHU JUN
ZHU JUN
ZHU JUN
ZHU JUN
ZHU JUN
TANG DAVID WEI
TANG DAVID WEI
TANG DAVID WEI
TANG DAVID WEI
ZHU JUN
ZHU JUN
ZHU JUN
ZHU JUN
ZHU JUN
JIN ZHAOWEI
JIN ZHAOWEI
JIN ZHAOWEI
JIN ZHAOWEI
JIN ZHAOWEI
WU PEIDING
WU PEIDING
ZHU JUN
ZHU JUN
ZHU JUN
ZHU JUN
ZHU JUN
DONG JINMING
ZHU JUN
ZHU JUN
ZHU JUN
ZHU JUN
ZHU JUN
ZHU JUN
ZHU JUN
ZHU JUN
ZHU JUN
JIN ZHAOWEI
JIN ZHAOWEI
JIN ZHAOWEI
JIN ZHAOWEI
JIN ZHAOWEI
JIN ZHAOWEI
JIN ZHAOWEI
JIN ZHAOWEI
DONG JINMING
ZHU JUN
ZHANG YUNDONG
DONG JINMING
ZHU JUN
ZHANG YUNDONG
DONG JINMING
ZHU JUN
DONG JINMING
ZHU JUN
ZHU JUN
ZHANG YUNDONG
DONG JINMING
DONG JINMING
JIN ZHAOWEI
DONG JINMING
ZENG ZHIJIE
JIN ZHAOWEI
DONG JINMING
ZENG ZHIJIE
NG CHARLES K
DONG JINMING

Officer
Shareholder
Affil Person
Affil Person
Shareholder
Shareholder
Shareholder
Shareholder
VP
VP
Affil Person
Shareholder
Shareholder
Officer
Shareholder
Shareholder
Shareholder
VP
CFO
VP
Officer
VP
VP
VP
VP
VP
VP
VP
VP
VP
VP
VP
CFO
CFO
CFO
CFO
VP
VP
VP
VP
VP
Pres
Pres
Pres
Pres
Pres
Shareholder
Shareholder
VP
VP
VP
VP
VP
Officer
VP
VP
VP
VP
VP
VP
VP
VP
VP
Pres
Pres
Pres
Pres
Pres
Pres
Pres
Pres
Officer
VP
Affil Person
Officer
VP
Officer/Dir
Officer
VP
Officer
VP
VP
Officer/Dir
Officer
Officer
Pres
Officer
Dir
Pres
Officer
Dir
Dir
Officer

5/15/2006
5/15/2006
8/18/2006
8/31/2006
9/1/2006
9/18/2006
9/20/2006
9/22/2006
9/30/2006
9/30/2006
11/7/2006
11/17/2006
11/20/2006
11/30/2006
12/4/2006
12/4/2006
12/20/2006
12/31/2006
12/31/2006
12/31/2006
12/31/2006
12/29/2008
9/9/2009
9/10/2009
9/10/2009
9/10/2009
9/18/2009
9/21/2009
11/18/2009
11/19/2009
6/23/2010
8/18/2010
9/27/2010
9/28/2010
9/29/2010
9/30/2010
12/21/2010
12/22/2010
12/23/2010
12/28/2010
12/31/2010
12/9/2011
12/12/2011
12/13/2011
12/23/2011
12/28/2011
12/6/2012
12/11/2012
6/25/2013
8/23/2013
8/27/2013
9/26/2013
9/27/2013
6/12/2014
6/16/2014
6/17/2014
6/18/2014
6/19/2014
6/20/2014
6/24/2014
6/25/2014
6/26/2014
6/30/2014
6/30/2014
7/1/2014
7/3/2014
7/2/2014
7/9/2014
7/10/2014
7/11/2014
7/15/2014
8/29/2014
9/2/2014
9/2/2014
9/3/2014
9/5/2014
9/5/2014
9/5/2014
9/8/2014
9/8/2014
9/11/2014
9/12/2014
9/12/2014
9/12/2014
9/16/2014
9/19/2014
9/19/2014
9/23/2014
9/23/2014
9/23/2014
9/24/2014
9/30/2014
9/30/2014

5/15/2006
5/15/2006
8/18/2006
8/31/2006
9/1/2006
9/18/2006
9/20/2006
9/22/2006
9/30/2006
9/30/2006
11/7/2006
11/17/2006
11/20/2006
11/30/2006
12/4/2006
12/4/2006
12/20/2006
12/31/2006
12/31/2006
12/31/2006
12/31/2006
12/30/2008
9/9/2009
9/10/2009
9/10/2009
9/15/2009
9/18/2009
9/21/2009
11/18/2009
11/19/2009
6/23/2010
8/18/2010
9/27/2010
9/28/2010
9/29/2010
9/30/2010
12/21/2010
12/23/2010
12/27/2010
12/28/2010
12/31/2010
12/9/2011
12/12/2011
12/13/2011
12/23/2011
12/28/2011
12/6/2012
12/11/2012
6/25/2013
8/23/2013
8/27/2013
9/26/2013
9/30/2013
6/12/2014
6/16/2014
6/17/2014
6/18/2014
6/19/2014
6/23/2014
6/24/2014
6/25/2014
6/26/2014
6/30/2014
6/30/2014
7/1/2014
7/3/2014
7/7/2014
7/9/2014
7/10/2014
7/11/2014
7/15/2014
8/29/2014
9/4/2014
9/4/2014
9/4/2014
9/5/2014
9/5/2014
9/5/2014
9/8/2014
9/8/2014
9/11/2014
9/12/2014
9/12/2014
9/15/2014
9/16/2014
9/19/2014
9/19/2014
9/23/2014
9/23/2014
9/23/2014
9/24/2014
9/30/2014
9/30/2014

VIMC

VIMICRO SHENZHEN CORP

Shareholder

9/29/2014

9/29/2014 144 Sale

200,000

$8.80

VIMC
VIMC

VIMICRO SHENZHEN CORP

Shareholder 9/30/2014 9/30/2014 144 Sale
VIMICRO INTERNATIONAL CO Dir
12/11/2014 12/11/2014 144 Sale

200,000
7,000

$9.15
$9.38

VIMC

VIMICRO INTERNATIONAL CO Dir

2,000

$6.25

144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
Amd
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
Amd
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
P
144 Sale -Planned
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
P
144 Sale -Planned
P
144 Sale -Planned
P
144 Sale -Planned
P
144 Sale -Planned
P
144 Sale -Planned
P
144 Sale -Planned
P
144 Sale -Planned
P
144 Sale -Planned
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale
144 Sale

12/12/2014 12/12/2014 144 Sale

Shares
47,500
88,155
80,000
10,000
400,000
800,000
1,200,000
100,000
10,000
20,000
235,000
156,471
134,443
8,750
100,000
400,000
600,000
18,750
45,000
34,025
8,750
7,050
4,000
1,000
5,000
3,000
1,000
1,000
5,000
110,000
50,000
35,000
4,000
4,830
1,190
30,543
3,750
9,100
4,700
1,553
2,747
4,000
5,500
3,380
27,120
1,440
10,000
40,000
29,773
6,600
2,000
8,073
3,100
1,000
3,500
1,000
3,000
600
1,200
11,372
1,700
2,500
12,628
25,700
63,900
81,200
89,200
8,500
18,000
12,600
900
1,100
107,117
47,000
7,000
31,950
9,000
1,000
15,000
1,000
3,500
4,500
6,000
8,546
3,000
160,000
1,000
16,500
116,345
1,000
25,000
5,000
1,000

Price
$16.15
$17.02
$10.44
$10.65
$10.60
$11.25
$11.31
$11.16
$11.78
$11.16
$10.64
$12.00
$11.16
$11.38
$11.06
$10.99
$10.00
$10.53
$10.53
$10.54
$10.51
$1.92
$3.38
$3.49
$3.44
$3.50
$3.48
$3.44
$4.20
$4.16
$4.92
$3.58
$3.43
$3.40
$3.38
$3.87
$3.80
$3.72
$3.76
$3.76
$3.65
$1.65
$1.64
$1.66
$1.47
$1.40
$1.35
$1.35
$1.35
$1.45
$1.50
$1.26
$1.28
$3.25
$3.07
$3.13
$3.15
$3.16
$3.15
$3.03
$2.99
$3.05
$2.85
$2.75
$2.58
$3.07
$2.85
$2.96
$2.75
$2.69
$2.72
$3.87
$4.08
$4.26
$4.35
$4.71
$4.63
$4.70
$5.18
$4.94
$5.45
$5.63
$6.11
$6.18
$7.47
$8.65
$8.75
$8.96
$8.94
$8.69
$8.16
$10.89
$10.00

PAGE 5 / 9

EVIDENCE OF VIMCS FALSIFIED GOVERNMENT CONTRACTS

DECEMBER 21, 2014

We searched all SEC records and could not find one single instance of an insider buying a single
share of VIMC, even when the shares were trading significantly below $1/ADS! Even as the
company was promising investors a pipeline of nearly $200 million of government contracts, not
one share bought in almost a decade of being public. This is so anomalous that we cannot think
of any other company for which it is true.
Equally damning is the fact that renowned private equity firm General Atlantic, who had access
to all insider information since the companys IPO and had been invested since 2005, sold all
their holdings at $1.97, or nearly 70% cheaper to the last closing price on December 18, 2013
and on January 15, 20142. Not exactly a vote of confidence for VIMCs public shareholders who
have only a fraction of the information and knowledge that the private equity insiders most
certainly had as they sold every share they owned.
Exhibit 4: General Atlantics Exit Price Below $2

It did not take us long to find out why insiders were in such a hurry to sell their shares.

ALARMING REVIEW OF GOVERNMENT RECORDS

In China, local governments routinely disclose to the public where the Peoples money is
being allocated. Especially, when investments, grants, and commercial contracts are involved,
details are disclosed on local government websites. Naturally, if VIMC is telling the truth about
its pipeline of government contracts, these government records should match VIMCs
promotional press releases.
Exhibit 5 (below) summarizes the findings from our research of the websites of the various local
government customers disclosed in VIMCs press releases.

http://www.sec.gov/Archives/edgar/data/1017645/000095014213002445/eh1301343_13da3-vimicro.htm and
http://www.sec.gov/Archives/edgar/data/1017645/000095014214000102/eh1400161_13da4-vimicro.htm

PAGE 6 / 9

EVIDENCE OF VIMCS FALSIFIED GOVERNMENT CONTRACTS

DECEMBER 21, 2014

Exhibit 5: Contract Values VIMC Press Releases vs. Official Government Announcements
Figures in millions

Date

Entity

12/4/2014

Zhongtianxin

10/23/2014

Zhongtianxin

10/16/2014

Zhongtianxin

Customer

Type of Contract
Construction of "Public Security Video &
Image Information System Project" in
Xiaodianqu District in Taiyuan
Xiaodianqu District (SVAC-compliant video
City of Shanxi Province
surveillance system and products)
Chenzhou Municipal Government SVAC-compliant video surveillance cameras
in Hunan Province
and system
Phase II Tianwang in Taiyuan City and
traffic control and monitoring (SVACTaiyuan Municipal Government in compliant video surveillance cameras and
Shanxi Province
system)
Traffic Police Detachment of
SVAC-compliant video surveillance cameras
Taiyuan
and system
Handan Municipal Government in SVAC-compliant video surveillance
Hebei Province
products
SVAC-compliant video surveillance
camcorders and systems

9/30/2014

Zhongtianxin

7/2/2014

VIMC

6/30/2014

VIMC

Maoming City in Guangdong

Province

6/30/2014

VIMC

Lanzhou City in Gansu Province

6/26/2014

Zhongtianxin

Taiyuan City in Shnxi Province

6/26/2014

Zhongtianxin

Taiyuan City in Shnxi Province

Date

Entity

Customer

9/30/2013

ZXDZ

7/25/2013

Zhongtianxin

Ziyang City in Sichuan province

Public Security Bureau of a large
Chinese city

Date

Entity

Customer

11/1/2012

ZXDZ

7/25/2013

Zhongtianxin

Jinzhong City Public Security

Bureau of Shanxi Province
Public Security Bureau of a large
Chinese city

SVAC-compliant video surveillance

camcorders and systems
SVAC-compliant video surveillance
products and systems for 28 streets
SVAC-compliant video surveillance
products and systems for 3 streets
Total

Contract Value
per VIMC
RMB
USD

Contract Value
per Government
RMB
USD

58.6

9.5

Not found

179.0

29.0

Not found

244.0

39.6

76.0

12.3

23.0

3.7

10.0

1.6

20.0

3.2

76.7

12.4

11.4
698.7

1.9
113.3

Type of Contract
City-wide surveillance network project
based on SVAC, deployed with China
Unicom
SVAC-based video surveillance products
and solutions
Total

RMB

Type of Contract
SVAC-based security surveillance products
and services for project to be completed by
the end of February 2013
SVAC-based video surveillance products
and solutions
Total

RMB

9.0

123.0
178.3

20.0
29.0

39.5

http://phx.corporate-ir.net/phoenix.zhtml?c=194779&p=irol-newsArticle&ID=1994935
http://www.tyzfcg.gov.cn/
http://phx.corporate-ir.net/phoenix.zhtml?c=194779&p=irol-newsArticle&ID=1980658
http://www.ccgp-hunan.gov.cn:887/chenzhou

http://phx.corporate-ir.net/phoenix.zhtml?c=194779&p=irol-newsArticle&ID=1978318
10.9 http://www.ccgp.gov.cn/cggg/dfgg/zbgg/201408/t20140815_4456427.htm
http://phx.corporate-ir.net/phoenix.zhtml?c=194779&p=irol-newsArticle&ID=1972080
30.9
5.0 http://www.tyzfcg.gov.cn/view.php?app=bidDetail&id=6639
http://phx.corporate-ir.net/phoenix.zhtml?c=194779&p=irol-newsArticle&ID=1944511
http://www.zfcg.hd.gov.cn/
Not found
Contract won by
China Telecom,
China Unicom, and
China Mobile, NOT http://phx.corporate-ir.net/phoenix.zhtml?c=194779&p=irol-newsArticle&ID=1943574
http://maoming.gdgpo.com/show/id/297e55e84574f0280146ade796283cea.html
VIMC
http://phx.corporate-ir.net/phoenix.zhtml?c=194779&p=irol-newsArticle&ID=1943574
http://www.ccgp-gansu.gov.cn/votoonadmin/article/classlist.jsp?class_id=140
Not found
http://phx.corporate-ir.net/phoenix.zhtml?c=194779&p=irol-newsArticle&ID=1942969
76.7
12.4 http://www.its360.cn/tender/201407/04/1414.html
http://phx.corporate-ir.net/phoenix.zhtml?c=194779&p=irol-newsArticle&ID=1942969
11.4
1.9 http://www.zzzlll.com:81/bbs/thread-37470-1-1.html
185.9
30.2
66.9

USD

55.3

123.0
162.5

Source

Source

1.7
Not found
1.7

http://phx.corporate-ir.net/phoenix.zhtml?c=194779&p=irol-newsArticle&ID=1859711
0.3 http://118.119.102.63/Content/200_21036.htm
http://phx.corporate-ir.net/phoenix.zhtml?c=194779&p=irol-newsArticle&ID=1841091
http://www.tyzfcg.gov.cn/
0.3

USD

Source
Contract won by
http://phx.corporate-ir.net/phoenix.zhtml?c=194779&p=irol-newsArticle&ID=1752945
Beijing Sitong
6.3 Zhineng, NOT VIMC http://ggzy.jzcfxxw.gov.cn:8080/news/notice/one/index.jspx?id=3088

20.0
26.3

Not found
-

http://phx.corporate-ir.net/phoenix.zhtml?c=194779&p=irol-newsArticle&ID=1841091
-

We note the following alarming findings:

1. Of the RMB 1.04 billion in total announced by VIMC in its press releases, only RMB
187.6 million, or just 18% were confirmed by government websites
2. Six of the contracts could not even be found, i.e. were either cancelled and thus removed
or never existed at all
3. Contract value was materially overstated in three cases, which we detail below in
Exhibits 6-8
4. Two of the contracts were actually granted to competitors of VIMC and not to VIMC,
who apparently took credit for their competitors wins in its press releases
Exhibit 5 references the links to the evidence. In Exhibits 6-8 (below) we call out separately the
three cases in which the press releases very materially overstated future contract revenue.

PAGE 7 / 9

EVIDENCE OF VIMCS FALSIFIED GOVERNMENT CONTRACTS

DECEMBER 21, 2014

Exhibit 6: Official Announcement of Budget for Ziyang City Surveillance Project

As noted in Exhibit 5, the press release associated with this deal announced that China Unicom
was VIMCs deployment partner. Although we could not find any mention of VIMC in the
government website, Exhibit 6 shows only RMB 1.7 million was collected by China Unicom,
and not the RMB 55.3 million announced in VIMCs press release.
Exhibit 7: Official Announcement of Budget for Taiyuan Traffic Surveillance Project

PAGE 8 / 9

EVIDENCE OF VIMCS FALSIFIED GOVERNMENT CONTRACTS

DECEMBER 21, 2014

VIMCs press release claimed RMB 76 million of RMB for the project shown in Exhibit 7 with
the Traffic Police department of Taiyuan, more than twice the RMB 30.9 million allocated by the
Taiyuan government.

Exhibit 8: Official Announcement of Budget for Taiyuan Traffic Surveillance Project, Phase II

Exhibit 8 shows the third case of very material overstatement in VIMCs press releases. The
project, Phase II of a traffic surveillance project in Taiyuan, had a total budget of RMB 66.9
million, but VIMC announced RMB 244 million, nearly four times the real amount, of future
contracted revenue instead.
Since all of VIMCs revenue is generated from the Chinese government, what does this evidence
say about VIMCs financials?
The question, of course, is rhetorical, and we remind investors that VIMC is an optionable
security that can be shorted by buying puts or selling calls (or both).

PAGE 9 / 9