From: Thomas Carroll [tdccasny@msn.com] Sent: Sunday, February 01, 2004 10:09 AM To: rule-comments@sec.gov Subject: Diseningenuos comments made to S7-23-03 "Our Street" contribution The Committee: With respect to you I submit: An example of a created short trade situation occurring in 2004 A recent activity by a group headquartered in London organized as "our-street" was directed at a company called USGA. (US Global Nanospace) For a $200.00 per month subscription (called a gratuity by our-street) they provide a 2 day notice of upcoming "research". Apparently the upcoming research involving USGA was an SEC complaint. It was released to the world on the internet news . I believe M2 was the first disperser of this press release. IF our-street had acted within the covenant they established with their contributors these contributors had a 2 day warning of the release. Our-street has a receipt from the SEC that a complaint was received against USGA that Our-street had filed. The short opportunity. USGA had seen significant price appreciation in the recent week with the release of a 2 for 1 forward split. The stock price had reached over $3.00 in interday trading. It had not settled back significantly on it's climb. (As with many Over the Counter or Bulletin Board issues, (development stage) companies have no real or even spotty track records. Investors know this and accept that risk. Investors believe though that every company that complies with SEC filing requirements and qualifies for listings on our exchanges is somehow "watchdogged" by the SEC rules and if the company was a scam or false entity, it would never "pass muster" to be listed at all.) USGA was an opportunity for the "short", because of it's rapid price increase and lack of solid financial foundation. Much press and promise, but no firm contracts. Announced but failed sales. USGA is involved in in-theatre armor upgrade kits for Humvees and a bio-decontaminant called All-Clear that is licensed from other parties. They are involved in explosion containment air cargo containers. (I believe the company has replied with no comment to callers requesting information on government contracts.) The method. Our-street assembles a "laundry list" of unanswered questions and files this research with the SEC as a detailed and very professional complaint. By the covenant created by the request for $200.00 a month gratuities for 2 day notice Our-street informs those generous contributors of this "research". With this 2 day notice (funded by a generous gratuity) the conspirator contributors can establish short positions in the stocks targeted by Our-street for research. Value of the Short activity. With naked shorting, there is some risk. Shares may not be available. If it's a sure thing however, an "in the know" conspirator can focus his attention and husband much reward from his foreknowledge. If he is trading the stock through an overseas account with an overseas brokerage and bank accounts, ... USGA may very well be the poster child for this market manipulation by press release. IF Our-street was a legitimate watchdog organization would they Press Release an "SEC Complaint" before an SEC public announcement of such a complaint? The release as I read it inferred an SEC complaint by the SEC against USGA. False Information in the press release: A count in the laundry list by Our-street purported that USGA had no patents. Later the same day as the initial PR Our-street retracted the no patents claim. In another press release == We didn't know they had European patents. == (Our-street lists a London address). == But we stand by everything else. == Financial Terrorism Our-street requests tips from interested parties. Obviously an interested party suggested USGA, a startup. A defense related contractor. Are there other defense or Homeland Security related companies in a similar position as USGA? ADZR Adzone research in NY comes to my mind. Our-street didn't mention them. That I know of. But I don't contribute. Synopsis: Our-street uses the specter of the SEC to create incidents that it's coconspirators can profit from by either selling or shorting a stock because they are given advance notice of the incident "to happen". Nick Tracy Enterprises: Nick Tracy Enterprises was listed on the Our-street website. Nick Tracy writing for Nick Tracy Enterprises purportedley wrote the following to this commission: NEXT PAGES TRACY COMMUNICATION ++++++++++++++++++++++++++++++++++++++++ From: info@our-street.net Sent: Thursday, November 27, 2003 12:33 AM To: rule-comments@sec.gov Subject: RE: File No. S7-23-03 As a public company watchdog we do not trade stocks but we do have extensive first hand knowledge of the abuses that exist within the Bulletin Boards. We work full time uncovering those abuses and reporting them to the SEC. We have just published a position paper on the subject of Regulation SHO. We offer it herein. REGULATION SHO A prelude to financial chaos On October 29, 2003, the Securities and Exchange commission issued a proposed rule change effecting short selling in a number of ways. The complete proposal can be found on the SEC website. We believe their current proposed rule changes are the result, in part at least, of an efficiently executed campaign to eliminate short selling led by some of the most notorious pump and dump specialists around. Attention was further brought to this movement by investrend, a financial website that claims to provide "independent" analysis of companies while executing "shareholder enhancement" programs for their client companies. Investrend launched an aggressive PR campaign utilizing an abusive technique called "ticker spam" adding as many as 119 company symbols in a single press release in order to promote its site while campaigning on the side of stock promoters and pump and dump stock manipulators against naked short selling. Since no legitimate PR distribution service allows abusive ticker spamming, investrend used its own financialwire.net service to effect the campaign. Their efforts have done more to keep this situation in the public's eye than any other single activity we are aware of. There can be no doubt that the types of abuses that infect the markets extend from abusive naked short selling at one extreme to manipulative and fraudulent pump and dump schemes on the other. Unfortunately, in its attempts to deal with abuses within the area of short selling, the SEC has completely ignored the market dynamic and, as a result, has set the stage for an economic catastrophe. They are, in our opinion, attempting to treat a symptom while ignoring the entire patient or considering the cause of the disease in the first place. (It should be noted that while naked short selling is illegal on the retail level within the US, it is not illegal outside the US nor is it illegal within the market maker community. This is contrary to many statements by proponents of Regulation SHO) Our-Street.com is convinced, based upon years of experience, that the SEC's current proposed ruling will exaggerate the losses experienced by the average investor in micro-cap companies while enriching the worst of the dishonest stock promoters in direct proportion to their unethical or illegal practices. At first, people may scratch their heads and wonder how that could be possible, but one only has to understand the market dynamic to realize that this, in fact, is the only outcome possible. We're going to repeat this because we want you to understand that this is not some kind of overstatement or hyperbole on our part. We are totally serious when we say this. We are absolutely convinced that the SEC's Regulation SHO, as proposed, will result in utter financial chaos, increasing investor losses while enriching unethical stock promoters within the bulletin board and pink sheet markets. We further are absolutely convinced, based upon how the rule is currently written, that no other outcome is possible. If you will take the time to read this article, you will come to understand why we can say this with such confidence. Before you can understand why we can say this with such confidence, you have to understand how the market works. The stock market is a dynamic situation. Within a market there are many factors all working to influence the market and a stock's price, all at the same time. Without going into great detail, on any given day, the geopolitical and economic conditions throughout the world affect the market. The weather and natural catastrophes affect the market. The market itself and its momentum both on an exchange wide basis and within a particular sector or and individual stock will affect a stock's performance. The company's performance and it's press releases also have a direct effect on a stock as does the amount of promotional activity and short selling taking place in the stock. All these things can and do affect a stock's price on any given day. THE SEC AGREES - SHORT SELLING PROVIDES THE MARKET WITH IMPORTANT BENEFITS When it comes to short selling in general, the SEC acknowledges that "short selling provides the market with at least two important benefits: market liquidity and pricing efficiency." The SEC explains these benefits further saying that "Market liquidity is generally provided through short selling by market professionals, such as market makers (including specialists) and block positioners, who offset temporary imbalances in the buying and selling interest for securities. Short sales effected in the market add to the selling interest of stock available to purchasers and reduce the risk that the price paid by investors is artificially high because of a temporary contraction of selling interest. Short sellers covering their sales also may add to the buying interest of stock available to sellers." The SEC goes on to explain pricing efficiencies in this way, "Market participants who believe a stock is overvalued may engage in short sales in an attempt to profit from a perceived divergence of prices from true economic values. Such short sellers add to stock pricing efficiency because their transactions inform the market of their evaluation of future stock price performance. This evaluation is reflected in the resulting market price of the security." Accordingly, it isn't simply short selling that is the problem, it is the abusive short-selling including abusive naked short selling that the SEC is addressing with this proposed change in the regulations. We share their concern but do not support their proposed solution. In broad terms, the reason we don't support the SEC proposal is because, like with any dynamic situation having a number of components, when you significantly alter one component, you change the entire dynamic and unless you address the offsetting components. This can create disastrous results if not properly thought through. THE BULLETIN BOARD - DANGER AHEAD With that basic truth established, let's focus specifically on naked short selling and exactly where the elimination of it will create economic havoc; that would be on the NASD Bulletin Boards. So, why is the bulletin board so different than other exchanges that the elimination of naked short selling would cause such a problem? The answer lies in the lack of certain listing requirements which are present on other exchanges. This would allow a company to structure their stock so as to make pumping the stock to unreasonable levels a snap and would virtually eliminate any opportunity for short sellers to find any stock to short to combat this event. Boxing a Stock One of the favorite tricks of unethical promoters is to organize or reorganize a stock prior to a heavy promotion so that the number of shares outside of their control is either greatly limited or virtually eliminated. This tactic is commonly called "boxing a stock". This is most usually done through a reverse split and, in the case of a shell company, is followed by a reverse acquisition. In accomplishing such a reorganization, the amount of freely traded shares is often reduced to the level where a legitimate market really can't exist. The poster child for both the campaign against naked short selling and as fine an example of the effect of aggressive promotion a boxed stock as one is likely to see was Genemax Corp. (OTC BB: GMXX). With over 15 million shares initially outstanding, the company began pumping their stock under the direction of Vancouver promoter Brent Pierce, whose activities in British Columbia were already restricted by a 15-year trading suspension imposed on him by the B.C. Securities Commission in 1993. According to Grant Atkins, one of Genemax's directors, the number of shares actually available to the public for trading at the time was 250,000, hardly enough to allow for a legitimate market but perfect for those running the promotion to pump the stock to beyond $20 from a pre pump level of $1.05 even in the face of heavy naked short-selling. Of course, 9 months later, the stock is approaching its pre pump levels as the people close to the pump, began dumping their shares into the elevated market and reaping a windfall at the expense of all those investors who believed the promotional hype. Now, the shorts are gone for the most part, and with the expanded float, the stock trades at a level that the market is deciding rather than a level being decided by the promoters who initially controlled the market for all intents and purposes. One can only speculate how high the stock might have gone had the naked short sellers not been there to counter the aggressive promotion of Pierce and his pals. Had Regulation SHO been in effect when GMXX was being pumped, there is no telling how high they could have pushed the stock since there would not have been any stock for short sellers to borrow, hence there would have been no short sellers. Accordingly, another unfortunate side effect of this lack of short sellers would be that there would be no one to counter the aggressive promotion on the various message boards where touts hype the stock and short sellers often bring forth the negative side of the company. CONCLUSION In order to protect the markets serve the common good and maintain a realistic market price for stocks we oppose the elimination of naked short selling. However, if the SEC determines it wants all to eliminate all non-market maker naked short selling, they better make sure that the short selling community has the ability to borrow stocks by instituting float requirements on all stocks. We recommend the following for a stock to be traded on the Bulletin Boards: A failure to meet these standards will move a stock to the Pink Sheets. 1. Public float must exceed 35% of the total issued and outstanding in order to qualify for trading on the bulletin boards. 2. At least 60% of the float must remain in street name to maintain a bid and offer on the stock. If the number falls below that, the market will revert to a "work out" market. (this is where each trade is negotiated and no bid or offer is quoted by market makers). 3. A stock must have a minimum of 100 non-affiliated shareholders, each with a minimum investment of $1,000 prepaid in cash and in free trading stock in order to qualify for initial trading. TOXIC FUNDING (THE FLOORLESS CONVERTIBLE SECURITY) ALSO KNOWN AS "THE DEATH SPIRAL" In our opinion, the biggest source of short selling and naked short selling abuses comes from the use of toxic funding strategies. These come in many forms from convertible debentures and options to simple private placements with a variable pricing structure based upon future market values. Regardless of their form, they all share one common trait. They all allow the funding source to purchase shares at a significant discount below the existing market, regardless of how low the stock price might fall. This sets the stage better than anything else for short selling abuses. A ruthless individual can literally drive a stock from over $1 to the sub penny level using toxic funding strategies and make risk-free money doing it. Since many, if not most, toxic funding sources exist within obscure offshore corporations, it is easy for them to short sell at will, undetected and assure themselves high profitability with complete disregard for the other shareholders in the company. Still, there are unsavory elements everywhere in business and it is up to the unscrupulous or lazy corporate executive to invite these funding strategies in before they can abuse the company. Since the dangers of toxic funding are so widely known, only a CEO lacking any ethical foundation or one so lazy and stupid he doesn't deserve your support would enter into one of these agreements. To claim that the capital source promised or agreed not to sell and hurt the stock or not to short the stock falls into the same ignorant excuses as "the checks in the mail" and "it's only a cold sore". Toxic funding is an invitation to short selling abuses, it is as simple as that. Blaming the system that allows naked short selling for the abuses caused by toxic funding is as stupid as blaming the lock manufacturer for your loss after giving the fox the key to your hen house. CONCLUSION Regardless of the outcome of the SEC's review of naked short-selling we support the elimination of floorless toxic funding strategies entirely. If you want to stop short sellers from torching a stock, take away the fuel, not the match. Loosen regulations so that companies can sell their stock privately at any discount to the market they want, just require they disclose it and publish the terms in a press release. If they want to sell stock privately for $.01 when the market price is $1.00, let them. Just make them disclose it in a press release. For the market to survive we must eliminate any opportunity for stocks to be priced at anything in the future but a fixed amount or an amount higher than the existing market price of the stock. GET RID OF THE PRIVATE EYE'S AND YOU ARE GOING TO NEED MORE COPS Curtailing the number of short sellers by eliminating naked short selling translates into a reduced number of serious investors doing due diligence and passing their findings on to the markets and the SEC. The direct result of this will be more abuse and less prosecution by the SEC since they will have to rely upon themselves more to gather evidence now being provided by short sellers. In order to protect the investing public the SEC must look to increasing its staff or hiring outside watchdogs as subcontractors to fill in the gap left by the short seller's departure from the markets. CONCLUSION Because of the negative effect it will have on the amount and quality of support given the Enforcement division by the short selling community, we oppose the elimination of naked short selling and favor a focus designed to remove the opportunity for abuses within all kinds of short selling instead of naked short selling itself. If the SEC moves to eliminate naked short selling, we recommend the establishment of subcontractors to act as watchdogs on behalf of the market. This can be in the form of a bounty or fee basis. Respectfully, Nick Tracy Enterprises, Ltd Our-Street.com ++++++++++++++++++++++++++ END OF TRACY LETTER If you would like to contact Mr. Tracy I believe his E-mail is: nicktracy@ananzi.co.za our-street.com is reachable on the web. Conclusion: Mister Tracy and his Co-Conspirators have spent much time on this scheme that they are using to wage a war of Financial Terrorism against the US Markets. The presence of short selling in any form, allows leverage beyond imagination. Criminal activity is a cancer and breeds on it's own success. Short selling allows people who are willing to operate outside the norms of civil or moral responsibility an untold advantage over the individuals who play by the rules. Since this hearing is to reach a conclusion, and it's conclusion if applied will have no real effect on foreign markets, I might disrespectfully suggest that opening the US market to allow even individual investors to naked short would be the most equitable solution. Of course if you reach that conclusion I'm leaving the country and shorting US Savings Bonds, in an overseas account. Thomas D. Carroll. US Citizen. tdccasny@msn.com PARTIAL TEXT COPIED FROM OUR_STREET WEB SITE FOLLOWS: ++++++++++++++++++++++++ Join us today and together we can take back Our Street and preserve the American Dream. As a member you will be notified when reports are published on our site and, if you are the kind of person that wants to be notified early, before everyone else and want other special service and benefits that comes from being our primary supporters, we understand and have a special membership just for you. +++++++++++++++++++++++ USGA PRESS RELEASES: +++++++++++++++++++++++++++++++++++ There were 8 results from your search, US Global Nanospace , ,SEC Confirms No Complaint Released Against US Global Nanospace - Jan 28 3:35 PM EST, US Global Nanospace , ,US Global Nanospace, Inc. Approves Increase in Authorized Shares and Forward Split - Jan 21 11:28 AM EST, US Global Nanospace , ,US Global Nanospace Joins NanoBusiness Alliance - Jan 16 11:07 AM EST, US Global Nanospace , ,Dr. Jiang Zhu Appointed Chief Science Officer US Global Nanospace - Jan 06 11:49 AM EST, US Global Nanospace , ,US Global Nanospace and Cyclone Aviation Products Announce Manufacturing Agreement and Initial Order for Twenty S.A.G. Humvee Turrets - Jan 05 9:13 AM EST, US Global Nanospace , ,TSWG Technical Brief on All-Clear Chem/Bio Decon Foam Now Available Online - Dec 24 9:17 AM EST, US Global Nanospace, Inc. , ,US Global Nanospace, Inc. Corporate Update - Dec 09 7:15 AM EST, US Global Nanospace, Inc. , ,Guardian(TM) Antiballistic Replacement Door Skins (GARDS(TM)) Now Shipping - Nov 20 5:00 AM EST +++++++++++++++++++++++++++++++++++++++ Cut and Paste from Our-Street.com , FOR PREVIOUS REPORTS GO TO ARCHIVES ATTORNEYS - NEED LITIGATION CONSULTING? STOCK FRAUD'S SILENT ACCOMPLICE SUBSCRIBE TO OUR EMAIL ALERTS We have a free subscription in addition to paid memberships so we want everyone to sign up. If you are a stock trader or investor, this could be the best money you ever invested. But remember, Our-Street.com is 100% subscriber supported. Without your support, we cannot do this valuable work! Please, subscribe today and help us take back Our Street! HELP SUPPORT OUR-STREET.COM WITH A GRATUITY US Global Nanospace, Inc. OTC- BULLETIN BOARD SYMBOL USGA Corporate Headquarters: 2533 North Carson Street* Suite 5107 Carson City, Nevada 89706 775-841-3246 ir@usgn.com The Ones Responsible Officers and Directors and Significant Players John Robinson Stephen B. Squires SEC FILINGS Some Basic Facts - as of September 30, 2003 Shares outstanding 13 November 2003 - 86,237,839 Total Assets September 30, 2003- $98,029 Total Liabilities - $2,987,244 Revenues for 6 months ending 9/30/03- $125,679 Total Net Loss for 9 months ended 9/30/03 - $3,126,081 Accumulated Deficit - $10,180,436 Stock price when report was published $2.85 Market capitalization $245,777,841 Date Complaint filed: January 28, 2004 Filed with: Enforcement Division Securities and Exchange Commission CONFIRMATION OF RECEIPT OF COMPLAINT Known actions to date - None NOTE: 28 January 2004 - We have received information pertaining to the foreign patent applications filed by Squires and USDR. These were filed with the European Patent Center. We apologize for this oversight but searched the USPTO as indicated by USGA. We will continue to investigate this matter to determine the status of these patents. We have also informed the SEC of this error and apologized to them as well. As stated below, we previously inquired directly to the company for this information but they did not respond in a substantive way. We appreciate the reader who took the time to get us this information. PATENT INFO THE SEC COMPLAINT SUMMARY BELOW IS A SUMMARY REPORT. TO READ THE ACTUAL COMPLAINT CLICK ON IT. Before we get into this report in depth, we want to make it very clear here that we support the idea behind anything that will make the troops in Iraq and elsewhere safer. As much as we support the war on terrorism and Homeland Security, we also have a problem with companies that use these and other hot topics to promote their stock and that is the focus of our report today. US Global Nanospace, Inc. is a company that has capitalized on both and seen their stock skyrocket while consistently failing to deliver. We find this most troubling. Due diligence produces clues as to some possible reasons why these failures occurred. US GLOBAL'S PRODUCTS ALL-CLEAR(tm) We also have some real problems with USGA's representations about this particular product. We have noticed that USGA posted the following claim on their website, that ALL CLEAR (tm) is "designed to allow expansion to include remediation of agro-terrorism or pesticide threats and to mitigate other livestock or agricultural risk from diseases such as Mad Cow, Hoof & Mouth or bacterial wilt" They also claim "In addition, ALL-CLEAR is being efficacy tested internationally for eradication and containment of both Hoof-and-Mouth and Mad Cow diseases and for use in other wide area applications, such as decontaminating aircraft arriving from quarantined areas and decontaminating farms and ranches" Mad Cow disease is caused by prions. Animals are infected when they eat food containing these prions. We have seen no evidence that MCD is transmitted by casual contact or even between cows who may from time to time kiss passionately. Animal feed is contaminated with prions when feed processors grind up parts of animals infected with the disease to make food such as bone meal. It is not spread like a virus or bacteria might be spread. Basically, when you feed a cow, food containing bone meal from another cow (cannibalistic cows, imagine that) and that bone meal was made from a cow with MCD, then the disease is spread to the cow eating cow. (tofu burgers anyone?). Just like many people pumped their stock based upon some far fetched connection to anthrax when that scare was most vivid in American's minds, today many companies are attempting to attach their products to one of today's latest hot-buttons, two of them being nanotechnology and Mad Cow disease. More than being a product which actually represents the ability to interrupt the MCD cycle and play a material part in its eradication, we believe that the only cycle being truly affected here is most likely the pump and dump cycle. In fact, we think the best way ALL CLEAR(tm) might be effective in preventing a cow from becoming infected with Mad Cow disease would be to stick the spray nozzle up the cow's ass as it approached the contaminated feed and discharge the unit until the cow thinks better of it and changed directions. Neither TIAX or the US Government has suggested this product is designed to impact the global Mad Cow problem and we would like some scientific support for US Global's contentions prior to taking them at face value. Guardian anti-ballistic security cockpit door SALES BUT NO REVENUE Another serious problem we have with US Global Nanospace is their consistency in announcing and promoting their stock based upon contracts that never materialize. Let's examine the many claims and statements as well as the truth surrounding the alleged sales of the companies Guardian cockpit door. On July 25, 2002 USGA, (then Caring Products, Inc) announced that their "proprietary Guardian Anti-Ballistic Panel Cockpit Security Door was selected for installation in DHL Airways' DC8 cargo aircraft. DHL, an air cargo industry leader, is anticipating the need to comply with broadening FAA flightdeck security regulations, initially enacted only for passenger-carrying aircraft." They went on to claim that "The Guardian Door is expected to be the first reinforced cockpit door to receive STC certification from the FAA, which USDRGA anticipates receiving by August 2002." They earlier announced in June 2002 that the application for STC certification had entered phase 5, the last phase in the approval process. In their February 2003, 10Q, the company claimed that "on September 11, 2002, we entered into an agreement with El-Al Israel Airlines to install the Guardian (TM) Door on El-Al's 747-200B aircraft." Then again on April 25, 2003 the company announced that "US Global Aerospace, Inc. (OTC Bulletin Board: USGA) announced today it has received new orders totaling $1,440,500 for 38 of the Company's Guardian(TM) Cockpit Security doors. The new orders include doors for El Al Israel Airlines' Boeing 737, 747, 757 and 767 fleets, and Aer Lingus' Airbus A320 and Boeing 737 fleets. The USGA Guardian(TM) door is the only enhanced security flight deck door that has passed the Israeli Security Agency's (ISA) extensive testing and been determined by the ISA to meet its rigorous standards." (Was this the same or a different El Al order?) (We also want to note that US Global has subsequently edited the original press release on their website to remove any mention of Aer Lingus for reasons which will become apparent). In May 2003, this claim was expanded by Stephen Squires, who at that time was claiming to be the "Vice Chairman" of the company in an interview with the Reno Gazette. He claimed then that ""We have 200 firm orders from existing airlines, inside and outside the U.S., including (Israel''s) El Al Airlines"" In this same article, Squires claimed that "About 50 of the Carson City-based company''s nearly 500 employees are involved in" the Guardian door program." Of course, USGA never has had anything close to 500 employees. It is now 1 1/2 years after August 2002 and the FAA has still not issued the STC certification for the Guardian door. According to his resume, President John Robinson had considerable experience working with the FAA prior to becoming President of USGA. We believe he knew or should have known that FAA approval would be highly unlikely or impossible within the 35 days as he claimed when announcing the DHL sale. In their July 11, 2003 filing of their 10K, the company basically attempts to unwind everything it claimed previously by saying: In April 2003 El Al Israel Airlines, while it was under the control of the government of Israel, submitted an order to USGA for the purchase of Guardian Doors for its fleet of aircraft. Since that time, however, the airline has been privatized. Currently we are unsure whether the change in ownership will have any effect on the purchase of the doors. In April 2003 we also received a purchase order from Aer Lingus, the national airline of Ireland, for Guardian Doors. Shortly after we received the purchase order, Aer Lingus notified us that it intended to award the contract for the cockpit doors to Airbus. We believe that the major original equipment manufacturers (OEMs) in the aircraft industry have such overwhelming resources and influence in the marketplace that it will be difficult or impossible for us to gain entry, even though we believe that the Guardian Door is the best product available. We are currently reassessing our ability to compete successfully in the OEM-controlled market for secure cockpit doors. However, we will continue to obtain a wide range of STC's for very specific markets, as we have identified a number of profitable custom door opportunities in areas that we believe the major OEMs are unwilling or unable to supply. Although anything is possible, after researching matters we have serious doubts about the accuracy of these claims. Here's why 1. El-Al only floated between 15% and 24% of their outstanding stock so the government retained control of the company. If firm contracts were in place, we believe that El Al, as a corporation, would still be required to honor its commitments. Of course this assumes that USGA was being completely truthful when it clearly stated that these were firm orders. 2. Air Lingus, on the other hand, announced the very next day after the US Global press release that they had completed installation of secure cockpit doors on all 7 of their international Airbus 330 jets. Additionally, according to USGA their doors are designed to Boeing model 7x7's and the Airbus 320. USGA doesn't mention the Airbus 330 which is an entirely different plane from the 320. The article also indicated that Aer Lingus was "in the process of examining options for the introduction of the doors on all short haul flights". Come on now, let's take a reality pill here. Aer Lingus was even more financially troubled following 9-11. Furthermore, it is common knowledge that Airbus is a government subsidized airline. Their only immediate requirements were to have security doors installed on their international flights and that was announced as COMPLETED THE DAY AFTER US GLOBAL ANNOUNCED THE SALE! I admit to being born at night, but it wasn't last night! Something stinks here. Something stinks real badly. So, did Aer Lingus cancel or was there ever a purchase order produced in the first place? Another aspect of this we find if very hard to accept is that any reliable companies would cancel a purchase order. Purchase orders normally are the final step in the process of acquiring a product and are designed to specify exactly the details of the item being purchased at that time. For example, a company might contract to purchase 7 cockpit doors from a supplier then issue the first purchase order for 2 of those doors to signal the desire to have them shipped pursuant to the contract. Something stinks here and we would like to know exactly what happened with the orders and the certification. We simply aren't buying the excuses given by USGA. AND, BY THE WAY, WHERE ARE THE OTHER 162 DOOR ORDERS? Let's not forget what Vice Chairman* Stephen Squires told the Reno Gazette. ""We have 200 firm orders from existing airlines, inside and outside the U.S., including (Israel''s) El Al Airlines"". According to Rich Schineller, the man in charge of investor relations for USGA, the El Al and Aero Lingus orders totalled 38 of the 200 represented in the Vice Chairman's statement. So, where are the orders for the other 162 Guardian Anti-Ballistic Cockpit Security DoorS? Here's another question that really needs to be answered. Is USGA a Production Approval Holder? A Production Approval Holder (PAH), according to the FAA, is the holder of a Production Certificate (PC), Approved Production Inspection System (APIS), PMA (Parts Manufacturer Approval) or TSOA (technical standard order authorization) who controls the design and quality of a product or part thereof. Since USGA is quick to brag about accomplishments, many of which are called into question because they never materialize, you would think they would disclose it if they were. It seems that the FAA requires not only certifies parts like different doors used to retrofit passenger airplanes, but they apparently certify manufacturers and designers as well. The last mention of the Guardian cockpit doors in a company press release was in an October update where it merited only three lines saying that the company claimed to still be talking to El Al about their doors and that they hadn't yet received the FAA certification that John Robinson assured the current and potential investors would be granted by August 2002. The subsequent Company Update listing the company's primary products didn't even give the Guardian door a mention. Total value of door orders between Aer Lingus and El Al $ 1,440,500 Total approximate value of all 200 firm orders @ $50,000 each $10,000,000 (USGA claims a value of $40,000 to $180,000 per door) TOTAL REVENUE FROM SALE $ ZERO - ZIP - NADA OF DOORS NO SALES! IS THERE ANYTHING ELSE? Well, let's try to be accurate, USGA did manage to sell some Radomes for total gross revenues of $125,679 in the last 6 months. These were the first revenues since the company's inception in March 2002 and allowed the company to hold the accumulated deficit for the first 21 months to only $10,475,838. MOOSE RIVER CONSULTING? WHO COULD FORGET MOOSE RIVER CONSULTING? On October 29, 2002, the company proudly "announced its acquisition of the Nanosil treatment technology through an exclusive license agreement with Moose River Consulting, Inc. Nanosil is a proprietary super hydrophobic surface modification process that produces surfaces that are designed to repel water completely." They also announced that their market potential for their Nanosil technology would exceed $50,000,000 per year! The acquisition was disclosed in the subsequent 10Q in November 2002 and was never heard of again. ANYONE CARE TO TELL US WHAT THAT WAS ABOUT? DID THEY ACTUALLY ACQUIRE IT? WHAT HAPPENED TO IT? WHO IS MOOSE RIVER? WHERE ARE MOOSE AND SQUIRREL? Vice Chairman? Stephen Squires, inventor of many of USGA's technology and Chief Technology Officer of USGA was interviewed by The Reno Gazette in May 2003. Steve demonstrated, better than most, the companies complete disregard for accuracy. First of all, he presented himself as the Vice Chairman of USGA. This position usually describes a director of the company who would serve as Chairman in the event the Chairman wasn't able to. Of course, when the company filed its 10K in July, Squires was not listed as director or an officer and certainly not Vice Chairman. Of course Squires had other interesting statements which were equally as questionable. Here they are. US Global Aerospace Inc.''s previous work was mostly classified, ""so you wouldn''t see a lot about us,"" said Vice Chairman Steve Squires. Of course, prior to getting involved in the Guardian cockpit door, the company called itself Caring Products International and their work was designing "a line of proprietary urinary incontinence products with disposable liners which were sold under the Rejoice brand name in the U.S., Canada and Europe" Of course, we never realized that adult diaper technology falls under the heading of national security requiring their development to be "mostly classified" but that is what Vice Chairman Squires seemed to be telling us. ""Really our expertise is in advanced materials development, mostly nanosciences,"" Squires said. Prior to announcing the hiring of Dr. Jiang Zhu on January 2, 2004, the company had not revealed any credible evidence to support this claim. We have seen no resume for Steven Squires, USGA's Chief Technology Officer so only know he used to be the president of Avcom Technologies and was responsible at least in part for Wheelits a lighting system designed so "THAT PEOPLE COULD SEE YOUR COOL CUSTOM WHEELS AT NIGHT WHILE YOU ARE DRIVING DOWN THE ROAD" Strangely enough, Avcom Technologies' parent company before it went bankrupt was United States Defense Research. Hey, isn't USDR owned by John Robinson? Small world!! Here is another statement from the Vice Chairman. ""We have 200 firm orders from existing airlines, inside and outside the U.S., including (Israel''s) El Al Airlines,"" he said. ""That will grow substantially now that the rest of the carriers can see the time savings."" We already have covered this claim so no sense going over it again. Are you starting to get the picture here? But wait, here is another Squires-ism. About 50 of the Carson City-based company''s nearly 500 employees are involved in this program, he said. ""We hope for 2003 to have 5 percent market in the U.S. and 10 percent of the world share,"" the executive said. ""That''s $56 million in revenues and we think that''s conservative."" When USGA filed its 10K in 60 days later, it was revealed that the company only had 11 full time employees. Plus, given what we know now about the door situation, and given at the time, the door was not certified and the company had zero revenues from inception, does anyone think $56 Million in the next 9 months was conservative in Squires or Robinson's mind? Executives offices are WHERE??? * The article also described the company as a Carson City based company. What the company has never bothered to disclose to the market is that their address of 2533 North Carson Street* Suite 5107 Carson City, Nevada 89706 belongs to Laughlin Associates, a Nevada incorporation company that also, for a fee, allows you to call their offices yours. There isn't a 5th floor in this two story building so Suite 5107 will be kind of hard to find. Now technically, Laughlin Associates offers their incorporation customers a special package where, for a fee, you can probably qualify to CALL their offices your office to qualify under the tax codes as Nevada has no corporate income tax. You also get use of conference rooms and other office features when you are in town but if you ask yourself the question, does John Robinson and his associate of many years Julie Seaman or any other full time employees (actual not technical) show up for work at the Laughlin offices every day? We don't think so. They are all working out of their actual offices at 1016 Harris Road, Arlington, Texas. Now frankly, we don't care what kind of charade a company wants to use to get the proper tax breaks but we think it is inappropriate at least to represent to a reporter that your company is a Nevada based company like Squires did and make it sound like it is a genuine part of the Nevada economy. Of course, one has to question what kind of reporter would simply interview a person then write a story without even bothering to check any of the facts. Talk about lazy and irresponsible reporting! PR companies do that but they are paid to regurgitate company promotional rhetoric. We always thought reporters and ESPECIALLY business editors like Ed Shur were supposed to be more responsible than that. We wrote Mr. Shur to see what steps he took to confirm the various representations made by Squires and the only reply we got was that they didn't share non-published information but "the proper attributions were in the story". Given the strength of his work here, he should consider applying for a job at the New York Times. TROUBLE WITH PROCEDURES Normally we wouldn't concern ourselves if a company failed to measure up to the standards expected by an accounting firm for reporting to the SEC. However, US Global is a company that has set its sights on working with the FAA and meeting their ever so stringent record keeping requirements. Because they are responsible for keeping air travel safe both mechanically and in matters of security, we are certain that the level of compliance required for companies working within the industry probably exceed that of a public company. Furthermore, when it comes to the war on terror, national security and the military and the war on terror we also believe companies who seek to do business with the the military and the manufactures who supply them with equipment must also have their internal systems for recording and reporting efficiently established. That is why we find it so troubling to read this disclosure in the company's last 10Q. "Our Chief Executive Officer ("CEO") and our Chief Financial Officer ("CFO") carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on those evaluations our CEO and CFO believed that our disclosure controls and procedures were designed to ensure that information required to be disclosed by us in the reports we file under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms and that such information is accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. However, this review was based on historical practices and procedures. Our CEO and our CFO were informed by Grant Thornton LLP ("GT") in July 2003 that our historical practices and procedures were not effective, would not insure timely reporting of the information required to be reported and would have to be changed. As a result of the foregoing, we will be implementing significant changes in our disclosure controls and procedures. We intend to take immediate corrective actions." We are concerned this could be a visible symptom of a problem far greater than what has been revealed. Is this company run with the type of a commitment to accuracy and efficiency that should be contracting to help provide for your defense and the defense of your military? POSSIBLE LEGAL PROBLEMS? We also located information pertaining to some litigation involving Stephen Squires and his Avcom Technologies, Inc. We have highlighted the troubling phrase in the failed appeal made by Avcom and Squires. During the trial, it reveals that: Due to a ""dire financial situation,"" Avcom subsequently executed an assignment for the benefit of creditors, transferring all of its assets to another company. Now, we are not attorneys so we are only speculating here but were these assets the rights to the technologies now being developed by US Global that were transferred and was Robinson's USDR Global Aerospace, Ltd. The timing certainly seems appropriate and these technologies were transferred apparently first from Squires and/or Avcom to USDR then from USDR to US Global. If this is the case, then this makes the fact that USDR appears to have been the parent company of Avcom at one time even more relevant and interesting. Since it appears also that the failed appeal resulted in a possible judgement for the plaintiff, we are also wondering if the plaintiff might also have a claim against the property transferred. We are attempting to contact the plaintiff to determine if this is the case. If there is something here, it could certainly explain why Stephen Squires suddenly decided to start going by S. Brad Squires. One thing for sure. We have a lot more questions than we have answers about this particular situation. CONCLUSION US Global Nanospace, Inc. is a company that has demonstrated the ability to talk the talk an awful lot more than it has walked the walk. They are a company that has promoted themselves based upon claims of FIRM orders for about $10,000,000 worth of their cockpit doors yet failed to generate a single dollar in revenues from those doors despite the fact that they claim these orders go back as far as September 2002. They are the kind of company that explains to a reporter that the reason they hadn't been heard of much before was because their work was mostly classified when their previous products were adult diapers. They are a company that appears willing to jump on just about any bandwagon in order to promote their stock including the Mad Cow disease bandwagon. Now they are asking us to believe that the military is actually testing their Humvee turret in Iraq and Afghanistan. Given their past tendencies, are we to believe them or is this simply another exaggeration? They recently announced that they have made a deal with an Israeli manufacturer to build their turrets and that the deal included an initial order of 20 turrets. What they didn't spell out, as usual, was who ordered the turrets. We suspect this order was not an order from a USGA customer but rather from USGA itself. Not surprisingly, the news release didn't make this point clear. Many of the answers to our questions raised here lie within the files of USGA's corporate offices... no... let's try to be more accurate. Many of the answers to the questions raised here lie within the files at the company's offices in Midland, Texas. We have written them to clarify the issues about these contracts and sales and will report here what we learn when/if they respond. Frankly, we are concerned enough about the apparent deceptions going on that we feel the SEC should give serious consideration to taking a look at exactly what is going on at this company. As always, we will gladly provide a forum for any documented and verifiable comments by the company and will promptly and sincerely apologize for any errors in our facts. Our commitment is to bring forth the truth and the facts in the matter and we encourage US Global Nanospace to produce whatever documents they can to clear up our concerns and the concerns of what we assume are many USGA shareholders. END MATERIAL FROM FROM OUR-STREET WEBSITE End of submission by Thomas D, Carroll Respectfully, Thomas D. Carroll _________________________________________________________________ Check out the new MSN 9 Dial-up — fast & reliable Internet access with prime features! http://join.msn.com/?pgmarket=en-us&page=dialup/home&ST=1