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yes, you are indeed buying a "story" here, not a company. so consider this "gambling money", not investing money. be prepared to either lose it, or make a ton.

here's a recent article from The

Provo, Utah-based Sensar (SCII:Nasdaq - news) has no ongoing revenue. Its CEO is a former lawyer who doesn't know much about technology. And it barely avoided being delisted by the Nasdaq stock market last year by scraping together some additional cash and doing a reverse 5-for-1 stock split in May, transforming its "penny" stock into one that at least had a number before the fractions.

Then why -- and how -- could this little-known technology company find itself branded a hot wireless communications concern whose stock had one of the most successful performances of any company on the Nasdaq last year? Shares of tiny Sensar skyrocketed from less than 2 bucks -- or below 40 cents before the reverse split -- a year ago to as much as 74 1/2 last week, before settling down to close Monday at 55.

The answer lies in a combination of factors that, on the one hand, should give investors pause: Sensar is going through a "reverse merger" that will render it unrecognizable -- and, for the time being, unanalyzable -- to public investors. On the other hand, the company has attracted impressive people and partners and therefore has a legitimate shot at becoming a hot prospect in the global race to supply ubiquitous Web connections through handheld devices.

First, the facts. Sensar's stock has taken off because the company doesn't intend to be Sensar anymore. Instead, it wants to be the product of a transaction whereby a private company trades its assets for shares in an existing public company. The turnaround specialists brought in to save Sensar -- formerly a hodgepodge of scientific instrumentation companies -- essentially went shopping last year for an Internet company. On their quest, they dangled precisely two assets: $5 million in cash and a Nasdaq listing. What they found was ITES, an Israeli company which, together with a U.S. affiliate called Net2Wireless, promises to deliver not merely data over cellular-phone lines, but full-color Web pages to personal digital assistants.

The deal that will merge Sensar, ITES and Net2Wireless -- the latter will become the company's name -- isn't expected to close until the end of the first quarter or the beginning of the second.

But shares of Sensar, the lone public entity of the lot, began to run in the third week of December after Sensar announced that David Rubner, the former CEO of Israeli telecommunications player ECI Telecom (ECIL:Nasdaq - news), would become its chairman. Rubner, a veteran of Israel's high-tech community, will build a management team for the company around ITES founder Hemi Davidson, who will remain a senior technology executive. Davidson's specialty is data compression, a critical factor in cramming Web pages over wireless signals. This morning, the company will announce that Joav Avtalion -- co-founder of Israel's Nice Systems, which 3Com (COMS:Nasdaq - news) acquired four years ago -- will become a director.

The stock moved up from 21 the day before Sensar disclosed Rubner's involvement to 74 1/2 on the penultimate trading day of the year. (The shares had begun to move when Sensar first started dealing with the Israelis.) Daily trading volume, which barely poked over 100,000 shares several months ago, reached a crescendo of 1.1 million shares Monday. That's nearly half of Sensar's float, meaning that half the shares available for public trading changed hands Monday.

Howard Landa, a lawyer brought in to salvage Sensar when its other businesses were failing, speculates that Israeli investors are excited by Rubner's participation. "He liked what he saw, and we obviously liked him for his connections in the wireless industry," Landa says.

Careful, though. Scarcity value largely explains the run-up of Sensar's shares. With a float of only 2.4 million shares, out of 2.9 million outstanding, it doesn't take much buying to drive up the price. The company's additional juice is its agreement with Israeli cellular carrier Partner Communications, which is conducting a trial of ITES' technology. Partner is a unit of Orange (ORNGY:Nasdaq ADR - news) in the U.K., a company which itself is being bought by Germany's Mannesmann. Mannesmann, in turn, is the subject of a hostile takeover attempt by Britain's Vodafone Airtouch (VOD:NYSE ADR - news). The upshot of this Monopoly-like trading is that the eventually renamed Net2Wireless, with its Israeli tech team and Nasdaq listing, could have connections with very powerful players in the cellular industry. That is, if the complicated deal is completed.

What's disturbing here is the very existence of a reverse merger. Former Sensar CEO Andrew Bebbington -- who is temporarily consulting for the company -- says the technique is ideal for his Israeli partners because there's no time for fooling around with the hassle of IPO roadshows and their attendant distractions. But companies that look for ways to go public without listing the normal way often either are naive or have something to hide. Creating a public company on the sly is certainly no way to build trust with a shareholder base.

More, Bebbington and Landa will be long gone when the deal closes and Net2Wireless moves to New York. "What people are buying is the Israeli group, not us," says Bebbington. Right. Then other than a listing on the Nasdaq -- thousands of others have done it -- what does the Israeli group get? Investors plugging into this red-hot -- and risky -- situation better hope everyone involved knows the answers.

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