Micro-Cap Review Winter 2010

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Micro-Cap Review Magazine

Transcript of Micro-Cap Review Winter 2010

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In past issues of Micro-Cap Review, I

often wrote about the macro financial

environment and the US stock market

in the Editorial column. In this issue I have

decided to skip the macro dissertation to

focus on the state of micro-cap companies

in the United States and elsewhere around

the world. For the last several years, micro-

cap companies in the United States have

struggled to raise capital. Those that were

lucky enough to find capital often did so on

poor terms. The economic storms in recent

years have all but poisoned the pool of capi-

tal available for smaller companies.

While capital has become more scarce here,

funding sources have become more global,

requiring US investment bankers to reach

far beyond US borders. Finding companies

overseas that need financing used to be like

shooting ducks in a barrel. After all, hunt-

ing for bear was usually pretty good when

US companies carried a loaded checkbook.

The footprint of US investment bankers

stretched from China and other Asian coun-

tries to Africa, Israel, and South America.

Competition for underwriting companies

included investment bankers from London,

Frankfurt, Tokyo, Toronto, Paris, Sydney, and

Dubai, just to name a few places.

The competition created several nuances.

One such nuance was driven by the lack of US

GAAP preparedness in these countries of ori-

Editor’s Letter

e d I t o r I a l

This Publication is not to be construed, under any circumstances, by implication or otherwise, as an offer to sell or a solicitation to buy or trade in any commodities or securities herein named. Micro-Cap Review Magazine and its employees are not, nor do they claim to be registered investment advisors or broker/dealers. This magazine contains forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934 relating to companies’ future operating results that are subject to certain risks that could cause results to differ materially from those projected. Readers are cautioned not to place undue reli-ance on these forward-looking statements. This publication undertakes no obligation to update these forward-looking statements. Micro-Cap Review Magazine, its owners, employees, their families and associates may have investments in companies featured within this publication and may elect to sell these investments or purchase additional investments in these companies at any time. However, the policy of our editorial staff is to avoid any pre-publication trading of featured stocks or sales until the release date of the magazine. In order to be in full compliance with the Securities Act of 1933, Section 17(b), where the publisher has received payment for advertisement/advertorial of a security, the amount and type of consideration will be fully disclosed. All information about the Company contained within an advertisement/advertorial has been furnished by the respective Company and the publisher has not made any independent verifi cations of such information and makes no implied or express warranties on the information provided. Readers should perform their own due diligence before investing in any securities mentioned. Investing in securities is speculative and carries a high degree of risk. All MicroCap Review Disclaimers apply http://www.microcapreview.com/disclaimer.php before investing view www.sec.gov/investors

gin. Chinese companies looking to go public in

the United States required catch-up account-

ing and SOX readiness, which inevitably cre-

ated a cottage industry both in China and the

United States. In this global issue of Micro-cap

Review, several articles describe the outcomes

of the hard work of global investment bankers

and their cadre of support people. How else

could over 500 Chinese companies be publicly

listed here in the United States?

The United States is the worldwide leader

in foreign company listings – a far cry from

the old days of simple ADRs that traded

on the Pink Sheets. More and more foreign

companies are viewing a public underwrit-

ing in the United States. American investors

have gobbled up billions of shares of Chinese

micro-cap companies, as well as shares of

other foreign micro-caps. The US financial

market has provided incredible liquidity for

early investors, public companies, and invest-

ment bankers. As long as global markets have

a demand for foreign public companies, and

liquidity in the US market remains strong,

there is no apparent reason for this trend to

end. Developing countries have a voracious

appetite for capital to fuel industries and

economies. Companies in these countries

have turned to global financial markets. They

look to the United States as the undisputed

king of capital, at least for now.

Wesley Ramjeet

www.microcapreview.com

Micro-cap ReviewP.O.Box4216Metuchen,NJ08840-1848T732-603-1250F212-202-6020

SNN Incorporated23705VanowenSt#333WestHills,CA91307

[email protected]

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WRITERSJohnFaesselMatthewHaydenChetHebertBeauJohnsonJordanKimmelSheldon“Shelly”KraftJackLeslieLarryMayM.C.ElvisOxleyRonReuvenMarshallStermanHolmesStonerRaySuprenardBenTran

[email protected]

[email protected]

BUSINESS DEVELOPMENT

[email protected]

[email protected]

GRAPHIC [email protected]

[email protected]

Micro-Cap Review Magazine is published Quarterly, Spring, Summer, Fall, Winter POSTMASTER send address Changes to Micro-Cap Review Corporate Offi ces. © Copyright 2007 by Micro-Cap Review Inc. All Rights Reserved. Reproduction without permis-sion of the Publisher is prohibited. The publishers and editors are Not responsible for unsolicited mate-rials.Every effort has been made to assure that all In-formation presented in this issue is accurate And nei-ther Micro-Cap Review Magazine or any of its staff or authors is responsible for omissions or information that is inaccurate or misrepresented to the magazine.

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www.microcapreview.com Micro-Cap Review Magazine 5

C O N T E N T S

WWW.MICROCAPREVIEW.COM

Q UA RT E R 1 2 0 1 0

Finance & Investments

6 A New Year’s Recommendation for the VC Community byMarshallSterman12 The Globalization of Consumerism byJordanKimmel15 China’s Micro-caps byHolmesStoner18 Ask Mr. Wallstreet-The New IPOs bySheldon“Shelly”Kraft20 Investing in China Micro-cap Stocks byMatthewHayden23 Funding Chinese Company Growth byBeauJohnson36 Junior Mining and Exploration Investment Strategies byRaySuprenard39 On the Market byDr.JohnFaessel46 The Other Side of the Story byRonReuven51 Ombudsman byJackLeslie53 Investing in Vietnam byBenTran

Legal, Tax & Accounting

50 Compliance Corner byChetHebert

Book Reviews

32 Start-up Nation Exceeds on the Test byDr.LarryMay

Human Resources

35 Managing Talent in a Downturn Economy-ATG byM.C.ElvisOxley

Profiled Companies

8 Bond Laboratories27 T3 Motion31 VCorp Services43 Healthy Coffee International47 Rogers Oil & Gas

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Not to worry. The mavens in Silicon Valley

and their counterparts on Route 128 (actu-

ally I-95) are simply advising their jockeys

to batten down the hatches and to stay out

in the cold. As long as VCs stop giving jock-

eys advice, it’s probably a good trade-off.

After all, VCs never thought positive cash

flow was something they had to worry

about. The formula was fairly simple. They

first made sure that there was a young and

passionate “team” that could articulate a

business plan to give a picture of the future

that looked like a hockey stick with a Viagra

overdose. Then they had the team create a

great Web site and extolled the virtues of

the venture while roping in their buddies

for B, C, and D rounds. Obviously their

buddies would return the favor. As long

as “one hand washed the other,” the daisy

chain kept everyone’s reputation and bonus

in tact. Unfortunately VCs do not walk on water,

which of course is what they would have

people believe. The 2 to 3 percent annual tar-

iff, plus the 20 percent slice of profits without

claw backs, was proof of that. But without a

Thundering Herd, legions of fawning ana-

lysts, mindless, non-discriminating mutual

funds sporting a record of sub-standard

returns (and I mean losses), the jury-rigged

money machine of the past is caput. The

point is that things have changed, and the VC

community needs a face-lift, a tummy tuck,

and some blood letting.

General Doriot must be rolling over in his grave as he listens to venture capi-

talists (VC) cry over the lack of IPOs. After all, if Bernie can take down his

billions with a meager 10 to 12 percent, why can’t the VC’s promise of ten baggers

with capital gains treatment reel in the multitudes? A closed door at the exit sign is

cutting off the flow of fresh capital to redo the Aspen condo.

A New Year’s Recommendation for the VC Community

Marshall s. sterMan

F I n a n C e

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The first step in the make-over is to remind

VCs of why they went into the business

in the first place. Let’s hope (and assume)

that it was because they believed that they

could manage money of investors who were

capable and willing to assume more risk in

a quest for mega returns. Investors didn’t

want to gamble in Vegas, but they didn’t

mind a day at the races; the VC wasn’t roll-

ing the dice but was “handicapping.” Venture

capitalists examined many factors, sat out a

number of races, and considered the odds,

having the benefit of knowing the jockey,

the competition, the breeding line, past per-

formance, track conditions, and a host of

other data that equated to charting, price-

to-earnings ratios, industry differentiators,

historic and current financials, etc. They also

accepted the fact that “in the beginning, God

created the business plan.” If only they could

embrace and support the plan, its precepts,

and beliefs, they could create value (per-

ceived or otherwise) that would produce an

“exit” worthy of the risk when measuring the

overall return of the portfolio. The VC’s role is to vet the many and anoint

the few. It’s a beauty pageant in which the

bodice is secondary to the brain. Gentlemen

prefer greens to blondes. Anything that reeks

of bio/pharma/nano or is related to sun/

wind/soil, or has at least six scientific board

members with ties to Harvard, makes the

cut. Until recently all that the VC had to do

was to point out the enormous international

markets, margins someone could drive a

truck through, and the protection of intel-

lectual property or “magic-sauce.” It helped

to have Wilson, Sonsini, and the oversight of

Coopers (oops, I meant Deloitte). Next was

to have the VC say, “Abracadabra,” toss back

a few coladas, then turn the team over to

Goldman Sachs, and wait for friends to call

to get on the friends-and-families list. That was yesterday, pre-unmasking

of Greenspan, Paulson, Rubin, Kravis,

Blackstone, ad infinitum, not to mention

a major portion of what was Wall Street.

Forget McArthur–there will be no return,

at least until the deepest scars in anyone’s

memory can be erased. If VCs want to stay

in the game, they really have to go to work.

Those with dreams of sitting in the front

room of San Pietro need to do more than

just field a good team. They also need to play

both ways and be able to execute options

that they would farm out in the past, but will

be personally responsible for going forward. Not unlike Goldman or Morgan, the VCs

that want to survive and fulfill their destiny

must morph into the closest equivalent of a

bank. They won’t have access to the “win-

dow” or be able to insure their depositors,

but can structure for a different environ-

ment and truly play on both sides of the

line of scrimmage. They need to adopt the

model of the merchant banker. They need

to keep in mind that they are dealing with

money that belongs to someone else–their

families, friends, and the king. Venture capi-

talist also need to be sure that they are not

on the opposite side of their borrower/cli-

ent. For example, they should not engage in

last-minute changing of terms by sending in

attorneys who then rape and pillage under

the guise of protecting the client. I am not

sure when the rules of engagement changed.

The environment used to be kinder, gentler

–and just as profitable–until people started

to pay more than 50 cents for a cup of coffee. I’m not suggesting the newly minted mer-

chant bankers (aka VC) change their selec-

tions/choices/beauty contest winners, but

they need to be able to orchestrate multiple

exit opportunities without the help of a sys-

tem that we know now has been broken. Their

tools are already in place. They just need to

use them so that their investors do not have to

count on the market to offer liquidity/return

until public or private take-outs are engi-

neered. Positive cash flow is always acceptable

if everyone can come to the trough. If that’s

not possible, then the public markets become

an option only if the VC can structure, price,

and “market” appropriately. It’s a subject for

another day but if VCs can put themselves in

the buyer’s chair, there are enough bells and

whistles that they can use to satisfy their latent

desire for an IPO that sizzles. It’s not an “exit”

but sets up the first trickle. Here’s to a New Year which aligns the

interests of the entrepreneur, investor, and

the mid-wife in a changed environment that

rewards the blue collar rather than the sable

cape.

About the Author

Marshall S. Sterman has had a distinguished career

in corporate finance with 50 years of experience in

the industry. He held positions at Sterman & Gowell

(investment banking and securities brokerage),

Croesus Capital (work out consulting for institu-

tional investors), M. S. Sterman & Associates (mer-

chant banking), Pilgrim Financial Services (invest-

ment in distressed securities), and The BankHouse

(merchant bank). Since 1986 Mr. Sterman has

worked at the Mayflower Group, a Boston-based

merchant bank to originate, mentor, and finance

both start-up and early stage ventures. His entrepre-

neurial activity includes helping to fund and manage

numerous operations, including the Standish Care

Company, the first assisted living company to go

public; KTI, a municipal waste company (merged

with Casella Waste); Rebound Programs, a provider

of juvenile corrections facilities; and hotel and real

estate development ventures. He currently serves

on the board of directors of numerous companies

and is actively involved in many business organi-

zations. Mr. Sterman received a BA degree from

Brandeis University in 1953 and an MBA degree

from Harvard University in 1955. After graduating

from Harvard, he served in the US Navy as a lieuten-

ant from 1955-1958. n

It’s a beauty pageant in which the bodice is secondary to the brain. Gentlemen prefer greens to blondes. Anything that reeks of bio/pharma/nano or is related to sun/wind/soil, or has at least six scientific board members with ties to Harvard, makes the cut.

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Every so many years the beverage industry introduces a major

new category. When this happens, a multi-billion dollar

drink segment emerges. Seemingly overnight obscure manu-

facturers become giant household names that join the ranks of Coca-

Cola and Pepsi. In the early 1980s wine coolers moved from beach

parties to grocery shelves. In the late 1990s the energy drinks made

big waves with mega-brands like Red Bull, Monster, and RockStar.

Over the last decade, energy drinks have lit up the packaged beverage

industry, churning out double-digit sales growth and strong profit

margins. Moving into 2010 and the next decade, the new category

looks to be hangover prevention and the next power-brand appears

to be Resurrection™ AntiHangover from Bond Laboratories, Inc.

Bond Laboratories, Inc. (OTCBB: BNLB) is the first company

to introduce a hangover prevention drink. Through its subsidiary,

Fusion Premium Beverages, the company launched Resurrection™

AntiHangover in September 2009. An 8.4 ounce drink, the product

is designed to be a “pretox” drink enjoyed either before consuming

alcohol, or as a mixer with the first drink of the night. The lightly

carbonated, mild fruit flavor mixes very nicely with alcoholic drinks,

including vodka, rum, tequila, and gin. The company promises no

hangover for the following 24 hours, the average amount of time it

takes the body to process alcohol. The company backs up that prom-

ise with a money back guarantee, no questions asked.

Is there enough consumer interest in hangover prevention? A

recent study reported that hangovers affect 74 million people in the

United States and cost U.S. workplaces $148 billion in lost productiv-

ity. Bond’s pitch is that everyone who has a drink should begin with a

can of Resurrection™ either before they begin drinking or as a mixer

with their first drink of the night. Why risk a hangover?

With the introduction of Resurrection™, an all natural hangover

prevention drink, Bond Laboratories believes it can dominate this

market and expand rapidly across the United States.

Bond Laboratories is a premier marketer of healthy food and

beverage products for health conscious consumers. The company

produces and markets its products through two operating divisions

– Fusion Premium Beverages and NDS Nutritional Products. Fusion

distributes a line of fortified beverages to support and promote an

active lifestyle. NDS manufactures and distributes a full line of

nutritional supplements to support healthy living through a variety

of retail channels, including GNC stores across the country. Bond

Laboratories has assembled a seasoned team of highly successful

sales and marketing executives with experience at many well known

beverage brands, including Coca Cola, Monster, RockStar and Dr.

Pepper/Snapple. Bond Laboratories is headed by CEO John Wilson,

who spent over 17 years at Coca-Cola and Coca-Cola Enterprises.

What is the value of being first to market with an innovative new

product in the beverage industry? According to CEO John Wilson,

“a new product can capture 55 to 65 percent of total market share

simply by leading the way as a pioneer in a category.”

Whenever new markets emerge, the big winners are invariably

those who are first to launch products with strong distribution and

marketing. Consider the energy drink market; Red Bull was intro-

duced into the United States in 1997.

Today it remains the leader with nearly

50 percent share of a market estimat-

ed at $7 billion. Monster, launched in

1999, is on track to generate over $1.2

billion in 2009. Even RockStar, which

arrived a few years after Monster, has

captured nearly 15 percent of the US

market. That’s not shabby for brands

that did not exist a decade ago.

the birth of the

resurrection™ the

AntihAngover Drink

Bond Laboratories believes that it is in

a similar position today where Red Bull

was back in 1997 when the company

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PROFILED COMPANIES

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brought the first energy drink to the U.S market. Bond Laboratories

has identified an untapped market segment, has formulated a prod-

uct to meet demand, and has assembled a management team with

deep industry relationships to create a strong distribution system.

enter the Perfect storm of 2008

After working on a hangover relief product for over a year, the

development team at Fusion Premium Beverages reversed its focus

from post-hangover relief to pre-hangover prevention. Ethanol (the

primary ingredient in alcoholic beverages) has a dehydrating effect

by increasing perspiration and urine production. The effects of dehy-

dration include headaches, dry mouth, and lethargy. Dehydration

also causes fluids in the brain to be less plentiful. In simple terms,

a hangover is the result of dehydration, brought on by the liver’s

attempt to overpower alcohol toxins. The bottom line is that once

the liver starts to attack the alcohol toxins, dehydration is inevitable

as is a hangover.

stAge one

In 2008, the founder of Bond Laboratories was introduced to a group

that had adapted Chinese herbs to essentially alter the way the liver

attacks ethanol. The result of using these herbs was the drastic reduc-

tion of dehydration and hangover symptoms. For several years this

group had been selling the herbal product as a pill in Canada, but

could not make the leap from capsule to pre-mixed drink, where the

real market opportunity lay. By the end of 2008, Bond Laboratories

acquired the rights to the product and successfully tweaked the for-

mula to produce a ready-to-drink version in an 8.4 ounce can, giving

birth to the Resurrection™ anti-hangover drink.

stAge two

In October of 2008, Monster Energy Drink announced it was moving

from the Anheuser Busch (A/B) distribution network to the Coca-

Cola network, eliminating one of the most profitable products on the

A/B delivery trucks. (In 2004, Monster Energy Drink entered into a

distribution agreement with Anheuser Busch, taking sales from $400

million to $1 billion by 2008. Profit margins were very strong at

$8 plus per case.)Monster viewed the Coca-Cola system as a better

fit for expansion outside of the country. Within 90 days, another

leader in the energy drink category, RockStar, entered into an exclu-

sive distribution agreement with Pepsi, essentially eliminating two of

the three top selling energy drinks from the beer distribution system.

stAge three

Then in November 2008, just as Resurrection™ was emerging from

the lab, Coca-Cola Enterprises (CCE) announced their latest round

of layoffs. In the stroke of a pen, Coca-Cola Enterprises sent a num-

ber of veterans packing. Many of these managers had 15 to 20 years

experience, including those with strategic relationships with some

the largest retailers in the country. The result was a market flooded

with highly-experienced beverage industry talent. The lay-offs gave

Bond Laboratories an opportunity to pick up former senior execu-

tives from leading beverage companies, including Coca-Cola, Pepsi,

Dr. Pepper, Snapple, Monster, and Rock Star.

By the beginning of 2009, Bond Laboratories had a potential

blockbuster product in Resurrection™. The market had major

beer distributors anxious to fill a major profit hole on their trucks;

and there was incredible management talent from the beverage

industry looking for work. It was The Perfect Storm!

Bond Laboratories believes the hangover prevention beverage

category is going to be enormous. The company looks to be correct.

Unlike energy drinks where the majority of consumers consist of

males between the ages of 16 and 26, the hangover prevention prod-

uct is gender neutral and appeals to a far broader age range. In fact,

the potential market is defined pretty much by the number of people

who drink. And the number of people who drink is huge.

The bottom line is that the alcoholic beverage business opens the

door to a potentially massive market opportunity for Resurrection™.

At a suggested retail price of $2.49 per can, Bond has the opportunity to

be the leader in a retail market estimated to be worth $17.8 billion in the

United States, almost four times larger than the energy drink market.

While the demand of energy drinks seems to be receding, trends

for the next several years appear to be focused on functional bever-

ages that do more than just quench your thirst. “The intrigue is in

the fringe part of the beverage businesses, which seems to be grow-

ing, even during the recession,” noted Gerry Khermouch, editor of

Beverage Business Insights.

New, niche drinks that meet specific demands of diverse customers

and carry healthy margins will get the attention of both distributors

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PROFILED COMPANIES

www.microcapreview.com Micro-Cap Review Magazine 11

and retailers. Margin trends in the beverage industry have declined

for years. For example, profit on a case of beer sold by a distributor

to a retailer is down to about $2 per case. Water was very profitable

for years, but the margins on it have also dropped to $2 per case or

less. Looking forward, one of the most profitable products on beer

trucks will be functional beverages, like Resurrection™ with margins

that exceed $9/case.

Distributors and the retailers are further attracted to Resurrection™

because it is brand neutral and incremental. This means the product

appeals to any and all consumers of alcohol regardless of brand/type

of alcohol purchased. Resurrection™ can be added on to beer multi-

packs, wine, and liquor sales.

how big is the tArget mArket?

According to a study by the National Institute on Alcohol Abuse

and Alcoholism (NIAAA), 138 million US adults have at least one

drink per week. With that said, let’s consider the math: 138 mil-

lion consumers x 52, (1 drink per week) = 7,176,000,000 purchase

opportunities per year.

consumer reAction?

The company conducted six months of research with consumers of

all ages. (“Let me understand this…you have a great tasting drink

that can mix with almost any alcohol and if I make this my first drink

of the night, you promise I won’t get a hangover for 24 hours? Do I

still get the same buzz? ...Yes?”). The company had no problem find-

ing volunteers to test the product.

results to DAte?

Resurrection™ gained access to over 20,000 accounts within 90 days

after launch.

why bonD lAborAtories?

Bond Laboratories has a bright future. While the biggest story is

Resurrection™, investors should also be aware that the company is

much more than a single product company. Bond Laboratories man-

ufactures and markets a line of nutritional products through its NDS

Nutritional Products division. For the quarter ending September

30, 2009, Bond Laboratories reported revenue of $2.2 million, up

from $501,000 in the same period a year before. These results were

obtained before the launch of Resurrection™.

In some ways Bond Laboratories is looking a bit like Hansen

Natural Corporation (parent company of Monster Energy Drink)

over a decade ago. At the initial launch of Monster, the split-adjusted

price was $0.50 per share. The stock now trades at nearly $40 per

share after hitting a high of around $70 per share in 2007. While not

suggesting that the growth of Hansen is in any way indicative of the

potential for Bond Laboratories, there are a few observations worth

noting. Hansen was an early entrant into the energy drink market.

Bond Laboratories believes that it is currently in the same position

for hangover prevention drinks. Currently, Bond Laboratories is

trading at approximately 2 1/2 times its pre-launch price. Where

Bond goes from here is unknown. But one thing is certain. Bond

Laboratories is a company worth watching in 2010.

For more information, readers should visit http://bond-labs.com

or contact Warren Rothouse or Bruce Weinstein Surety Financial

Group, LLC at (410) 833-0078. Rumor has it that if readers ask, the

company will send them a free sample of Resurrection to try. n

Disclaimer: This corporate profile is based upon information provided by the issuer

or company representative. The information is not intended to be, and shall not con-

stitute, an offer to sell or solicitation of any offer to buy any securities. It is intended

for information purposes only, and to increase awareness of the company profiled.

Safe Harbor Statement: The statements in this advertorial or profile relating to

future products, partnerships, technology, and positive direction are forward looking

statements within the meaning of the Private Securities Litigation Reform Act of

1995. Some or all of the aspects anticipated by these forward looking statements may

not, in fact, occur. Factors that could cause or contribute to such differences include

but are not limited to contractual difficulties, demand for the Issuer’s common stock,

and the company’s ability to obtain future financing. Micro-cap Review Magazine

may have received payment to publish and print this advertorial or corporate profile.

Micro-cap Review Magazine disclaimers apply and may be reviewed at www.micro-

capreview.com/disclaimer.php. Before investing in any security, you are strongly

advised to review all public filings of the issuer of such security, which can be found

at www.sec.gov, as well as warnings published by the SEC at www.sec.gov/investors

and to consult with your professionals.

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As global trade continues to expand and

multinational corporations spread around

the globe, we will continue to see an ever-

expanding need for an improved infrastruc-

ture. The projects that will help to build

out the infrastructure, as well as the work

that will be needed to maintain it, require a

tremendous amount of financing and man-

power. The globalization of consumerism is

creating the demand and is the force behind

the next big growth cycle.

As we wonder where new jobs will come

from, just consider what it takes to build a

single bridge-the architects, engineers, and

the laborers. Here in America, many of our

existing bridges and roads are behind sched-

ule in terms of maintenance and repairs. In

fact, our population has grown dramatically

over the years and our entire infrastructure

can use updating. All these jobs by definition

are domestic- you cannot outsource these

jobs overseas. Compare our infrastructure

to China. The U.S. highway system has more

than 27,000 miles of highway that was built

over several decades. Just within the last

several years, China has built almost 25,000

miles of highway and has announced that it

is planning on expanding its highway system

to more than 50,000 miles by 2020, while

adding 97 airports and also almost dou-

bling its shipping container traffic. China

is employing their workforce to help bring

up their standard of living while also creat-

ing a population that can consume. Hello,

Washington!

When we think of the transportation

infrastructure, Americans tend to think

domestically, as usual. While our last genera-

the globalization of consumerism

F I n a n C e

Demand creates new “magnets”

The world is getting smaller. We hear this all the

time. The reality is not that the world getting

smaller- travelling around the world is getting easier.

by Jordan KIMMel

Page 13: Micro-Cap Review Winter 2010

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Page 14: Micro-Cap Review Winter 2010

14 Micro-Cap Review Magazine www.microcapreview.com

tion was amazed by the construction of the

Golden Gate Bridge in San Francisco and

the Verrazano-Narrows Bridge in New York

City, we just saw the completion of the mul-

tibillion-dollar Chunnel connecting separate

countries in Europe. While some people will

continue to dwell on the last recession, we

should realize that the globalization of con-

sumerism will lead to further projects with a

scope we can’t even imagine.

The global infrastructure build-out is tak-

ing place on every continent, but there is

a reason everybody thinks about China as

much as they do. While the tremendous

infrastructure stimulus package initiated

domestically was enough to awe any central

banker, it is dwarfed by the spending tak-

ing place in China. There are no less than

a dozen massive new bridges being built

throughout China, with dozens more on

the drawing board. We think Texans think

big? The construction of the Three Gorges

Dam in China required more than 350,000

tons of steel, and it will have the capacity to

produce the power equivalent of 15 nuclear

power plants.

We also need to think about the new ener-

gy grids and massive communication proj-

ects required to keep up with ever-increasing

global trade. And while I urge investors to

think globally, we cannot even stop there. I

recently read about “pods” or channels being

thought out that will greatly enhance space

travel. Japan has announced and already

started construction of a new power plant

that will orbit in space and beam energy

back to Earth. I am not talking about science

fiction here; I am talking about a $20 billion

project already initiated that is putting engi-

neers, manufacturers and suppliers to work

today. Our domestic space program is just

kicking back into gear and our exploration

of our deep oceans is just beginning.

Currently, 30% of our work force is

employed in industries that did not even

exist 30 years ago. This amazing fact may

be repeated again over the next 30 years.

Who knows what to expect in the field

of transportation that will lead to even

more of a global community. Some cur-

rent ideas range from flying cars, jet-pack

lanes, underwater subways, hover boards

and teleportation. In fact, believe it or not

in 2009 scientists announced the first actual

teleportation event- beam me up, Scotty! We

can only imagine the new job opportunities

and the amount of new investments required

to pull off future scientific ventures. Capital-

intensive projects and industries are never

funded with cash. We will ultimately see

multibillion-dollar financing put together in

the capital markets generating multimillion-

dollar fees to the financial firms putting

together the deals. Don’t for a minute think

Wall Street is dead- it is just spreading out

around the world.

We do not need to think of all these

magnificent large-scale technology advance-

ments to be excited about the opportunities

to invest in the infrastructure sector of today.

With the advent of the Internet, consum-

ers and businesses from around the world

are changing the landscape of purchasing,

distribution, and international shipping. I

believe the next growth cycle will lead to an

even higher level of global trade and infra-

structure needs.

In my new book, The Magnet Method of

Investing (Wiley, 2009), I showed the list of

companies that ranked out the highest on

my model as we went to print. Using my

Magnet® Stock Selection Process, I use a

“bottoms up” approach to identify the indi-

vidual companies within each sector that

have the best combination of value, growth

and momentum. The list was not intended

as a buy list- just a list of the top ranked

companies according to the Magnet model.

It was interesting to see how many of the top

ranked companies are based overseas.

I have no doubt there will be great oppor-

tunities presented in the various sectors that

benefit from the ever-expanding infrastruc-

ture being built around the world. Some of

the new market leaders will come from all

corners of the world. As always, many of

the leaders of the next bull markets are now

small companies that many investors have

not heard about yet. That is why investing

is so interesting- and potentially rewarding.

About the Author

Jordan Kimmel is the Market Strategist at National

Securities Corp., and as a Financial Planner he man-

ages customer accounts at their affiliate National

Asset Management. He is the author of the recently

released book, The Magnet Method of Investing, and

can he be found and contacted through his website

www.magnetinvesting.com. n

currently, 30% of our work force is employed

in industries that did not even exist 30 years

ago. this amazing fact may be repeated again

over the next 30 years.

Page 15: Micro-Cap Review Winter 2010

why look At micro-cAPs?

Investors buy micro-cap stocks mainly to

profit from inefficiencies in the stock mar-

ket. In fact, information inefficiency is high-

er among small-cap stocks than blue chip

stocks. Investors who can exploit such inef-

ficiency can profit greatly. From my experi-

ence, few research analysts write reports

on small-cap companies. Thus, much infor-

mation remains undiscovered, and will

therefore take longer for it to be reflected in

the share price. Investing in small-cap stocks

in China is especially exciting, because the

universe of micro-cap stocks is huge and is

getting bigger.

Based on history, we can understand why

small-cap companies are driving China’s

economy. China started converting from

a planned economy into a market economy

only recently. In 1982 the then party leader,

Deng Xiaoping, introduced the Open Door

Policy. The reforms initiated under this poli-

cy helped launch China into a new era.

As a result of the market reforms, small,

private enterprises have played a bigger role

in China’s economy since the 1980s. The

small-caps in China are not only more in

number, but also better in quality, because

they represent the new economy. Further,

they are mostly run by entrepreneurs rather

than civil servants.

how to invest in

smAll-cAPs?

There are thousands of small-cap stocks in

China, so how do we exploit the information

inefficiency faster than others? And where

should we start looking for such inefficiency?

An example of themes is outsourcing.

During the 1990s when many global indus-

F I n a n C e

China’s Micro-Caps

A Huge Investment Opportunity

by holMes stoner

www.microcapreview.com Micro-Cap Review Magazine 15

Page 16: Micro-Cap Review Winter 2010

tries outsourced production of goods to

China, companies involved in this trend ben-

efited greatly. Instead of visiting companies

across all sectors and industries, or screen-

ing companies with all kinds of numeric

parameters, we use themes to point us to the

relevant segments of the economy.

Devils are always in the details. Identifying

the themes sounds very simple, and most

people who read the newspaper can tell what

themes exist in the world. The details of each

theme, however, are difficult to analyze and

capture. Let’s go back to the earlier example

of the outsourcing theme. The outsourcing

trend started off with textiles and apparels,

and then moved to household electric goods,

such as refrigerators and washing machines.

Outsourcing later moved to computers and

laptops, then mobile phones, then contain-

ers, then ships, then machines, then car

parts, then automobiles, then medical equip-

ments….then what next? Investors can make

money in manufacturing companies only

at the beginning of the outsourcing trend

for specific products. Late investors will see

competition intensified and profit margins

squeezed.

whAt Are the current

themes?

Education

Within China’s emerging middle class, we

see the demand for education services grow-

ing rapidly. Chinese parents are willing to

spend a high percentage of their income to

educate their only child. They are also will-

ing to spend a lot of money to upgrade their

own professional skills to face the increas-

ingly demanding and fast changing job mar-

ket in China. Most of the listed companies in

education are small and serve customers in a

few niche markets.

Environment protection

The biggest gain that China got from

hosting the Olympics in 2008 was rais-

ing the environmental consciousness among

Chinese people. A strong public awareness

of environmental issues will help the gov-

ernment enforce policies more effectively.

Other areas of particular interest and great

upside growth potential are:

• Information Technology

• Discretionary Consumer Products

• Industrials

• Materials

• Health Care

• Utilities

• Telecommunication Services

• Real Estate

• Consumer Staples

• Energy

whAt is the risk of

smAll-cAP investing?

Investors believe company-specific risk to be

the greatest risk when investing in small-cap

stocks. This explains why small-cap stocks

usually under-perform when a financial cri-

sis occurs. Because of corporate governance

issues, investing in both large-cap and small-

cap stocks in China is risky. The only real

difference is that when there are failures,

large-caps will likely not end up bankrupt

or get delisted. Most of the China large-cap

companies have the state as a major share-

holder. In the worst case, the government

will bail out the company .

is it the right time to

invest in smAll-cAPs now?

The essence of small-cap investing is in the

stock picking. Average index performance

is meaningless, because the index covers

too many stocks. Investors should always

keep a certain percentage of their assets in

small-caps, especially in China small-caps.

Doing so is a good investment decision if

only for the sole reason mentioned above

- the private sector is growing rapidly and

is taking a bigger part of China’s economy.

Furthermore, I can see a secular trend which

will benefit China as a whole, and in par-

ticular for small-caps. China’s development

over the last decade was made possible by

huge inflows of foreign capital, both direct

investments in industries and capital market

investments.

In the next decade, I foresee China’s

growth to be driven primarily by an influx

of human capital. Immigration is China’s

emerging mega-theme and will serve as the

reason for the country’s future develop-

ment. An important source of immigrants

will be overseas Chinese. Overseas return-

ees are highly educated and professionally

trained. Many have post-graduate degrees

from prestigious US universities. Returnees

will see better career prospects in China.

More importantly, going forward China will

attract not only ethnic Chinese, but also for-

eigners of all nationalities.

The influx of foreign human capital will

mark the next stage of China’s development.

The progress will be measured not only in

quantity, such as GDP growth or kilome-

ters of highways and railways, but also by

degree of sophistication. Small-cap, private

enterprises are among the first to attract

high-quality human capital because of their

more flexible compensation schemes. With

a simple corporate structure, smaller com-

panies give younger employees a chance to

make an immediate impact and move up in

the company.

About the Author

Holmes H. Stoner Jr.

Chairman

American International Chamber of Commerce

Pacific Rim Business Council/AIBC

American International Business Council (AIBC)

Pacific Rim Business Council (PRBC)

No 977 Kangding Road

Shanghai 200042

Tel: +86 21 2211 6184 (General);

+86 21 5158 6105 (Direct)

Fax: +86 21 2211 6197

Mobile: +86 15000851121

Website: www.pacrimdirectory.com

www.americaninternationalbusinesscouncil.com n

16 Micro-Cap Review Magazine www.microcapreview.com

Page 17: Micro-Cap Review Winter 2010

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Page 18: Micro-Cap Review Winter 2010

18 Micro-Cap Review Magazine www.microcapreview.com

The stock market in recent years can be

compared to the California wildfires. In the

last few years, fires in California have rav-

aged hundreds of thousands of acres of for-

ests and land, not to mentioned thousands

of homes and properties. The destruction

left behind smoking timbers and leveled

ground. Similarly the stock market has been

a financial hell to investors during the last

decade. Since 2000 the dotcom bust and

the ensuing financial debacles have turned

hundreds of companies into mere shells and

have left many investors broke. Only the

shells remained from those defunct com-

panies. Many such companies did not have

any comeback hopes, last minute manage-

ment saves, or white knights. As with the

California fires that burned away years of

un-cleared brush and trees, the stock market

crash incinerated the market and caused a

meltdown of micro-cap stocks.

Over time the ground will grow again and

new tundra will emerge. Incredibly the same

has started to happen for the leftover public

shells. Following the dotcom bust, these

shells blanketed the landscape like a scene

from the war in Iraq where blown up tanks

were strewn all over the desert following

Desert Storm.

Each of these blown up tanks can be

thought of as an empty public company

shell. In the case of a blown out public shell,

the company may have run out of money,

may have fallen to zero value due to compli-

ance issues, or may have had lousy manage-

ment. Many of the companies went bank-

rupt. They ceased filing documents with

the Securities and Exchange Commission or

stopped reporting financials altogether.

In a market where stocks were trading

with volume and moving higher, these pub-

lic company shell carcasses could lay there

abandoned. So long as there was a healthy

IPO market, private companies could start

fresh by going public through an underwrit-

ing, instead of dealing with the baggage or

cleanup costs by using a public company

shell. Thus, many of the public shells laid

there lifeless. As they laid there, sharehold-

ers of the public company shells disap-

peared. Worked, however, continued on the

shells, and clean-up costs started to accrue.

Keeping track of transfer agents, stock cer-

tificates, and other records became more

difficult. Many of these abandoned shells

fell to the lawyers and accountants. After all,

many of them had done work for companies

and were yet to be paid in full. Can’t say I

blame them for grabbing the shell. At least

it had some value to them. Little did people

realize just how much value the shells would

turn into.

Raising capital is a science not an art.

Once the entity has been created, the compa-

ny only needs to answer a few questions. Can

the shares be sold at the expected valuation

to investors? And do investors have an exit

strategy? Exit strategy means being able to

sell stock in the public market at a later date.

Of course, the timing and cost are the key to

decide which method is used for the equity

raise. How long will it take to get through the

Securities and Exchange Commission review

process? How much money is anticipated

for the whole process? These are questions

that need to be answered. I suspect that

large-cap stock underwritings were the last

equity deals completed, because the big boys

F I n a n C e

A S K M R . W A L L S T R E E T

The New IPOs

After writing the article, “Where Have All the IPOs Gone,” I

realized how much the stock market has changed over the

years. My experience has been in the world of micro-cap stocks,

so I will focus on the area that I know best.

by sheldon “shelly” KraFt

Page 19: Micro-Cap Review Winter 2010

www.microcapreview.com Micro-Cap Review Magazine 19

always had money. The first deals to collapse

in funding droughts are those dealing with

micro-cap companies. Smaller boutique

underwriters that once handled such deals

simply don’t exist anymore.

Back in the heydays, investment banking

fees and professional costs rose five-fold

in some cases and issuers had no guaran-

tee of ever being funded. But the market

has changed dramatically. The capital rais-

ing industry has been devastated, following

the wake of the capital shrinkage affecting

middle-market and small-cap underwriters.

The credit crunch has forced companies to

raise money by new ways and new sourc-

es. Raising capital for micro-cap emerging

growth companies remains extremely tough

today. However, credit must be given where

credit is due. The entrepreneurial spirit and

the need to raise capital at reasonable costs

have fostered the incredible and brilliant

resurrection of all those once-abandoned

public shells. These resurrected shells have

become today’s new IPO’s.

During the dotcom bust, many public

shells fell to the Pink Sheets, which was the

only place left to fall and remain a pub-

lic company. Investors belie the regret of

their investments into these risky companies.

Many investors not only lost money, they

were not allowed to take a tax deduction.

An investor could recognize a capital loss

for tax purposes, only if they could sell the

stock to lock in the loss. The IRS required

proof of the sell for the loss to stand up,

which meant producing a buy to establish

a cost basis and a sell ticket. Investors had

to prove the loss against a 1099 which was

sent by the brokerage house to the IRS. In

many cases, investors did not to sell the stock

because market makers were not around

when the market imploded. Many investors

were not able to establish a sell transaction,

and therefore did not prove the loss. Millions

upon millions of shares were deemed value-

less and as such these worthless certificates

became the proverbial wallpaper for the new

bathroom walls.

Regardless of the many issues, the public

shells were abundant, cheap to buy, and

relatively easy to clean up. Once purchased

and cleaned up, they were the perfect way to

take a private company public by means of a

reverse merger into the public shell. The two

key elements of timing and cost were desir-

able and gave “instantaneous gratification”

to all investors. I would love to write a book

entitled, Instantaneous Gratification-–wel-

come to the world of Wall Street!

The use of public shells to take a company

public started out as a well-kept secret by

SEC law firms. These firms were engaged in

the practice of filing S1, SB2, and IPO docu-

ments with the SEC. Taken together, each

component of the transaction involving the

accounting firm, law firm, investor relations

firm, and the market maker helped give birth

to the cottage industry of going public via a

reverse merger into a public company shell.

This cottage industry is now the IPO market.

It is truly difficult to shoot a hole in the

model. Once the public company shell is

identified, which can be very difficult, it is

very methodical to reverse merge the private

company into the shell. The process first

involves issuing a reverse stock split of the

shares in the old company shell. This is done

to minimize the holdings of the old share-

holders from the previous public company

and to recapitalize the company. The next

step in the process is to change the name

and stock symbol and issue new shares to

the new shareholders to capitalize the new

company (newco). In fact, having the old

shareholders around can be useful to newco

to meet certain trading requirements and

limitations.

Raising money for a private company in

today’s market environment is very difficult.

Placing the same private company into a

public shell provides greater assurance that

the company will raise money (although

there are never any assurances or guarantees

except death and losses). Once public, the

issuing company has many choices from

which to choose to raise money. Investors

may ask why is this so? It is because the

public company has a built-in exit strategy.

The shares in a public company can be sold

at some point in the future in the market. So

the end in this case justifies the means.

The new IPO is the reverse merger.

An investor’s portfolio of bust out stocks

may have some value after all. Investors

should check to see that they still have the

certificate(s) of that once promising dotcom

company that they lost thousands of dollars

on. Investors should do some homework and

find out whether the shell is now a Chinese

iron manufacturer or the largest real estate

company in Beijing or a company trading

at $40 a share. Even a few shares could be

worth some bucks. Investors may want to

start peeling the certificates off of their bath-

room walls or basement, because there may

be gold in them paper.

Most likely investors who owned stock

certificates in the defunct company were left

in the dark about the reverse merger deal.

The deal makers probably never contacted

these investors, because the old shareholders

were considered a sleeping dog and should

not be disturbed. Investors, however, should

not be lazy and try to do some work to find

out what happened to the shell of their old

company. The information about the com-

pany shell is available either through FINRA,

Depository Trust Company, NASDAQ, the

transfer agent or the Pink Sheets. A stock

broker or financial advisor will be of little

help on this. Maybe the title of this article

should have been “Finding the Lost Value

in Old Shells.” Readers will get the idea.

Hopefully, I increased their understanding

of the new IPO market in this two part series

written for Micro-Cap Review magazine. n

Over time the ground will grow again and new tundra will emerge. Incredibly the same has started to happen for the leftover public shells.

Page 20: Micro-Cap Review Winter 2010

20 Micro-Cap Review Magazine www.microcapreview.com

The country will continue to enjoy strong

growth in 2010 due to several macroeco-

nomic drivers. First, investment growth,

although expected to be lower than that

in 2009, should still be robust, given the

long-term nature of infrastructure projects

and the revival of the real estate market.

Second, domestic consumption will likely

grow at its current strong level, supported

by continued government incentives. Third,

export demand should slowly recover with

an improving world economy. Fourth,

China will likely keep its currency exchange

rate stable with the US dollar to maintain

exports. Fifth, fiscal policy will likely remain

expansionary with more focus on increas-

ing consumption and infrastructure spend-

ing. Monetary policy, however, will likely

be more restrained, as China tries to rein

in excess liquidity to prevent an asset price

bubble. Lastly, China should see a mild infla-

tion in 2010 due to excess capacity in many

industries. I believe China’s GDP growth

rate could be close to nine percent in 2010,

but the growth pattern could be an inverse

V-shape. The growth rate in the beginning of

2010 should be stronger due to the momen-

tum of the economy and the lower base for

comparison in 2009. Industries that should

benefit from government policies include

forestry, agriculture, environmental protec-

tion, medical and health, and automotive.

Goldman Sachs recently stated that China

stocks remain “a bright spot” and are set to

rise by as much as 30 percent through 2010

as the nation’s domestic demand increases,

even though concerns over tigher mon-

etary policy will spur volatility. They believe

Investing in China Micro-cap StocksInvesting in China

F I n a n C e

by MattheW hayden, PRESIDENT OF HC INTERNATIONAL, INC.

In 2009 China surprised the world with its strong economic recovery,

which was largely due to unprecedented government stimulus policies

and a strong balance sheet. The GDP growth rate rebounded from 6.1

percent in Q1 to 8.9 percent in Q3. China was expected to exceed its eight

percent growth target for 2009.

Page 21: Micro-Cap Review Winter 2010

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Page 22: Micro-Cap Review Winter 2010

22 Micro-Cap Review Magazine www.microcapreview.com

banks, insurers, Internet businesses, health-

care services, and equipment providers will

do the best. “A property market bubble can-

not be ruled out” if monetary policy remains

“too accommodative for too long,” but they

believe valuations are not stretched. In addi-

tion, Goldman predicts China stocks in 2010

to be strong in the first half of the year, to

experience a pullback at mid-year, and then

find stability and buyers in the third quar-

ter. As liquidity remains strong, it will lead

Chinese stocks to “a strong finish” in 2010.

Are they right? I don’t know, but Goldman is

the ax in many markets and is run by some

of the most intelligent people on Wall Street

who more often than not are able to create

their own destiny.

Getting back to the fundamentals that

most of us can understand, if a company

executes on its growth plan, generates more

cash flow each year, and invests wisely for the

future, its stock price should follow. It does

not mean that the move higher will be in

a straight line, but it is the most important

thing to consider. Thinking along these lines

is better than getting caught up in the noise

which surrounds us each day. Whether the

market is up or down, millions of investors

are trying to figure out what is going to hap-

pen next. Is the market rolling over? Are we

in the next bull market? Is each pullback

just normal backfilling in a move to the next

level?

I must say that the sell-off we saw in

October 2009 in Chinese stocks was so quick

and so dramatic that it caught me off guard

and was as unsettling for most investors. It

looks like deja vu all over again. Let’s face it;

these stocks have had a major run during the

past year. In looking at the 200 companies

on my quote screen, I can easily say that

the average stock is up 100 percent, with

many up two, three, or even five-fold. Can

someone really blame investors for profit

taking? What we have seen in our six years of

following micro-cap and small-cap stocks is

that when the US market sells-off, the China

stocks seem to pullback at least two to three

times of what the overall market does, mean-

ing high beta. So if the S&P goes down five

percent, most micro-cap China stocks are

down 15 percent, something we witnessed

last week. Investors should be aware that

during the past six years the market has

experienced three major sell-offs in China

stocks. The sell-offs occurred even though

the majority of the companies continued to

show very good numbers. This shows us the

macro market and investor psychology. Risk

appetite does have a great deal to do with

how these stocks trade.

It’s interesting to take a 600-foot perspec-

tive and look objectively to see the changes

that have taken place. There are now around

550 China-based companies listed on U.S.

stock exchanges, a significant universe which

offers multiple choices in each industry and

sector. About half of these companies are

listed on a major exchange and the major-

ity have bilingual staff, and most do a

decent job at communicating to English-

speaking investors. Many companies have

made marked improvements over time. Each

year more and more people start to realize

that China is one of the primary growth

engines for the next decade. They buy a few

stocks at first; and if they have success, they

buy more. With larger market capitaliza-

tions, listings, and liquidity, investors will

start seeing larger institutions entering the

market. Over the past few years, I have

seen more marquee small-cap funds get-

ting involved in our China space, including

Heartland Value, Wellington, Fidelity, Royce,

and Janus, just to name a few. While we will

still have meaningful pullbacks, the reality

is that the universe of people investing in

the space has increased dramatically. Over

time the market should become more effi-

cient and support valuations that are more

representative of those in the United States.

Given the environment, investors can argue

that valuations could be considerably higher.

When it comes to volatility, it’s here to stay.

(Factoid: China now represents 9 out of the

top 50 companies in the world measured by

market capitalization, up from only 1 at the

beginning of 2000. The United States cur-

rently represents 21 of the top 50 companies,

down from 29 in the same period.)

Given the worldwide flow of information

and the use of systematic computer trading,

the move toward real-time trading will lead

to markets that fluctuate widely, depending

on the news of the day. We get phone calls

from a lot of individual investors who try to

figure out why a stock went down 15 percent

in a week with no news. While it’s unnerv-

ing, it’s important for people to understand

that this is not unusual. If investors can’t

handle volatility, then they should not buy

these companies. Understanding the rules

of engagement is one of the key variables to

being a successful stock picker. It’s important

for investors to do their homework, particu-

larly figuring out entry points and staying

diligent. This is difficult for most investors

(including me) to do and requires strict

discipline. In the final analysis, it’s the entry

and exit points that investors pay for a stock

which really matters.

It’s also important to consider the huge

disparity between valuations in China and

the United States. In China, investors have

limited investment choices. Stocks are basi-

cally the only liquid asset people can invest

in. So with millions of investors and limited

choices, multiples can easily get stretched.

Looking at the universe of China-based

stocks listed in the United States, many

are trading below 10-times earnings. This

fact offers up the opportunity for multiple

expansions and should enable investors to

see a meaningful return on their investment

while nothing else changes. While invest-

ing in Chinese companies carries inherent

risks, including issues over financial controls,

accounting, and founders maintaining large

ownership positions, the reality is that these

companies have proven how to grow their

business and put capital to work in an accre-

tive manner. As this track record grows and

investors see consistency, they will feel more

comfortable paying up for the higher quality

companies. We are starting to see this now,

but the valuation gap remains meaningful. n

Page 23: Micro-Cap Review Winter 2010

www.microcapreview.com Micro-Cap Review Magazine 23

In one of civilization’s oldest cradles,

an amazing transformation is taking

place. In the past 30 years, China has

been home to the fastest growing economy

the world has ever seen. This is a land where

change is taking place on an unprecedented

scale, where people are living lives unimagi-

nable just a few years ago. This communist

nation has learned how to cash in on capital-

ism. The country and its people are growing

richer and more powerful each day.

It’s impossible to ignore the economic

phenomenon that has unfolded in China

over the past three decades. In 1978

Chairman Deng Xiaoping, the architect of

“The New Socialist Market Economy,” initi-

ated an unprecedented social and economic

transformation that ended Chairman Mao

Zedong’s devastating Cultural Revolution.

The successful implementation of this

ambitious and revolutionary social exper-

iment laid the foundation for what has

funding chinese company growth & going Public in the

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Page 24: Micro-Cap Review Winter 2010

24 Micro-Cap Review Magazine www.microcapreview.com

become the world’s most dynamic econo-

my. Since 1992 the country has garnered

annual growth rates averaging near 10 per-

cent. Hailed by the Economist in 2005 as

“The Great Leap Forward” and “A Model

of Reform,” China has emerged as an eco-

nomic powerhouse. It has grown faster

for a longer period than any other country

in history. The People’s Republic of China

(PRC) now accounts for 13 percent of global

gross domestic product (GDP) based on

purchasing power parity (PPP) exchange

rates. Most economists agree that China

will soon surpass Japan in GDP, making it

the second largest economy on earth. Based

on purchasing power measures, China could

reach parity with the United States by 2020.

Even in the face of the most signifi-

cant economic downturn since the 1930s,

China’s economy continues its unprecedent-

ed expansion. The country’s emergence as

an economic superpower is nothing short of

a miracle. But this is only the beginning. As

global economies struggle to get back on

their feet, China has uniquely positioned

itself to weather the economic storm. Last

fall, with the strongest balance sheet on

earth, Beijing put the world on notice that

the PRC was ready, willing, and able to take

its “rightful” place as a new leader on the

global stage.

China is certainly not immune to the cur-

rent global economic downturn. However,

as the rest of the world has slipped into a

deep recession, China continues to expe-

rience impressive economic growth. The

PRC is fiscally sound. The country generates

massive budget and trade surpluses that

are growing every year. Further, China is

not burdened by high debts. The country

has the largest foreign exchange reserves in

the world. But most importantly, due to

the closed nature of its financial markets,

China has not suffered from the illiquidity

and deleveraging dynamics that continue to

hold most major economies down. In fact,

Chinese banks are now among the most

profitable on earth. Even as the rest of the

world scrambles to navigate through these

challenging times, China is once again set-

ting a new course for its future. Using its

considerable resources to sustain growth,

create employment, and increase domes-

tic consumption in ways that significantly

reduce reliance on exports, the China mira-

cle continues.

In an authoritarian political society,

Chinese leaders can adjust fiscal and mone-

tary policy quickly. In response to last year’s

global financial meltdown, Chinese leaders

made a dramatic macroeconomic shift away

from controlling inflation to insuring “stable

and relatively fast growth.” The official

proclamation was, “Growth Above All Else,”

and this policy has become the nation’s top

economic agenda. It has already become the

major driver of the next phase of China’s

development.

To prime the pump, Beijing announced

it would spend an estimated 4 trillion yuan,

(about US$586 billion), over the next two

years in 10 major areas. The new stance

focused on “proactive fiscal policy and an

appropriately accommodative monetary

policy.” The economic stimulus was the larg-

est in China’s history and, in relation to total

GDP, the largest ever initiated by a major

country. The cost for the two-year pro-

gram is 13 percent of GDP compared to 1 to

2 percent of GDP in the United States and

the European Union. Chinese state media

called the plan “a wide-ranging effort to

offset adverse global economic conditions by

boosting domestic demand.”

The stimulus focuses on transportation

infrastructure, environmental projects, and

housing–productive investments that will

boost growth and create employment that

in turn drive domestic consumption. We

expect more measures in the future to stim-

ulate consumption, including policies to

support domestic stock markets and real

property transactions, and increased social

infrastructure spending to boost disposable

income. Further, lower commodity prices,

lower inflation, and lower interest rates in

2009 are a bullish combination for China

domestic consumption themes.

Unlike most of the economic stimuli

initiated in Western economies, China’s had

immediate and significant effect. According

to an article published by the People’s Daily

Online on September 11, 2009, “’China’s

economy has disconnected with other coun-

tries and took the lead in the recovery,’ said

Wang Qing, chief economist of Morgan

Stanley Greater China. The growth rate of

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Page 25: Micro-Cap Review Winter 2010

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Page 26: Micro-Cap Review Winter 2010

26 Micro-Cap Review Magazine www.microcapreview.com

China’s GDP growth rate this year, Morgan

Stanley predicted that it would reach 9 per-

cent in 2009 and 10 percent in 2010.”

On July 30, 2009, the Economist reported,

“The gap between growth in emerging Asia

and the G7 has never been wider...China

does not publish quarterly figures, but econ-

omists think its GDP jumped by an annu-

alized 15-17%...In contrast, America and

Europe probably saw their economies con-

tract...Asia’s recovery is on track...Unlike in

America and Europe, where crippled bank-

ing systems and high debts blunt the impact

of low interest rates. Asia, especially China,

is awash with liquidity, which will support

domestic spending.”

On September 18, 2009, the New York

Times reported, “The whole country is back

on track...The Chinese central bank said the

country’s economy surged at an annualized

rate of 14.9 percent in the second quar-

ter. The United States economy shrank at an

annual rate of 1 percent in that period.”

The Economist stated on August 13, 2009,

“China’s economy is roaring back...In dol-

lar terms, the increase in emerging Asia’s

consumer-spending this year will more than

offset the drop in spending in America and

the Euro area. This shift in spending from

the West to the East will help rebalance the

world economy.”

Historically deep worldwide recessions

redirect sovereign wealth homeward. Unlike

the United States and Europe that are forced

to run monetary printing presses at 110 per-

cent of capacity and/or initiate massive tax

and spend policies while borrowing unprec-

edented sums from nations like China to

stimulate their economies, China is awash

in cash. Going forward, if domestic demand

falters, China can use its huge surpluses

to support its economy with even higher

spending and lower taxes.

The fundamentals are clear. China has

enormous excess savings as shown by its mas-

sive current account surplus. Unlike current

conditions in the West, Chinese consumers

are not drowning in debt, and the economy

is not constrained by banks. Household sav-

ings is high and credit card use is almost

nonexistent. To sustain growth and fuel

domestic consumption in the world’s larg-

est market, China has the benefit of US$2

trillion in foreign assets to expand credit to

businesses and consumers alike.

China is rapidly evolving from a nation

that has relied on exports to a nation driven

by domestic consumption. No doubt the

rise of the Chinese consumer is unprec-

edented. But equally important are the

undeniable gains in productivity that huge

investments in infrastructure bring. These

advancements add up to one key take-away

for investors. Productivity increases should

create a new cycle of investment, economic

growth, and prosperity that will benefit all

participants, public and private. Historically

productivity is a catalyst for investment

and higher stock market returns. In the

West, especially in the United States, ris-

ing productivity resulted in rapid economic

expansion accompanied by a financing and

stock market boom for new and expanding

businesses.

The bottom line is that the earth’s axis

is tilting East. On September 15, 2009 the

New York Times said, “China is too small to

‘save the world’, even though it is the first

major economy to pull decisively out of its

downturn. But Beijing has earned respect

for its rapid, overwhelmingly monetary and

fiscal policy response to the crisis, and the

country’s banks have so far sailed serenely

through the storm...China is walking taller

on the world stage than it was a year ago...

It’s not that China has accrued more power

so much as that China is revealing itself as

being willing to wield that financial power

in more diverse ways than in the past. So

it is causing the global community to sit up

and take much more notice...The days when

China was content to sit on the sidelines are

over.”

The Economist reported on August 13,

2009, “Asian’s emerging economies are

recovering much more quickly than econo-

mies in other parts of the world...According

to Barclays Capital, emerging Asia is the

only region in the world where output has

regained its level before the crisis. This is

largely due to China, where industrial pro-

duction rose by 11% in the 12 months to

July [2009], but all the Asian countries have

seen a strong pick-up. In contrast, up to

June [2009] America’s production continued

to fall....If anything, the crisis has reinforced

the shift of economic power from the West

to the East.”

Even though macroeconomic fundamen-

tals in the PRC are stronger than those of any

other country on earth, Chinese companies

listed in U.S. capital markets that have solid

balance sheets, seasoned management teams,

and high growth rates, trade at discounts to

similar companies in more developed mar-

kets. For seasoned investors who understand

China, who have the patience to imple-

ment proven strategies, and who have the

tenacity to get deeply involved, opportunity

abounds. As the world works its way out of

the current mess, China is emerging quickly

into a wiser, wealthier, and more powerful

country. As investors return to the mar-

kets, the fundamental strengths in China are

becoming obvious. There is a clear indica-

tion that this is a resurgent market with the

most potential and the best opportunities

for growth.

History suggests that the Golden Rule will

prove itself once again. Like it or not, world

leaders are coming to grips with the reality

that China is in much better shape than any

other industrialized country. As a result,

China will increasingly be setting global

economic agendas. And the citizens of the

Peoples’ Republic truly believe doing so is

their destiny. Even in the face of global eco-

nomic uncertainty, these are exciting times

for China.

At Chinamerica Holdings, LLC, we believe

that China is on the brink of a long-term

economic and stock market boom—driven

by rising levels of productivity and dramatic

increases in domestic consumption—which

will provide investment opportunities with-

in and beyond its public equity markets. n

Page 27: Micro-Cap Review Winter 2010

www.microcapreview.com Micro-Cap Review Magazine 27

business summAry:

Founded in March of 2006, T3 Motion,

Inc. (T3 Motion) is a California-based

company that specializes in zero-gas

emissions electric vehicles serving the profes-

sional markets of Law Enforcement, Private

Security, Private Industry, Government, and

Military. T3 Motion products are born from

the creative merging of cutting-edge electric

vehicle systems technology, highly-reliable

features necessary for professional fleet mar-

kets, and the unique iconic design charac-

teristics that make them ideal for the profes-

sional fleet market. T3 Motion’s commit-

ment to the vision and creative application

of technological advances has culminated

in their specialized expertise to enhance the

alternative fuel vehicle markets.

A hand-picked team of expert engineers,

veteran designers, seasoned management,

and environmental specialists was assembled

under the T3 Motion banner. This diverse

and accomplished group brought together

world-renowned backgrounds in engineer-

ing and design previously seen in some of

the world’s most celebrated automobiles and

electronic systems.

The challenge for the T3 Motion team,

explore the unfulfilled needs of personal and

fleet transportation through the vision of

professional-grade alternative green energy

vehicle products. Through extensive criti-

cal analysis of the functional needs and per-

formance requisites of the professional sec-

tor, the team focused on creative solutions

for alternative fuel vehicles with emphasis on

integrating its core electric drive system and

power management technology into electric

personal mobility vehicles, electric low speed

vehicles, and converting fossil fuel vehicles

into electric vehicles. In late 2006, T3 Motion

launched the first of many alternative fuel

products, the T3 Series Electric Stand-Up

Vehicle (ESV). Shortly thereafter, in 2008,

T3 Motion launched the CT Series Micro Car

L.S.V./N.E.V. and, most recently, in February

of 2009, completed the first prototype of the

fully electric mail delivery vehicle for the USPS,

the eLLV. From its inception, T3 Motion has

actively pursued cooperative relationships with

organizations in the professional fleet markets

for its design, features, and performance char-

acteristics. This active dialogue has led to a

crystal-clear understanding of the professional

market and demands for the electrification of

fleet vehicles in the marketplace. T3 Motion’s

line of solutions squarely hits the target for

environmentally-friendly, cost-effective pro-

fessional vehicle solutions that is designed to

improve efficiency and provide a return on

investment to its professional customers. As

the marketplace continues to evolve, so will T3

Motion through its commitment to research,

development, and manufacture of vehicles and

products that continue to revolutionize the

way our customers think about transportation.

business strAtegy

T3 Motion’s core strategy is addressing

the increasing need for Law Enforcement,

Government, Military, and Private Security

and private industry with robust, inexpen-

sive, flexible ESVs that also meet increasing

trends for eco-conscious, zero gas emission

vehicles that are not hostage to increasing

fuel costs. The Department of Homeland

Security 2006 budget was $54.9 billion and

the combined annual budget of U.S. police

agencies is approximately $51 billion. T3

Motion believes that the law enforcement

market represents $196 million in potential

sale revenue. Between 2006 and 2009, T3

Motion successfully secured the leading posi-

tion as the preferred ESV solutions provider

in the professional law enforcement market.

T3 Motion has effectively built strong brand

value and awareness in the professional mar-

ket that sets it apart as the iconic professional

image in law enforcement ESV solutions.

Between 2008 and 2009, we further built

upon our success in the law enforcement

market by partnering with the five larg-

est private security companies and national

property management companies to pro-

vide the next generation of cost effective

perimeter patrol solutions. Based on actual

deployments nationwide, customers have

reported an annual cost savings of $17,500

per vehicle deployed as compared to gas

powered vehicles. The Private Security and

Private Industry market represents $585 mil-

lion in potential sales revenue. T3 Motion

is well positioned to expand in this growing

market as many major security partners and

national property management companies

are planning to roll out T3 Motion solutions

on a national and international level.

Between 2008 and 2009, T3 Motion also

began its marketing efforts into the govern-

t3 motion, incC o M Pa n y P r o F I l e

Page 28: Micro-Cap Review Winter 2010

28 Micro-Cap Review Magazine www.microcapreview.com

ment and military market. In 2008, T3

Motion began conducting a trial with the

United States Postal Service (USPS) using a

modified T3 Series vehicle for postal delivery.

In a press release from the USPS in 2008, it

was reported that the energy cost of delivering

mail to over 700 homes was approximately

$0.25 per day using the T3 ESV solution. In

2009, T3 Motion was invited to submit a pro-

posal for the USPS Long Life Vehicle (LLV)

electrification program. The final selection

for contract award of up to 50,000 vehicle

conversions is expected to be announced in

mid to late 2010. In 2009, T3 Motion received

its GSA contract listing and began selling to

all federally funded organizations. In 2009,

T3 Motion successfully completed its trial

with the Defense Logistics Agency (DLA) to

provide vehicles for use in perimeter patrol

and warehouse operations at all military and

government run facilities (6,000 facilities

worldwide). The military market represents

$234 million in potential sales revenue and

the USPS eLLV opportunity represents $1

billion in potential sales revenue.

T3 Motion has over 600 clients and partners

including the top organizations in each mar-

ket such as; LAPD, NYPD, LA Sheriff, Miami

Dade police, G4S Wackenhut, Securitas,

IPC, Andrews International, Allied Barton,

Simon Properties, GGP, Westfield’s, Target

Corporation, USPS, DOJ, DOD, and the DLA.

To date, T3 Motion has elected not to serve

the direct-to-consumer market in order to

maintain a strong professional brand image

and brand value. However, T3 Motion is

active in evaluating the readiness of the mar-

ket to adopt EV solutions such as it CT3 and

GT3 Series consumer commuter products.

T3 Motion believes that the market for

T3 Series and the CT Series vehicles are

equally large outside United States. Between

2008 and 2009, T3 Motion has established

distribution partnerships in Canada, Latin

America, Trinidad, Bahamas, United Arab

Emirates, Saudi Arabia, Turkey, Qatar,

Australia, and is continuing its expansion

into international markets.

mArkets:

Federal / State / County / Municipal Law

Enforcement agencies (18,000 throughout

the U.S.), Mall / Lifestyle Centers /Retail

properties (30,000 throughout the U.S.),

Airports, Ports, Transportation Centers,

Entertainment / Sports venues, Amusement

Parks, Hotels/Resorts, Colleges / Universities

/ K-12 Schools, Hospitals / Medical Centers,

EMS /Paramedic / First Responders,

Warehouses, Factories, Parcel / Cargo

Delivery, and Private Industry Security.

ProDucts AnD solutions:

T3 Series: T3 Motion launched its first

product, the T3 Series professional three

wheeled ESV in October of 2006 at the

International Association of Chief of Police

(IACP) show in Boston, MA. The T3 Series

ESV was designed for the Law Enforcement,

Government, Military, Private Industry, and

Security markets. The T3 Series ESV features

a stable elevated platform, an authoritative

command presence, a zero-degree turning

radius, integrated LED lighting, and unlim-

ited range via field swap-able, rechargeable

power module. The company currently has

over 1,700 units in the market.

The T3 Series ESV is a three-wheeled,

front-wheel drive stand-up electric pro-

fessional personal mobility vehicle. It was

designed and developed as a professional

tool to address the needs of law enforcement

patrol, campus policing, community policing,

airport security, military base security, mall

security, patrolling of parks and beaches, as

well as private security and private industry.

The T3 Series is perfectly suited for enforce-

ment operations in parking lots, parking

structures, inside large commercial buildings,

around building perimeters, as well as side-

walks and roadways connecting those areas.

The elevated platform of the T3 enables offi-

cers/security personnel to see above parked

vehicles in a discrete observation position.

The operator can effectively patrol a larger

area than on foot or riding a bicycle. The

elevated platform of the T3 Series allows the

operator to safely and quickly maneuver in

crowded pedestrian areas. The design of the

T3 Series lends itself to interaction between

operator and the public.

ct micro cAr:

In order to capitalize on T3 Motion’s core

competencies in power management and

drive systems, the company has developed

the core platforms necessary to market new

products into existing markets and future

growth markets. In late 2008, T3 Motion

introduced the four-wheel electric CT Micro

Car (L.S.V./N.E.V.) into its established mar-

kets, using the market penetration driven by

the successful introduction of T3 Series ESV.

fleet vehicle solutions:

With the professional marketplace actively

searching for environmentally-conscious

and professional application vehicles, the T3

Motion electrification of fleet vehicles is an

immediate response to the needs of the pro-

fessional community. The T3 Motion solu-

tion is incredibly effective in a variety of day-

to-day professional applications and provides

an effective way to reduce both the cost of

Page 29: Micro-Cap Review Winter 2010

www.microcapreview.com Micro-Cap Review Magazine 29

fleet ownership and carbon emissions.

Many companies are grappling with the

need to cut costs and reduce carbon emis-

sions. Their vehicle fleets represent a signifi-

cant portion of this challenge. Fleet managers

are searching for the best ways to achieve

both goals, thus driving further investigation

of electric vehicles as an alternative to inter-

nal combustion engine vehicles. Traditionally

included in a business case for vehicles, life-

time costs of the vehicles are acquisition costs,

fuel costs, maintenance, and residual value,

however, fleet managers are now required to

begin including the cost for emissions.

As all of these factors become increasingly

important, and as commercial vehicle reg-

istrations and fleet sales rebound from the

economic downturn in 2010 and beyond, T3

Motion anticipates that Electric Vehicles will

become a major focus for fleet operators in

key markets around the world.

cleAn energy = green

results:

The zero-gas emission T3 Series gets the

equivalent of over 250 miles a gallon. In addi-

tion to being environmentally friendly, the T3

Series is also extremely cost-effective. The T3

Series uses about 1.5 kilowatt of electricity

to fully recharge in less than 4 hours. Based

on California energy rates, the T3 Series costs

ten cents a day to recharge (based on $.10 per

Kilowatt per hour). Per mile, the energy costs

are a half cent (based on $.10 per Kilowatt per

hour). The electrical recharge costs for a dis-

tance of 10,000 miles is less than $60 (based on

average daily operation range of 15-20 miles).

The T3 Series is a truly an unlimited

range electric vehicle. With a second set of

batteries (“Power Modules”), the T3 Series

is the first multi-shift electric professional

personal mobility vehicle designed for pro-

fessional applications. With two sets of (Type

B) Power Modules, the T3 Series is capable

of 24-hour unlimited range operation. The

Power Modules can easily be hot-swapped in

less than one minute.

T3 Motion, Inc. has conducted third party

research with multiple national security, prop-

erty management, and law enforcement enti-

ties. The T3 Motion, Inc. fuel cost analysis was

focused on the use of electric T3 Series vehicle

versus a gasoline-powered automobile/SUV

for outdoor patrol-based applications.

The initial data gathered from these agen-

cies reveals an average annual savings of

$12,000 to $15,000 per gasoline powered

vehicle per year (based on $2.00 per gal-

lon). This annual savings range includes the

purchase price of the T3 Series vehicle. After

amortizing the cost of the T3 Series purchase

beyond the first year, the annual fuel cost

savings increases to $18,000 to $25,000 per

gasoline-powered vehicle per year.

The T3 Series electric professional per-

sonal mobility vehicle is the ideal solution

for outdoor patrols like parking facilities,

perimeter security, sporting/concert venues,

business districts, and community relations.

At T3 Motion, Inc. we believe that our tech-

nology should be a benefit to both our profes-

sional-end users and the environment. The T3

Series ESV electric personal mobility vehicle is

one of the most energy efficient ways to patrol

from Point A back to Point A—the operator

begins and ends at the same point-without

producing any environmentally harmful gas

emissions. The T3 Series ESV proves that clean

energy can also be cost-effective.

strAtegic PArtnershiPs:

T3 Motion has developed partnerships

and associations to further the visibility of

both T3 Motion and T3 Motion products.

These dynamic partnerships include the

Safe City Foundation (www.mysafecity.com)

Corporate Sponsor, International Association

of Campus Law Enforcement Administrators

(IACLEA) Titanium Sponsor, the Association

of the United States Army (AUSA), the Western

Riverside County Council of Governments

(WRCOG), and the South Coast Air Quality

Management District (SCAQMD).

Strategic sales partnerships include

Target Corporation, Marriott Resorts, IPC

International, Simon Property Group,

Andrews International, Securitas, Valor

Security Services, Wackenhut, Allied Barton,

Glimcher Realty Trust, Security Industry

Specialists, United Security, Inc., First Alarm,

and General Growth Properties.

meDiA coverAge:

The T3 Series ESV has generated worldwide

media coverage from network, cable and local

television to local newspapers to national and

industry magazines to all manner of Internet

blogs. For T3 Series customers, it is an oppor-

tunity to share with the public their myriad

of reasons for making the leap to clean tech-

nology. Whether it’s increased efficiency,

lowered operating costs, carbon reduction, or

good old fashioned community relations, T3

Motion’s products make it very easy for their

customers to tell their tale. n

Disclaimer: This corporate profile is based upon information provided by the issuer or company representative.

The information is not intended to be, and shall not constitute, an offer to sell or solicitation of any offer to buy

any securities. It is intended for information purposes only, and to increase awareness of the company profiled.

Safe Harbor Statement: The statements in this advertorial or profile relating to future products, partnerships,

technology, and positive direction are forward looking statements within the meaning of the Private Securities

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in fact, occur. Factors that could cause or contribute to such differences include but are not limited to contractual

difficulties, demand for the Issuer’s common stock, and the company’s ability to obtain future financing. Micro-cap

Review Magazine may have received payment to publish and print this advertorial or corporate profile. Micro-cap

Review Magazine disclaimers apply and may be reviewed at www.microcapreview.com/disclaimer.php. Before

investing in any security, you are strongly advised to review all public filings of the issuer of such security, which

can be found at www.sec.gov, as well as warnings published by the SEC at www.sec.gov/investors and to consult

with your professionals.

Page 30: Micro-Cap Review Winter 2010

30 Micro-Cap Review Magazine www.microcapreview.com

Page 31: Micro-Cap Review Winter 2010

www.microcapreview.com Micro-Cap Review Magazine 31

We live and work in an ever-chang-

ing environment, surrounded by

technological advances. Courts

and regulatory bodies in many business

and professional disciplines are embracing

electronic filings, and many businesses have

embraced telecommuting and electronic com-

munications. The world that we live in has

made it possible for attorneys and paralegals

to become mobile and virtual, allowing attor-

neys and other legal professionals to utilize

experienced professionals efficiently and eco-

nomically. Today’s economic environment

continues to challenge legal professionals to

reduce expenses while finding ways to help

clients increase their bottom line.

The use of efficient technologies and expe-

rienced professionals is becoming ever so

important, and has created an environment

in which virtual legal services can succeed

and grow. As virtual legal services are com-

ing into their own, it is becoming increas-

ingly possible for legal services providers to

serve clients across borders.

enter vcorP services, llc.

Vcorp Services, LLC has developed relation-

ships with law firms that are serving Israeli

businesses. Its objective is to assist Israel-

based investors and entrepreneurs establish

their US corporate entities in the United

States. Israel is a small and young country,

yet it has a strong economy, a modern bank-

ing system, an educated population, and laws

aimed at attracting foreign investors. Israel’s

high-tech industries, including the life-sci-

ences industries, are among the world’s most

robust. The Israeli business scene is heav-

ily dependent on international commercial

activity. Many of these companies turn to the

United States for financing.

Law firms and CPA firms in the United

States spend much of their time and energy

connecting Israeli companies with US investors

and financiers. Vcorp Services, LLC is devel-

oping relationships with law and accounting

firms that serve international businesses. The

professionals at Vcorp continually look to

forge relationships with investor groups and

law firms with corporate and commercial

law practices in diverse industries, including

hi-tech, securities, finance and banking, intel-

lectual property, media, telecommunications,

real estate, and international trade.

Operating in virtual environments is

becoming the natural evolution of the legal

industry. We are connected by phones and

computers. Attorneys and paralegals tele-

commute. Courts and state regulators have

embraced technology and electronic filing.

Lawyers communicate with their staff via

e-mail and text messaging. It is in this envi-

ronment that Vcorp Services continues to

develop its cross-border relationships and

provide expertise in corporate services to

clients worldwide. n

C o M Pa n y P r o F I l e

Disclaimer: This corporate profile is based upon information provided by the issuer or company representative.

The information is not intended to be, and shall not constitute, an offer to sell or solicitation of any offer to buy

any securities. It is intended for information purposes only, and to increase awareness of the company profiled.

Safe Harbor Statement: The statements in this advertorial or profile relating to future products, partnerships,

technology, and positive direction are forward looking statements within the meaning of the Private Securities

Litigation Reform Act of 1995. Some or all of the aspects anticipated by these forward looking statements may not,

in fact, occur. Factors that could cause or contribute to such differences include but are not limited to contractual

difficulties, demand for the Issuer’s common stock, and the company’s ability to obtain future financing. Micro-cap

Review Magazine may have received payment to publish and print this advertorial or corporate profile. Micro-cap

Review Magazine disclaimers apply and may be reviewed at www.microcapreview.com/disclaimer.php. Before

investing in any security, you are strongly advised to review all public filings of the issuer of such security, which

can be found at www.sec.gov, as well as warnings published by the SEC at www.sec.gov/investors and to consult

with your professionals.

vcorp and the global economy

Page 32: Micro-Cap Review Winter 2010

32 Micro-Cap Review Magazine www.microcapreview.com

Israelis made the desert bloom, fought and

won major wars, and absorbed poorly edu-

cated and penniless immigrants. The country

did all of this while creating a dynamic com-

munity that has benefited the world. The

role of Israel in the global economy and the

reasons for its success are explained in two

new books, Start-up Nation by Dan Senor and

Saul Singer and Israel Test by George Gilder.

Dan Senor, former civilian spokesper-

son for the Coalition Provincial Authority

in Iraq, collaborated with Jerusalem Post

columnist Saul Singer to inform the world

about Israel’s unique contributions. The facts

astound even the knowledgeable. There are

more NASDAQ-listed companies in Israel

than in all of Europe or the eastern powers

of China, Japan, Korea, and India combined.

Israel attracts more venture capital than any

other country, except for the United States.

And on a per capita basis, Israel exceeds the

United States by two and a half times. Israel

has contributed to the intellectual property

that enables Intel, Cisco, Google, Microsoft,

and eBay to advance productivity in the 21st

century economy. Intel trumpets the Pentium

microprocessor, but it may be more accurate

to declare the slogan, “Israel Inside.” The

technological innovations that permitted a

faster, better chip were conceived by a com-

bination of Israeli genius and temerity. Intel

produces its cutting edge chips in Qiryat Gan

in a 3.5 billion dollar facility in Israel.

Start-up Nation epitomizes the secret

sauce that accounts for Israel’s unprece-

dented productivity. The authors note what

Harvard Business School professor Michael

Porter calls “clusters” made up of universi-

ties, educated workers, and entrepreneurial

risk takers in explaining Israel’s economic

miracle. The military experience and cul-

ture are formative characteristics. Americans

identify themselves with Ivy League creden-

tials, whereas service in elite military units

defines Israelis. The Talpiot unit recruits

the best and the brightest from Israel’s high

schools and trains them in math and physics

to preserve the nation’s mandatory techno-

logical superiority as a condition for surviv-

al. Individual initiative and decision mak-

ing are cultivated. Officers are addressed

by first name and soldiers can challenge

the wisdom and judgment of superiors.

Israelis network in the military and bring

their skills, teamwork, and higher sense of

purpose to the business sector.

G e n e r a l

Start-up Nation Exceeds on the Test

Israel is a young country, plagued by hostile neighbors, perpetual secu-

rity threats, an Arab boycott, and an absence of natural resources. It was

a start-up country that succeeded beyond the world’s imagination.

by larry May

Page 33: Micro-Cap Review Winter 2010

www.microcapreview.com Micro-Cap Review Magazine 33

Israel has produced some corporate giants,

including Teva in pharmaceuticals, Lumenis

in medical lasers, and Checkpoint in Internet

security. Many Israeli technology start-ups

are bought by American companies. Cisco is

a prime example, having purchased nine cut-

ting-edge Israeli companies. Warren Buffet, the

oracle of Omaha, made his first foreign invest-

ment by purchasing Iscar, an Israeli machine

tool company, for US$4.5 billion. A myriad

of Israeli companies are working to improve

the health and welfare of the world in medi-

cal devices, pharmaceuticals, and biotechnol-

ogy. The world of computers, cell phones, and

wireless connectivity is dependent on Israeli

technology to sustain and improve.

Senor and Singer do an admirable job

of telling the history of a unique country

and the economic engines that power its

trajectory forward. The facts tell the story of

incomparable achievement and the stories

tell an emotionally engaging narrative of

how individuals and a society can flourish

in spite of insurmountable adversity. From

the challenge of Israel’s war of independence

to its economic devastation of the 1990s and

the omnipresent threats to security, Israel’s

lessons are powerful and persuasive. It pro-

vides a model for other smaller countries

with gifted populations, such as Singapore,

South Korea, and Taiwan, and lessons to

restore the spirit of innovation, ingenuity,

and invention that made America great.

Start-up Nation is a must-read for anyone

interested in how countries, businesses, and

people succeed against all odds.

While Start-up Nation is apolitical and

minimizes the special Jewish ingenuity and

enterprise that define Israel, George Gilder’s

contemporaneously published book The

Israel Test frames the argument that Israeli

achievement is a boon to civilization, not the

cause of the poverty of its Arab citizens and

the surrounding Muslim world. The book

is an articulate and convincing dissertation

that capitalists create opportunity, wealth,

and a better quality of life for many peo-

ple. An example is Israeli entrepreneur Shai

Agassi’s plan to decouple automobile travel

from oil which may be the world’s salvation

from the distorting economics and pollution

of fossil fuels.

George Gilder explains much of Israel’s

entrepreneurial spirit and success in terms

of Jewish scientific excellence and entrepre-

neurship that have spanned other cultures

and decades. His analysis focuses on a soci-

ety that elevates intellectual achievement, a

protestant work ethic, and ambition rather

than force and violence. His earlier book,

Wealth and Poverty, was a persuasive argu-

ment for capitalism, and The Israel Test is

the triumph of a successful capitalist society

that concentrated Jewish genius. He does

an excellent job of recording the history of

Israel as a counterpoint to the current eco-

nomic activity perpetrated on the world by

Arab governments and its debilitating effects

on Palestinians in the territories.

Gilder describes early economic experience

in Israel as pathetic, portraying the Israelis

“as mendicant nebbishes” touring the world,

tin cup in hand. Gilder critiques the socialist

fantasies of Israel’s early love affair with the

infertile soil and labor unions embodied in

the histadrut. Throughout the 1990s the gov-

ernment was the major owner of banks, cor-

porations, and real estate. Gilder attributes

Israel’s success to Prime Minister Benjamin

Netanyahu’s financial reforms, an influx of

Russian scientists, and the influence of retired

American capitalists. The confluence of these

trends took Israel from last among indus-

trialized nations to second behind only the

United States in the key fields of telecommu-

nications, microchip software, biopharma-

ceuticals, medical devices, and clean energy.

Adjusted for population, Israel decisively has

exceeded the United States.

The chapter on current Prime Minister

Benjamin Netanyahu is informative, maybe

a little too effusive. Gilder’s digression on

game theory and the contributions of John

Van Neumann detracts from the book’s

more salient arguments. Notwithstanding

Gilder’s self indulgence, The Israel Test rein-

forces Start-up Nation with complementary

and additional compelling narratives.

There are many Israeli companies deserv-

ing investor attention. Many are small-caps

and need an introduction to the readers

of Micro-cap Review magazine. There are

pitfalls in investing in Israel where business

is dominated by a few investment banks

and wealthy families. Information is often

published in Hebrew and there is little cover-

age of Israeli firms by America’s investment

companies. Against these challenges is the

prospect of great opportunities to improve

the human condition and for profitable

investment in the world’s most successful,

quintessential start-up nation.

About the Author

Dr. Larry May is a Phi Beta Kappa graduate from

Harvard University and received his M.D. degree

from Harvard Medical School. He is the former

chairman of the medical advisory board of Herbalife

and is the medical director of Targeted Medical

Pharma. Dr. May is on the faculty of the UCLA

School of Medicine and currently practices medicine

near Los Angeles. He has been consistently recog-

nized by peers as being among the best doctors in

the country, having been included in the publication,

Best Doctors in America. n

senor and singer do an admirable job of telling the his-

tory of a unique country and the economic engines that

power its trajectory forward.

Page 34: Micro-Cap Review Winter 2010

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Page 35: Micro-Cap Review Winter 2010

www.microcapreview.com Micro-Cap Review Magazine 35

In an economy with double digit unem-

ployment, many companies believe that

they should be less worried about find-

ing employee talent. Besides, a swell of well-

trained, experienced professionals walk the

streets in suits. People go from networking

event to career fair to outplacement center,

ever in search of jobs that are in short supply.

Jim Lehrer’s News Hour recently profiled

a career fair for experienced candidates, all

of whom lined up along a major New York

City thoroughfare to share their resumes

with potential recruiters. But once inside,

candidates were presented with a host of

“opportunities,” such as Cash For Gold in-

home sales and schools that teach in-home

massage. One former telecommunications

executive walked away with a job offer from

an alternative energy company – for two-

thirds of his previous salary and no benefits

– which, in his words, “beat being unem-

ployed for the last full year.”

Thus is the current state of the economy

and morale of our workforce. Professionals

who will survive in this recession are the

ones who are proactive and flexible. Those

who have a job should pay attention to their

current situation and avoid making risky

moves. To help stand out from the crowd

and avoid pitfalls, existing managers should

keep the following points in mind, accord-

ing to Jason Gennaro, Recruiting Director at

Spectrum Careers in McLean, VA.

1) Managers should take a second look

at the job description to see that it match-

es their core capabilities. What was once

labeled “sales” may now be more marketing-

focused. Would accepting an offer to head a

sales team be the right move to make?

2) Managers should learn to “manage up.”

They should communicate and quantify to

senior management and other stakeholders

the value that managers make on a regular

basis.

3) Managers should also learn to “manage

down.” They should select and cultivate the

right people under them to develop the best

functioning team possible.

Micro-cap companies should take a lesson

from companies that survived The Great

Depression of the 1920’s. As was the case

then, companies today should pay attention

to key areas:

1) Focus on a few things and do them well.

2) Rely on family and friends for support

but ultimately be responsible for the outcome.

3) Apply a mixture of Toyota’s Lean

Manufacturing and Jack Welch’s 10 Percent

Rule to ensure your human capital is focused,

hungry, and collaborative.

One company in particular is leading

the way in human capital development.

Established in 1996 in Florida, Assessment

Technologies Group, Inc. (ATG) helps com-

panies manage talent more effectively. Their

system, ATGenius, works through four inter-

locking processes which include 1) leadership

development and training, 2) performance

enhancement, 3) sourcing and selection, and

4) organizational design and development.

“ATGenius builds productive individuals

and organizations by helping organizations to

select precisely the right person for every job,

build more effective and efficient teams with-

in the organization, strengthen leadership

in the organization, facilitate organizational

change, and improve employee productivity

and commitment, and operate at peak per-

formance with lower costs,” states Stephan

Pollan, Chief Executive Officer of ATG.

Based on the six points above, ATG’s sys-

tem is the necessary ”secret sauce” for indi-

viduals and companies focused on thriving

in the current recession.

ATG’s Senior Organizational Consultant,

Renee Gillespie, Ph.D., works with clients to

implement day-to-day organizational practic-

es, policies, and management styles that sup-

port employees at all levels and their custom-

ers. Her work focuses on the following areas:

• Facilitating decisions to help stakehold-

ers work across personal, professional, or

cultural differences

• Building teams and one-on-one relation-

ship management

• Developing talent to fit the organization

• Promoting relationship selling

• Managing conflict resolution

• Harnessing the power of company stories

• Managing company talk

To lift the economy from the doldrums,

it is essential that smaller companies not

only survive but succeed. Proven case studies

can help managers of micro-cap companies

learn useful tips and avoid costly mistakes.

Readers that come across micro-cap com-

panies with unique or innovative practices

should share them with us.

In the interim, companies should assess

their human capital needs and consider

whether an integrated approach would

improve the business model. Are prospects

being sourced from optimal sources or just

daily want-ads? Are current employees able

to do exponentially more with some leader-

ship training and development? Is the orga-

nization structured in an optimal way? The

right answers to these questions are essen-

tial to the company’s survival… and more

importantly to its success–post-recession.

About the Author

M. C. Elvis Oxley is President of Oxley Consulting,

LLC (www.oxley-consulting.com) and an adjunct

professor at The George Washington University

Graduate School of Political Management. n

C o M Pa n y P r o F I l e

managing talent in a Downturn economy – Assessment technologies group

by M.C. elVIs oXley

Page 36: Micro-Cap Review Winter 2010

36 Micro-Cap Review Magazine www.microcapreview.com

Many industries were turned

upside down in the stock mar-

ket in 2009. One of the hardest

hit for investors was the junior minerals

exploration industry. The reason for this

was simple. For many years before 2009,

most junior minerals exploration compa-

nies operated based on one business model.

That model usually entailed the following

steps. First, companies would find a prop-

erty with suspected mineral reserves, then

they would identify the reserves, and then

would “prove out” such reserves by con-

ducting geological studies and “drill pro-

grams” to determine the amount of reserves

and their recoverability. After reserves are

quantified, companies would then imple-

ment a mining program and begin produc-

ing on those reserves using capital raised in

public markets.

In the past this model worked because

larger companies had little interest in explor-

ing for and proving reserves, which inherent-

ly had high risks and costs. Larger companies

depended on smaller companies that could

raise money in capital markets to “flesh-out”

good properties. Once this had been accom-

plished, those smaller companies would then

develop the properties or sell those proper-

ties to larger mining companies.

The economic crisis has inflicted pain on

many of these junior exploration companies.

Many investors withdrew their money from

this market, which led to a severe shortage of

capital to “prove-out” reserve properties. The

credit crunch damaged those junior explora-

tion companies whose business model was

based solely on reserve values.

Basically, the market said, “We are unwill-

ing to fund exploration of your assets if you

can’t in short order show revenue from your

properties.”

For years mineral exploration companies

raised capital based on proved reserves value

and used the funds to prove out still more

reserves. The process continued until the

company began producing or sold the prop-

erty to a larger mining company. For many

years, the reserves value alone was enough

Junior mining and exploration Investment Strategies In 2010

F I n a n C e

by ray suPrenard

Page 37: Micro-Cap Review Winter 2010

www.microcapreview.com Micro-Cap Review Magazine 37

to produce a large market capitalization. Not

anymore.

The exploration companies that were in

this predicament had two choices. Companies

either continued the existing business model

and hoped that the market would return, or

re-focused their strategy and began produc-

ing from their properties and grow the com-

pany using that production.

Many of the junior mining companies that

chose the former have either lost most of

their market value, or they failed and went

out of business. The ones that chose the lat-

ter have had the benefit of revenues, as well

as a portion of their reserve values capital-

ized as assets on the balance sheet. This is a

best-of-both worlds scenario.

Matmown, Inc. was one company that saw

this trend occurring before the markets cor-

rected. Founded in 2005, Matmown decided

to restructure the business into an asset/

revenue model, while remaining a private

company during the current environment.

In 2009 the company moved ahead with set-

ting up production on their primary copper

property in Chile and returned to produc-

tion on their primary gold property in Peru.

While their main copper property in Chile

was significant, they actually had very solid

production in 2006 on their 7,000 hectares

gold property in Peru; in fact, they produced

at an average grade of 16.4 grams per/ton,

which was an extremely high grade produc-

tion by any standards.

While this is good production, readers

might ask the question, “Why mine in South

America as opposed to North America?”

To answer that question, it’s helpful for

readers to obtain some background facts.

Peru is one of the top ten gold producers in

the world and one of the top five silver pro-

ducers. Chile is the number one producer of

copper. Both countries share similarities in

that mining is a primary source of revenues,

and most of the mining operations are

undertaken by foreign companies. Mining

companies choose to operate in Chile and

Peru primarily because of the lower labor

and extraction costs.

North America has many rich mineral

deposits. The problem with exploiting those

properties has to do with economics. Labor

costs in North America are among the high-

est in the world; couple that with higher

costs for goods, equipment, and stricter

reparation factors, the total production cost

is often greater than the value of the min-

erals extracted. This creates a net loss for

companies.

These cost factors, however, are lower in

both Peru and Chile. The lower costs mean

that minor mineral deposits can often be

exploited profitably. Further, major min-

eral deposits allow companies to earn sig-

nificantly higher profits than if those depos-

its were located in North America. The

increased revenues can prove significant in

the valuation of a company’s stock and to the

overall growth of a company.

Taking all of the above factors into

consideration, investors should focus on

exploration mining companies with certain

attributes. Investors should look for com-

panies that are increasing both revenues

and assets through production and explora-

tion. Moreover, such companies should have

assets located in highly stable, low produc-

tion cost countries, such as Peru and Chile.

Matmown is one company that has been

structured in precisely this way. In addition,

the company has a highly experienced man-

agement team that knows how to develop

private and public companies within mul-

tiple industries. Management has solid rela-

tionships with people in the financial mar-

kets and can eminently prepare Matmown

to become a public company. Management

has one of the best short and long range

approaches to asset development and rev-

enue growth that I have seen. Frankly speak-

ing, investors should pay attention to this

company in 2010.

About the Author

Ray Suprenard started his first company while he was

still in college for less than $2,000. He built that into

a multi-million dollar business within three years.

Upon graduating from college, he began focusing

his efforts on undervalued asset acquisition, interna-

tional trade, and international business development.

Over the last 17 years, this global strategy has enabled

Ray to be involved as a principal and/or consultant

for multiple companies in multiple industries and

jurisdictions throughout the world. He is recog-

nized as an expert in the trading of international

commodities, including but not limited to precious

metals, base metals, and oil. Additionally, as a prac-

tical expert in corporate financing and company

expansion, he is currently involved with many of

the largest private equity funds in the world, assist-

ing them in asset allocation and primary corporate

investments. n

investors should look for

companies that are increasing both

revenues and assets through produc-

tion and exploration. Moreover, such

companies should have assets located

in highly stable, low production cost

countries, such as Peru and Chile.

Page 38: Micro-Cap Review Winter 2010

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www.microcapreview.com Micro-Cap Review Magazine 39

❏ A Honey Pot of Stupendous Resources

for the Next Millennium

❏ Supplying the World with Copper, Gold,

Coal, Molybdenum, Silver, Tungsten,

Rhenium, etc., etc., etc.

❏ More on: Beyond Superlatives and

Introducing a New Undiscovered Micro-

cap that’s a Key Part of the Play*

❏ • Ivanhoe Mines, Inc (NYSE: IVN) $13.70

– Market cap $5.8 billion

❏ • Mosquito Consolidated Gold Mines

Limited (CVE: MSQ.V) $1.21 – Market

cap $71 million

I’m itching to tell the Mosquito story*

(see below) but let’s first talk about the

country that will rewrite the natural

resources playbook over the next century—

Mongolia—and the company that brought

the world’s eyes to it–Ivanhoe Mines and its

Oyu Tolgoi mine, the world’s largest copper-

gold development project.

Mongolia is big. It is three times the size

of France or twice the size of Texas, but with

only 2.6 million people. The prestigious

Mining Journal has described Mongolia as a

country with “world-class mineral deposits

and huge potential with 70 percent of the

country remaining unexplored.”

I visited the Ivanhoe’s Oyu Tolgoi (Turquoise

Hill) project in southern Mongolia twice, first

in 2005 and again in 2006. In 2003 I discov-

ered Oyu Tolgoi back when Ivanhoe Mines

was much like tiny Mosquito, unknown and

undiscovered by investors. Now Ivanhoe’s

Oyu Tolgoi is the world’s largest copper-gold

development project, located 80 km north of

the China border. The company’s shares have

had a huge run, and I believe the stock price

has a lot more room for growth yet. There is

also a humongous coal deposit nearby, and it

too is part of the Ivanhoe story.

The visits to the Ivanhoe mine and coal

sites were made with a group of interna-

tionally known investment bankers, money

managers, analysts, geologists, and mining

experts. The trips were an eye opener, to put

it mildly. Not only did I ride a camel, but I

discovered Ivanhoe to be one of my “Best

Ideas” in those years. The stock obviously has

been a big winner since then.

On October 6, 2009 Ivanhoe Mines

reached an agreement with Mongolia that

finally spelled out the “tax take” by the

government. The deal will set off a mining

boom that is going to ignite the country’s

economy and bring many jobs and benefits

to the people there. Fueled by a free market

economy, investor-friendly mining laws, and

new mineral discoveries, Mongolia is quickly

becoming China’s Canada. In fact, it’s a cer-

tainty that Mongolia will become a stagger-

ingly prosperous nation much like Kuwait.

What Ivanhoe found buried in the vast-

ness of the Gobi Desert is a 6.6 kilometers

long, 1.5 kilometers deep, and about 1 kilo-

meter wide copper and gold ore body, the

likes of which have not been discovered on

planet Earth in over 50 years. So far, over one

million meters of sample cores have delin-

eated the positioning, the size, and the grade

of this immense deposit.

It’s important to note that the Oyu Tolgoi

project is being engineered, overseen, and

built out by John Macken, Ivanhoe’s presi-

dent and CEO. Some time ago Mr. Macken

finished building out Grasberg, the world’s

largest ever operational copper-gold mine

in Indonesia. Freeport-McMoRan (FCX), a

company with a market capitalization of $37

billion, owns 66 percent of Grasberg.

At full production (six years out), it is esti-

mated that Ivanhoe’s Oyu Tolgoi mine can

produce approximately 1.6 billion pounds of

copper and 900,000 ounces of gold per year.

At $1.00 per pound of copper (current price is

$3.39), you can figure the yearly cash flow. And

with the benefit of by-product accounting,

allowable under US GAAP, the gold content in

the ore will pay virtually all of the production

costs of the copper. Here’s some hypothetical

math: at $1.00 per pound times 1.6 billion

pounds equals $1.6 billion a year. At $3.00 per

pound times 1.6 billion pounds equals $4.8 bil-

lion a year. (That’s just the copper; add the gold

and – goodness that’s a bunch of cash flow.)

The Oyu Tolgoi deposit contains 78 billion

pounds of copper resources and 45 million

ounces of gold resources, based on a March

2008 estimate. It should be noted that the

project is well into development with over $1

billion “spent” in the ground to date.

So get the picture: the Mongolians (and

Ivanhoe) are sitting on some stupen-

dous natural resources. Mining is already

Mongolia’s single largest industry and is

growing in high double-digit increments,

but it is still in its infancy.

F I n a n C e

O N T H E M A R K E TCommentary and Insights

by dr. John Faessel

Page 40: Micro-Cap Review Winter 2010

40 Micro-Cap Review Magazine www.microcapreview.com

Ivanhoe’s Oyu Tolgoi project also now

includes partner and mighty resource player,

Rio Tinto (RTP) [$161.56 NYSE market-cap

$89 billion], which bought into Ivanhoe in

2006. The Rio Tinto equity investment in

Ivanhoe is now well over US $1 billion, or

19.7 percent of the company. This amount

will likely increase up to approximately

US$2.3 billion in the near future.

On December 7, 2009 John Macken

announced that the joint Ivanhoe Mines-

Rio Tinto Oyu Tolgoi Technical Committee

had approved a conditional US$758 million

budget for 2010 to bring the project into

production. In the press release Mr. Macken

said, “Ivanhoe is considering a schedule that

could see construction of the initial open-pit

mine completed in 2012 and commercial

production begin in 2013.”

* now whAt About

ivAnhoe’s coAl?

Down in southern Mongolia just 25 miles

from the China border resides a coal mine

called Ovoot Tolgoi. It is the world’s larg-

est producer of metallurgical and thermal

coal. Ivanhoe spun off Ovoot Tolgoi to

South Gobi Energy Resources Ltd. (SGQ-

V), while taking a 80 percent ownership in

South Gobi—soon to be a Hong Kong IPO,

I’ve heard.

The dimensions of the coal resources are

staggering. While most coal seams in North

America might be four yards thick in some

places, Ovoot Tolgoi has coal seams that are

as big as 100 yards thick, and the deposit

has multiple seams of this quality and size

according to evaluations of preliminary core

drilling. Okay, so the coal resources are rich

in grade and thicker than a 30-story build-

ing, but what about the outside dimensions

or length of the coal body? Astonishingly,

the coal seam is one of five conformable

seams and has been mapped in outcrop and

sub-crop throughout a major coal basin that

stretches a total of 75 miles east and west

of the Ovoot Tolgoi mine on South Gobi’s

claim.

South Gobi plans to produce between 4

million and 6.5 million tons of coal in 2010

and 2011, respectively. Measured and indi-

cated coal resources at Ovoot Tolgoi have

been upgraded to total proven and probable

reserves of 114.1 million tons, with 92 per-

cent of the reserves in the proven category.

Total coal resources are thought to be over

412 million tons. South Gobi has 43 licenses

covering 16,000 km² in southern Mongolia.

The quality of the coal is super high-

grade. It contains virtually no ash or sulfur

and is of extremely high calorific value. You

don’t have to mill it, you don’t have to wash

it, you don’t have to clean it, and you don’t

have to process it; all you have to do is sell it

and you can mine it for a dollar a ton. This

coal is of such high bituminous rank that

it can be gasified or liquefied. Metallurgical

coal sells for about $140 a ton and is an

ingredient in steel production.

Norwest Corp., the world’s preeminent

coal engineering company, has independent-

ly estimated the dimensions and grade of the

South Gobi coal resources.

Ivanhoe is scooping out this coal from

the South Gobi open-pit mine around the

clock. The coal is being sold to the Chinese

and picked-up by a virtually never-ending

convoy of trucks.

China’s coal production last year was up

7 percent from 2008. Roughly 90 percent of

China’s electrical plants run on coal. China

produced 43 percent of the world’s coal last

year, but it wasn’t nearly enough to meet

demand. A new part of the Ivanhoe mosaic

has also taken shape: it’s the build-out of a

new rail link from an important steel mill

near Beijing to the Chinese border with

Mongolia.

The supply/demand/value and price met-

rics of coal look dazzling to me. China today

is the world’s largest consumer of metal-

lurgical and thermal coal. Coal provides up

to 70 percent of China’s energy, and some

analysts believe that prices for coking/metal-

lurgical coal, the form used in steel produc-

tion, will continue to rise. In the first 11

months of 2009, China’s crude steel produc-

tion increased to nearly 518.2 million tons,

up 12.1 percent over the first 11 months of

2008. Meanwhile, finished steel production

from January to November 2009 was up 17.4

percent to 628.3 million tons. It’s easy to see

that the math for coal is in favor of increas-

ing demand and price.

* now About mosquito

Much like Ivanhoe Mines, this story has

legs and legs and legs! And if investors

missed the boat early on Ivanhoe, Mosquito

has compelling parallels.

Headquartered in Vancouver, Canada,

Mosquito Consolidated Gold Mines Limited

is a mining exploration and development

company. It has a diverse portfolio of high-

potential precious and base metals projects

that are located in low-political-risk areas in

North America and Australia.

That’s the sterile version of what they do.

The color story, much like that of Ivanhoe

in the early years, just reeks of the kind of

potential that will raise the hairs on the back

of even a seasoned investor. Mosquito’s par

excellence prize asset is its wholly-owned,

Idaho-based CUMO deposit that is thought

to be the world’s largest and still undeveloped

molybdenum deposit. The resource also has

positively astonishing concentrations of tung-

sten, silver, and rhenium that taken separately

would be exceptional mining plays.

I mentioned that Mosquito’s market capi-

talization is only $71 million—yet its molyb-

denum and other mineralizations are worth

billions, perhaps as much as $77 billion;

indeed, the stock is trading at its highs but

to rationalize its tiny market capitalization

and the huge value of the mineralization in

the ground is always a conundrum of sorts.

In cases like this, it’s good to make compari-

sons. In this case, Ivanhoe comes into view

once again. After an asset is discovered, it

needs to be assayed, then its size delineated,

and perhaps its sweet spots located (higher

concentrations of the mineralization). That

alone takes gobs of money, and then it takes

broadcasting to the mining and investor

Page 41: Micro-Cap Review Winter 2010
Page 42: Micro-Cap Review Winter 2010

42 Micro-Cap Review Magazine www.microcapreview.com

community, among other things. All of that

work is done in the quest of more money

and more money and then more money. The

good news is that when you really have it in

the ground and it’s big and rich, it isn’t quite

such a slog. But it’s still a process. As one gets

closer to production, the shares of the com-

pany generally trend higher. As part of the

process, add in investment banking relation-

ships, research reports, road shows bringing

professional miners and fund managers to

the asset, investor relations, etc. Along the

way management has to build with the

possibility that larger companies may want

to partner with it or buy the company out.

More processes always mean more money.

By the time a discovered asset becomes a

big mine in production, it can take billions

of dollars. And some of these mine sites are

gigantic; they are medium-sized towns often

out in the middle of nowhere or near the

Arctic Circle or deep in some jungle. The

good news with Mosquito’s CUMO deposit

is that it’s in a very easily accessible and very

friendly mining state called Idaho, where

mining is bread and butter. Mining infra-

structure, power, water, major roads, and rail

networks—and a trained workforce—are

available within 50 miles of the property.

Having already defined the huge size and

the richness of its ore body, Mosquito manage-

ment is well along in spreading the word. From

what I’ve heard, the biggest mining companies

in the world are now aware, and are becom-

ing more aware of the company’s scope and

value. Have I mentioned China yet? Oh yes!

Molybdenum is a necessity in making steel,

and China is the leading steel producer in the

world by a long shot. This story gets better and

better, don’t you think? China is desperate for

oil, iron ore, coal, aluminum, molybdenum,

etc. China is now the world’s leading producer

of automobiles, not to mention trucks and

cranes and big buildings and big dams. I’ve

been there and it’s mind-boggling. You may

know that China is searching out all of these

assets around the world and buying into com-

panies on a scale that is near unimaginable.

Almost every day we read stories about their

interest in these natural resources from places

you’ve never heard of. Having the world’s

largest and richest molybdenum deposits will

make all of the above-mentioned “processes”

much easier to undertake.

Molybdenum demand is expected to

increase between five and seven percent

annually over the next decade with demand

forecasted to outstrip supply for several years

to come. Global demand calls for additional

21 million pounds by 2011, rising to 85 mil-

lion pounds by 2015. In January, JPMorgan

analysts said they will see a likely rise of 55

percent in molybdenum prices in two years.

To quote the prestigious Northern Miner

regarding Mosquito’s CUMO asset:

“The project, 15 km southwest of Idaho

City, is undoubtedly large. The scoping study

considers the economics of the CUMO proj-

ect at four mining rates between 45,000

tonnes per day and 181,000 tonnes per day,

projecting initial capital costs in the range of

US$1.6 billion to US$3.4 billion.”

Based on a pre-tax financial model (earn-

ings before interest, tax, depreciation, and

amortization) and using a long-term, base-

metal price scenario, Ausenco’s ** study

showed the CUMO project having a net

present value (NPV) of US$16 billion for a

150,000 short tons per day ore production

rate and US$10 billion for a 100,000 short

tons per day ore production rate. These very

substantial figures indicate that Mosquito

should be developing CUMO toward an ini-

tial ore production rate of between 100,000

and 150,000 short tons per day. Importantly,

on November 23, 2009 Mosquito completed

the key public disclosure of information

relating to mineral properties in Canada

called Ni 43-101.

** The Ausenco Group (ASX: AAX)

[Market-cap AUD$564 million], headquar-

tered in Brisbane, Australia, is a leading

provider of engineering, project manage-

ment, and operation solutions for the global

resources and energy sectors and employs

around 2,200 people across 13 countries

around the world.

molybDenum Primer:

Molybdenum (Mo, atomic number 42) is

a refractory metallic element used princi-

pally as an alloying agent in steel, cast iron,

and superalloys to enhance hardenability,

strength, toughness, and wear and corro-

sion resistance. Ideal for tough environments

where heat, pressure, and corrosion are fac-

tors, molybdenum makes steel stronger and

lighter and makes stainless steel more resis-

tant to corrosion. Due to its low toxicity,

molybdenum is used as a catalyst in energy

production. It has a current price of about

US$12.50 a pound.

Also of note: on February 22, 2010 the

London Metal Exchange will launch trading

in molybdenum futures.

I strongly encourage readers to spend

some time on Mosquito’s Web site, which is

very comprehensive. The corporate presen-

tation, fact sheet, and the CUMO interac-

tive model are particularly informative and

engaging.

comPAny web sites:

Mosquito Consolidated Gold Mines

Limited: www.mosquitogold.com

Ivanhoe Mines: www.ivanhoe-mines.com

South Gobi Energy Resources: www.

southgobi.com

Please e-mail requests for my Best Ideas

for 2010 to [email protected].

About the Author

Dr. John Faessel is a Wall Street analyst who is widely

recognized for his insights into public companies and

financial markets. Dr. Faessel advises firms, brokers

and traders. His market evaluations cover global

currencies, credit markets, sector strength analysis,

technical analysis, sentiment overviews and both

long-side and short-side recommendations. For over

20 years, Dr. Faessel’s “On the Market” reports have

been widely distributed throughout the world to an

extensive list of financial institutions, investment

banking firms, mutual funds, hedge funds, brokers,

foundations and high net worth investors. n

Page 43: Micro-Cap Review Winter 2010

www.microcapreview.com Micro-Cap Review Magazine 43

ProFIled CoMPanIes

Healthy Coffee International (Pink Sheets: HCEI)

cAtegory creAtor

The architect of the Healthy Coffee con-

cept, Rick Aguiluz wanted to create a prod-

uct that would provide health benefits to

people around the world. He wanted to

give people an opportunity to start their

home business for less than $500. And then

he wanted to teach them how to use the

Internet to build a global coffee distribu-

tion business. Sue Homemaker can earn

money by selling coffee to her friends and

neighbors through weekend coffee parties.

Joe Carpenter can earn commissions from

the Healthy Coffee business of his cousin

in Iowa, his sister-in-law in Japan, and his

brother in London.

heAlthy coffee usA

Healthy Coffee International sells products

exclusively through its subsidiary, Healthy

Coffee USA, Inc. (www.HealthyCoffee.com).

The company is well positioned in the mar-

ketplace at the junction of three mega-bil-

lion dollar industries: coffee, wellness bever-

ages, and energy drinks.

“hArDest working mAn

in mlm”

It all started in 1996 when Rick Aguiluz

was involved in his first network market-

ing company. Within 13 months he became

the top associate with over 25,000 distribu-

tors in his organization and was appointed

as the national sales director. Aguiluz was

responsible for opening a branch office in

the Philippines. He launched the office with

5,000 people at the Philippines International

Convention Center. This opening was the

biggest launch event in the company’s his-

tory, bigger than the launch events of the

United States, Mexico, and Canada com-

bined.

Aguiluz worked for two public compa-

nies as director of sales. While serving in

those roles, he helped open several offices

in two Asian countries. In 1999 Rick was

featured on the cover of an MLM magazine

as the “Hardest Working Man in Network

Marketing.” In 2003 he worked for a US

start-up of an Asian company as vice-pres-

ident of sales and marketing. He built the

Page 44: Micro-Cap Review Winter 2010

44 Micro-Cap Review Magazine www.microcapreview.com

1,200 square foot operation with 800 dis-

tributors and $30,000 per month sales into

a 46,000 square foot operation with over

75,000 distributors and $30 million per year

sales in less than three years.

coffee is big business

In 2003 businesses sold 400 billion cups of

coffee worldwide, making coffee the world’s

most popular and widely distributed drink.

Coffee is the second biggest commodity in

the world next to oil.

AmericAns love coffee

Four out of five Americans drink coffee reg-

ularly. Over 50 percent of American adults

drink three to four cups of coffee daily. In

total, Americans consume over 400 million

cups of coffee each day.

why heAlthy coffee

Healthy Coffee sells a line of instant gour-

met coffee drinks that are not only deli-

cious, but also healthy. The products are

based on proprietary formulas that com-

bine the health benefits of ginseng, reishi

mushroom, and other top-quality ingre-

dients with the world’s finest coffee beans.

Ginseng helps boost energy levels, while rei-

shi helps improve circulation and strengthen

the immune system.

Ginseng is a highly touted herb that has

been in use for thousands of years. The

Chinese have used it for 5,000 years, and

North American herbalists since ancient

times. Ginseng is classified as an adaptogen,

because the active ingredient found in the

ginseng root helps normalize imbalances

within the body by increasing resistance to

the harmful effects of physical, chemical, and

biological stress. Respected researchers in

China, Japan, and Korea have done extensive

studies of ginseng and verified its effective-

ness in reducing fatigue and increasing stam-

ina. They have also found that ginseng plays

an important role in forming red blood cells,

eliminating anemia, and possibly reducing

cell damage, thus helping to counteract age-

related defects.

Reishi (or Ganoderma lucidum) is the

Japanese name for red mushroom, and is

also known as lingzhi in China. In Asia reishi

is known as the “Miraculous King of Herbs.”

Practitioners of traditional Chinese medicine

have used reishi as a herbal remedy for more

than 4,000 years. This amazing herb contains

over 200 important nutrients, including trit-

erpenoids, polysaccharides, and organic ger-

manium. Research has shown that reishi is

a powerful source of antioxidants that help

balance and strengthen the immune system

while helping to eliminate toxins.

ProDucts

EnerGi Blend: The only instant gourmet cof-

fee with ginseng and reishi, plus non-dairy

creamer and cane sugar.

EnerGi Black: The only instant gourmet

black coffee with ginseng and reishi.

EnerGi Chai: The only instant milk tea with

ginseng and reishi.

EnerGi Blast: The only instant energy drink

with ginseng and reishi.

future ProDucts

EnerGi Choco: The only instant chocolate

drink with ginseng and reishi.

Energi Mocha: The only instant mocha

coffee drink with ginseng and reishi.

globAlizAtion: now in 11

countries

Healthy Coffee has first mover advantage

by quickly establishing offices in 11 coun-

tries: Australia, Canada, China, Germany,

Japan, New Zealand, Philippines, Puerto

Rico, Samoa, Sweden, United Kingdom, and

distributors in 29 more countries. The com-

pany’s goal is to have offices in 100 countries

in 10 years.

billion DollAr comPAny in

10 yeArs

The company is working towards its plan

to build a network of 2.5 million indepen-

dent distributors in 100 countries (25,000

distributors per country). The plan is to

have customers order a minimum of $25

of products every month. That would make

Healthy Coffee a billion-dollar company in

10 years. n

Disclaimer: This corporate profile is based upon information provided by the issuer or company representative.

The information is not intended to be, and shall not constitute, an offer to sell or solicitation of any offer to buy

any securities. It is intended for information purposes only, and to increase awareness of the company profiled.

Safe Harbor Statement: The statements in this advertorial or profile relating to future products, partnerships,

technology, and positive direction are forward looking statements within the meaning of the Private Securities

Litigation Reform Act of 1995. Some or all of the aspects anticipated by these forward looking statements may not,

in fact, occur. Factors that could cause or contribute to such differences include but are not limited to contractual

difficulties, demand for the Issuer’s common stock, and the company’s ability to obtain future financing. Micro-cap

Review Magazine may have received payment to publish and print this advertorial or corporate profile. Micro-cap

Review Magazine disclaimers apply and may be reviewed at www.microcapreview.com/disclaimer.php. Before

investing in any security, you are strongly advised to review all public filings of the issuer of such security, which

can be found at www.sec.gov, as well as warnings published by the SEC at www.sec.gov/investors and to consult

with your professionals.

Page 45: Micro-Cap Review Winter 2010

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Page 46: Micro-Cap Review Winter 2010

46 Micro-Cap Review Magazine www.microcapreview.com

the other side of the story

Is gold useless?

I’m probably going to make a few people

very upset by writing about this topic, but

the short answer to the question is more YES

than NO. So before I start getting some hate

mail about why I think the yellow metal is

useless, let me clarify that it’s technically use-

less for the purpose that most investors are

using it for—protection against inflation.

Countless times people have asked me the

question, “Why don’t I invest in gold to protect

against inflation?” Moreover, there are vari-

ous newsletters that talk about how investors

are supposed to protect themselves from the

coming “hyperinflation by investing in GOLD

TODAY.” This question has, of course, become

much more popular, as many of us saw the yel-

low metal nearly quadruple in price over the

last decade. Well, in order for gold to protect

people against inflation, it technically needs

to be tied to the dollar in some way. Many

investors continue to pour billions of dollars

into gold via open ended funds, exchange-

traded funds (ETFs), money managers, and

even outright purchases of gold bars, think-

ing that the value of gold is tied to the paper

currency. Unfortunately, this assumption has

been incorrect for nearly 40 years.

For the last several centuries, all of the

major monetary systems were anchored by

gold. When countries traded with each other

using currency, they made sure that it was

backed by the yellow metal—hence the need

to continually mine more. In 1971 the Bretton

Woods system, or so-called “Gold Standard,”

broke down and was eliminated by the United

States government. The current backing of

each dollar that we hold or owe today is based

on the “Good Faith of the United States of

America.” In so many words, we have had

an extraordinary amount of currency being

printed without knowing whether or not we

have enough gold bars to make the paper

worth the denomination printed on it. Are

people still questioning why all of our coun-

try’s bondholders are getting worried? To scare

everyone even more, we also don’t know exact-

ly how much money is currently in circulation

since the Fed stopped reporting the broadest

measure of the entire money supply within

the economy in March of 2006—M3 (money

supply). The Fed still reports the M1 and M2

figures, but they are not as broad as M3.

With all of the new money being printed

at high speeds in Washington over the last

several months by our new administration, it

has brought the “how much” question to mind

more than a few times. A very wise old man

once told me “don’t go write a check you can’t

cash!” I think he was referring to something

else at the time, but somehow I get the feeling

that it can also be used here.

So, a few obvious questions come to mind

at this point.

• How or why is gold going to protect any-

one from inflation if it isn’t pegged against

the paper currency?

• What is the current gold to currency ratio?

• Why are all of these funds and fund man-

agers lying to people (again)?

• Why did gold go up so much if it’s not

pegged to the dollar?

• What kind of printer does the govern-

ment use? (pure curiosity)

I can’t answer all of these questions, but

will do my best with a couple of them.

I am not trying to alarm you or scare you

more than you may already be with everything

that’s going on in this world. The United States

of America has the best credit and economy in

the world. If we really put everything in per-

spective, our economy is larger than the next

four largest economies in the world...com-

bined! We do owe an extraordinary amount

of money (approximately $55 trillion and

counting), but that’s an issue for another day.

The point is that gold is a very limited metal

and cannot protect you against inflation. Only

about 1/8 (12%) of the world’s gold supply is

actually used by the end consumer (e.g. jew-

elry), with its largest customer being India. I’m

guessing that the only reason why gold became

so hot is because Wall Street needed something

to temporarily market and replace the “old

products,” because demand definitely wasn’t

going up by 400 percent. It’s a very similar

situation, if not the same reason why oil (black

gold) skyrocketed to nearly $150 per barrel last

summer. It was pure speculation.

Remember, Wall Street is the biggest and

best marketing firm in the world. It’s not

always a matter of profits and losses, but a

matter of consumer demand! So the next

question would be “why would anyone invest

in gold?” Having family in the jewelry busi-

ness and growing up with the day-to-day

teachings of the profession, I still can’t bring

myself to see a fundamental reason. But if

someone wanted to speculate that the pre-

cious metal will have more demand than

“projected supply,” then they have the only

reason you ever need to speculate into some-

thing. Gold jewelry is luxury first, investment

second (and people aren’t buying 100 ounces

of it to put around their neck). If you are

using gold as an investment, based on supply

and demand for something tangible, then

gold may find a small place in your portfolio.

The main purpose of this article is to educate

investors, so that they don’t get into gold

blindsided, thinking that President Barack

Obama is helping their investment by print-

ing more money. In my opinion, if investors

wanted to protect themselves against infla-

tion, they are better off buying a company

that is growing at a pace that’s at least double

the historical average inflation rate. The good

news is that they can buy that company at

a steep discount today. If you don’t like the

stock market, then you can still do very well in

the municipal bond market by buying some

tax-free bonds for a small discount. Either

way, bonds are simpler and are backed by the

solvency of an entity rather than dependence

on continued speculation.

About the Author

Yaron “Ron” Reuven is founder, president, and CEO of Reuven Enterprises, one of the top boutique financial services firms on Wall Street. The firm offers financial planning, investment advice, insur-ance and many other services to high and ultra high net-worth individuals, corporations, and pensions. Before founding Reuven Enterprises, Mr. Reuven worked at several leading financial services firms, including First Union and Raymond James. n

by ron reuVen

F I n a n C e

Page 47: Micro-Cap Review Winter 2010

www.microcapreview.com Micro-Cap Review Magazine 47

R O G E R S O I L & G A S

The New Oil Boom is Upon Us

Experts believe that the Bakken field has more

oil reserves than all of Saudi Arabia. Now,

if that alone does not excite investors, then

they will be impressed by the potential oil

revenues estimated at $1 trillion. The Bakken

oil reserves are one of many discoveries that

will help rejuvenate oil exploration and devel-

opment in North America. According to Dr.

Paul Pelzin, an economist at the University

of Montana, what we are seeing is “a good,

old-fashioned oil boom.” Rogers Oil & Gas is

paving the way for shareholders and investors

to benefit from this boom.

Rogers Oil & Gas is an oil exploration

and production company that offers supe-

rior returns for growth-oriented investors.

Incorporated in Delaware and headquar-

tered in Phoenix, Arizona, the privately-

held company is the brainchild of John D.

Rogers, chairman and president, and Robert

H. Keenan, chief executive officer. Rogers’

background includes 35 years of experience

in the financial services industry. He has

served on the board of director of several

insurance companies. His experience in the

insurance industry has given him a unique

advantage to lead an oil exploration and pro-

duction company. Investing in commodi-

ties requires strong risk-management skills,

similar to those employed in the insurance

business. Rogers’ expertise in project financ-

ing has made his transition to the oil and gas

industry very successful. Keenan, a profes-

sional accountant since 1980, has consider-

able experience in tax planning and business

consulting for a long list of international

clients. In addition, he was a cofounder

of an oil and gas company with extensive

exploration and drilling activities. Together

ProFIled CoMPanIes

Investors will find on the Web site of Rogers Oil & Gas Corp. a very excit-

ing video about a recent US Geological Survey. The video tells about the

discovery of the Bakken oil field in North Dakota, one of the greatest oil

discoveries in US history.

Page 48: Micro-Cap Review Winter 2010

48 Micro-Cap Review Magazine www.microcapreview.com

with other managers, Rogers and Keenan

have about 100 years of combined financial

experience. And on the technical side, the

company boasts of having the “best of the

best” in engineering and geological talent.

Within two years of operation, Rogers

Oil & Gas has already made major inroads

in its niche market. After having great suc-

cess in Canada during the first year, the

company has turned its focus to the United

States. Rogers and Keenan are very excited

to report that the entry into the US market

has been smooth. The move into the United

States will allow the company to profit from

a much bigger market “which is 10 times

greater than that of Canada’s and a wonder-

ful place to raise capital.” Having already

achieved positive cash flow in early 2010,

the company has a strong balance sheet with

impressive financial leverage.

Rogers Oil & Gas is committed to invest-

ing in “win-win” projects that benefit share-

holders. This commitment requires carefully

measuring risk while striving for steady and

aggressive growth. This risk-based approach

to investing is the key to the company’s suc-

cess. During the credit crunch, Rogers Oil

& Gas has provided vital capital to compa-

nies that are involved in low-cost oil and

gas development projects with high return

potential. Further, the company has limited

shareholders’ risk by following a simple for-

mula: invest in multiple wells and leave the

extracting to others - their partners who are

experts at operating wells. Rogers Oil & Gas

will generally invest between 5 to 50 percent

interest in a well (although the company

will invest from 50 to 100 percent interest

in the right situation). This allows the com-

pany to limit its exposure to any one project.

Currently, Rogers Oil & Gas holds from 14

to 50 percent interest in approximately 20

separate wells. The company is positioned

for “steady and aggressive growth over the

next 18-36 months” and plans to invest in at

least 16 new development wells and 4 new

exploratory wells within the next two years.

A vital part of Rogers Oil & Gas’ business is

focused on the extraordinary Bakken region.

This oil deposit spans 200,000 square miles

across North Dakota, Montana, and Canada.

The US Geological Survey estimates that

up to 4.3 billion barrels of oil are sitting

underground in the Bakken Formation. The

US Department of Energy reports that “this

could increase crude oil [production] in

America by billions of barrels.” According

to conservative estimates, the oil deposit is a

resource worth over $1 trillion. The Bakken

Formation has a tremendous amount of oil,

enough to completely satisfy 100 percent of

America’s need for oil for decades. To top it

off, the oil is a light 41 degree sweet crude oil,

which is considered by some to be the best

quality crude oil in the world.

The Bakken oil deposit was first discov-

ered in 1951 and is the biggest oil find in

US history. Back in the 1950s people had

high hopes that the discovery would bring

economic benefits to the area. But it soon

became clear that extracting oil from the

Bakken Formation was simply not cost-

effective. The technology was limited then,

and the crude oil had high water content. So,

the Bakken reserves just sat untouched, until

now. John Rogers explains that extract-

ing oil from the Bakken region is viable

today. Technological advances like horizon-

tal and computer-aided drilling, combined

with recent local government support, have

made oil drilling there an attractive invest-

ment. Currently, oil extraction costs have

plummeted to below $20/barrel, while these

same barrels sell for $75/barrel or more.

Also, each well can produce 100 to 120 bar-

rels per day on average, with some wells

initially flowing a staggering 3,000 barrels

per day. When these profit margins are com-

bined with ease of rig deployment, relatively

unencumbered pipeline accessibility, and a

large employment base in North Dakota,

Montana, and Saskatchewan, the company

has an opportunity to earn huge profits.

Rogers Oil & Gas has learned the fine art

of achieving rapid growth while minimizing

risks. The company knows where to find the

best oil extraction projects, how to invest in

these projects, and why it is investing in such

projects. John Rogers points to single-mind-

ed focus as a key competitive edge. “We

have replaced the words in our organization,

‘we might’, ‘we maybe’, ‘we could,’ with ‘we

will’ and ‘we are.’ And that is one of the big-

gest differences of our organization. We are

very focused on what we are doing. We are

very focused on our projects. We are very

focused on our partnerships. We are very

focused on our business model. We have not

varied or swayed in any way, shape or form

from what we have been doing. We know

what we are doing and we are doing it well.”

Clearly John Rogers and Rob Keenan are

steering the company in the right direction.

With its successful entry into the US market,

Rogers Oil & Gas is a company to watch. n

Disclaimer: This corporate profile is based upon information provided by the issuer or company representative. The

information is not intended to be, and shall not constitute, an offer to sell or solicitation of any offer to buy any securi-

ties. It is intended for information purposes only, and to increase awareness of the company profiled.

Safe Harbor Statement: The statements in this advertorial or profile relating to future products, partnerships, tech-

nology, and positive direction are forward looking statements within the meaning of the Private Securities Litigation

Reform Act of 1995. Some or all of the aspects anticipated by these forward looking statements may not, in fact, occur.

Factors that could cause or contribute to such differences include but are not limited to contractual difficulties, demand

for the Issuer’s common stock, and the company’s ability to obtain future financing. Micro-cap Review Magazine

may have received payment to publish and print this advertorial or corporate profile. Micro-cap Review Magazine

disclaimers apply and may be reviewed at www.microcapreview.com/disclaimer.php. Before investing in any security,

you are strongly advised to review all public filings of the issuer of such security, which can be found at www.sec.gov,

as well as warnings published by the SEC at www.sec.gov/investors and to consult with your professionals.

Page 49: Micro-Cap Review Winter 2010

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Page 50: Micro-Cap Review Winter 2010

50 Micro-Cap Review Magazine www.microcapreview.com

As we prepare this edition of Compliance

Corner, many of our readers across the

United States have weathered a brutal win-

ter. The start of 2010 has given us signs that

brighter days are ahead. Already we’ve seen

rays of sunshine peaking through the clouds.

We are adjusting not only to the change in

weather, but also to news coming out of

Washington, DC. It appears that business in

most sectors of the economy is improving.

fAir AnD AccurAte creDit

trAnsAction Act (fActA)

As reported in our last issue, the November

1, 2009 effective date has been postponed

to May 1, 2010. Many readers will consider

this good news. However, as in the past,

regulators expect greater compliance after

they have extended effective dates for rules;

i.e. there will be no excuse for not complying

with the new regulations.

finrA rulebook

consoliDAtion

The FINRA Office of General Counsel con-

tinues to consolidate the former NASD and

NYSE Regulation rulebooks. Several rule

notices are out for comment. Professionals

should review the FINRA Web site for rule

changes submitted to the SEC, as well as

those out for comment to FINRA. Firms

should not wait for someone else to make

a comment. Every firm should file its own

comments in the manner prescribed and

be part of the solution. All comments are

reviewed, and in many cases the comments

result in changes to rule submissions and

can result in total withdrawal of the rule

proposal. The FINRA Board, as well as the

SEC Commissioners and staff, want to hear

comments by member firms.

brokercheck web site

For many years FINRA has operated the

BrokerCheck Web site, which provides infor-

mation on brokers and firms currently reg-

istered and those that have been registered

within the last two years. Going forward,

BrokerCheck will carry information on all

registered brokers and firms on a perpetual

basis. The belief is that persons and firms

who have been disciplined or banned from

the industry will have that information con-

tinually available rather than disappear after

two years.

new rAte for fees PAiD

unDer section 31 of the

eXchAnge Act; effective

DAte: JAnuAry 15, 2010

The SEC has enacted its regular appro-

priation under Section 31 of the Securities

Exchange Act of 1934. Effective January 15,

2010, the Section 31 rule decreased the rate

applicable to specified securities transac-

tions on the exchanges and in the over-the-

counter markets from $25.70 per million

dollars to $12.70 per million dollars. This fee

rate will remain in place until further notice.

sec APProves chAnges to

the Personnel Assessment

AnD gross income

Assessment fees; effective

DAte: JAnuAry 1, 2010

The SEC has approved changes to FINRA’s

regulatory pricing structure as origi-

nally outlined in Regulatory Notice 09-56

(September 2009). Effective January 1, 2010,

FINRA revised the rate structures for the

personnel assessment and the gross income

assessment fees.

custoDy of investor funDs

or securities helD by

investment ADvisors

The SEC has amended its rules covering the

custody of investor funds or securities held

by investment advisors. Under the revised

rules, among other changes, the custodian

will have to verify that all withdrawals of

funds or securities were authorized by cli-

ents. The new rules also require annual

audits of client assets and a review of the

advisor’s internal controls to protect client

assets.

About the Author

Chet Hebert is founder and president of The

Compliance Department Inc., a compliance con-

sulting firm located in Centennial, Colorado. The

firm assists broker-dealers and investment advisors

in the areas of firm formation, compliance, CRD

service bureau, outsourced back-office processing,

and branch office audit services, including AML and

Reg S-P compliance. For more information about the

firm, please visit www.thecompliancedepartment.

com or call Chet at 303-339-9870. n

leGal • taX • aCCountInG

by Chet hebert

The Compliance Corner

Page 51: Micro-Cap Review Winter 2010

www.microcapreview.com Micro-Cap Review Magazine 51

The staff is evaluated and the budget is implemented. There are meetings to discuss new

ideas for the coming year.

Overlooked are some important points. Compliance officers increasiningly play a crit-

ical role in today’s regulatory environment. Attendance at their meetings is mandatory.

Often glanced over with minimal discussion is suitability. This is my personal favorite.

I would suggest that each branch manager, broker, registered investment advisor (RIA),

and investment advisor representative (IAR) perform an annual evaluation. It is usually

the main issue of contention when client disputes result in arbitration.

Review your client’s financial statements, risk tolerance, marital status, retirement

plans, and potential and current objectives. Meet with your clients in person. Give them

a pen and paper. Have them put in writing their risk tolerance goals and current finan-

cial objectives. Read them together and discuss how these can be accomplished.

If you are an RIA or an IAR, you must meet the requirements of renewal of registra-

tion. It must be paid in full or you are subject to automatic termination by FINRA.

Advisors must submit all required documentation to each state in which they are regis-

tered. Form ADV, Part 1 annual amendment must be filed. The form is due no later than

90 days after the firm’s fiscal year end. For example, if the fiscal year ends on December

31, 2009, the form must be filed through the IARD system by March 30, 2010. The

annual amendment requires firms to update the assets under management, number of

accounts, and the number of clients. It is a good idea to review all pages to make certain

there are no omissions or errors.

There are a number of paths to take to be certain that you have done everything right.

Hiring a professional consultant that specializes in this service is always prudent. This

time of year is also a good time to review your options of coverage in the event you are

in need of such services. n

ombudsman

F I n a n C e

This is the

time of year

when investment

branch managers

are looking to set

goals for 2010.

They usually

try to figure out

how to increase

production

while reducing

overhead costs.

by JaCK leslIe

Page 52: Micro-Cap Review Winter 2010

52 Micro-Cap Review Magazine www.microcapreview.com

SGS-COC-004752

Page 53: Micro-Cap Review Winter 2010

www.microcapreview.com Micro-Cap Review Magazine 53

Forces driving this productivity improve-

ment and the growth conditions in Vietnam

will likely continue in the foreseeable future.

Despite these trends, investors should be

aware of the potential risks in Vietnam,

including difficulties posed by government

fiscal and monetary policies, which have

been blamed for the recent surge in inflation.

vietnAm towArD us cAPitAl

mArket entry

It has been a while since I was involved in

taking the first Vietnamese company public

in the United States. Working with a team

from Providential Capital, we effectuated a

reverse merger with a Pink Sheets company

and then upgraded it to the OTC Bulletin

Board. Today Cavico Corporation (NASDAQ:

CAVO) is the sole Vietnamese company listed

on NASDAQ. The capital markets in Vietnam

are not quite mature and stable enough.

Indeed, entry into the US capital markets is

a new concept for Vietnamese companies;

investment bankers that want to be pioneers

in this area must be prepared to put in the

vietnamOverview of

Vietnam stands out among the N-11 economies as having achieved the

highest economic growth rate in recent years. According to Goldman

Sachs, productivity increases have been an important source of Vietnam’s

economic growth, along with capital accumulation and labor gains.

by ben tran

Page 54: Micro-Cap Review Winter 2010

54 Micro-Cap Review Magazine www.microcapreview.com

extra effort. Firms must be patient and be

willing to hold hands every step of the way to

make investment banking transactions from

Vietnam a success.

Today there are many boutique invest-

ment banks or M&A advisors initiating steps

to tap into the Vietnam market as they once

did with China a decade ago. Fortunately,

the Vietnamese government recently passed

a new circular to allow Vietnamese compa-

nies to list on U.S. stock exchanges; however,

the rule does not yet allow 100 percent equi-

ty listing for Vietnamese issuers. Thus, form-

ing a joint venture with a foreign company

is the only alternative for listing Vietnam-

based companies in the United States at the

moment.

Given current market conditions, listing

a Vietnamese company is not attractive if it

lacks a sexy story and sufficient net income.

Further, if China-based companies listed on

US stock exchanges today are facing difficul-

ties raising money in the United States, it

is likely that Vietnam-based companies will

have an even harder time. Further, having

so-called connections with local Vietnam rep-

resentatives might not be enough. There are

only a few Vietnam specialists with investment

banking experience in the United States and

who have actually done a cross-border trans-

action. Taking a Vietnamese company public

in the United States is a complex process that

requires integrated skills, global experience,

and local understanding. Like China, any

cross-border M&A negotiation from Vietnam

could be very lengthy. Investment bankers

who have cross-border experience might be

able to raise funds from a limited number of

Asia-focused global institutions. Compliance

with US GAAP audit requirements is perhaps

the biggest bottleneck in listing a Vietnamese

company. Many Vietnamese companies have

numerous subsidiaries, which make the audit

process a complicated ordeal.

Recently, IPOs have started to surface in

Vietnam due to an opening of government

policies to help stimulate the securities mar-

ket. Many Vietnamese companies that once

planned to enter the US capital markets are

now considering an IPO in Vietnam to cut

costs and save time. In fact, certain compa-

nies may have an easier time raising funds

with a local IPO. To maximize IPO services,

an effective M&A advisor must have working

relationships with global private equity firms

that are looking to make pre-IPO invest-

ments in Vietnam.

vietnAm outlook

Since the end of the Asian financial crisis in

2000, Vietnam has managed to restore fast

economic growth with the help of state-

owned enterprise reforms, fiscal incentives,

improvements in legal protections for busi-

nesses, the establishment of an equity mar-

ket, and the trade agreement signed with

the United States. Despite Vietnam’s rapid

economic success, this growth performance

is not unprecedented in Asia. During the

best growth periods, Vietnam outperformed

Indonesia, Malaysia, and India, but fell behind

China and more developed countries, such

as Singapore, Korea, and Taiwan. Goldman

Sachs expects Vietnam’s GDP to grow eight

percent per year through 2020. Goldman’s

forecast is good news. If Vietnam manages

to stay on this growth path, the government’s

target of doubling GDP from its year-2000

level by 2010 and again by 2020 is achievable.

Surprisingly Vietnam is not heavily affected

by the current global economic downturn due

to its strong domestic market. An increasing

number of emerging tycoons in Vietnam is

looking to invest in the local capital markets.

The local markets served as the playground

to create new “red” capitalists a few years ago.

Today, these Vietnamese high net worth indi-

viduals are looking to profit from local assets

by finding legal and fast track ways to invest

outside Vietnam via international oil and gas

projects, real estate investments, and perhaps

foreign publicly traded companies.

Vietnam is considered a new Asia tiger

with its GDP growth rate comparable to that

of China. Some institutions even regard

Vietnam as the next China. With a popula-

tion of 88 million people, two-thirds of

whom are under 30 years old, Vietnam has a

strong workforce to serve as the foundation

to support a fast growing economy. Vietnam

is compelling to investors who know how

to capitalize on the country’s advantages

of global natural resources, manufacturing,

and tourism where the country stands out

among peers. Vietnam is vibrant and on the

move! n

Page 55: Micro-Cap Review Winter 2010

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Page 56: Micro-Cap Review Winter 2010