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Micro-Cap Review Magazine is published Quarterly, Spring, Summer, Fall, Winter POSTMASTER send address Changes to Micro-Cap Review Corporate Offices. © Copyright 2007 by Micro-Cap Review Inc. All Rights Reserved. Reproduction without permission of the Publisher is prohibited. The publishers and editors are Not responsible for unsolicited materials.Every effort has been made to assure that all Information presented in this issue is accurate And neither 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.

e d I t o r I a l

Editor’s Letter
n 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, microcap 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 capital 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, hunting 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 countries 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-

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gin. Chinese companies looking to go public in the United States required catch-up accounting and SOX readiness, which inevitably created 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 underwriting 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 investment 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

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 reliance 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 verifications 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

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C O N T E N T S
Q U A RT E R 1 WWW.MICROCAPREVIEW.COM 2010

Finance & Investments
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A New Year’s Recommendation for the VC Community by Marshall Sterman The Globalization of Consumerism by Jordan Kimmel China’s Micro-caps by Holmes Stoner Ask Mr. Wallstreet-The New IPOs by Sheldon “Shelly” Kraft Investing in China Micro-cap Stocks by Matthew Hayden Funding Chinese Company Growth by Beau Johnson Junior Mining and Exploration Investment Strategies by Ray Suprenard On the Market by Dr. John Faessel The Other Side of the Story by Ron Reuven Ombudsman by Jack Leslie Investing in Vietnam by Ben Tran

Legal, Tax & Accounting
50
Compliance Corner by Chet Hebert

12 15 18 20 23 36 39 46 51 53

Book Reviews
32
Start-up Nation Exceeds on the Test by Dr. Larry May

Human Resources
35
Managing Talent in a Downturn Economy-ATG by M.C. Elvis Oxley

Profiled Companies
8 27 31 43 47
Bond Laboratories T3 Motion VCorp Services Healthy Coffee International Rogers Oil & Gas

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A New Year’s Recommendation for the VC Community
eneral Doriot must be rolling over in his grave as he listens to venture capitalists (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.
Not to worry. The mavens in Silicon Valley and their counterparts on Route 128 (actually 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 jockeys 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

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Marshall s. sterMan

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 tariff, plus the 20 percent slice of profits without claw backs, was proof of that. But without a Thundering Herd, legions of fawning analysts, 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.
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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 rolling 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 performance, track conditions, and a host of other data that equated to charting, priceto-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 (perceived 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 intellectual 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
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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.
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 “window” or be able to insure their depositors, but can structure for a different environment 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 capitalist also need to be sure that they are not on the opposite side of their borrower/client. 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 merchant bankers (aka VC) change their selections/choices/beauty contest winners, but they need to be able to orchestrate multiple exit opportunities without the help of a system 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 engineered. 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 institutional investors), M. S. Sterman & Associates (merchant banking), Pilgrim Financial Services (investment 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 entrepreneurial 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 organizations. 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 lieutenant from 1955-1958. n

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PROFILED COMPANIES

very so many years the beverage industry introduces a major new category. When this happens, a multi-billion dollar drink segment emerges. Seemingly overnight obscure manufacturers become giant household names that join the ranks of CocaCola 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 promise 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 productivity. 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

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– 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 introduced into the United States in 1997. Today it remains the leader with nearly 50 percent share of a market estimated 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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“GOOG”?
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Looking for the next

a Financial Publisher, Media & Entertainment Company

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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 product to meet demand, and has assembled a management team with deep industry relationships to create a strong 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 number 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 executives 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!

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 dehydration 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 reduction 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 formula 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 CocaCola 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 exclusive distribution agreement with Pepsi, essentially eliminating two of the three top selling energy drinks from the beer distribution system.

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 product 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 beverages that do more than just quench your thirst. “The intrigue is in the fringe part of the beverage businesses, which seems to be growing, 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

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 multipacks, 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 million 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 finding volunteers to test the product.

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

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 manufactures 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™.

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. Micro-Cap Review Magazine

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the globalization of consumerism
Demand creates new “magnets”

T

he 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.
As global trade continues to expand and multinational corporations spread around the globe, we will continue to see an everexpanding need for an improved infrastructure. 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 manpower. 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 schedule in terms of maintenance and repairs. In fact, our population has grown dramatically over the years and our entire infrastructure

by Jordan KIMMel

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 doubling its shipping container traffic. China is employing their workforce to help bring up their standard of living while also creating 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 www.microcapreview.com

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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.
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 multibillion-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 consumerism will lead to further projects with a scope we can’t even imagine. The global infrastructure build-out is taking 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 taking 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 energy grids and massive communication projects 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 engineers, 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 current 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. Capitalintensive 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 advancements to be excited about the opportunities to invest in the infrastructure sector of today. With the advent of the Internet, consumers 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 infrastructure 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 individual 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 opportunities presented in the various sectors that benefit from the ever-expanding infrastructure 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 manages 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

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China’s Micro-Caps
A Huge Investment Opportunity

F I n a n C e

by holMes stoner

why look At micro-cAPs?
Investors buy micro-cap stocks mainly to profit from inefficiencies in the stock market. In fact, information inefficiency is higher among small-cap stocks than blue chip stocks. Investors who can exploit such inefficiency can profit greatly. From my experience, few research analysts write reports on small-cap companies. Thus, much information 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,
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Deng Xiaoping, introduced the Open Door Policy. The reforms initiated under this policy 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-

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tries outsourced production of goods to China, companies involved in this trend benefited greatly. Instead of visiting companies across all sectors and industries, or screening 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 containers, then ships, then machines, then car parts, then automobiles, then medical equipments….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.

ing the environmental consciousness among Chinese people. A strong public awareness of environmental issues will help the government 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 crisis occurs. Because of corporate governance issues, investing in both large-cap and smallcap 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 shareholder. In the worst case, the government will bail out the company .

whAt Are the current themes?
Education Within China’s emerging middle class, we see the demand for education services growing rapidly. Chinese parents are willing to spend a high percentage of their income to educate their only child. They are also willing to spend a lot of money to upgrade their own professional skills to face the increasingly demanding and fast changing job market 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-

will benefit China as a whole, and in particular 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 development. An important source of immigrants will be overseas Chinese. Overseas returnees 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 foreigners 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 kilometers 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 companies give younger employees a chance to make an immediate impact and move up in the company.

About the Author 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
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

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

The New IPOs
by sheldon “shelly” KraFt

A

fter 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.
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 compliance issues, or may have had lousy management. Many of the companies went bankrupt. 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 public 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 underwriting, 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, shareholders of the public company shells disappeared. Worked, however, continued on the shells, and clean-up costs started to accrue.

The stock market in recent years can be compared to the California wildfires. In the last few years, fires in California have ravaged hundreds of thousands of acres of forests 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 companies. Many such companies did not have any comeback hopes, last minute management 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

Keeping track of transfer agents, stock certificates, 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 company 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
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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 guarantee of ever being funded. But the market has changed dramatically. The capital raising 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 sources. 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 public 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 valueless and as such these worthless certificates became the proverbial wallpaper for the new bathroom walls. Regardless of the many issues, the public
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Over time the ground will grow again and new tundra will emerge. Incredibly the same has started to happen for the leftover public shells.
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 desirable and gave “instantaneous gratification” to all investors. I would love to write a book entitled, Instantaneous Gratification-–welcome 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 documents 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 shareholders 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 bathroom 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 company 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

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F I n a n C e

Investing in China Micro-cap Stocks
n 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.
The country will continue to enjoy strong growth in 2010 due to several macroeconomic 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 increasing consumption and infrastructure spending. Monetary policy, however, will likely be more restrained, as China tries to rein

I

by MattheW hayden, PRESIDENT OF HC INTERNATIONAL, INC.

in excess liquidity to prevent an asset price bubble. Lastly, China should see a mild inflation 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 momentum of the economy and the lower base for comparison in 2009. Industries that should benefit from government policies include forestry, agriculture, environmental protection, 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 monetary policy will spur volatility. They believe
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banks, insurers, Internet businesses, healthcare services, and equipment providers will do the best. “A property market bubble cannot be ruled out” if monetary policy remains “too accommodative for too long,” but they believe valuations are not stretched. In addition, 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 quarter. 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 happen 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 perspective 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 majority have bilingual staff, and most do a decent job at communicating to Englishspeaking 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 capitalizations, 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 getting 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 efficient 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 unnerving, 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, particularly 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 basically 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 investing 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 accretive 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

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F I n a n C e

funding chinese company growth & going Public in the united states

by beau Johnson

n 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 unimaginable just a few years ago. This communist nation has learned how to cash in on capitalism. The country and its people are growing richer and more powerful each day.

I

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,” initiated an unprecedented social and economic transformation that ended Chairman Mao Zedong’s devastating Cultural Revolution. The successful implementation of this ambitious and revolutionary social experiment laid the foundation for what has

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become the world’s most dynamic economy. Since 1992 the country has garnered annual growth rates averaging near 10 percent. Hailed by the Economist in 2005 as “The Great Leap Forward” and “A Model of Reform,” China has emerged as an economic 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 significant economic downturn since the 1930s, China’s economy continues its unprecedented 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 current global economic downturn. However, as the rest of the world has slipped into a deep recession, China continues to experience 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 setting a new course for its future. Using its considerable resources to sustain growth, create employment, and increase domestic consumption in ways that significantly reduce reliance on exports, the China miracle continues. In an authoritarian political society, Chinese leaders can adjust fiscal and monetary 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 largest in China’s history and, in relation to total GDP, the largest ever initiated by a major country. The cost for the two-year program 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 stimulate 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 countries and took the lead in the recovery,’ said Wang Qing, chief economist of Morgan Stanley Greater China. The growth rate of China’s GDP in Quarter 2 was 7.9%... As to
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China’s GDP growth rate this year, Morgan Stanley predicted that it would reach 9 percent 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 economists think its GDP jumped by an annualized 15-17%...In contrast, America and Europe probably saw their economies contract...Asia’s recovery is on track...Unlike in America and Europe, where crippled banking 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 quarter. 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 dollar 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 percent of capacity and/or initiate massive tax and spend policies while borrowing unprecedented 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 massive 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 largest 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 unprecedented. 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, rising 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 economies 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 production 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 fundamentals 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 markets. For seasoned investors who understand China, who have the patience to implement 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 markets, the fundamental strengths in China are becoming obvious. There is a clear indication 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 economic 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 within and beyond its public equity markets. n

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

t3 motion, inc
business summAry:

F

ounded in March of 2006, T3 Motion, Inc. (T3 Motion) is a California-based company that specializes in zero-gas emissions electric vehicles serving the professional 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 markets, and the unique iconic design characteristics that make them ideal for the professional fleet market. T3 Motion’s commitment 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 engineering 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 critical analysis of the functional needs and performance requisites of the professional sector, 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 characteristics. 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 professional 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.

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 position 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 market that sets it apart as the iconic professional image in law enforcement ESV solutions.

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, inexpensive, 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

Between 2008 and 2009, we further built upon our success in the law enforcement market by partnering with the five largest private security companies and national property management companies to provide 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 million 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-

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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.

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.

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 proposal 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 market 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 market 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

structures, inside large commercial buildings, around building perimeters, as well as sidewalks and roadways connecting those areas. The elevated platform of the T3 enables officers/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.

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 unlimited 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 professional 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 enforcement operations in parking lots, parking

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 markets, 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 professional community. The T3 Motion solution is incredibly effective in a variety of dayto-day professional applications and provides an effective way to reduce both the cost of
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fleet ownership and carbon emissions. Many companies are grappling with the need to cut costs and reduce carbon emissions. Their vehicle fleets represent a significant 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 internal combustion engine vehicles. Traditionally included in a business case for vehicles, lifetime 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 registrations 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 addition 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 distance 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 professional 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
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research with multiple national security, property management, and law enforcement entities. 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 agencies reveals an average annual savings of $12,000 to $15,000 per gasoline powered vehicle per year (based on $2.00 per gallon). 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 personal 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 technology should be a benefit to both our professional-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 opportunity to share with the public their myriad of reasons for making the leap to clean technology. 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 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. Micro-Cap Review Magazine

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vcorp and the global economy

W

e live and work in an ever-changing 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 communications. The world that we live in has made it possible for attorneys and paralegals to become mobile and virtual, allowing attorneys and other legal professionals to utilize experienced professionals efficiently and economically. 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 experienced 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 coming into their own, it is becoming increasingly possible for legal services providers to serve clients across borders.

their US corporate entities in the United States. Israel is a small and young country, yet it has a strong economy, a modern banking system, an educated population, and laws aimed at attracting foreign investors. Israel’s high-tech industries, including the life-sciences industries, are among the world’s most robust. The Israeli business scene is heavily 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 developing 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, intellectual 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 telecommute. 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 environment that Vcorp Services continues to develop its cross-border relationships and provide expertise in corporate services to clients worldwide. n

enter vcorP services, llc.
Vcorp Services, LLC has developed relationships with law firms that are serving Israeli businesses. Its objective is to assist Israelbased investors and entrepreneurs establish
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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. Micro-Cap Review Magazine

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G e n e r a l

Start-up Nation Exceeds on the Test

I

srael is a young country, plagued by hostile neighbors, perpetual security threats, an Arab boycott, and an absence of natural resources. It was a start-up country that succeeded beyond the world’s imagination.
Israelis made the desert bloom, fought and won major wars, and absorbed poorly educated and penniless immigrants. The country did all of this while creating a dynamic community 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 spokesperson 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

by larry May

technological innovations that permitted a faster, better chip were conceived by a combination 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 unprecedented productivity. The authors note what Harvard Business School professor Michael Porter calls “clusters” made up of universities, educated workers, and entrepreneurial risk takers in explaining Israel’s economic miracle. The military experience and culture are formative characteristics. Americans identify themselves with Ivy League credentials, 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 technological superiority as a condition for survival. Individual initiative and decision making 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.
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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 cutting-edge Israeli companies. Warren Buffet, the oracle of Omaha, made his first foreign investment 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 medical devices, pharmaceuticals, and biotechnology. 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 provides 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 people. 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 entrepreneurship that have spanned other cultures and decades. His analysis focuses on a society that elevates intellectual achievement, a protestant work ethic, and ambition rather than force and violence. His earlier book, Wealth and Poverty, was a persuasive argument 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 economic 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 government was the major owner of banks, corporations, 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 industrialized nations to second behind only the United States in the key fields of telecommunications, microchip software, biopharmaceuticals, 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 reinforces Start-up Nation with complementary and additional compelling narratives. There are many Israeli companies deserving 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 coverage 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 recognized 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 history of a unique country and the economic engines that power its trajectory forward.
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Opportunity…
is looking you in the eye

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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

n an economy with double digit unemployment, many companies believe that they should be less worried about finding employee talent. Besides, a swell of welltrained, 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 inhome sales and schools that teach in-home massage. One former telecommunications executive walked away with a job offer from an alternative energy company – for twothirds of his previous salary and no benefits – which, in his words, “beat being unemployed 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, according 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 matches their core capabilities. What was once labeled “sales” may now be more marketingfocused. 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
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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 companies manage talent more effectively. Their system, ATGenius, works through four interlocking 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 within the organization, strengthen leadership in the organization, facilitate organizational change, and improve employee productivity and commitment, and operate at peak performance with lower costs,” states Stephan Pollan, Chief Executive Officer of ATG. Based on the six points above, ATG’s system is the necessary ”secret sauce” for individuals 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 practices, policies, and management styles that support employees at all levels and their customers. Her work focuses on the following areas: • Facilitating decisions to help stakeholders work across personal, professional, or cultural differences • Building teams and one-on-one relationship 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 companies 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 leadership training and development? Is the organization structured in an optimal way? The right answers to these questions are essential 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

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F I n a n C e

M

by ray suPrenard

Junior mining and exploration Investment Strategies In 2010
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any industries were turned upside down in the stock market 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 companies operated based on one business model. That model usually entailed the following steps. First, companies would find a property with suspected mineral reserves, then they would identify the reserves, and then would “prove out” such reserves by conducting geological studies and “drill programs” to determine the amount of reserves and their recoverability. After reserves are quantified, companies would then implement a mining program and begin producing on those reserves using capital raised in public markets. In the past this model worked because larger companies had little interest in exploring for and proving reserves, which inherently 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 accomplished, those smaller companies would then develop the properties or sell those properties 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 exploration companies whose business model was based solely on reserve values. Basically, the market said, “We are unwilling 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 property to a larger mining company. For many years, the reserves value alone was enough
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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 producing from their properties and grow the company 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 latter have had the benefit of revenues, as well as a portion of their reserve values capitalized 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 corrected. 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 setting up production on their primary copper property in Chile and returned to production 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 production 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 producers. 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.
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investors should look for
companies that are increasing both revenues and assets through production and exploration. Moreover, such companies should have assets located in highly stable, low production cost countries, such as Peru and Chile.
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 highest 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 minerals 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 mineral deposits allow companies to earn significantly higher profits than if those deposits 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 companies that are increasing both revenues and assets through production and exploration. Moreover, such companies should have assets located in highly stable, low production 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 management team that knows how to develop

private and public companies within multiple industries. Management has solid relationships with people in the financial markets 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 revenue growth that I have seen. Frankly speaking, 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, international 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 recognized as an expert in the trading of international commodities, including but not limited to precious metals, base metals, and oil. Additionally, as a practical expert in corporate financing and company expansion, he is currently involved with many of the largest private equity funds in the world, assisting them in asset allocation and primary corporate investments. n

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FInanCe

ON THE MARKET
Commentary and Insights
by dr. John Faessel

❏ 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 Microcap 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 ’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 coppergold 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 discovered 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
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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 internationally 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 certainty that Mongolia will become a staggeringly prosperous nation much like Kuwait. What Ivanhoe found buried in the vastness of the Gobi Desert is a 6.6 kilometers long, 1.5 kilometers deep, and about 1 kilometer 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 delineated 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 president 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 estimated 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 billion 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 stupendous 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.

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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 MinesRio 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 largest producer of metallurgical and thermal coal. Ivanhoe spun off Ovoot Tolgoi to South Gobi Energy Resources Ltd. (SGQV), 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 building, 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 indicated coal resources at Ovoot Tolgoi have been upgraded to total proven and probable reserves of 114.1 million tons, with 92 percent 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 highgrade. 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 independently 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 metrics of coal look dazzling to me. China today is the world’s largest consumer of metallurgical and thermal coal. Coal provides up to 70 percent of China’s energy, and some analysts believe that prices for coking/metallurgical coal, the form used in steel production, 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 increasing 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 highpotential 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 tungsten, silver, and rhenium that taken separately would be exceptional mining plays. I mentioned that Mosquito’s market capitalization is only $71 million—yet its molybdenum 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 comparisons. 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
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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 company generally trend higher. As part of the process, add in investment banking relationships, 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 infrastructure, 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 management is well along in spreading the word. From what I’ve heard, the biggest mining companies in the world are now aware, and are becoming 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 companies 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 million 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 project 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 (earnings before interest, tax, depreciation, and amortization) and using a long-term, basemetal 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 initial 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], headquartered in Brisbane, Australia, is a leading provider of engineering, project management, 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 principally as an alloying agent in steel, cast iron, and superalloys to enhance hardenability, strength, toughness, and wear and corrosion resistance. Ideal for tough environments where heat, pressure, and corrosion are factors, molybdenum makes steel stronger and lighter and makes stainless steel more resistant 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 presentation, fact sheet, and the CUMO interactive 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 Dr.Faessel@onthemar.com.

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

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ProFIled CoMPanIes

Healthy Coffee International
(Pink Sheets: HCEI)
cAtegory creAtor
The architect of the Healthy Coffee concept, Rick Aguiluz wanted to create a product 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 distribution 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 marketplace at the junction of three mega-billion dollar industries: coffee, wellness beverages, and energy drinks.

“hArDest working mAn in mlm”
It all started in 1996 when Rick Aguiluz was involved in his first network marketing company. Within 13 months he became the top associate with over 25,000 distributors 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 history, bigger than the launch events of the United States, Mexico, and Canada combined. Aguiluz worked for two public companies 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-president of sales and marketing. He built the

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1,200 square foot operation with 800 distributors 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 regularly. 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.

eliminating anemia, and possibly reducing cell damage, thus helping to counteract agerelated 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 triterpenoids, polysaccharides, and organic germanium. Research has shown that reishi is a powerful source of antioxidants that help balance and strengthen the immune system while helping to eliminate toxins.

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 countries: Australia, Canada, China, Germany, Japan, New Zealand, Philippines, Puerto Rico, Samoa, Sweden, United Kingdom, and distributors in 29 more countries. The company’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 independent 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

ProDucts
EnerGi Blend: The only instant gourmet coffee 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.

why heAlthy coffee
Healthy Coffee sells a line of instant gourmet coffee drinks that are not only delicious, but also healthy. The products are based on proprietary formulas that combine the health benefits of ginseng, reishi mushroom, and other top-quality ingredients with the world’s finest coffee beans. Ginseng helps boost energy levels, while reishi 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 effectiveness in reducing fatigue and increasing stamina. They have also found that ginseng plays an important role in forming red blood cells,

future ProDucts
EnerGi Choco: The only instant chocolate drink with ginseng and reishi.

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.

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The Micro Cap C Suite Executive Search Firm
Stanton Chase is ranked among the top 10 global talent search firms with 69 offices in 41 countries we possess a global reach to serve our good clients worldwide. We have six specialist practice groups that operate as international teams which provides us a unique opportunity to listen carefully to our clients. Stanton Chase is owned by its partners who take individual responsibility for personally executing on and delivering outstanding quality for each assignment. Stanton Chase is a member of the Association of Executive Search Consultants.

LEADERSHIP TALENT FOR GROWTH
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by ron reuVen

F I n a n C e

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 useless 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 various 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 yellow 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, exchangetraded funds (ETFs), money managers, and even outright purchases of gold bars, thinking 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 country’s bondholders are getting worried? To scare everyone even more, we also don’t know exactly 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 anyone 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 managers 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 government 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 perspective, our economy is larger than the next four largest economies in the world...combined! 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. jewelry), 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 business 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 precious metal will have more demand than “projected supply,” then they have the only reason you ever need to speculate into something. 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 printing more money. In my opinion, if investors wanted to protect themselves against inflation, 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, insurance 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 www.microcapreview.com

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ProFIled CoMPanIes

The New Oil Boom is Upon Us
I
nvestors will find on the Web site of Rogers Oil & Gas Corp. a very exciting 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.
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 development 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.
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RO G E R S O I L & G A S

Rogers Oil & Gas is an oil exploration and production company that offers superior returns for growth-oriented investors. Incorporated in Delaware and headquartered in Phoenix, Arizona, the privatelyheld 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 production company. Investing in commodities requires strong risk-management skills, similar to those employed in the insurance business. Rogers’ expertise in project financing has made his transition to the oil and gas industry very successful. Keenan, a professional accountant since 1980, has considerable 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

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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 success 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 wonderful 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 investing in “win-win” projects that benefit shareholders. 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 success. During the credit crunch, Rogers Oil & Gas has provided vital capital to companies 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 formula: 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 company 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 discovered 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 costeffective. 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 extracting 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 investment. 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 barrels per day on average, with some wells initially flowing a staggering 3,000 barrels per day. When these profit margins are combined 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-minded 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 biggest 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 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.

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The Compliance Corner
by Chet hebert

As we prepare this edition of Compliance Corner, many of our readers across the United States have weathered a brutal winter. 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.

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 information on brokers and firms currently registered 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 continually available rather than disappear after two years.

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 clients. The new rules also require annual audits of client assets and a review of the advisor’s internal controls to protect client assets.

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.

new rAte for fees PAiD unDer section 31 of the eXchAnge Act; effective DAte: JAnuAry 15, 2010
The SEC has enacted its regular appropriation 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 transactions on the exchanges and in the over-thecounter markets from $25.70 per million dollars to $12.70 per million dollars. This fee rate will remain in place until further notice.

About the Author
Chet Hebert is founder and president of The Compliance Department Inc., a compliance consulting 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

finrA rulebook consoliDAtion
The FINRA Office of General Counsel continues 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 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 www.microcapreview.com

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F I n a n C e
by JaCK leslIe

ombudsman
T
his 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.
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 critical 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 financial 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 registration. 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 registered. 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

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SGS-COC-004752

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vietnam V
by ben tran

Overview of

ietnam 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.
Forces driving this productivity improvement 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. 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

vietnAm towArD us cAPitAl mArket entry
It has been a while since I was involved in
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vietnAm outlook
Since the end of the Asian financial crisis in 2000, Vietnam has managed to restore fast economic growth with the help of stateowned enterprise reforms, fiscal incentives, improvements in legal protections for businesses, the establishment of an equity market, 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 individuals 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 population 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
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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 investment 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 companies to list on U.S. stock exchanges; however, the rule does not yet allow 100 percent equity listing for Vietnamese issuers. Thus, forming a joint venture with a foreign company is the only alternative for listing Vietnambased 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 difficulties 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 representatives 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 transaction. 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 market. 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 companies 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 investments in Vietnam.

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