Micro-Cap Review Spring 2010 by Planet MicroCap Review Magazine

MICRO-CAP REVIEW $5.00

Quarter 2 • 2010

Investing in the Green Economy By Todd Pitcher [6]

Geothermal Energy-Heating Up By Larry Turel [37]

Jatropha’s Place in the Biofuels Race By Lissa Swihart [44]

Tax Benefits of Green Energy Projects By Robert Green [66]

Special Green Issue

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UCORE’S BOKAN MINE

Largest U.S. Heavy Rare Earth Deposit: Critical to American Clean Energy

22118 20th Ave SE Suite 142 Bothell WA 98021 Phone: 425-424-3324 Fax: 425-483-8454 www.neahpower.com (NPWZ.OB)

neah power. always onTM.

Neah Power Systems Patented, award winning, disruptive, fuel cell technology with prior investments of ~ $40M from Intel Capital, Novellus Systems, Office of Naval Research, etc. The Company has a world-wide distribution network in place, and is offering direct methanol fuel cell and other renewable energy solutions for consumers, industrial and military applications.

Patented, award-winning technology Multiple US and international patents, highly awarded technology

Top 100 Young Innovators

Startup of the Year Product offerings Contact products@neahpower.com for more information.

Neah Infinity eLTM 50

•  •  •

25W, 50W, 100W, 8 hr systems Customizable power and output specifications Unique non-air breathing capability

Neah Custom eLTM •  •  •

Custom integrated solutions Customizable power and output specifications Unique non-air breathing capability

Neah Hot & ColdTM •  •

1.5T, 3T, and 5T heating and cooling Off the grid or on-grid capable

Neah Remote Area Power Supplies (RAPS)TM •  •  •

1.5kW, 3kW, 10kW+ systems Hybrid solar / fuel cell / storage systems Mini- to large scale renewable energy deployments

E D I T O R I A L

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ere in this issue is our long awaited coverage of the green sector of the micro-cap market. The green sector covers an array of topics, including job creation, water conservation, alternative energy projects, political initiatives, new inventions, economic growth, saving the planet, pollution reduction, energy-saving products, tax incentives, and so on and so forth. Hopefully we have brought you, our readers, the most compelling articles filled with information compiled by our staff and contributing writers operating in the micro-cap space. It is fascinating to see the new companies sprouting worldwide, making the financial community all abuzz with new ideas, new products, and new technologies. We have made a concerted effort to gather a diverse cross-section of the green space, including legal and accounting issues, government initiatives, samples of companies and their future prospects. As publishers we recognize our responsibility to help save the planet; therefore, we have digitized this issue to save paper and have created a cyber distribution system to more than 35 million green-energy aware individuals, along with our readership base that includes thousands of FINRA members, investment bankers, stockbrokers, high net worth individuals, and money managers worldwide. Today’s new “green” micro-cap emerging growth companies may be tomorrow’s large-cap multi-billion dollar household names. Please read this issue online or in hard copy and share with friends and colleagues. Some information is brand new and is written by experts who have all contributed this information for our mutual benefit.

SNN Incorporated 23705 Vanowen St #333 West Hills, CA 91307 PUBLISHER Wesley Ramjeet wesley@microcapreview.com Sheldon Kraft skraft@snnwire.com EDITOR Ronald Stone Ron@microcapreview.com WRITERS Gordon Chiu James DePelisi Michael Fulp Shelley Goldberg Robert Green Robert Haag Chet Hebert Jordan Kimmel Sheldon Kraft Jack Leslie Larry May Daniel Murphy M.C. Elvis Oxley Paul Pelosi, Jr. Todd Pitcher Stephen Robbins Marshall Sterman Lissa Swihart Larry Turel Steven Witherly ACCOUNTING Jennifer Anglade Accounting@microcapreview.com ADVERTISING Vong Bui Vong@microcapreview.com BUSINESS DEVELOPMENT Ron Stone Ron@microcapreview.com CIRCULATION Jackie Peters Jackie@microcapreview.com Suki Chen Suki@microcapreview.com GRAPHIC PRODUCTION Tony Vibhakar Tony@microcapreview.com WEBMASTER Kelvin Chen Kelvin.chen@3amediaonline.com Micro-Cap Review Magazine is published Quarterly, Spring, Summer, Fall, Winter POSTMASTER send address Changes to Micro-Cap Review Corporate Offices. © Copyright 2009 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 MicroCap Review Magazine or any of its staff or authors is responsible

for omissions or information that is inaccurate or misrepresented to the magazine.

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Green companies remind me of biotech companies when they first came into the scene; cloning, gene splicing, and DNA were new terms. Perhaps readers may remember some of those names, such as Amgen, Genentech, and Biosphere. They started in exactly the same way as today’s green companies, as micro-cap companies. The green market potential is even larger than the biotech industry. The green sector reaches far beyond the biotech sector, even as we know it today. The green sector touches every phase of life, including the biotech and pharmaceutical sectors, from solar power to wind, from geothermal to hydrogen-powered vehicles. As green company technologies continue to develop, we will see new products on store shelves. Each day amazing breakthroughs in the green sector are being discovered that help to eliminate pollution, conserve water, and reduce harmful emissions. Finally, the save-the-planet consciousness has reached a cadre of entrepreneurs willing to leave corporate life to start green companies, whose lifeblood is provided by the entrepreneurs’ own initial funding or those of friends and family members, early investors, non-profit organizations, or government agencies. Hopefully we have made our small contribution in this issue of Micro-Cap Review. We used recycled paper and non-toxic ink to print this issue and we digitized and made it available on the Web to engage readers interactively. If we all do our part, Earth will be a better place to live for us, our children, and their children.

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 2

2010

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Featured Articles

Profiled Companies

12 14 21 42 50 56

Neah Power Systems Ucore Rare Metals VisEnergy Private Company Marketplace Converted Organics Terrasphere

Viewpoints

Green Paradigm Shift Technologies by Gordon Chiu Uranium: The New Green Metal by Michael Fulp Geothermal Energy-Heating Up by Larry Turel Jatropha’s Place in the Biofuels Race by Lissa Swihart Wealth from Waste by Steven Witherly & Larry May

Finance & Investments

Investing in the Green Economy by Todd Pitcher Clean Tech-The Technology Eco-Boom by Jordan Kimmel China’s US-Stock Exchange Listed Cleantech Companies by Robert Haag Ask Mr. Wallstreet-Micro-cap Capital Formation by Sheldon “Shelly” Kraft The Challenges of Green Investing by Shelley Goldberg

A Challenge to All Entrepreneurs by Sheldon “Shelly” Kraft Government Budget Focus by M.C. Elvis Oxley & Daniel Murphy Getting Jobs and Money into the Economy by Marshall Sterman Green Jobs by Paul Pelosi, Jr. Overcoming Loss by Stephen Robbins Ombudsman by Jack Leslie

Legal, Tax & Accounting

Clean Balance Sheet Can Help a Company in More Ways than One by James DePelisi Tax Benefits of Green Energy Projects by Robert Green Compliance Corner by Chet Hebert

Comics

Wall Street Chicken

69 www.microcapreview.com

Micro-Cap Review Magazine

F I N A N C E

Investing in the Green Economy Promises, Pitfalls, and Profits

ens of billions of dollars are being invested in renewable energy and clean technology, and billions more will be invested over the next decade. There is substantial motivation to do so on several fronts:

Todd M. Pitcher

Micro-Cap Review Magazine

• Governments worldwide are addressing the impact of climate change with emissions reduction strategies (e.g., adopting lower carbon intensive generation technologies and those that reduce emissions); • Alternative energy and clean technology have become a viable trillion dollar growth industry and present investors with ample opportunities to invest in future energy needs; and • Governments generally remain committed to the potential for new jobs created by

“New Green Deals,” despite the mixed results of the 2009 Copenhagen climate conference. Whether the rationale is environmental, economic, or political, money is flowing into the alternative energy and clean technology market. • The United States will use about $100 billion of the $787 billion government stimulus package towards clean-technology investments and activities. • South Korea expects to commit $84 billion to clean-technology investments by 2013.

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• China could end up spending $440 billion to $660 billion toward its clean-energy build out over the next decade. • Through the Clean Tech Fund, the World Bank and other multilateral organizations plan to raise $40 billion for investment into countries to deploy low-carbon technologies and renewable energy projects. • Bloomberg New Energy Finance recently projected that the annual investment in renewable energy must increase to $230 billion by the end of the decade, if governments are to meet their emissions reduction targets. Renewable energy will account for 22 percent of the world’s installed power generation capacity by 2020, up from 13 percent today, and will account for 31 percent by 2030. However, renewable energy must account for 40 percent by 2030, if governments are to hit their targets. The list goes on. These data points support the thesis that there is a real, long-term commitment to investing in and adopting alternative energy and clean technologies at the federal, state, municipal, utility, and consumer level. For an investor, the impulse for opportunity is poignant. The range of potential investments in various segments of renewable energy and clean technology is broad.

A fundamental way to make money in the financial markets is to find out where “everyone” is going and try to get there first. But risks abound. Investors who want to be part of the green economy should be cautious of falling into the trap of “environmental religion” investing. Successful investments in emerging growth industries frequently require a horizontal and vertical understanding of the marketplace. Even though revenues from solar, wind power, and biofuels are projected to increase in aggregate to over $300 billion over the next decade, investing in any garden variety solar, wind, or biofuel company will not nec-

essarily result in a winning or even a prudent strategy. A diversified approach to investing isn’t without risks either. The first, and one of the most widely known clean technology funds available today, the PowerShares WilderHill Clean Energy Fund (NYSE:PBW), is down 20.6 percent year-to-date, and is down 49.7 percent since 2007. On September 22, 2009, the NASDAQ OMX Clean Edge Smart Grid Infrastructure Index began with a base value of $250. As of June 2010, it traded at about $242. On June 26, 2008, the NASDAQ OMX Clean Edge Global Wind Energy Index began with a base value of $250. As of June 2010, it traded at about $114. The NASDAQ® Clean Edge® Green Energy Index (CELS) began on November 17, 2006 at a Base Value of $250. As of June 2010 it traded at about $187. Despite the promise of hundreds of billions of investment dollars pouring into the green economy, stock performance has been spotty. How is a green investor going to reconcile the incredible potential of growth in alternative energy and clean technology markets with totally lackluster stock performance over the past 24 months? At what point do sectors like solar and wind come back into favor and begin to outperform?

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Still time to get in early… but watch your step.

Greener tomorrows… Here is what we know. Big money is flowing into the green economy. Companies that have developed differentiated technologies at sufficiently low costs to compete with incumbent fossil fuel energy technologies without government support will be winners in the long-term. These companies will continue to have access to the capital markets and will have sufficiently strong balance sheets to adapt, scale, and consolidate as conditions dictate. As with any growth industry, the profile of leaders in the renewable energy and clean technology markets will change with alarming frequency. Many companies with leading positions today may lose their edge tomorrow when a more cost effective technology emerges. We have seen this dynamic unfold across the landscape of renewable energy and clean technology segments.

What investors should look for • In solar, investors should avoid companies integrating downstream, unless there is actually a plan to “own” the customer. Too many midstream firms think the easiest way

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to fill their manufacturing pipeline is to buy accounts by purchasing integrators. This is an expensive, high-overhead way to pick up a business in most cases. Scale is probably more critical in solar manufacturing than in any other industry, which is rightly obsessed with beating the costs out of systems. Cost-perwatt is a more critical metric than efficiency when evaluating a successful solar project in which a solar investor has plenty of space but efficiency remains critical on the rooftop. • In wind, investors should avoid newcomers. The market is mature, and the incumbents are well established from a brand, installed customer base, and manufacturing perspectives. The exception to this rule will be firms that are entering the market with a differentiated profile (technological, geographic, or customer base). These firms may be purchased by an incumbent anyway. • Potential upside exists in the demand management, controls, and efficiency market. The low-hanging fruit of the green economy continues to be consumption reduction. This is the logical first step which is ignored all too often by many energy generation firms, because they just want to sell more panels or other distributed generation. Companies that build relationships with customers based on energy expertise and trust by first reducing total energy spend and demand and then by supplying alternative generation will win out in the end. Ultimately companies find themselves with a strong client base for developing recurring revenues. • In biofuels, investors should avoid ‘generation 1’ business models. The winning firms will have to vertically integrate, be logistically differentiated, and be extremely efficient, given the razor-thin margins which are endemic to the industry. From a feedstock perspective, regardless of the actual substance to the food-fuel debate, the bottom line is that this debate will continue to be noise and therefore is subject to too much political risk to make sense as an investment. Investors should try to find firms that can scale using non-edible feedstock. • Geothermal is a proven, base-load tech-

nology with tons of potential. The problem is that geothermal development is extremely capital intensive on the front end and takes substantial land and capital resources to make sense as a long-term equity investment for growth investors. The most appealing model is one which is diversified and encompasses developing, owning, operating, technology licensing, EPC, and even consulting. Interestingly, there haven’t been much in the way of geothermal companies adding waste-heat recovery to the mix, which would be lower in terms of scale (sub-10MW), but which balances out some of the logistical risk that greenfield geothermal development carries. Recovery heat energy firms tend to generate quicker cash flow, and the technologies in both cases are actually very similar. • The EV, hybrid, and PHEV market is going to be massive, eventually. Every major auto manufacturer is heading down this path. The problem for investors is that there isn’t a good way to find a reasonable risk profile for pure plays in this space. Invariably, those that succeed will get consolidated. On a related basis, energy storage carries much of the same characteristics and perhaps even greater upside potential, but also an incredible amount of technology risk. It is almost prohibitively expensive to get into the game, and the curve to commercialization and cash flow profitability is inevitably a long one.

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This greatly increases the risk profile of energy storage stocks, which are only suggested for investors with the strongest stomachs. The bottom line is that successful investing long-term in the green economy requires a fair amount of due diligence and knowledge about the markets. There are too many ways to underperform in the short-to-mid term. Don’t buy into the “rising tide” thesis. It may have some level of relevance in bubble-markets, but can absolutely destroy a portfolio in just about every other instance Investing smartly in alternative energy and clean technology requires a broader, contextual understanding of the energy markets as a critical backdrop, sensitivity to political winds, as well as more specific vertical-related comprehension about key technologies and what makes them better and more differentiated. Even then, there is no guarantee of success. These practices can only mitigate risk, but the reward, for investing smartly in the green economy at this still early stage can certainly be spectacular.

About The author Todd M. Pitcher is founder and managing partner of Aspire Clean Tech Communications, Inc., an alternative energy and clean technology-focused professional services firm based in San Diego, California. Mr. Pitcher writes and publishes the Aspire Week in Review newsletter. For more information about Aspire, please visit www.aspirecleantech.com. n

Micro-Cap Review Magazine

V I E W P O I N T S

A Challenge to All Entrepreneurs

his story is being written at a time when the British Petroleum (BP) oil spill will go down in history as the worst environmental disaster ever.

I just don’t feel right, knowing that this accident could have and should have been avoided, but wasn’t. My heart goes out to the families of those who lost their lives in this tragedy. I wonder what steps are being taken to prevent this calamity from ever happening again. We have the technology to find, drill, pump, and control the flow of oil a mile below the ocean surface, yet emergency equipment is not available to cope with a disaster such as the BP oil spill? Is there no plan yet in place to remediate oil that is spilling into the ocean? Even today, the oil spill hasn’t been fully stopped. I remember when Iraqi troops were exiting Kuwait after their failed invasion. The last terrorist act that the soldiers committed was to destroy Kuwait’s oil wells. The press coverage of wells burning in the desert is now forgotten by most of us. The BP oil spill is very different. This oil spill

will affect our children and grandchildren. Fish covered with oil on their skin and gills are being poisoned. So far, British Petroleum has not had much world pressure outside the United States; yet some twelve weeks after the Deepwater Horizon oil rig exploded in the Gulf of Mexico, millions of gallons of oil are still destroying wildlife, shorelines, habitats, preserves, ocean vegetation, and in some cases causing irreparable damage. First, it was Hurricane Katrina and now the BP oil spill. This hard hit area of the United States is being destroyed. Jobs are disappearing; industries like shrimp fishing are at a standstill. Terrorists are watching the same news reports as we are, which alarms me to no end. We have to get this right folks. It is time to regulate and plan for worst case scenarios on every offshore oil rig and establish procedures when dealing with such disasters.

Whoever has the answer and can have it tested, perfected, and put into the market will be richly rewarded.

by Sheldon “shelly” Kraft

Micro-Cap Review Magazine

Where are the answers? This is a great challenge to entrepreneurs near and far. Necessity is the mother of invention. Someone out there has the answer, whether he or she is an engineer, mechanic, or a librarian. It doesn’t matter what line of work that person is in. What matters is that the person invents the needed technology. Whoever has the answer and can have it tested, perfected, and put into the market will be richly rewarded. The world doesn’t need another can opener or a cork screw. It is time ladies and gentlemen to think, design, and build something that works and works quickly. n

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PROFILED COMPANIES

The Need for Power Neah Power Systems Figure 1: Compact, high power -density, silicon fuel cell

A company with an innovative fuel cell technology that can change the way battery power is used in consumer, industrial, and military applications

The Need for Power

ortable electronic devices have become ever-present and have an ever-growing need – reliable power. Laptop computers, mobile phones, and portable e-books are only a few of the power hungry applications that demand a ceaseless supply of power. Consumer products lead the way, but industry and the military are also seeking effective mobile and “off-thegrid” power solutions. The need for portable power has been primarily met by lithium-ion batteries. The drawbacks to this technology are many, including low power capacities, long recharging times, and added weight. Lithium-ion batteries also have a history of safety and disposal concerns. Manufacturers are increasingly turning to fuel cells as a replacement to battery power. Fuel cells generate power by the electrochemical conversion of a fuel. The advantag-

Figure 2: Neah uses cost effective technologies like atomic layer deposition, injection molding, and wire bonding

Micro-Cap Review Magazine

es to fuel cells are many. They produce power for a longer period and can be recharged instantly. Direct methanol fuel cells are the most promising solution because of their compact size and use of methanol as fuel. Commonly referred to as wood alcohol, methanol is readily available, environmentally safe, and “energy dense.” Most current fuel cells are based on a decades old technology called proton exchange membrane or PEM. Each PEM contains a gel-like membrane to produce power. Although performance of PEM-based fuel cells has improved since their introduction in the 1960s, they continue to have significant technical and commercial limitations. PEMs require access to air to produce needed chemical reactions. Environmental factors, including water and pollution, can reduce the effectiveness, reliability, and duration of the power supply. Neah Power has developed an innovative technology that eliminates the primary drawbacks to PEM-based fuel cells and batteries. Neah Power has created a porous silicon design that uses a liquid electrolyte, which allows the fuel cell to operate in nonair environments. This can be particularly useful in naval, aerospace, or military applications where little or no air is available. The silicon-based fuel cell can produce more power for its size and can be manufactured using existing semiconductor production facilities. This makes the Neah Power fuel cell a cost-effective solution.

Neah Power has multiple U.S. and international patents, and the technology has won multiple awards. Most recently the company was awarded a contract by the Office of Naval Research of the U.S. Navy for the production of a fuel cell prototype.

Limitations of PEM-Based Fuel Cells Like batteries, fuel cells have two electrical terminals or electrodes, one negative and one positive. Fuel cells generate electricity by combining a fuel, such as methanol, at the negative electrode (the anode) with oxygen from air or another oxidant at the positive electrode (the cathode). Electricity is produced from the chemical reaction of the fuel, catalyst, and electrolyte at a common point (the three-phase interface). Current fuel cell designs create this three-phase interface at the surface of a polymer material called the PEM. The PEM serves as a separator between the two electrical terminals in the fuel cell. Its solid lattice contains functional groups that help conduct protons. Since the functional groups are fixed in place and are not available freely in liquid form, the only place for the production of electricity is at the surface of the PEM. This design limits the chemical reaction to a two-dimensional area and restricts the power output of the fuel cell. It also leads to several technical and commercial limita

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Figure 3: Neah Infinity eLTM line of fuel cells available in 5W, 50W, 100W, 8 hr systems

tions, including the fuel crossover contamination, fuel waste, and low power densities. The PEM-based power supply also degrades in poor environmental conditions and from seepage of water from fuel cell ventilation.

The Neah Power Advantage Silicon-based fuel cells have significant advantages over those based on PEM technology. Neah Power’s revolutionary technology replaces the PEM and uses a liquid electrolyte with a silicon electrode structure. Neah Power fuel cells can maintain its efficacy for longer durations while operating in a far greater range of environments. Instead of using a two-dimensional electrode surface, the silicon fuel cell uses a threedimensional zone for higher power output. This design offers a higher “power density” and can produce up to 250 percent more power than can the PEM design (see Figure 1). Neah Power’s fuel cell is self-contained. The porous silicon electrodes can be assembled into cells and stacks without additional separators between the positive and negative terminals. This allows the fuel cell to carry an on-board oxidant, which means that the fuel cell can operate anaerobically (i.e.,without any interaction with the environment). This unique feature opens up markets for Neah Power’s fuel cells that the current PEM fuel cells cannot serve. While environmental conditions, such as humidity, temperature, and pollutants, can cause the typical PEM fuel cell to degrade, the Neah Power self-contained fuel cell includes an on-board oxidant and serves as a reservoir for collecting any excess water. This enhances the operation of the fuel cell by preventwww.microcapreview.com

Figure 4: Neah Hot & ColdTM line of direct current air conditioning available from 5000 BTU to 18000 BTU

impact of using fossil fuels or toxic chemicals to produce power. In view of its “green” goals, Neah Power recently acquired a distributor of direct current air conditioning systems. These systems can function using solar, wind, fuel cells, or battery power inputs, and can operate in locales without access to the traditional power grid.

Available Products ing contaminants from interfering with the chemical reaction. The Neah Power fuel cell has been proven to run in excess of 2,000 hours with less than a 10 percent loss in power. The Neah Power fuel cell also uses its fuel source, methanol, efficiently by employing a recirculation process that operates until all available fuel in the replaceable cartridge is consumed.

Fuel Cell Manufacturing Costs Most PEM fuel cell manufacturers purchase PEM membrane materials rather than manufacture the product internally. In addition, these manufacturers often have to invest in expensive production plants to build and test their product. This leads to high capital and product costs. In contrast, Neah Power uses outsourced semiconductor manufacturing facilities to produce silicon wafers. This provides the benefits of using the cost-efficient infrastructure of the semiconductor processing industry. Thus, Neah Power can take advantage of proven technologies, such as atomic layer deposition, injection molding, and wire bonding. This arrangement allows for favorable economies of scale like those of the semiconductor industry (see Figure 2).

The “Green” Business With the focus on the environment today, individuals and businesses are looking for ways to protect the environment when developing power sources. Using renewable fuels, like methanol, can lessen the negative

Neah is currently taking orders for its various products: the stand alone fuel cell products (the Neah Infinity eLTM) (see Figure 3), the custom designed and application engineered products (the Neah Custom eLTM), the direct current air conditioning product line (Neah Hot and ColdTM line of direct current air conditioning products) (see Figure 4), and the remote area power supplies (Neah RAPSTM).

Meeting the Power Need Neah Power’s patented technologies are ground-breaking and applicable to a wide variety of products and markets. With its technological and cost-effective product offerings, Neah Power could soon be the leader in portable power supply and off-thegrid power systems. 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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PROFILED COMPANIES

A Rare Opportunity Ucore Rare Metals Tackles a U.S. Supply Crisis in the Green Energy & High Technology Metals Sector

ising from a rainy and windswept inlet in Southeast Alaska is a foreboding granite intrusion that locals sometimes refer to as the “Rock.” The location is Bokan Mountain, near the head of Kendrick Bay on South Prince of Wales Island, an area known for its Pacific Northwest scenery and prodigious rainfall. “Bokan is located about as far south in Alaska as you can possibly go without stepping into Canada,” says Jim McKenzie, president and CEO of Ucore Rare Metals (OTC:UURAF; TSX.V:UCU; www.ucoreraremetals.com), the sole owner of U.S.-based Rare Earth One, LLC. “So, the area has fairly mild weather year round, an excellent feature for any mining operation. But it ranks up there with Seattle for the highest annual rain counts in the U.S. Best to take your rubber boots when you venture to Bokan.” The Bokan project is the unlikely center of an emerging white-hot political debate on some of the scarcest, most valuable and most sought after metals known to man – metals that are available in this area of Alaska and very few other places in the Western world. Known by the somewhat mysterious sound-

ing name of rare earth elements (REE) or rare earth metals, they’re a group of metals of strategic importance to the United States. They’re so critical, in fact, that a Senate committee was recently convened to investigate the threatened supply of these irreplaceable “technology metals,” and the progressive cutback of rare earth metals exports from China, the dominant supplier of these materials to the United States and most of the world. So, what exactly are these obscure high technology metals that we can’t seem to live without? “They’re a unique group of metals set off from the periodic table [of elements], since they share unique characteristics unlike any other elemental group,” says Dr. Anthony Mariano, a Massachusetts-based expert in rare earth mineralogy. “Those characteristics – such as thermal properties and super conductivity – have made them absolutely essential to high tech and green technology applications in the modern world.” With such unpronounceable names as Europium, Gadolinium, Terbium, and Dysprosium, they’re an unusual combination of the seemingly exotic and the absolutely indispensible,

and they’re central to the ongoing competitive viability of U.S.-based technology in the 21st century. “Much of what we consider to be the clean-tech, high tech, and industrial complex in the U.S. today would grind to a standstill without the rare earths,” says McKenzie. “China currently has a near monopoly on this product, and an announcement in 2009 indicating a staged withdrawal of these metals from world markets has created a flurry of investment interest. Fact of the matter is that you cannot have a ‘clean-tech revolution’ without access to these technology metals.” That announcement served as a warning shot from China to the West, and the race was on for the United States to find replacement sources in the near term. The Chinese announcement also triggered a phenomenon that some junior resource pundits are calling “Rare Earth Mania,” bringing into focus companies like Ucore, with the largest historical deposit of heavy rare earth metals on U.S. soil at its Bokan Mountain location. In turn, the Bokan project is one of very few contenders capable of meeting a rapidly approaching supply gap,

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The United States is the world’s largest consumer of rare earth elements (or REEs). Until 25 years ago, Uncle Sam was also the world’s largest producer of these materials, with a virtual lock on the art and science of rare earth metals production. But the Chinese changed the equation in 1980s and 1990s, flooding the market with inexpensive REEs and essentially driving the United States out of the technology metals business. The result was the unavoidable closure of the leading U.S.-based rare earth metals mine at Mountain Pass, California. In the fallout, America also saw the loss of rare earth metals processing capabilities and know-how to countries in the East. For example, General

Motor’s Magnaquench operating unit is now owned and operated by Chinese concerns. Such was the case for the past quarter century, with globalization flourishing and China continuing to all but monopolize a field once considered a U.S. birthright. But in 2009, the rare earth metals industry again took an unexpected turn. In August of that year, as part of its Five Year Plan, China announced that it would no longer serve as the world’s primary supplier of these strategic metals. China said that the exponential growth in the demand for rare earth metals had created a situation in which the country was simply running out of these critical resources and could conceivably exhaust reserves in as few as 15 years at the current rates of global consumption. With that announcement, Beijing offered an olive branch to the West, but one with a distinctive barb. Yes, China would be cutting back on rare earth metals exports in the near term. U.S.-based manufacturers, however, could ensure long term access to these crucial materials simply by relocating their manufacturing facilities to China. As might be expected, this suggestion was greeted with more than a little political resistance in the U.S. Congress. Soon after, a lobby effort took hold to reignite the once mighty rare earth metals industry in the United States. In the nine or so months since then, the rare earth metals discussion in the United States has taken on a life of its own. An industry-specific lobby group known as the Rare Earth Industry and Technology Association (or “REITA”) has been hard at work in Washington, D.C. Proposed legislation was recently tabled by Rep. Mike Coffman (R. Colorado) to reinvigorate the U.S. high technology metals sector (introduced to the media as the proposed

as China shuts down rare earth metals supplies to the United States over the next 36 to 60 months. “Unbelievably, much of what we consider to be the essential technologies of today, from laptops to cell phones to medical devices and much more, would be unworkable without the heavy rare earths,” says Mariano. “What’s more, the majority of green technologies touted as alternatives to fossil fuels, such as wind turbines, electric vehicles, and even solar generators, would be largely ineffective without the inclusion of REEs. They’re the absolute lifeblood of high technology and green technology today.”

A Lost Art and a Critical Science

Micro-Cap Review Magazine

“RESTART” Act). The U.S. Departments of Defense and Energy have also weighed in on mushrooming rare earth metals politics, and agendas have been discussed to wean the United States off of its almost complete dependence on China as quickly as possible. In turn, the media has been alight with rare earth metals coverage, with no less than the New York Times and the Economist weighing in on the rare earth metals crisis and its implications for the United States, the world’s largest consumer of these technology metals.

The Bokan Initiative In the whirlwind of renewed interest in rare earth metals, one of the largest REE resources in the West is being expedited to restart production at Mountain Pass, California. The owner of that facility, Molycorp Minerals LLC, has received a great deal of press coverage with the company recently announcing a planned IPO to fuel the RESTART embers. But while Molycorp’s Mountain Pass facility has an abundance of a specific group of metals known as the light rare earth elements (or LREEs), there remains a gaping hole in the supply equation for the United States. That hole comes in the form of heavy rare earth elements (or HREEs). This brings us once again to Bokan Mountain in Alaska and Ucore Rare Metals. “Not all rare earth metals are created equal,” says McKenzie. “HREEs are significantly more scarce than the LREEs and are also a great deal more valuable. While Molycorp has a lock on the largest historical LREE deposit in the States, Ucore has the counterpart with the largest historical HREE deposit. So, between these two companies, the United

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“So, what makes Ucore’s Bokan project so special, and why is it the answer to the United State’s HREE needs?” we asked McKenzie. “Well, there’s a host of factors that set Bokan apart as the absolute near term go-to [source] for heavy rare earth metals in the States,” says McKenzie. “Bokan is a prior producing mine, with much of the required infrastructure still intact – including broad area road networks and prospective ore staging sites. It’s got deep water access pretty well at mine-mouth, which means we can ship largely unprocessed ore anywhere in the world for well under a dollar per ton.”

“It’s in an area that’s been set aside by the U.S. federal government specifically for sustainable resource development, with zero first nations issues,” continues McKenzie. “Bokan is in a temperate weather zone, with ease of access year-round. Importantly, it’s estimated to be the largest historical, non 43-101 compliant HREE deposit in the States.” “But more important still is Bokan’s American location from a political, competitive, and homeland security perspective. Simply put, it’s located on U.S. soil, which essentially eliminates the possibility that the States could wind up trading one foreign dependency for yet another. With enough HREEs to furnish U.S. technology growth in its own back yard in the near term and at low cost, the case for Bokan versus alternative nondomestic sources is strong, to say the least.” McKenzie emphasizes that Alaska has been proactive in getting Bokan back into production as a heavy rare earth metals facility. In April 2010, the Alaskan State Legislature and House of Representatives unanimously passed a resolution that will expedite that process. Resolution 16 states that Alaska legislators will, to the full extent allowable by state law, remove all permitting hurdles required in activating the Bokan project as a producing HREE mine. With this sort of geopolitical support, Ucore believes that an HREE mine can be active in as few as three to five years, which is lightning speed by mining standards. Another drawing card is the growing demand for domestic rare earth metals production at a federal level, with Congress actively advancing this agenda. Ucore is also quick to point out that Bokan is unique not only in the United States, but on a world level as well. In addition to other HREEs, drill assays have indicated anomalously high levels of Terbium and Dysprosium. These are among the most valuable metals known to man, and considered by many to be the “miracle REEs,” essential to everything from green technologies, to medical applications, to military and industrial uses. Their presence makes Bokan a rarity among rare earth metals deposits

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States has the potential for complete self sufficiency across the full spectrum of rare earth elements: both LREEs and HREEs.” “The United States is moving quickly toward eliminating its dependence on nondomestic rare earth metals supplies,” continues McKenzie. “Taking Mountain Pass and Bokan into account, the United States has enough rare earth metals on its own soil to furnish domestic needs for decades to come; and the supply is available in the reasonably near term, and without the need to look beyond U.S. borders. Many consider rare earth metals to be the key component in green energy technologies and the driver behind the post-fossil fuel technology age. The U.S. has a window of opportunity to gain complete domestic sufficiency in a sector that China has long dominated, and control its own destiny in a critical area of growing global competition. So, the case for an independent mine-tomarket rare earth metals industry in the States is gaining a great deal of momentum.”

The Alaskan Advantage

worldwide, the vast majority of which are skewed to the much less valuable LREEs. As a result, Ucore has opened dialogue with multiple end users in the United States at a state and federal level, including public and private operators. With demand escalating and supplies rapidly dwindling, McKenzie believes that Ucore Rare Metals couldn’t be in a better position at a better time.

Inventories & Essential Tools We say good-bye to McKenzie as he prepares to assess the inventory for Ucore’s drill program at Bokan for the summer of 2010. On the docket are barge facilities and helicopter supplies, diamond drill bits, and core boxes by the dozens. He confers with key members of his management team, Harmen Keyser, Cliff Hanson, Peter Manuel, and Nick Vermeulen, just days before a military-like mobilization of crew and heavy equipment to Kendrick Bay near Bokan. The list seems complete, but he seems perplexed, like something essential has escaped the fine teeth of the inventory manifest. “Oh yes,” says McKenzie, “I almost forgot the two most important items for survival in Southeast Alaska … a decent pair of Extratuf rubber boots.” 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. Microcap 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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F I N A N C E “We are like tenant farmers chopping down the fence around our house for fuel when we should be using Nature’s inexhaustible sources of energy—sun, wind and tide. I’d put my money on the sun and solar energy. What a source of power! I hope we don’t have to wait until oil and coal run out before we tackle that.” —Thomas Alva Edison (American inventor, 1093 patents, 1847-1931)

Clean Tech… the Technology Eco-Boom T

here is an obvious silver lining to the spike in energy costs we have experienced over the last few years. The jump in energy costs has done the important job of increasing our awareness of our country’s need to adapt and create a comprehensive energy policy.

by Jordan Kimmel

Micro-Cap Review Magazine

Consumers and domestic auto manufacturers alike seemed to fail to learn any lessons from the oil spikes of the 1970’s. The prior warnings of “peak oil” fell on deaf ears. In the end, it is usually pure economics that ultimately leads to changes in consumer behavior. The good news for our environment is that any real long term energy policy will set off a clear path that will lead to a greener society- and lead to a host of new industries that will create millions of jobsright here in America. The recession of 2008-9 was so severe, it seemed like many economists were acting as if they never lived through a previous down-

turn. When I graduated college, the unemployment rate was higher than it is today. In fact in 1981 the entire country was in much worse shape than it is today. The unemployment rate was over 12% and it looked to many that America’s best days were passed. Then along came the technology revolution that ushered in one of the longest and greatest periods of prosperity and wealth creation in our country’s history. Interestingly, several of the very same venture capitalists that funded the most successful technology companies that were founded in the 1980’s are bankrolling the clean-tech companies sprouting up today.

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The question is, “Who will break through with what?” Whether it will be a major corporation that comes up with the next big thing, or one of the thousand of garage start ups- clean alternatives to today’s hydrocarbons will surface.

Thomas Edison long ago warned against the hazards of the combustion engine and our thirst for fuel. He understood back then that we would need to develop alternatives to pumping and polluting. There is no doubt that sometime in the future our primary sources of energy will not be coming from hydrocarbons. It will take time for existing alternative energy solutions to transition in, but we can expect there will be new technologies that will emerge in years to come. Give an entrepreneur a problem and he will find a solution! We often hear the question, “Where will the new jobs come from?” To be sure, that seems like a tough question, but sometimes you need to look back in time to get a proper perspective. It turns out that currently 30% of our country’s workforce is employed at companies that are in industries that did not even exist 30 years ago! The unpredicted explosion in technology over the last 25 years, and unforeseen boom in related jobs, has clearly outpaced nearly anyone’s expectations. While it is hard to imagine another engine of growth similar to the technology

boom- I think you could now look forward to the clean-tech energy boom! We cannot even imagine the new job opportunities and the new companies that will create the more eco-friendly environment we all know we need. 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 in the energy sectorand how many of them are based overseas. Only one of them has anything to do with alternative energy. The question is, “Who will break through with what?” Whether it will be a major corporation that comes up with the next big thing, or one of the thousand of garage start ups- clean alternatives to today’s hydrocarbons will surface. The US has vast amounts of coal and natural gas. One challenge is to find a way to use coal cleanly. I would not bet against Thomas Edison either- solar, wind, and hydropower are all being advanced by today’s engineers. The sure way to create a profitable business is by providing a solution to a big problem. I am keeping my eye out for any and all future “Magnets”- they will emerge over time.

I continue to be amazed at the progress and innovations coming from today’s engineers and scientists. If you look carefully, there are always new, profitable companies emerging in the market. When you can find them in an industry that is just blossoming you know you may be onto something. There is new interest in investing in companies that are “doing well by doing good”. If we can find “Magnet stocks” that help solve the energy problems of today, even better. Your children and grandchildren might even be one of the millions of employees at one of these still unfounded green companies. While too many investors are still gloomy thinking about the recent problems- the future is bright. Tomorrow’s society and energy sources will be cleaner and more efficient – and you may be able to make profits by identifying the new leaders taking us there. n 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.

We cannot even imagine the new job opportunities and the new companies that will create the more eco-friendly environment we all know we need. 20

Micro-Cap Review Magazine

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PROFILED COMPANIES

VisEnergy, Inc.

Simplifying Sustainability

“O

ne of the fastest, easiest, and cheapest ways to make our economy stronger and cleaner is to make our economy more energy efficient,” said President Obama in a news release dated June 29, 2009. “That’s why we made energy efficiency investments a focal point of the Recovery Act. And that’s why today’s announcements are so important. By bringing more energy efficient technologies to American homes and businesses, we won’t just significantly reduce our energy demand; we’ll put more money back in the pockets of hardworking Americans.” The energy-related challenges of the 21st century require a dramatic shift in direction, from an emphasis on energy production to an emphasis on sustainable energy and resource management policies. While current investments in energy efficiency are having an important impact on the U.S. economy, efficiency remains underfunded and the potential benefits of efficiency remain unrealized. There is a fundamental shift in policy occurring at all levels of government that will create a multitrillion

dollar market opportunity between now and 2020. “Making buildings more efficient represents one of the greatest, and most immediate opportunities we have to create jobs, save money, save energy, and reduce carbon pollution,” said U.S. Secretary of Energy Steven Chu in a 2009 press release issued by the U.S Department of Energy. “Our goal should be buildings that are 80 percent more [energy] efficient.” (http:// www.energy.gov/news2009/7648.htm) As with all previous socioeconomic shifts, technology will play a critical role in the pending transformation. As we move from a consumption-based market to one that is focused on “Smart Consumption” based on a “Smart Grid,” technology will be the key to enabling and measuring the effectiveness of this shift. The economic downturn has virtually halted new construction and shifted the emphasis on the retrofit market. Companies are clearly focused on sustainable practices to prepare for the major policy shifts (i.e. cap and trade legislation). We expect the market to accelerate with this increased level of focus.

The energy-related challenges of the 21st century require a dramatic shift in direction, from an emphasis on energy production to an emphasis on sustainable energy and resource management policies. www.microcapreview.com

At present, most organizations are faced with the dual task of delivering energy efficiencies against financial and environmental goals; however, the implementation of a tactical plan is a significant challenge, because the landscape is confusing or incomplete. Unlike most providers in the industry, VisEnergy has the ability to deliver a turnkey solution that offers a broader scope of products from one source rather than multiple parties. As stated within the news release by President Obama and Secretary Chu, “Residential and commercial buildings consume 40 percent of the energy and represent 40 percent of the carbon emissions in the United States. Building efficiency represents one of the easiest, most immediate and most cost effective ways to reduce carbon emissions while creating new jobs. With the application of new and existing technology, buildings can be made up to 80 percent more efficient or even become ‘net zero’ energy buildings with the incorporation of on-site renewable generation.” The future lies in a company’s ability to achieve not only zero-energy building (ZEB), but also to increase profitability from energy management. Many building owners and facility managers are now realizing that effective lifecycle management is essential in achieving corporate energy objectives. VisEnergy strives to help building owners lower operating costs, reduce the carbon

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VisEnergy distances itself from the more single-focused service providers by delivering true, long-term benefits to customers with a combination of industry best practices, experienced professionals, and best-in-class technology. footprint, meet regulatory compliance, and ultimately increase asset value by offering a comprehensive energy management program and an optimized renewable energy plan. VisEnergy has a significant head start in this area with over six percent market share in New Jersey, one of the leading solar producing states in the country. With unparalleled 300 percent year-overyear growth in revenues for the past six years, VisEnergy is one of the best positioned companies to capitalize from this eco-energy boom. Few companies have the experience to successfully implement all that encompass a turnkey energy management venture, including benchmarking, engineering, design, implementation, and continuous full-service commissioning. VisEnergy currently shares the spotlight with a handful of potential competitive companies, including Renewable Energy Installers and Energy Efficiency Vendors. VisEnergy distances itself from the more single-focused service providers by delivering true, long-term benefits to customers with a combination of industry best practices, experienced professionals, and best-inclass technology. At the core, the company’s energy monitoring technology significantly reduces building energy costs, energy consumption, and carbon emissions through its best-in-class iBEnergy™ Software Suite. VisEnergy’s intelligent software applications provide real-time insight at the individual building, campus, or enterprise portfolio level, and are easily deployed via software as a service (SaaS) model. The products enable and empower building stakeholders to be more energy efficient, realizing savings that can range from five to thirty percent annu-

ally. The company’s solutions are being used by a host of leading commercial and financial organizations, government agencies, and educational institutions. The VisEnergy executive team consists of recognized operational and industry experts that include the area’s best solar engineering and field installation operators. Currently one of the leading engineering, procurement, and construction (EPC) firms of photovoltaics, VisEnergy uses only proven technologies to deliver successful solar power system solutions. The company prides itself on delivering the highest quality products coupled with timely and professionally managed installations, resulting in long-term financial benefits to customers. VisEnergy guides each customer step by step through the process, eliminating confusion behind the purchase, installation, and use of a solar electric system. The company’s combination of industry prowess, domain expertise, technology, best practices, and experienced professionals deliver maximum value to customers. Bill Hoey, chairman of VisEnergy and CEO of both NJ Solar Power and Quality Attributes Software, has kept the vision since he installed his first solar panel in 2003. “To effectively manage anything requires the ability to measure it; thus, by benchmarking and monitoring all energy usage, you can quickly determine meaningful savings opportunities. If you apply the same logic of monitoring and understanding of production maximization of free renewable power, you have a powerful ability to recognize sustainable financial win-win results.” VisEnergy’s energy lifecycle management, continuous commissioning services, and renewable solar energy products enable

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customers to reduce energy consumption and maximize profitability of their building portfolio. Further, VisEnergy is helping to improve energy sustainability and reduce carbon emissions. 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. Microcap 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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Micro-Cap Review Magazine announces introduction of its First Resource Issue & pr o

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www.tmx.com/cleantech This is not an invitation to purchase securities listed on Toronto Stock Exchange or TSX Venture Exchange. TMX Group and its affiliated companies do not endorse or recommend any of the securities listed above. ÂŠ2010 TSX Inc. All rights reserved. Do not reproduce or modify this document withoutTSX Inc. prior written consent. Toronto Stock Exchange and TSX Venture Exchange, are trademarks of TSX Inc.

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F I N A N C E

China’s Cleantech Companies Forge a Path to Sustainable Growth C

hina’s position in the clean technology (cleantech) industry is unparalleled among the nations of the world. The country’s already massive and increasing demand for energy, minerals, and other resources has created a powerful need for clean energy and other clean technologies.

by Robert Haag

Micro-Cap Review Magazine

China is not only the most populous nation in the world, but also the fastest growing major economy. More than any other nation, it needs clean technology to sustain and safeguard its future development. The Chinese government has demonstrated great foresight and vigor by enacting policies to foster the development and growth of its cleantech industries and companies. By providing inexpensive loans from state banks, direct investments by the government and/or state run companies, land grants, technology transfers, tax credits and mandated buying, China has clearly shown that it is committed to fostering the growth of its cleantech industry. In the clean energy sector, China has made a significant push in manufacturing and increasingly in research and development

and deployment. China’s near-term clean energy targets include a 20 percent reduction in energy intensity from 2006 to 2010 and a 40 to 45 percent reduction in carbon intensity below 2005 levels by 2020. China wants to produce 20 percent of its electricity from renewable energy resources by 2020. In terms of attracting new investments in the clean energy sector, China has now become the leader. In 2009, clean energy investments in China totaled $36.4 billion, ahead of the United States, which totaled $18.6 billion, and the United Kingdom, which totaled $11.2 billion. According to the China Greentech Report, jointly issued by PricewaterhouseCoopers and the American Chamber of Commerce in Shanghai in September 2009, the estimated size of China’s green technology market could

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be between $500 billion and $1 trillion annually, or as much as 15 percent of China’s forecasted GDP in 2013. With the positive incentives from the Chinese government’s policies to develop green technology solutions, China is playing an increasingly important role in green technology market development. Many people believe China is poised to take the lead in a variety of cleantech industries, most notably renewable energy. China is a significant player in solar power, wind power, hydro power, lithium-ion and related battery technology, fuel cell technology, industrial waste management, and biodiesel, a renewable and clean-burning biodegradable fuel. Many of China’s cleantech companies are listed on U.S. stock exchanges, such as A-Power Energy Generation Systems (NASDAQ:APWR), a provider of distributed power generation systems and a manufacturer of wind turbines; China Green Agriculture, Inc. (NYSE:CGA), a producer of humic acid-based organic fertilizers that are environmentally safer than traditional fertilizers; Duoyuan Global Water Inc. (NYSE:DGW), a domestic water treatment equipment supplier; and China BAK Battery (NASDAQ:CBAK), one of the world’s largest manufacturers of lithiumbased battery cells. (Please see a selected list of companies at the end of this article.) The largest U.S.-listed Chinese companies in the alternative energy sector are within the solar industry. The top three companies by market capitalization are: Suntech Power Holdings Co. Ltd. (NYSE:STP), a leading designer, developer, and manufacturer of photovoltaic (PV) products worldwide; Trina Solar (NYSE:TSL), a leading manufacturer of solar PV products, including ingots, wafers, cells, and PV modules; and Yingli Green Energy Holding Co. Ltd. (NYSE:YGE), a leading manufacturer and seller of PV components, including multicrystalline polysilicon ingots, wafers, PV cells, PV modules, and integrated PV systems. China is currently the world’s largest producer of solar products. In addition to investment opportuni-

ties in larger companies that are listed on the NYSE and the NASDAQ Global Select Market, many other China cleantech companies trade on smaller exchanges, such as the NASDAQ Capital Market and the OTC Bulletin Board (OTCBB). They include China Wind Systems, Inc. (NASDAQ:CWS), a supplier of forged rolled rings to the wind power industry; China Sun Group HighTech Co. (OTCBB:CSGH), a Dalian-based producer of anode materials used in lithium ion batteries; China Solar and Clean Energy (OTCBB:CSOL), a provider of solar water heaters and renewable energy solutions; China Industrial Waste Management, Inc. (OTCBB:CIWT), a company which collects, treats, and recycles industrial wastes; and China Energy Recovery Inc. (OTC:CGYV), a manufacturer and installer of waste heat energy recovery systems that provide facilities with greater energy efficiency. According to The Cleantech Group and Deloitte, a record number of clean technology investment deals were completed in the first quarter of 2010. Clean technology venture investments in North America, Europe, China, and India, totaled $1.9 billion across 180 companies, up 29 percent from the previous quarter and up 83 percent from the same period a year ago. The leading sectors were transportation, solar, and energy efficiency technologies. Chinese companies raised $72 million in 10 disclosed rounds. Although the total investment was approximately the same as in the previous quarter, the deal count was the highest in more than three years. In China, the two largest deals were for Wuhan HC SemiTek Co., Ltd., an LED lighting company, which raised $22 million from CXC Capital (a joint venture of China Development Bank and Cisco Systems), IDG Ventures, and private investors; and Prudent Energy, a developer of vanadium redox flow batteries for large scale energy storage, which raised $22 million in Series C funding from Northern Light Venture Capital, Sequoia Capital China, Draper Fisher Jurvetson, and DT Capital. To date, approximately 30

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Chinese cleantech companies are listed on major stock exchanges. Many more companies are waiting to list their shares in the United States. Cleantech companies in China haven’t gone unnoticed by the world’s greatest investor. In late December 2008, Warren Buffett spent $230 million buying up 10 percent of BYD Co. Ltd., a Chinese battery, mobile phone, and electric car company. He believes the company can become the world’s largest automaker by selling electric cars. He may be onto something. In March, BYD, which stands for Build Your Dreams, replaced FawVolkswagen to become the number three maker of automobiles in China after selling 68,129 vehicles in March, an increase of 99.3 percent. The company plans to produce 800,000 cars in 2010 with the goal of becoming the world’s largest automaker by 2025. Since 2003, I have been travelling to China for business and have lived in Asia for almost three years, including most of last year in China. The scale of the social changes and multitude of business opportunities there are astounding. There is no way that the media can convey the true scale. However, as the reader can see from the sample list of 31 U.S.-listed Chinese cleantech companies, there are ample opportunities for U.S. investors to participate in China’s growth by buying into Chinese companies that are listed on U.S. stock exchanges. In fact, right now there are over 500 U.S.-listed Chinese companies. Many more companies are lining up to be listed every week. If you would like more information, please send me an e-mail at robert@irthcommunications.com. n

About the Author Robert Haag is the Asia managing director of IRTH Communications. IRTH provides investor relations and consulting services to cleantech and green companies. A graduate of Hamilton College, Mr. Haag has worked in the investment industry for 20 years and spends most of his time in China. IRTH is based in Santa Monica, California and was founded by his brother, Andrew Haag.

*See page 26 for a Sampling of 31 Chinese US-Listed Cleantech Companies.

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31 Chinese US-Listed Cleantech Companies A-Power Energy Generation Systems, Ltd. (NASDAQ:APWR) is a leading provider of distributed power generation systems in China and a fast-growing manufacturer of wind turbines. The company recently celebrated the launch of the final development phase of its jointly owned Texas Wind Farm. Advanced Battery Technologies, Inc. (NASDAQ:ABAT) is a leading developer, manufacturer, and distributor of rechargeable Polymer Lithium-Ion (PLI) batteries, and is a manufacturer of electric vehicles. China Agri-Business, Inc. (OTC: CHBU) is a manufacturer and distributor of solar water heaters and space heating devices, and is a provider of renewable energy solutions in China. China Agritech, Inc. (NASDAQ:CAGC) is engaged in the development, manufacture, and distribution of liquid and granular organic compound fertilizers and related products in China. The company has developed proprietary formulas that provide a continuous supply of high-quality agricultural products while maintaining soil fertility. The company sells its products to farmers located in 28 provinces of China. China BAK Battery, Inc. (NASDAQ:CBAK) is one of the world’s largest manufacturers of lithium-based battery cells as measured by production output. The company produces battery cells that are the principal component of rechargeable batteries commonly used in cellular phones, notebook computers and portable consumer electronics, such as digital media devices, portable media players, portable audio players, portable gaming devices, and PDAs. China Clean Energy, Inc. (OTC: CCGY) is engaged in the development, manufacturing, and distribution of biodiesel and specialty chemical products made from renewable resources. China Energy Recovery, Inc. (OTC:CGYV) is an international leader in designing, manufacturing, and installing waste heat energy recovery systems which provide facilities with greater energy efficiency. The company’s primary focus is on the Chinese market. CER’s technology captures industrial waste energy to produce low-cost electrical power, enabling industrial manufacturers to reduce their energy costs, minimize emissions, and generate saleable emissions credits. China Green Agriculture, Inc. (NYSE:CGA) China Green Agriculture, fertilizer products are certified by the Chinese government as “Green Food Production Materials.” The company produces and distributes humic acid-based organic fertilizers across China through a wholly-owned subsidiary. China Industrial Waste Management, Inc. (OTC:CIWT) is engaged in the collection, treatment, disposal and recycling of industrial wastes principally in Dalian and surrounding areas in Liaoning Province through its 90 percent-owned

subsidiary, Dalian Dongtai Industrial Waste Treatment Co., Ltd. (“Dalian Dongtai”) and other indirect subsidiaries. China Organic Agriculture, Inc. (OTC: CNOA) is a diversified leading company based in China and primarily engaged in processing and distributionoriented high-quality natural foods. It mainly engages in green and organic rice processing and distribution, food provision, mountain specialty trading, and production and marketing of ice wine and red wine. China Ritar Power Corp. (NASDAQ:CRTP) is the leading supplier of innovative nano gel and environmentally friendly battery products and solutions for power applications and power storing systems. China Ritar’s products and solutions are used in Alternative Energy (solar and wind power), Telecommunications (3G), Uninterrupted Power Source (UPS) and Light Electrical Vehicles (LEV) industries. China Solar and Clean Energy Solutions, Inc. (OTC: CSOL) is a manufacturer and distributor of solar water heaters and space heating devices, and is a provider of renewable energy solutions in China. China TMK Battery Systems, Inc.(OTCBB:DFEL) Founded in 1999, TMK manufactures and distributes high rate discharge Nickel Metal Hydride (“Ni-MH”) multi-cell batteries that are reliable and long-lasting rechargeable power solutions for widely used consumer products, which include home appliances, cordless power tools, medical devices, multiple personal communication devices and electric bicycles segments. China Wind Systems, Inc. (NASDAQ:CWS) supplies forged rolled rings to the wind power and other industries and industrial equipment to the textile industry in China. With its newly finished state-of-the-art production facility, the company has increased its production and shipment of high-precision rolled rings and other essential components primarily to the wind power and other industries. Duoyuan Global Water Inc. (NYSE:DGW) is a leading China-based supplier of domestic water treatment equipment. Duoyuan’s products address the key steps in the water treatment process, such as filtration, water softening, water-sediment separation, aeration, disinfection, and reverse osmosis. Green Material Technologies, Inc. (OTC: CAGM) is a Chinese leader in developing and manufacturing starch-based biodegradable containers, tableware, and packaging materials. Gushan Environmental Energy Limited (NYSE:GU) produces biodiesel, a renewable, clean-burning, and biodegradable fuel and a raw material used to produce chemical products. Biodiesel is made primarily from vegetable oil offal, used cooking oil, and by-products from biodiesel production, including glycerine, plant asphalt, erucic acid, and erucic amide.

HQ Sustainable Maritime Industries, Inc. (AMEX:HQS) ($83M) is a leading producer of functional, sustainable Tilapia biomass, including fish and personal healthcare products. JA Solar Holdings Co., Inc. (NASDAQ:JASO) is a Chinese manufacturer of high-performance solar products. LDK Solar (NYSE:LDK) is a leading manufacturer of multicrystalline solar wafers and PV products. LianDi Clean Technology Inc. (OTC:LNDT) is a leading provider of clean technology, downstream flow equipment, engineering services and software to China’s leading petroleum and petrochemical companies. The company is focused on the large, rapidly growing, clean technology market for oil refineries, projected to reach over $1 billion in the next 10 years. This market is expected to benefit from favorable Chinese government policies, including tax benefits and other incentives. New Energy Systems Group (OTC: NEWN) is a vertically integrated, original design manufacturer and distributor of lithium ion batteries and backup power systems. ReneSola Ltd. (NYSE:SOL) is a leading global manufacturer of solar wafers. Rino International Corp. (NASDAQ:RINO) designs, manufactures, installs, and services proprietary and patented wastewater treatment, desulphurization equipment, and high temperature anti-oxidation systems for iron and steel manufacturers in China. Sancon Resources Recovery, Inc. (OTC: SRRY) is a rapidly growing environmental services and waste recycling company with operations in both China and Australia. SmartHeat Inc. (NASDAQ:HEAT) is a market leader in China’s clean technology energy savings industry. Solarfun Power Holdings Co., Ltd. (NASDAQ:SOLF) is a vertically integrated manufacturer of silicon ingots and photovoltaic (PV) cells and modules in China. Suntech Power Holdings Co. Ltd. (NYSE:STP) is a leading Chinese company with a market capitalization of over $2.5 billion. Suntech is a worldwide leader in the design and manufacture of innovative solar energy solutions for a wide variety of customers and applications across North America, Europe, Asia, and Australia. Trina Solar Ltd. (NYSE:TSL) is a leading integrated manufacturer of solar photovoltaic products, including ingots, wafers, cells, and PV modules. Worldwide Energy and Manufacturing USA, Inc. (OTC:WEMU) is a U.S.-based China manufacturing company specializing in products for customers in the industries of solar energy, aerospace, wireless telecommunications, medical equipment, and automotive industries. Yingli Green Energy Holding Co. Ltd. (NYSE:YGE) is a leading solar energy company and one of the world’s largest vertically integrated photovoltaic manufacturers in China.

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F I N A N C E

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

The Micro-Cap Capital Formation Process

s head of the company, a microcap CEO has to wrestle with many responsibilities, none of which is more important than the participation and direction in the capital formation process. All eyes are on CEOs and their efforts to raise money, develop investment banking relationships, enhance interest in the value of the company’s stock price, create volume and liquidity in the stock, fine-tune the amount of debt, and accordingly identify new potential mergers or acquisitions using the company’s shares as currency. In the earliest stage of a micro-cap company, the CEO is often more concerned with keeping the lights on. Beyond the startup stage, the CEO’s role in the capital formation process gets much more interesting, demands greater creativity, and is an important factor to assess the CEO’s competence. In today’s environment, banks avoid talking to companies about lending, particularly to smaller companies. In fact, existing borrowers with bank lines of credit have seen interest rates increased, or the credit facility reduced, frozen, or called in altogether. In the past, bank lending to qualified emerging growth companies was an integral part of the capital formation process. Banks could be counted on for some or most of the financing needs. The banks survived on the fee income and thrived on the equity kickers. Unfortunately, CEOs today can no longer count on banks to provide adequate financing. Many growth companies face the reality that banks increasingly have become missing in action. The disappearance of banks from the capital formation process places significantly more pres-

sure on the CEO to raise equity capital in the capital markets, including going public, doing PIPES, or using convertible debt instruments. The capital raising process is anything but fun and requires enormous skill, financial expertise, persistence, and great advice from trusted advisers and professionals having the company’s best interests in mind and at heart. Money raising fees can be steep. Although regulatory guidelines exist to prevent usury, no one works for free and many CEOs and professionals arrange fees to be paid in stock and cash, mostly on the back-end based on performance. All bets, however, are off when a CEO becomes desperate. Valuations go out the window and toxic deals look more like helpful offerings. Micro-cap companies that are adept at raising money share common traits. Successful companies have a clear picture of how much money they need to raise and present an accurate use of proceeds to investors. Companies indicate exactly how they intend to grow the company, pay back investors, and show that every dollar received will have a substantial return on investment. Executives at these companies work relentlessly to trim the fat and show investors how frugal companies spend and how they generate high returns for investors. Prudent CEOs consistently “promise less and deliver more.” They establish a track record that enables them to maintain their post. Moreover, successful CEOs are straight-talkers; they provide answers as they know to be true and avoid changing answers based on how the questions are being asked. Let’s now focus on the nuances of the

capital formation process of green and green-related companies. Green companies have the government on their side. Federal, state, and local governments provide grant money for alternative energy developments, co-payments to companies and homeowners for purchasing new energy reduction technology, and many reimbursement programs too many to list. In today’s political atmosphere “green” also means jobs. Jobs mean a stronger economy and jobs mean consumer spending. Today’s green companies share similar stories with those of past biotech companies. For instance, the initial capital infusion into companies will never be enough. Research and development is a very costly activity. After a product is developed, it needs to be protected, produced, packaged, and promoted, which can take years and many millions of dollars. Green is the new “buzz word” of Wall Street. Investors are looking for good green companies, and investment bankers are ready to talk to them and love the space. From Al Gore to T. Boone Pickens, from President Obama to the entire U.S. Congress, the social consciousness has been raised to save the planet. New urgency exists to adopt alternative energy to address global warming and reverse the effects of environmental pollution. The time is here and here with a purpose. The question is whether there is enough green cash to support this emerging growth industry filled with the promise to create jobs for millions of Americans. Ultimately the question may really become, “Can we afford not to fund these green companies?” n

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F I N A N C E

The Challenges of Green Investing Finding the right investment or choosing the talent to find it

pportunities for investment in the green space abound and are multiplying globally, whether in renewable energy, sustainable or clean technology.

BY Shelley Goldberg

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Projects aided by government stimulus packages or private investments are taking place from water salination and wave technology to solar thermal energy and photovoltaics, from biomass and algae farms to the smart grid (linking information technology with electricity delivery), from sustainable building and construction materials to hydrogen enhanced retrofit technology. The list goes on. While President Obama has promised to “create new industries and revive old ones…,” China is further along in its green initiatives, and Europe continues ahead with its long history of project developments. Whether deciding to invest in green companies directly or via an investment manager, each route presents its own set of challenges. An investor who chooses to construct a portfolio of individual green investments, either in listed or non-listed companies, should be aware of the following issues: 1) Access to information: Many pureplay green investments are micro or smallcap companies with little to no Wall Street coverage; and many businesses are located overseas or in remote areas with limited interaction with management. Access to local expertise can also be difficult and often is a prerequisite. 2) Liquidity: Stocks of micro and smallcap companies tend to trade in light volume, making liquidity a concern.

3) Access to credit: Obtaining credit continues to be a challenge for start‑up and early stage companies. Additionally, navigating the mix of private and public funding sources can be difficult to monitor and assess. 4) The M&A environment: The industry is ripe for takeovers; this is good news for the sector, but not necessarily for the investor on the wrong side of the transaction. 5) Limited hedging vehicles: Many small-cap companies do not have listed options. Nor do private equity plays. And while there is a growing number of green focused exchange-traded funds (ETFs) and exchange-traded notes (ETNs), finding the appropriate short for a long-only or longbiased portfolio can be difficult, as they tend to have low correlations to green portfolios. Commodity futures or general market indices (S&P) may be more effective hedges. Should an investor opt for professional investment management, finding the talent requires an active, hands-on, and on-going due diligence. It is advisable to construct a list of criteria essential for manager selection and specific to the green space. Examples include the following areas:

Micro-Cap Review Magazine

1) Macro thinkers: A manager must have a solid grasp of the global macro environment to compliment a bottom-up investment approach. An in-depth knowledge of the green space and respective investments, carries little weight when correlations approach 1.0 or 100 percent and when market beta is high. A macro approach is particularly crucial in times of market bubbles, which we already have witnessed in the green space, and will likely experience again. 2) Specialists and generalists: There are both pure play names as well as large industrials with green subsidiaries. A specialist’s knowledge of a conglomerate’s ancillary investment in wind turbine blade manufacturing, potentially representing a small percent of the firm’s revenue, is insufficient, without a solid understanding of the entire organization, best served by generalists. 3) Proven track record, both long and short: A hedge fund manager with talent only on the long side is not as effective as one with the knowledge and ability to seek out overvalued companies, questionable and unproven technology, or ineffective management. 4) Non-equity traders: It is beneficial for a manager to employ traders on the team who understand the dynamics of the commodities, foreign exchange, credit, and fixed income markets. With this added talent, managers are better suited both to hedge the portfolio and to construct an Alfa overlay with other instruments. 5) Experienced scientists and technologists: Great bottom-up investors may be exceptional at analyzing balance sheets, debt ratios, and cash flows, as well as assessing management; yet such investors generally lack a deep understanding of the science behind the technology. Technologists can help in this area. They can provide insights into the science, including where it sits on the traditional energy parity scale, whether it is cleaner or more productive and efficient than others, and its long term viability. 6) Access to climatologists, meteorologists, geographers, and demographers: Such expertise can give a manager an edge in under-

standing temperature patterns, climate change, glaciations, river flows, and hurricanes, as well as population growths and shifts, and the resultant consumption patterns of energies, raw materials, water, proteins, and agriculture. 7) Strong ties to politicians, lobbyists, and legislators: Green initiatives are highly influenced by politics and policy makers, both domestically and internationally, as well as on the federal, state, and local levels. Federal assistance is highly fragmented, while regional laws vary considerably, whether for a multi-state, single state or municipal project. Issues over taxation, government incentives, and environmental regulations can alter the course of, or even put an abrupt halt, to a project overnight. 8) Access to sector-specific attorneys: A green investment manager must be knowledgeable about legal issues in a number of areas: environmental and energy, intellectual property and patents, public policy, litigation, M&A, tax, contracts (as it pertains to procurement, sourcing, leasing etc.), and sovereign governments and trade. The type of strategy to employ should be consistent with the investor’s liquidity requirements, risk tolerance, and time committed for due diligence. With respect to liquidity and lock-ups, many green projects require years of research and development and build out, which tend to favor longer-term investments rather than those providing monthly or quarterly liquidity. As such, the private equity route is potentially the better approach to green investing. Additionally, less liquid investments can be more difficult to value and hedge, and may not be appropriate for the risk adverse investor or for the low volatility portfolio. In general, the more successful managers are running actively managed and diversified portfolios. The following section provides a list of the available investment options:

• Best suited for longer-term plays where liquidity and lock-ups are less of a concern

Shelley Goldberg most recently served as a fund of funds portfolio manager and sector head of global resources with Union Bancaire Privée. Previously, she traded commodity derivatives for many years. She then served the role of risk manager for a hedge fund seed capital provider (Stonehedge Partners), which led to the launch of her own energy hedge fund (G3 Capital Partners). Throughout her career she has built portfolios of direct investments, as well as funds of hedge funds and other investment vehicles in the green sector. n

Micro-Cap Review Magazine

Private Equity / Venture Capital

• Opportunities available outside of listed markets • Potentially higher risk

Hedge Funds • Ability to pick both winners and losers (long and short) • Ability to hedge with other vehicles (options, commodities, foreign exchange, derivatives, etc.) • Alpha generators

Long-only (mutual funds) • High beta • No hedging or shorting • Restricted in the ability to sit on cash during downturns or high volatility environments

Sector Indices (ETFs and ETNs) • Passive investing • Pure beta • Lower portfolio turnover The green space is dynamic, evolving, and growing, offering potential for strong returns, coupled with a low correlation to the broader markets. While there are many approaches to green investing, success in the space requires a deep knowledge of the sector, as well as a strict and disciplined approach to investing and diligent investment manager oversight. Following these steps is key toward keeping green investments not only in the green, but profitable. n

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Green Paradigm Shift Technologies I

n many people’s minds, “green living” means going back to nature and recycling plastics and paper products. Lately there’s been much talk about reducing the carbon footprint, but even that concept is only the tip of the iceberg. Today’s green living is bigger and more sophisticated than people realize. The health and environmental issues confronting people around the world has spawned a slew of innovative companies. Revolutionary breakthroughs are in the works that potentially can transform how people live, work, and play. Such transformational technologies are at the heart of green paradigm shift technologies (GPSTs). Companies that possess GPSTs are among the most sought out by investors today. Companies with GPST share the following characteristics: 1) Improve existing products by reducing harmful side effects. 2) Fulfill a significant market need and not just a special want or desire. 3) Possess proprietary technology that is unique and unprecedented. 4) Has the leadership opportunity to create a substantial shift (verifiable by the technology, science, and management). 5) Possess scalable business operations. by Gordon Chiu

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Until recently, patients with advanced prostate cancer used to suffer immense pain as

the cancer spread to other parts of the body. The barrage of treatments existing then had too many side effects; often the cancer became resistant to treatment protocols. Then biotechnology companies started to emerge and introduced innovative drugs to treat intransigent diseases, such as prostate cancer. One such company was Dendreon. Dendreon (NASD: DNDN) was focused on targeting and eradicating cancer using a new class of therapy known as active cellular immunotherapies, or ACIs, which used live human cells to trick the patient’s own immune system into fighting cancer. The idea behind ACI was as old as ayurvedic and traditional medicines historically used in India and China. These ancient practices relied on personalized medicines, which had proven to be highly effective even to this day. Imagine what technological advancements can be achieved today if children, scientists, and physicians are taught these Eastern medical principles early on? Further, personalized medicines used in regions of the Far East are relatively inexpensive compared with those of the West. The low healthcare costs make this area increasingly enticing for the United States. Dendreon is a living

GPST Biotechnology

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example of personalized medicine and technology working together. A revolutionary event occurred in western medicine on April 29, 2010, when Dendreon announced that it had won U.S. Food and Drug Administration (FDA) approval for Provenge®, the world’s first cancer vaccine. Prior to Provenge, men with advanced prostate cancer had few treatment options; the few that were available often did not extend patients’ lives. The Provenge vaccine, however, was shown to extend a patient’s life by an average of 4.1 months. The drug works by stimulating the patient’s immune system with an injection of a patient’s own cells. Philosophically, using the patient’s own cells to trigger an immune response is a very green and novel approach to cancer treatment, a method which once had many naysayers. In the future, hundreds of similar treatments will enter the floodgates because of this breakthrough.

Investment About two years ago, Dendreon’s stock was trading at $3 per share with a market capitalization of $400 million, despite the company having no earnings. Some said that the company was based on hype or hypothetical concepts. After the FDA approved Provenge as a cancer vaccine, Dendreon’s stock was trading as high as $54 per share with a market capitalization of over $7.2 billion, an 18 times increase in value. Numerous Dendreon-like companies from start-ups to small-caps in the biotechnology sector will arise. Venture capitalists, investment bankers, and retail investors are tempted to create portfolios of such investments. The growth of the business will depend on having the right science, execution strategies, and management team. Although this is one of the harder technologies to understand, GPST biotechnology will play an important role in medical health care in the near future.

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GPST in the Water Industry

About the Author

Some people have called it global climate change. Others call it hype. One thing is certain. Without proper management, biological, pharmaceutical, and toxic wastes will eventually end up in our water and food supplies to threaten the human population. This problem applies to both developed and emerging countries. Over the past decade, water-related/supported transmittable diseases (WR/STDs) have threatened to decimate humanity at epidemic and pandemic proportions on several notable occasions (e.g., SARs in 2002, H5N1-Avian Flu in 2006, H1N1-Swine Flu in 2009). As dangers to human survival increase, certain technologies in biological, chemical, and material sciences will experience major paradigm shifts. For example, animal husbandry, waste water, and solid waste disposal are areas with the most urgent needs. Consequently, companies in these industries have the most potential to develop technological breakthroughs. Scientifically speaking, the frequency of contact, high concentrations of microbes (e.g., virus, bacteria, and fungi) are perfect storm conditions that can lead to virulence and cause epidemic health threats. Under these conditions, a new microbe can come into existence and catch the public unprepared. Relying solely on ultraviolet radiation and chlorination to disinfect drinking water can be dangerous. Traditional sanitation methods are not fail-safe. You may have noticed that the odor of tap water has increased substantially over the years. Particular companies are focusing their research on technological advancements that control microbes at the water source. While every 50 years, an opportunity arrives that could save lives, this particular sector of research could save all of humanity. n

Dr. Gordon Chiu is an execution driven businessman with more than 15 years of combined domestic and international experience in biomedical, chemical, cosmetic, medical, and technology industries. He has been invited to serve on the board of public and private companies and to provide vital advice to the board while increasing overall shareholder value. His solid background and broad experience has allowed him to accomplish and advise in areas of Alzheimer research, breast cancer research, dermatology, drug addictions research, green technology and antimicrobial research. He started his career as a research scientist at Pfizer and Merck & Co., and has healthcare and marketing experience with strong links to Wall Street and Asia. His educational background began with a B.S. degree in chemistry from Rensselaer Polytechnic Institute with a summa cum laude. He graduated with an M.S. degree in chemistry from Seton Hall University with high honors. Additionally, Dr. Chiu was accepted as an MD/PhD candidate under the National Institutes of Health’s Medical Scientist Training Program for four years at the Mount Sinai School of Medicine where he also researched, developed, consulted, and advised the Department of Dermatology’s Dr. Huachen Wei in skin cancer research. Seeing the opportunity to impact foreign policies in healthcare, he transferred his credentials to the fully accredited University of Bridgeport School of Naturopathic Medicine to receive his doctorate in naturopathic medicine. With this unique background, he has investigated the validity of foreign treatments and their success level for public health. He has also been chosen to serve as an advisory role in the identification of low cost solutions (i.e. non-invasive diagnostic equipment) for emerging countries that cannot afford to maintain armies of physicians across numerous sub-specialties. His years of experience and continuous involvement have created deep relationships within the scientific, business, and medical communities. Dr. Chiu developed and owns methodologies called directed combinatorial algorithmic libraries (D.C.A.L.) that are used in various commercial applications, composition development, and research.

Disclosure: Dr. Chiu does not hold an investment position in Dendreon Corporation. He has been appointed as an independent adviser to SNN.

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Uranium: The New Green Metal U

ranium is commonly known as “the other yellow metal,” because the uranium oxide concentrate produced by mines is a bright yellow, coarse powder called “yellowcake.”

by MICHAEL S. (MICKEY) FULP

Micro-Cap Review Magazine

However, there is now good reason to consider uranium “green.” Nuclear power plants produce electricity with only a minute amount of greenhouse gases. With the current worldwide emphasis on reducing carbon emissions, environmental, scientific, and political communities are supporting expansion of nuclear power production as a green technology. Even the co-founder of Greenpeace Patrick Moore supports nuclear power as a means of mitigating climate change. My, how times have changed! The U.S. domestic uranium business was devastated in 1979 with the accident at Three Mile Island. That event combined with the fictional movie about a nuclear reactor meltdown starring Jane Fonda (The China Syndrome) led to massive protests against nuclear power by environmentalists. Numerous plants in the planning stage or under construction were cancelled due to permitting difficulties, construction delays, and cost overruns. The uranium price collapsed and nearly all domestic mines were shut down by the mid to late 1980s. Although nuclear energy continues to supply nearly 20 percent of our electric-

ity, it’s been 14 years since a new nuclear power plant has been commissioned in the United States. The de facto moratorium on new construction will end with President Obama’s recent announcement of government loan guarantees for building two new nuclear reactors in Georgia. But the damage has been done: during the past 30 years the United States has gone from a net exporter of uranium to a massive importer. We currently consume 55 million pounds while producing only four million pounds of uranium a year. Worldwide, nuclear energy supplies about 13 percent of electrical power and that percentage is projected to grow substantially over the next two decades. There are currently 56 new nuclear reactors under construction in the world and more than 200 are on the drawing board. There will be a substantial increase in uranium demand over the next 20 years. Nearly half of the world’s 2009 uranium mine supply came from countries that are unstable, corrupt, or unfriendly to the West. The top ten producers include Kazakhstan (which recently became the world’s largest), Russia, Niger, Uzbekistan, China, and Ukraine.

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This is not an all-star cast of model governments. Kazakhstan is increasingly nationalizing its nuclear power industry. Leaders of the country’s state-owned uranium mining company were charged with corruption last year. Niger had a military coup that overthrew its despotic president one year ago. And Uzbekistan recently closed its border with Kyrgyzstan to refugees fleeing ethnic bloodshed, as a result of the government coup. I doubt few Americans would consider two other countries on this list, Russia and China, to be our trusted friends. Ukraine is a former Soviet republic and lies within the Russian sphere of influence. As if this was not enough, one-half of our domestic uranium consumption for the past 15 years has been supplied by the dismantling of Russian nuclear weapons and the conversion of weapons-grade uranium to reactor-grade uranium. Known as the “Megatons to Megawatts” program, that supply agreement expires in 2013. So, where will the United States get its uranium supply in the next 20 years? The current yearly deficit is over 50 million pounds and the Russians are cutting half of that supply in three years. I think a partial answer lies in revitalizing our domestic uranium mining industry. There are numerous uranium projects in advanced permitting, construction, and development stages in the Western United States and Texas. However, with a recent spot uranium price of $41 per pound and a long-term contract price of $60 per pound, little investment interest currently exists for uranium explorers, developers, and miners. The uranium sector of our micro-cap junior resource market has been beaten up and trounced upon since the uranium spot price collapsed from $135 per pound in mid2007. It is a forgotten commodity with a few strong companies surviving from the many juniors that piled into the sector during the uranium bubble days. And that is precisely why I am interested. For those who are not familiar with my

work, I employ a contrarian philosophy and strive to identify sectors that are out of favor with the speculating investment community and choose undervalued companies with the right combination of share structure, people, and projects that will lead to rewards for shareholders. I like to buy when volumes and prices are low to be well-positioned for a run-up when the sector comes back on the investor’s radar screen. In the gold sector, I commonly invest in exploration companies that operate in countries with significant geopolitical risk. Since these emerging market countries have not had every meter of ground trod upon by curious geologists in the past, giant gold deposits still can be discovered by the tried and true methods of “boot leather and drilling.” However, I am unwilling to take those sorts of risks in the highly sensitive and geopolitically risky uranium business. The companies that draw my interest are exploring and developing projects in past and/or currently producing major districts in North America. These geologically and geopolitically favorable areas include the largest and highest grade uranium province in the world, Saskatchewan’s Athabasca Basin; the world’s second largest producer, New Mexico’s Grants Mineral Belt; the Wyoming Basins; and the South Texas Uranium district. In my opinion, the junior uranium sector offers good speculative risk with current market valuations. I see opportunities to make some “green” with my uranium plays. I urge you to do your own research and due diligence, assess your personal risk profile, and decide if there are companies in this space that are worthy of your investment. n

About the Author

Micro-Cap Review Magazine

The Mercenary Geologist Michael S. “Mickey” Fulp is a Certified Professional Geologist with a B.Sc. degree in earth sciences with honors from the University of Tulsa, and M.Sc. degree in geology from the University of New Mexico. Mickey has 30 years experience as an exploration geologist searching for economic deposits of base and precious metals, industrial minerals, uranium, coal, oil and gas, and water in North and South America, Europe, and Asia. Mickey has worked for junior mineral explorers, major mining companies, private companies, and investors as a consulting economic geologist for the past 22 years, specializing in geological mapping, property evaluation, and business development. In addition to Mickey’s professional credentials and experience, he is high-altitude proficient, and is bilingual in English and Spanish. From 2003 to 2006, he made four outcrop ore discoveries in Peru, Chile, Canada (British Columbia), and the United States (Nevada). Mickey is well-known throughout the mining and exploration community for his ongoing work as an analyst, newsletter writer, and speaker. Contact: Contact@MercenaryGeologist.com Disclaimer: I am not a certified financial analyst, broker, or professional who is qualified to offer investment advice. Nothing in a report, commentary, this website, interview, and other content constitutes or can be construed as investment advice or an offer or solicitation to buy or sell stock. Information is obtained from research of public documents and content available on the company’s website, regulatory filings, various stock exchange websites, and stock information services, through discussions with company representatives, agents, other professionals and investors, and field visits. While the information is believed to be accurate and reliable, it is not guaranteed or implied to be so. The information may not be complete or correct; it is provided in good faith but without any legal responsibility or obligation to provide future updates. I accept no responsibility, or assume any liability, whatsoever, for any direct, indirect or consequential loss arising from the use of the information. The information contained in a report, commentary, this website, interview, and other content is subject to change without notice, may become outdated, and will not be updated. A report, commentary, this website, interview, and other content reflect my personal opinions and views and nothing more. All content of this website is subject to international copyright protection and no part or portion of this website, report, commentary, interview, and other content may be altered, reproduced, copied, emailed, faxed, or distributed in any form without the express written consent of Michael S. (Mickey) Fulp, Mercenary Geologist. Copyright © 2010 Mercenary Geologist. All Rights Reserved.

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Geothermal EnergyHeating Up Finding the right investment or choosing the talent to find it

eothermal energy is derived from the original formation of the Earth, the radioactive decay of materials, and the sun’s energy absorbed at the surface. Prehistoric man used geothermal energy for heating bath water and ancient Romans used it for space heating. Today, geothermal energy is used for generating electricity. Geothermal plants of various types are being built around the world. Generation of geothermal energy in the United States is subject to the same regulations as those for other energy sources. State public utility commissions (PUCS) control the destinies of geothermal power producers.

In comparison Solar energy’s future looks bright. The downside is that solar energy has only a 25 to 35 percent reliability (sunrise vs. sunset, as the sun does not shine all the time). The popularity of wind energy is gaining strength. Wind-generated power has a 25 to 40 percent reliability (the wind does not always blow when you need it). Geothermal energy is hot! Geothermal energy is available with over 90 percent reliability. Worldwide geothermal power plants produce over 12 gigawatts (one gigawatt

By Larry Turel

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is equal to one billion watts), less than one percent of global electricity demand. This compares favorably with many nuclear plants. A recent Massachussetts Institute of Technology survey has named “enhanced geothermal” to generate 100 GW worldwide by 2050. The United States is already the world leader in geothermal energy. A growing number of utilities and energy companies has already made a presence in the industry, including Southern California Edison, San Diego Gas & Electric, PG&E, Chevron, and an unlikely source, Google. Reliability is very important for operating systems because energy plant operators are at risk of being charged for any energy shortfall. This means that if the energy supply is not delivered at the promised energy load or capacity, the public utility will have to go out on the spot market. High temperature geothermal heat is found near tectonic plate boundaries in regions with high earthquake and volca-

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nic activity, oceanic trench formation, and mountain-building. Even cold ground contains heat, which can be extracted by using a geothermal heat pump. The use of geothermal energy for heating homes and buildings is a rapidly growing market, which is estimated to grow by over 10 percent annually. Closed-loop geothermal heat pumps circulate a carrier fluid (most often a water/ anti-freeze solution) through pipes buried in the ground. As the fluid circulates underground it absorbs heat and brings the now warmer fluid to an electric heat pump which extracts the heat from the fluid. The remaining fluid is now without heat and is sent back into the ground to repeat the cycle. The heat that is extracted by the heat pump is used to heat the house. This technology makes geothermal heating economically feasible in any location. Geothermal energy encourages conservation of natural resources and produces minimal high-carbon emissions, while making us less dependent on fossil fuels. Geothermal energy is a true renewable energy source. We can now take this same principle and apply it on a much larger scale. Geothermal energy is considered renewable because it is derived from the nearly infinite heat supply generated by the ongoing process at the molten core of the planet. According to the Geothermal Energy Association, the heat continuously flowing from the earth core is estimated to be equivalent to 42,000 GW of power (20+ times today’s global electricity generation). If harnessed properly, geothermal could become a material contributor to global electricity generation. The earth’s natural heat produces molten rock (magma) which heats and creates reservoirs of superheated fluids (hot water or brine) at some locations within relatively shallow distances of the earth’s surface. Geothermal electricity generation is possible by drilling a well to bring to the surface these superheated fluids or stream to drive turbines. A growing number of companies is generating electricity using this technology.

Relatively shallow geothermal resources are found in some areas of the Earth, including large portions of the western United States. Below is a U.S. geothermal resource map, prepared by the U.S. Department of Energy. The geothermal resource map of the United States shows the estimated subterranean temperatures at a depth of six kilometers (just under four miles), which is considered relatively near the surface. As the map shows, essentially most areas of the United States have some form of available, near surface geothermal potential. Use of geothermal resources is based on temperature. The highest temperature resources are generally used for electric power generation. Geothermal power in the United States currently totals about 2,800 MW or the output of five large nuclear plants. An almost inexhaustible supply of heat resources is found within the earth. A well managed geothermal program has the potential to be operational for decades, and perhaps centuries. One geothermal resource is dry steam, which is used to power steam plants to generate electricity. In these plants, steam is passed directly through a turbine, heat exchanger, or radiator to generate electricity. They are commonly used at areas such as the geysers in northern California, other portions of western United States, Iceland, some parts of Japan, and other geothermal hot spots around the world.

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The dry steam technology uses the steam from a geothermal production well to be fed directly to a steam turbine without a secondary heat exchanger. The turbine then converts the change in steam pressure into mechanical rotational energy, which is then converted to electrical energy by a generator. Exhibit 1

Although dry steam geothermal power plants may emit marginal quantities of hydrogen sulfide (H2S), nitric oxide (N2O), and carbon dioxide (CO2), these emissions are much lower per energy unit than those based on fossil fuels. By using gas mitigation systems to remove these small amounts, geothermal power can be made an emission-free source of electricity. Again, geothermal power has the potential to help reduce global warming if widely deployed to replace fossil fuels and gases.

Flash Steam Power Plants It is more common for very high temperature geothermal fluids (above 350 °F) to be

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produced from a geothermal resource. This high temperature pressurized fluid is passed through a low temperature tank. The tank allows a portion of the flow to “flash” off as steam, which is then directed to a turbine to generate electricity. The remaining spent geothermal fluid is returned for reinjection or in some cases is used for additional energy generation in either a dual flash cycle or in a “binary bottoming cycle” power unit. Using this type of power unit, a second flash tank is used to separate the fluid at a lower pressure to drive the turbine and produce more power. Exhibit 2

Enhanced Geothermal Systems (EGS)

Free Green Energy LLC is a non-utility power producer located in Houston, Texas. The company plans to make use of two separate resources, (neither of which requires combustion or produces a single pound of CO2 emission) geothermal energy and kinetic energy. The company is currently in the process of identifying, acquiring, and operating geothermal energy properties using geothermal powered engines to generate electricity. Geothermal Energy’s source will be hot brine from producing and abandoned oil and gas wells in Louisiana, Oklahoma, and Texas. According to the Texas Secretary of State and the Texas Railroad Commission (responsible for the regulation of oil and gas production in Texas), there are 13,000 to 16,000 abandoned oil and gas wells in Texas alone. Using a closed-loop organic Rankine cycle (ORC) to create pressure by boiling EPA-approved chemicals into gas. The gas expands in a one-way system and turns a patented twin screw expander, which drives a generator to create electricity.

Kinetic energy’s source is focused on high pressure gas wells owned by others to produce electricity and will share revenue with the gas producer. It is expected that orphan wells will be used to produce electricity with pressure generated by CO2 injection. In the case of orphan wells, the company will be the producer and will not be required to share revenue with a third party. There are several desirable advantages currently associated with renewable energy projects, including: 1) Tax Credits – Two common tax credits are available. a. Investment Tax Credit (ITC) - The federal government has allowed an investment tax credit (ITC) of 10 percent. b. Production Tax Credit (PTC) – Operators of geothermal power plants are entitled to a production tax credit (PTC) of $.021 per kilowatt hour for 10 years. The PTC is indexed for inflation, so the rate is expected to increase over time. To illustrate the use of the tax credits, let’s assume that a geothermal power project with a 10 MW generating capactity with a cost of $25 million. Investing in such a plant will result in an investment tax credit of $2,500,000 and an annual production tax credit of $1,838,000 (or $18,386,000 over a 10 year period). The tax credits may be combined for a one-time ITC of 30 percent. The present value of the PTC at a four percent interest rate is $12,420,923. This ITC may be given in the form of an immediate tax-free cash grant, rather than be used as a tax credit to reduce tax liabilities at year end. The present value of the combined ITC and PTC, with the PTC claimed annually over the 10 year period, is $14,920,923. This is much greater than the elective ITC of 30 percent ($7,500,000). 2) Accelerated Depreciation – Up to 50 percent of the amount invested may be depreciated the first year. However, if the 30 percent ITC is used, the depreciable amount becomes 85 percent of cost and the first year depreciation is limited to 42.5 percent

With the rising popularity of geothermal energy as an alternative to fossil fuels, significant amount of capital has been invested in research and development of new technologies. Although not commercially viable as yet, enhanced geothermal systems (EGS) are designed to extract heat from areas with low permeability and porosity, which would substantially enhance extraction technologies and methodologies. Enhanced geothermal systems consist of production and injection wells that are drilled to more than 10,000 feet in depth, enough to reach sufficient permeability and porosity. In a recent major report entitled “The Future of Geothermal Energy,” Massachusetts Institute of Technology estimated that EGS could provide up to 100 GW of new geothermal capacity annually.

Free Green Energy LLC

Binary-Cycle Power Plants. For lower resource temperatures (300 to 350 °F), it is more efficient to transfer heat from the geothermal fluid to a secondary fluid (with a lower boiling point – typically a hydrocarbon such as isobutane or isopentane) that vaporizes. These vapors will then drive the turbine which generates electricity. Such plants are called “binary” since a secondary fluid is used in the actual power cycle.

Exhibit 3: Binary-Cycle Power Plant – U.S. Department of Energy

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(50% of 85%). At the maximum allowable depreciate rate of 50 percent, the first year depreciation amount on a 10 MW of capacity is $12,500,000. 3) Intangible Completion Costs – If the well produces commercial oil and gas associated with the thermal or kinetic energy used to generate electricity, intangible completion costs will be deducted. This would amount to about $4,300,000 on a 10 MW capacity. 4) Depletion Allowance – If the well produces commercial oil or gas, well participants are allowed to shelter some of the gross income derived from the sale of the oil and gas. This can range from 15 to 20 percent. 5) Renewable Energy Credits (RECS) – Renewable energy credits are created when a renewable energy project begins creating power. The green power is sold into the grid where the project is located. The RECS are sold separately from the electricity as a commodity. 6) Carbon Credits – Carbon credits provide an incentive for companies to reduce CO2 gas emissions. Credits are calculated based on the amount of carbon dioxide normally generated that is offset by the zero emission of a renewable energy project. Currently there are five exchanges trading in carbon allowances: Chicago Climate Exchange, European Climate Exchange, Nord Pool, Power Next, and the European Strategy Exchange. There are at least two electronic markets that also have been established: Cantor CO2e and Preserval Marketplace. 7) Exemption from Severance Tax – In Texas, oil or gas produced coincident with geothermal energy is exempt from state severance tax. As exhibited, a multitude of incentives exist to encourage investment in geothermal energy.

According to John Doerr, a pioneer venture capitalist whose firm bankrolled Sun, Google, Compaq, and Symantec, “The market for energy technology is larger, maybe

10 times larger, than the Internet boom that preceded it. We’re at the beginning of a green technology boom. The sheer magnitude of the problems can translate into an equally vast opportunity.” To create a kind of world fit for his daughter to live in, he says that we need to invest now in clean, green energy. According to a recent report by the Geothermal Energy Association (GEA), the April 2010 United States Geothermal Power Production and Development Update showed a 26 percent growth in new projects in the United States in the past year. There are 188 projects underway in 15 states which could produce as much as 7,875 megawatts (MW) of new electric power. According to GEA, the projects under development will represent capital investment of more than $35 billion when completed. “California could achieve its 2020 goal for global warming emissions reductions just by keeping energy demand level and replacing coal-fired generation with geothermal,” said Karl Gawell, GEA’s executive director. Geothermal power generation is concentrated mostly in the U.S. South and Southwest. In these regions the number of projects is increasing at a rate ranging from 50 to 400 percent. States with geothermal power projects include Alaska, Arizona, California, Colorado, Hawaii, Idaho, Louisiana, Mississippi, Nevada, New Mexico, Oregon, Texas, Utah, Washington, and Wyoming. This translates into over 28,000 direct and indirect permanent jobs to be added to the workforce. This represents capital investment of more than $35 billion, and it is accelerating. The renewable energy boom has been driven largely by environmentalists who fear the dangers from an increased reliance on foreign oil and clear evidence of global warming. The boom is being greatly accelerated by the Obama administration, which will require that by the end of 2012, at least 10 percent of all electricity consumed in the United States be derived from clean, sustainable energy sources, such as solar, wind, and

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The Future Is Now

geothermal. With the national generating capacity currently around one million megawatts, this will increase the renewable portion from 20,000 megawatts generated today from solar, wind, and geothermal to about 100,000 megawatts in 2012–a 500 percent increase in only four years. With recent improvements in drilling technology, geothermal plants can now be built and operated at costs comparable to those of coal-fired plants, with the added benefit of near zero fuel cost. To quote a former racehorse owner’s thoughts, “Never invest in anything that eats while you’re sleeping (i.e., a racehorse), but if you can find an industry that creates revenue while you are sleeping, invest in that instead.” Scientific evidence suggests that humanity is living unsustainably. To reduce the effects of consumption of natural resources to within sustainable limits requires the development of new and green technologies. That is the path that we must follow. n

About the Author Larry Turel has worked in the securities and investment banking industry for over 30 years, including serving as a securities broker and trader. Mr. Turel has a deep understanding of all facets of the securities and investment banking business. He has advised public and private companies to develop and execute on business plans. Further, he has helped many clients secure funding using bridge loans, private placements, and initial public offerings. Mr. Turel currently serves as chief executive officer of Zoegenics LLC, a private cancer clinical research company focused on improving immune systems in humans and animals. The company is in the process of licensing specific patents and intellectual properties, and inventions to joint venture pharmaceutical and manufacturing companies. In addition to his responsibilities at Zoegenics, he has recently been appointed vice president- corporate development/ IR for Spot Mobile International Ltd., a publicly traded telecommunications company based in Miami, Florida. He also serves on the advisory board of Free Green Energy LLC and Gift and Save, Inc. Mr. Turel graduated from Ithaca College in Ithaca, New York with a bachelor of science degree in business administration with a minor in economics.

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PROFILED COMPANIES

The Private Company Marketplace An Alternative Financing Tool

apital formation has not worked well for emerging companies seeking capital. Private companies in particular find the process to be challenging given that the marketplace has become high speed and fragmented. Sophisticated trading strategies relying on algorithms and derivative products appear to have replaced an efficient pricing mechanism for individual issues. Growing companies looking for capital cannot turn to the security industry as they once did. The volatility of traded securities today has helped generate fat profits for securities firms, but has not helped issuing companies in a way that they would expect. With this as a backdrop and the potential of the Internet as a support system, Private Company Marketplace, Inc. (PCM), was founded to provide a Web-based platform for private companies (and public companies doing private capital raises) and the accredited investor community. In the current environment, private capital has become increasingly important to the emerging company and, for that matter, companies of all sizes. In the past, private companies did not have an effective platform to find investor capital. What had been available consisted of segmented programs designed to trade illiquid securities or Web portals that listed available offerings seeking wider participation. It was evident that private companies needed a central platform that functioned like stock exchanges for public companies. The nature of a public company, however, rests in its liquidity. The existence of an efficient pricing mechanism borne from the dis-

counting of all relevant information in the public’s trading activity should theoretically result in a fair price for each issue. Platforms for public companies are based on trading. Private companies, on the other hand, are illiquid by nature. How companies are priced depends on the due diligence of the individual investor and the investor’s perceived value. Private companies need a platform designed for capital formation, not trading. They need a platform that provides information delivered in an efficient manner to the greatest number of accredited investors. Accredited investors need a platform that delivers that information in a consistent manner so that they can make optimum investment decisions. To address the issue of liquidity, the Private Company Marketplace offers an integrated global platform that allows members to auction their stock when changing personal situations dictate. This auction is not designed to price the stock as efficiently as a liquid public issue but gives accredited investors an opportunity to create their own liquidity event at a price that is determined by the seller based on available information. The Private Company Marketplace allows companies and accredited investors to interact for the benefit of both. In addition, as a FINRA/SIPIC member, Private Company Marketplace can be part of a selling group in underwritten private placements. Private Company Marketplace leverages the Internet to disseminate information efficiently to potential investors and to provide a medium for them to communicate directly with a company. With the tools provided by

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PCM, a company can raise immediate capital or create visibility to attract a following for future financing opportunities. The Private Company Marketplace is designed to list companies and not just current stock offerings. Companies have a platform to provide information consistently to inform current and potential investors. More information about Private Company Marketplace can be found at www.pcmexchange.com. 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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Micro-Cap Review Magazine Goes Scientific in the Fall The issue will feature Biotech, Life Sciences, Med-tech & Pharmaceutical companies. Biotech

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Jatropha’s Place in the Biofuels Race J

atropha, a biofuel feedstock, could change the way the world thinks about energy. Pitted against the most viable alternative energy sources on the planet, Jatropha has the potential to compete in one of today’s fastest growing industries.

By Lissa Swihart

Micro-Cap Review Magazine

With government mandates to reduce the global carbon footprint, the biofuels industry has been sent into a frenzy. Alternative fuels are in high demand and the race is on to find the alternative fuel of choice. Jatropha curcas, also known as the “diesel plant,” is an oil-bearing, sub-tropical, drought-resistant shrub capable of growing in challenging environments. When grown in the right climate, Jatropha produces nonedible nuts high in oil. Crude Jatropha oil (CJO) can be used to run diesel engines

and has been tested successfully for use in aviation. Jatropha, however, has yet to become a household name. Despite the myriad of articles and news programs about Jatropha and the heavy-hitting brands attached to it, the biofuel feedstock has a lot of competition in the world of alternative energy. Jatropha’s greatest attributes are its non-food crop status and its ability to serve as a drop-in, cleaner burning replacement for traditional diesel fuel. Jatropha has made headlines because of its association with organizations, such as Toyota, Nestle, Kia, Bayer, General Motors, NASA, and Boeing. Some are exploring the use of Jatropha as a replacement for traditional fuel; some are growing Jatropha to counter their own carbon footprint. Originating in Central America, the plant was largely considered a weed before the discovery of the plant’s potential as a biofuel resource, and was sometimes used as a hedge to divide fields. The oil from its nuts was occasionally used to fuel lamps. Jatropha begins to flower within six to eight months of planting, matures within three to four years, and continues to produce fruit for up to 50 years. When pressed, oil is extracted for

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biofuel and a pulp residue or seedcake is left behind, which can be made into either fertilizer or animal feed. Needless to say, Jatropha is no longer considered a weed. Jatropha made its biggest debut in 2008 and 2009 when technological developments made it possible to refine CJO to be used as a dropin fuel in existing engines. News sources, such as New York Times, Newsweek, and Forbes, began to feature articles about the plant. In 2007, the Wall Street Journal published an article entitled, “Jatropha Plant Gains Steam in Global Race for Biofuels.” In 2008, the Economist kept the Jatropha buzz going with an article entitled, “Kept aloft by plants and algae.” In 2009, Time magazine questioned, “Jatropha: the Next Big Biofuel?” In February 2010, Reuters published, “Jatropha Shines as Non-Food Oil for Biodiesel.” Crops like corn and soybean once dominated the world of biofuels until scientists, environmentalists, and human rights advocates took issue with the effects of food versus fuel. Prices of these crops were driven up because of the demands of the oil industry. Those crops became cost prohibitive to some populations. Jatropha is inedible, which excludes it from the food versus fuel criticism. Beyond its non-food status, the use of crude Jatropha oil does not require engine modification, an attribute that makes its use environmentally friendly and cost-effective. Will Thurmond, president of Emerging Markets Online, predicted the necessity for biofuels to act as drop-in fuel in his 2009 article “Drop in Fuels: the Next Generation” published in Biofuels International. According to Thurmond, “from 2009 to 2020, the industry will see increasing investment into the production of ‘drop-in’ fuel technologies and refinery processes to meet rising demands for the integration of biomass and petroleum systems, and to support national biodiesel mandates and targets for biofuels production.” Thurmond listed Jatropha as one of the feedstocks that can be refined to produce a drop-in fuel “that require[s] no changes to distribution, storage or engines for planes.”

He used the United States as an example of a country that has spent more than $7 billion on its existing petroleum refining, storage, pipeline, and distribution structure, not to mention the hundreds of millions of dollars spent on research and development to produce a new airline jet engine. In order to be viable, biofuels have to act as a drop-in replacement. On December 30, 2008 in Auckland, New Zealand in a joint initiative between Air New Zealand, Boeing, Rolls Royce, and Honeywell’s UOP, Jatropha diesel was tested in the world’s first commercial aviation test flight powered by Jatropha diesel specially blended for aviation applications. Last year, MIT’s Technology Review published research findings by Alok Adholeya, director of (TERI) Biotechnology and Management of Bioresources. “Jatropha is a one-stage conversion [to biodiesel],” Adholeya says, explaining that converting the plant oil to an oil that can be burned as fuel requires only one stage of heating and mixing with methanol. The resulting fuel, he says, “is a very good quality diesel that can be used in any transport vehicle.” With so much public evidence of Jatropha’s potential, some biofuel companies are relying on public participation to get Jatropha plantations up and running. Bedford Biofuels, headquartered in Calgary, Alberta, Canada is educating investors about the potential of Jatropha to attract small and large investments. The company will plant 100,000 hectares (or 247,000 acres) of Jatropha in the Tana Delta District of Kenya. David McClure, the president and CEO of Bedford, said most of the CJO produced will be consumed domestically but once quantities allow, the oil can be shipped to other parts of Africa, Europe, and beyond. In March 2010, NASA announced the addition of a Jatropha experiment to the International Space Station to test the effects of microgravity on Jatropha cells with the intent to accelerate the cultivation of the plant for commercial use. An article on NASA’s official Web site

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quoted Wagner Vendrame, the principal investigator for the experiment at the University of Florida. “As the search for alternate energy sources has become a top priority, the results from this study could add value for commercialization of a new product,” said Vendrame. “Our goal is to verify if microgravity will induce any significant changes in the cells that could affect plant growth and development back on Earth.” The sky appears to be the limit for Jatropha. Once considered a weed, the plant has the potential to leave a green footprint in history.

About Bedford Biofuels Bedford Biofuels is a biofuel company headquartered in Calgary, Alberta that syndicates private investment offerings in Canada to facilitate its Jatropha operations in Kenya. The company seeks to fund large-scale operations, thereby allowing it to create commercial quantities of biofuel. Bedford has achieved stable production costs by securing long-term land leases and exclusive supply agreements, and by choosing geographical areas with available labor, pre-existing infrastructure, facilities, utilities, and government support. Bedford’s humanitarian division EMPOWER (Every Member Prospers on World Energy Resources) was formed to bring healthcare, education, and clean water to the people in the areas in which Bedford operates. EMPOWER will teach farmers to grow their own Jatropha crop to sell it to Bedford for income. Through intercropping and the transfer of farming skills to local farmers and landowners, EMPOWER will contribute to long-term food and financial security. All of Bedford’s Jatropha operations will incorporate sustainable use of natural resources, farming practices, and production. For more information about Bedford Biofuels, please contact Robert Vanden Heuvel at (403) 648-6100 or robvh@bedfordbiofuels.com, or visit http://www.bedfordbiofuels.com/ welcome/microcapreview/. n

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Wealth from Waste Nutraceutical Ingredients from Food Production Waste Streams

With advances in food production, many waste streams are now being turned into profits by science-saavy entrepreneurs who recognize potential profits from other people’s waste.

By Steven Witherly and Larry May, M.D.

Micro-Cap Review Magazine

he U.S. food industry is a giant with annual sales approaching one trillion dollars. The industry generates a tremendous amount of waste by-products that end up in landfills, polluting both earth and waterway systems. In the past, much of the by-products were used as animal feed. Prompted by fears of contaminated animal pathogens (e.g., mad cow disease), recent regulations have been enacted to put a stop to this practice. Each foodstuff – meat, milk, fruits, or vegetable – creates unique waste byproducts that must be disposed of properly, depending on the chemical composition and levels of microbial contamination. With advances in food production, many waste streams are now being turned into profits by science-saavy entrepreneurs who recognize potential profits from other people’s waste. The nutraceutical industry now

creates value-added nutritional ingredients with a myriad of health benefits.

The Nutraceutical Industry Companies today can convert waste streams into substances with a range of beneficial uses, such as reducing the pain of osteoarthritis and improving mood energy and cognitive functions. In some cases, these ingredients can substitute for over-thecounter drugs, often without side effects. With worldwide sales of almost $80 billion, this fast-growing nutraceutical category has mined novel ingredients that prevent or ameliorate modern aches and pains. Let’s take a look at the creative efforts of some entrepreneurial companies that transform someone else’s garbage into profits.

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Ancient Waste Stream Problem

Shrimp and Shellfish Waste Streams

Cheese production used to be an environmental hazard. When cheese is manufactured, cow or goat’s milk is coagulated with an enzyme (rennet) that separates the casein (cheese) from the whey protein fraction (milk serum). The whey used to go straight to the municipal drain as late as the early 1960s. Cheese production creates a lot of whey-mineral soup, which used to be siphoned off as a waste stream. Today this highly polluting protein stream is transformed into hundreds of valuable food and pharmaceutical ingredients. The ability to pull off or “ultrafiltrate” whey components (called fractions) from the waste stream created a new industry. The whey protein fractions (proteins, sugars [lactose], salts, immunoglobulins, and enzymes) may be more valuable than the cheese itself. The revenue stream from cheese production waste includes whey, a high quality protein that is found in shakes and many food supplements. Whey also contains a variety of immunoglobulin, disease-fighting proteins with many health benefits. Other healthful whey fractions include enzymes (e.g. lactoperoxidase) with unique disease fighting properties. Today the whey protein industry is worth billions of dollars with numerous companies leading the way in whey protein extractions and derivatives (called hydrolysates). For example, Davisco International, a family-owned business which started in 1943 from a single factory, supplies the U.S. food industry with almost 400 million pounds of cheese and 65 percent of all whey protein sold worldwide. Their novel whey hydrolysate (Biozate 1) is easily absorbed, promotes lean muscle mass, and enhances the metabolic rate. Another innovative whey fraction is called glycomacropepide (GMP), which has been shown to contribute to a feeling of fullness or enhanced satiety.

Chitin is the name of a long chain biopolymer found in the protective shells (exoskeletons) of shrimps, clams, and crabs. Next to cellulose (trees and plants), chitin is one of the most abundant protective biopolymers on earth. Modern food processing methods can now take this polysaccharide and break it down into a number of very useful ingredients that find their way into food, pharmaceuticals, cosmetics, textiles, and even paper products. Chitin is a unique mucopolysaccharide with low toxicity and can be easily manipulated to make both water-soluble and fat-soluble ingredients. By far the two most useful ingredients derived from chitin are chitosan, a type of water insoluble fiber, and glucosamine, one of the sugar molecules that are the building blocks of chitin in the first place. Chitosan finds many uses in various industries—printing, leather curing, water purification, and paper manufacturing. When ingested, chitosan is also a fat absorbing fiber source, which is extremely popular in Japan. Chitosan is produced by grinding up shrimp shells, which are then chemically treated (deacetylated) to open up the molecules to bind to fatty materials. A recent meta-analysis of six studies showed significant reductions in a fatty material known as cholesterol. Glucosamine, the popular dietary treatment for arthritis, is produced from chitin by acid hydrolyses of the polymer followed by deacetylation. Glucosamine is a much smaller molecule and is easily absorbed in the intestines. Generally glucosamine is very safe. A rare person with severe shellfish allergy may react to glucosamine supplements. Cargill, the food processing giant, discovered a way to make glucosamine from a fermentation process that first creates chitin with a subsequent acid hydrolysis step, thus making glucosamine a product suitable for vegetar-

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ians. Their product is called Regenasure™ and is shellfish-contaminant free and kosher as well. Also, a Wisconsin-based company called Bio-Technical Resources has developed another unique fermentation process based on metabolic bacterial engineering that makes low cost glucosamine from a common bacteria.

Olive Processing Waste Streams The popularity of olive oil as a seasoning and cooking oil has never been higher due to its great taste and health benefits associated with the Mediterranean diet. Olive processing has a dirty little secret. The processing and pressing of the oil releases large amounts of olive water or olive mill waste. This olive effluent used to be dumped in sewers or allowed to soak into the earth. Olive oil contains many beneficial antioxidants called polyphenols. The wastewater, however, had many times more, as much as 300-500 times more beneficial polyphenols than those found in the olive oil produced. With annual production of 11 million tons of this wastewater, olive oil processing used to be an environmental problem until Roberto Crea, Ph.D. and CEO of Hayward, California-based CreAgri Inc., developed a way to turn the pits, skins, and olive water into ingredients for the food and cosmetic industry. By using a proprietary freeze-dry concentration technology CreAgri transformed the olive water into a highly concentrated polyphenol mixture called Olivenol™. Many studies show that olive polyphenols promote cardiovascular wellness, provide antioxidant protection, and may boost the immune system.

Rice Processing Waste Streams Rice is the second most popular grain behind corn. The production of white or milled rice generates an abundance of rice bran, the outer kernal. This lipid and nutritional

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rich fraction of rice is limited to feedstuff because it goes rancid almost as soon as it is produced. This highly nutritious waste stream of essential fatty acids, B-vitamins, antioxidants, and polyphenols was just waiting to be tapped. To use rice bran it must first be stabilized or rendered non-reactive to prevent the various components from degradation. Bran stabilization was solved by a scientists who founded the Phoenix-based company NutraCea™. Their unique rice bran stabilizing process takes the outer bran as it comes off the rice kernel and stabilizes it on the spot—thus creating a nutritious food with a shelf life, which has been extended from a few minutes to one year and possibly even longer! NutrCea now provides the food industry with a high quality, nutrient-dense powdered rice bran that has many applications— from a food taste enhancer to improving the nutritional quality of almost any food. Another by-product of their technology is rice bran oil, a delicate tasting oil which has unmatched frying capabilities due to its high smoke point. Rice bran oil also contains many healthful properties derived from the low saturated fat profile and numerous polyphenolic (antioxidant) substances.

extract (GSE). The company’s brand called MegaNatural™ is made from unfermented ruby red seeds and from the seeds left over from white wine making. The health properties of GSE are astonishing. Dozens of clinical trials have shown GSE to contribute to improved cardiovascular health, improved skin tone, reduced blood pressure, and enhanced mental alertness. Grape seed extract actually crosses the blood-brain barrier. Although grape seed extract is preferred in its native liquid form, many other parts of the grape lend itself to additional nutraceuticals, including quercetin from the juice, natural coloring agents from the skins, and resveratrol, the possible life-span extending nutraceutical found as the white powder on the outside of the grape skin.

Tomato Waste Streams

Wine consumption is known to produce many health benefits, ranging from reducing high blood pressure to increasing good HDL cholesterol. A variety of polyphenols and anthocyanidins are released in the fermentation of wine making. Wine is fermented from grapes with seeds and skins kept in tact. Beneficial antioxidant polyphenols are eventually found in the finished bottled product. This process leaves millions of tons of waste grape skins and seeds, which sometimes are used as animal feed but usually are thrown in landfills. In the early 1990’s, the wine making giant, Canadaigua Brands (now Constellation), began selling a proprietary grape seed

Although ketchup makes French fries taste great, the production of America’s favorite condiment creates multiple waste streams from the washing, peeling, and seed extraction of tomato paste. The chemical compound that makes tomatoes and watermelon bright red is the straight chain carotenoid known as lycopene. This potent fat-soluble antioxidant has numerous health benefits, including boosting the immune systems and protecting the skin from harmful radiation from the sun. Several long-term epidemiological studies suggest a connection between tomato consumption and lowered risk of prostate cancer and coronary heart disease. Lycopene is relatively expensive to make synthetically. Many methods have been developed to extract lycopene from the tremendous quantities of tomato waste. Several companies have developed technologies to extract the lycopene from tomato skin, pulp, and seeds. The best known is Israeli-based LycoRed, a nutraceutical company which pioneered the extraction of lycopene along with associated phytochemicals that complement the antioxidant action of lycopene

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Wine Making Waste Streams

itself. Such nutritional cofactors—phytoene, phytofluene, beta-carotene, and vitamin E— greatly enhance the absorption of the lycopene, a carotenoid notorious for its ability to resist human digestion. Many popular nutraceuticals are derived from nonedible components of food. Bromelain, a pain-fighting enzyme, is extracted from the stems of processed pineapple. Pycnogenol®, which has a myriad of benefits from reducing diabetic retinopathy to enhancing sexual function, comes from the bark of the maritime pine. Kudzu, which fights alcohol dependence, and saw palmetto, which supports prostate health, are extracted from noxious weeds.

Future Directions Advances in separation and extraction technology promise to add many new healthy ingredients to an already expanding list of nutritional phytochemicals. With the worldwide emphasis on green technology, food processors and innovative biotechnology companies can mine “greens” from waste streams that accompany almost any type of food or feed processing. n

About the Authors Dr. Steven Witherly is a nutraceutical consultant in Valencia, California. He previously was the head of research and development at Herbalife, Nutrilite (Amway), and Leiner Health Products. He received a Ph.D. degree in human nutrition from Michigan State University and an M.S. degree in food science from the University of California at Davis. Dr. Witherly is the author of the book, Why Humans Like Junk Food, and is the inventor of the new antihangover drink called Resurrection. Dr. Larry May graduated Phi Beta Kappa from Harvard University with a bachelor’s degree in economics 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 has authored several books, including a popular textbook. He currently practices medicine near Los Angeles and consistently has been recognized by peers as being among the best doctors in the country. Dr. May has been honored in publications, such as Best Doctors in America.

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PROFILED COMPANIES

Converted Organics Inc. (NASDAQ: COIN) Growing a Greener Future from the Ground Up

ne of the most valuable and overlooked resources available today is food waste. Food waste is often viewed as a liability, because it usually ends up in landfills where the waste decomposes and creates harmful greenhouse gases, such as methane. Converted Organics Inc. (NASDAQ: COIN) sees food waste as an opportunity. Based in Boston, MA, the company is helping to change the way the world thinks about food waste. Through the use of a patented technology, Converted Organics can cost-effectively convert food waste into organic fertilizer products - valuable resources that are renewable and environmentally safe.

31 million tons of food waste is disposed of annually in U.S. landfills. Converted Organics in Brief A publicly listed company since 2007, Converted Organics Inc. is a clean technology company that holds a proprietary technology called High Temperature Liquid Composting (HTLC®TM) that allows the rapid conversion of food waste into effective, sustainable, allnatural fertilizers. The company’s products

are used in the retail lawn and garden, professional turf, and agriculture markets. Converted Organics intends to build, own, and operate food-waste-to-fertilizer manufacturing plants near large U.S. cities that generate high volumes of food waste. The company’s manufacturing plants can operate as perpetual urban recycling facilities: they never fill-up and don’t pollute. Currently Converted Organics oper-

COMPANY TIMELINE 2007 - Converted Organics Inc. went public via an IPO and began construction of its first manufacturing facility in Woodbridge, New Jersey. 2008 - Acquired the assets of California Liquid Fertilizer Corporation, a company that manufactures and markets liquid organic fertilizers into the agriculture market. 2009 - Began manufacturing and marketing fertilizers from the plant in Woodbridge, New Jersey. 2010 - Entered into a license agreement with MassOrganics LLC to install and operate Converted Organics manufacturing facility in Sutton, MA. 2010 - Acquired a license from Heartland Technology Partners, LLC (“Heartland”) to use certain technologies in the treatment of industrial waste waters.

To date, Converted Organics has raised $89 million in capital and has quickly established a name for itself by selling organic fertilizer products in the retail lawn and garden, professional turf, and agriculture markets. 50

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ates two manufacturing facilities: one in Woodbridge, NJ (just outside of New York City) and one in Gonzales, CA (just south of San Jose, CA). The Woodbridge facility is permitted to receive 500 tons of food waste per day, or 150,000 tons of food waste per year. The food waste is comprised primarily of fruits and vegetables, cereals and grains, and meats and fish – a diverse mix that yields a very rich and highly effective organic fertilizer. Converted Organics has two sources of revenue. While fertilizer product sales remain the biggest source of revenues, the company also generates revenues from “tip” fees from waste haulers who accept food waste generated by grocery stores, food processors, and hospitality venues. Since Converted Organics offers a lower “tip” fee than landfills charge, waste haulers have an incentive to bring their food waste to Converted Organics’ facility. Within six days of receiving the food waste, Converted Organics converts the waste into fully-pasteurized organic fertilizers ready for sale. The company also licenses the HTLC® technology to third parties. Converted Organics recently signed a licensing agreement with MassOrganics LLC, which will install, operate, and use the HTLC® technology to manufacture organic fertilizers in Sutton, MA. Converted Organics is also developing smaller capacity operating units, named the Scalable Modular AeRobic Technology (SMART) units, which the company will design, build, and sell to third parties to handle smaller food waste volumes. The SMART unit will include a license to use Converted Organics’ proprietary HTLC® technology, and purchasers of the SMART units will generate revenue from tip fees, as well as from sales of fertilizer in markets where their units operate.

Food Waste: Big Problem, Big Opportunity

fills. Herein lies the problem: when food waste is land-filled, it decomposes anaerobically (without oxygen) to produce methane gas. Methane is a greenhouse gas that is 21 times more potent than carbon dioxide (CO2). According to the U.S. Environmental Protection Agency (EPA), “Landfills are the largest source of human-related methane emissions in the United States, accounting for approximately 34 percent of all methane emissions.” 1 Converted Organics is helping to reduce greenhouse gas emissions by diverting food waste from being disposed of in landfills. Converted Organics is not only helping to reduce greenhouse gases through recycling, but is also helping to replace harmful synthetic fertilizers. The production of synthetic fertilizers consumes vast amounts of energy and generates unwanted CO2 emissions. To produce one ton of synthetic fertilizer today requires burning enough natural gas to release 4.6 tons of carbon dioxide into the atmosphere. In contrast, every ton of Converted Organics fertilizer produced is a net carbon savings. Also, by constructing facilities near large cities, which are the biggest sources of food waste, Converted Organics eliminates the need for costly interstate transportation of food waste to landfills, thereby further reducing CO2 emissions.

Process and Technology At the heart of Converted Organics’ process is a well documented microbial digestion process called High Temperature Liquid Composting (HTLC®). This process is an extremely efficient, state-of-the-art, in-vessel biological system which rapidly converts organic matter into high quality, organic fertilizer products. In the most basic terms, the HTLC® process takes the age-old concept of composting food waste one step further by introducing additional oxygen and heat into a closed, carefully monitored tank to greatly

accelerate the digestive process. By speeding up this process, food waste that would normally take months to compost can be converted into useful, all-natural fertilizer products in a matter of days. The HTLC® process also guarantees full product pasteurization, eliminating the harmful pathogens often present in unprocessed food waste. The finished product is a fertilizer blend that is rich in nutrients, plant growth regulators, and organic matter. The fertilizer, free of synthetic chemicals, animal manures, and bio-solids, can be used to enhance the soil’s overall condition. Best of all, it is completely safe to use around children, pets, and the natural environment.

Current Markets Retail Lawn and Garden About 30 million homeowners buy fertilizers for their lawns at retail lawn and garden stores. More consumers are buying all-natural, organic fertilizers, because they are safer than synthetic chemical fertilizers. Organic fertilizers are experiencing more favorable market growth than synthetics. After just one year of selling into the retail lawn and garden market, Converted Organics is selling its products to Home Depot, Wal-Mart, Sam’s Club, and Whole Foods. In 2010, the company’s “big box” retail customers have reported same store sales growth of 129 percent for Converted Organics’ products versus 2009. Professional Lawn Care The trend toward going organic in the consumer market has greatly influenced the professional lawn care market. Homeowners often request all-natural, organic based programs, such as those from Converted Organics to replace synthetic chemical fertilizer programs. Until recently, the organic options available to professional lawn care companies have been mainly comprised of chicken waste or bio-solids (treated sewer

Each year in the United States, 31 million tons of food waste is disposed of in land-

http://www.epa.gov/epawaste/conserve/materials/organics/food/fd-basic.htm

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1 ton of synthetic fertilizer = 4.6 tons of CO2 from the burning of natural gas sludge) fertilizers. Both have inherent weaknesses (e.g., odor, low coverage, negative public perception), leaving many lawn care companies on the hunt for better organic fertilizers. Converted Organics fertilizers are ideal for professional lawn care companies that are looking for a cleaner, safer alternative. A number of national professional lawn care companies now order Converted Organics products in bulk because of the product’s price and performance and the compelling environmental story. Golf Market The United States has over 18,000 golf courses, and it’s estimated that golf courses consume $400 million of fertilizer annually, with fertilizers and pesticides accounting for 60 percent of golf course consumable demand. Golf course superintendents are under great pressure to reduce the use of synthetic chemicals and improve the environmental footprint of their courses. This means shifting away from the use of synthetic fertilizers, which can deplete soil nutrients and pollute surrounding waterways with unwanted chemicals. Golf courses are making the shift towards naturalbased fertilizers, which enhance soil health and decrease the dependence of turf on petroleum-based fertilizers. Converted Organics liquid fertilizers can be used to replace or significantly reduce synthetic fertilizer used on golf courses. According to a multi-year study conducted by Cornell University, Converted Organics fertilizers have been shown to decrease the incidence of common turf grass diseases, enabling superintendents to reduce fungicide use by up to 50 percent. In short, Converted Organics fertilizers enable golf course superintendents to decrease chemical

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inputs while improving turf quality, environmental footprint, and profitability. Agriculture The agriculture market is comprised of two segments: 1) certified organic agriculture; and 2) conventional agriculture. Converted Organics sells into both segments. Certified organic growers are required to use certified organic fertilizers. Converted Organics has a full product line of fertilizers that support U.S. Department of Agriculture (USDA) certified organic crop production. There are approximately seven million acres of certified organic farmland in production. Farmers increasingly are shifting more acreage from conventional to organic production to meet growing consumer demand for healthier foods. In the conventional agriculture market, Converted Organics liquid fertilizers have been proven to deliver improved yields at lower cost when blended with synthetic fertilizers. For this reason, conventional growers are using Converted Organics fertilizers to maximize the quality and quantity of yields and minimize costs. About 23 million tons of liquid fertilizer are used in the U.S. agriculture market annually. Converted Organics fertilizers enable growers to produce more food per acre at a lower cost, an important factor given that global food demand will rise as the human population swells to an estimated nine billion people by 2050. Converted Organics is dedicated to promoting sustainable agriculture by offering a replacement for synthetic fertilizers.

Holding strong to the belief that waste is a valuable resource, Converted Organics is acquiring businesses and other clean technologies that align with the company’s mission to convert waste materials into highquality, environmentally-friendly products (i.e., organic fertilizers, clean water, and energy). In March 2010, Converted Organics acquired a license from Heartland Technology Partners, LLC (“Heartland”) to use certain technologies to treat industrial waste waters. Converted Organics’ acquisition of Heartland’s technology helps diversify the company’s business while maintaining a “green environmental” focus. To learn more about Converted Organics, including obtaining an analyst report by Concentric Research, please visit www.convertedorganics.com/micro or send an e-mail to info@convertedorganics.com. 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.

Growing Green Converted Organics is seeking to transform how food waste is perceived and managed, and how plants and crops are cultivated.

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PROFILED COMPANIES

Terrasphere Systems, LLC revenue in three ways: 1) licensing fees and royalties; 2) sale of equipment; and 3) product sales.

Technology Introduction People around the world are seeking high quality, locally produced food that is free of pesticides and other chemicals. Additionally, economic, societal, political, and regulatory trends have created a strong demand for innovative agricultural solutions. In many regions of the world, unfavorable climate conditions make it impossible to meet these demands year round. TerraSphere Systems, LLC is revolutionizing the way people grow food. The company partners with investors and entrepreneurs to solve food production problems on a commercial scale by creating the ideal environment for plant production.

TerraSphere employs an automated, software-driven plant growth system that can be used to grow a variety of crops–from lettuce to tree seedlings to rare medicinal herbs. The core TerraSphere technology is a module that places rows of plants perpendicular to an interior light source. Locating the seedlings close to the light allows for higher light levels when using low level lighting. A psi pressure of 90 is used when feeding through the sprayers to ensure even distribution of the nutrient solution to the crops. The result is an abundance of plants with strong, compact, and multidirectional growth.

Advantages Company Founded in 2003, TerraSphere Systems, LLC designs and builds highly efficient vertical growth systems in compact, safe, pollutantfree facilities. TerraSphere’s state-of-the-art technology is fully contained, which means crops can be grown year-round in any location using precise combinations of light, water, and nutrients to maximize production. TerraSphere currently operates a facility in Vancouver, Canada and has successfully grown a variety of crops, including lettuce, strawberries, spinach, basil, and safflower. TerraSphere offers investors a dependable return on investment (ROI) by generating

TerraSphere offers many benefits over traditional growing methods, including yields of up to ten times greater than those of conventional crop production methods. This urban agricultural model allows locally grown, pesticide-free produce to be cultivated closer to population centers, resulting in fresher produce in stores, lower supply chain costs, and reduced carbon emissions. The controlled growing environment offers many other benefits: it protects crops from weather-related problems; eliminates the need for synthetic pesticides, herbicides, and fungicides; reduces nitrate run-off; and preserves natural resources owing to reduced farmland use.

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Gaining Ground TerraSphere has been developing its proprietary indoor growing system for the past seven years. The company has completed a number of transactions, including a partnership with the Squamish Nation and Choices Markets, British Columbia’s leading organic foods grocer. As a pioneer in alternative agriculture production, TerraSphere provides a sustainable solution to the hunger crises facing the world’s growing population. To learn more about TerraSphere Systems, LLC, please visit www.terraspheresystems. com or send an e-mail to info@terraspheresystems.com. 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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V I E W P O I N T S

Government Budget Focus Smart Grid and Alternative Energy

he focus on renewable energy over the past several years has created a frenzy of investment—most of which is dependent on the success of the policies of the Obama Administration.

by M.C. Elvis Oxley & Daniel R. Murphy

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These policies share a single motivation which is to reduce carbon emissions. We have seen a surge in start-up ventures which are looking to manufacture and provide services in solar, wind, and other forms of renewable power generation. However, with all this effort and focus, renewable sources of energy only comprise two percent of today’s total generation within the United States. Until the federal government focuses on the electric grid to build more capacity and until investment is made in the design of a truly national transmission system, renewable power energy will suffer to expand as a driver of power generation. There are other investments today which will also revolutionize our power generation and transmission. The utilization of technology within the grid and distribution systems has become known as “smart grid” and has increased the efficiency of those systems in an effort to curb demand. In addition, energy efficiency has become a significant driver in reducing demand, and thus carbon emissions. The Obama Administration has made significant investments in both of these sectors through distributing America Reinvestment and Recovery Act (ARRA)

funds in the form of grants. Moreover, President Obama has proposed a “Cash for Caulkers” program that will invest in energy efficiency and retrofitting projects around the country. Heartland Energy Partners (HEP) is an Arlington, Virginia-based company that focuses on both the smart grid and energy efficiency sectors for the nation’s 930 electric cooperatives. The electric cooperatives were awarded $260 million in ARRA grant money to invest in smart grid technology. These projects range from a basic AMI investment to the integration of a meter data management system and demand response programs. HEP is currently assisting Golden Spread Electric Cooperative of Amarillo, TX with their $43 million smart grid project. However, Heartland Energy Partners’ largest opportunity lies within the energy efficiency market with electric cooperatives. Legislation is moving through both houses of Congress that will create a new energy efficiency program for electric cooperative customers/members. This program consists of loans which the cooperative must pay back within ten years. The program will be admin-

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istered by the USDA and includes upgrades such as new furnaces, hot water heaters, and insulation. An energy audit will be conducted first to identify any mitigations in need of installation. Then a certified contractor will install any new equipment with an inspector checking for quality and safety assurance. HEP serves a niche market with the electric cooperatives that many companies have found very difficult to serve. Many cooperatives are located in rural areas and can be difficult to travel to for sales calls. The other discouraging aspect is the size of the various cooperatives—the smallest has 900 meters and the largest coop manages a system with 250,000 meters. The average cooperative is around 30,000-50,000 meters. This small meter base and the sheer number of cooperatives—900 plus—makes it very difficult for a large integrator to formulate a sales strategy. However, Heartland Energy Partners has done just that, and has built its business model around the values and needs of this underserved market. Its founder, John English,

is from rural Oklahoma and his family has served in the electric cooperative community for nearly twenty years. “Electric cooperatives have special needs and a special way of communicating that the large west coast integrators find difficult to connect with”, English said. “Electric cooperatives are suspicious of any outsider or vendor who is just looking to make a quarterly sales quota. Cooperatives want to provide value for their customers/members”. HEP’s ability to connect with its customer base is why the company will be profitable in its first fiscal year. The values in which the company embodies is very much in tune with rural America. These values center on service—service to country, service to community, and service to family. Two of HEP’s board members served as multiple term governors of rural states. Both former governors Tommy Thompson (Wis.) and Frank Keating (Okla.) are playing significant roles within the company’s strategy to penetrate the markets in their respective states. Heartland Energy Partners is a company that illustrates that other green investments

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in energy are viable today. The smart grid and energy efficiency sectors are proving results immediately versus the more longterm investments of renewable sources of energy. The inability to receive regulatory approval for the construction of new power plants due to the new climate change legislation and the effect any new energy bill will have on such a significant building project has placed new power plants and designs in limbo. Instead of generating more power, HEP and the electric cooperatives believe we must find a way to drive down demand through current technology and programs. n

About the Authors M. C. Elvis Oxley is President of Oxley Consulting, LLC (www.oxley-consulting.com) and a professor at The George Washington University Graduate School of Political Management. Dan Murphy is Chairman of Chadbourn, a Division of Colorado Financial Service Corporation (www.dan.murphy@coloradofsc.com).

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V I E W P O I N T S

Getting Jobs and Money into the Economy

here are no magic bullets or cure alls for the current economic problems; only common sense. It dictates that the best solution to getting the country back on track is to create jobs that pay a living wage and are building blocks for future economic growth. New and early stage ventures have been the undisputed drivers that create sustainable jobs. Financing such ventures has always been the venue of friends and family, angel investors, venture capitalists, and both investment and traditional bankers. The sad fact is that the “system” that created the American dream has been dismantled by our regulators (SEC, FINRA, etc.) and our representatives (Congress). They abrogated their responsibility to protect small businesses and the residents of every street except Wall. Big was always better. To get there, the system winnowed out the small broker dealer and any source of debt that didn’t require attorneys and accountants charging at least

by Marshall Sterman

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$500 per hour. Never mind the “unintended consequences” of Sarbanes-Oxley, which continues to confound. And to make matters worse, the guardians of our personal wealth (the same people watching porn and not getting filings reviewed on a timely basis) have redefined “sophisticated” in an effort to take the last vestige of non-institutional help from the entrepreneur. Where are Barney Frank, Harry Reid, and Nancy Pelosi when you really need them? Believe it or not, there’s still a simple and effective way to bring investor money back to the table. There is a way to validate those entrepreneurs and companies that cannot be denied, protect the interests of the taxpayers, and give the needed jump-start to a rebuilding process that rewards everyone, not a privileged few. For starters, we ought to take the decision making out of the hands of the people that gave thumbs up or down for the likes of Citicorp, Lehman Brothers, Bear Stearns, AIG, etc. Either a company qualifies or it has to go back to the drawing board and come up with a better business plan and a team to execute on it.

Rather than continuing to fund politically motivated pet projects, the Treasury’s printing press should be used to match, dollar for dollar, any new equity investments in start-up or early stage enterprises. ANYONE putting capital at risk qualifies a company for matching funds. No need for legions of bureaucrats to procrastinate and pass judgment on the merits. What is important is that investor money is equity and the U.S. taxpayer matches it up to a “to be determined” amount (at a minimal dollar for dollar), have salary caps ($150,000, for example), restrictions regarding “insider” sales, and have repayment of interest and principal on the government money on a free cash flow formula. Investors are rewarded for their risk by the added leverage the government funds provide and by a reduction in the rate of any tax on capital (20 percent?). Once the government funds are repaid the company is back under the same rules and regulations that everyone else has to abide with. God bless America! n

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V I E W P O I N T S

by Paul F. Pelosi, Jr.

Green Jobs

Attracting Innovation and Growing the Work Force

overnments and communities continue to rise out from the financial collapse of 2008. During these tough economic times there is an increasing need to look towards new ways of reshaping the economy. A new green workforce has arisen to bring forth a more energy-efficient, cost effective, and environmentally-friendly business environment. Green workforce refers to and an all employees focused on promoting energy efficiency efforts, the creation of electric vehicles and alternative power. In these trying time the green work-force must continue to expand. It is imperative for the market to believe that benefits of moving towards a “green” economy will and can exceed the costs of the investment required in order for it to exist. This has already happened in the past few years with the rollout of environmentally efficient light bulbs. Once it was proven to be a good example of the marriage between energy and cost efficiency, it was an easy sell to the rest. The first five percent of people who adopted such light bulbs were innovators who were certainly motivated by environmental concerns. The 80 percent which followed were driven by different kinds of incentives. The remaining 15 percent were those who were not inclined to adopt any kind of environmental initiatives, but did so voluntarily because everyone else was doing it. By taking a proactive approach, businesses and governments are able to jump start a community willingness to light their buildings in a more environmentally sound way. As with light bulbs, another important opportunity for the expansion of a green work force is the construction of energy

and water efficient buildings. Building new and improving existing buildings to new “green” specs plays a central role in this cause because it does not require a behavioral change, while also providing communities with the benefit of more jobs and a more sustainable quality of life. On the local level San Francisco in particular, has become established as a leader in the environmental world due to successful city mandates regarding commercial building and energy efficiency. Health and quality of life issues are the essential focus. San Francisco has experienced this success because of creative partnerships with other local governments and in the private sector. By understanding the needs of all people in the community, San Francisco is better able to present more fully integrated programs which lead toward sustainability. The green work force will continue expanding, as long as local governments keep making investments for innovative ventures and the marketplace must realize that environmentally sound businesses can be profitable. The number of green workers has increased dramatically with the implementation of the American Recovery and Reinvestment Act (“The Act”), which earmarked $150 billion for projects related to smart electricity grids, energy efficiency, and local renewable energy projects. The Act expanded the green work force by accelerating the promotion of clean technologies by the federal government, upgrading many of the 500,000 existing government buildings, and expanding federal grants to assist states and municipalities to build LEED-certified public buildings.

In the future, a significant driver of green jobs will be corporations eager to gain a competitive advantage by investing in projects which reduce costs, increase revenues, and achieve sustainability goals. Even during periods of economic slowdown, corporations are under pressure by their consumer networks to provide greener products, reduce resources consumption, and increase efficiencies. Hardships caused by spikes in commodity prices have forced businesses to implement programs to protect against worldwide demand for oil and other energy sources. Success against the most pressing economic and environmental challenges of our times depends on an unprecedented level of collaboration among citizens, local businesses, multinational corporations, clean technology companies, professional groups, and governments. Citizens are asking for a better quality of life. The media, politicians, and celebrities have all helped emphasize the importance of environmental measures. Health and scarcity of resources are the main concerns. Younger people tend to want environmental reforms in the workplace, and are more likely to be vocal about these reforms. The key for the future of the United States in the green space will be to design, manufacture, and deploy technologically advanced products for the renewable energy market. A task which will require us to stay ahead of our international competitors in order to meet the needs of the community, which will in turn dramatically expand the green work force. n

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“Overcoming Loss” W

hy is a Rabbi writing a column in a financial publication? Because I am so well acquainted with loss, both personally and professionally; the publishers thought I might be able to offer a different approach to responding to and overcoming the recent dreadful losses in the collapse of the financial system in America. It’s not just that I lost assets, just like all of ment and career to death and mourning. So you, but also because I have spent almost fifty years as Rabbi and psychologist helping people through all kinds of losses, from financial to physical, from bankruptcy to death. In my practice, I have specialized in counseling individuals, families and businesses through the transition of difficult losses, sales and foreclosures. I even have worked helping family businesses through the complexity of communication and decision-making. Personally, we—my wife and I, and our family—have gone through our own losses, ranging from multiple life-threatening illnesses and accidents to losses of employ-

Rabbi Stephen Robbins, Psy.D.

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I approach the issue of overcoming the losses you all live with from this financial collapse from a very heartfelt position. We spend our lives trying so hard to avoid loss, from the time we are babies struggling with separation anxiety up through this stage in our lives. We think that if we work and plan hard enough that we will avoid the losses that attend life. And so we are all illprepared when loss happens… and it does, over and over again. Loss is the by-product of change. When we are born, our fists are clenched and we are screaming as if to hold on to everything that life presents. And when we die, our hands unroll, releasing everything, our mouths open, with nothing left to scream for. My spiritual tradition teaches me how to live, neither fearing loss nor trying to avoid it, but accepting loss as the prelude to change. If we think of our lives as a vessel filled to the top or in our case in America, overfilled, we keep trying to shove in as much as we can. Change becomes traumatic. Nothing new can enter if something old does not make way for it and leave. Just as we go through stages of growth in which we leave behind our childhood and young adulthood and mid-life crisis and enter into our senior

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years (where I am now), we discover if we are wise enough to let go of that which can no longer be held onto, mourn its passing, learn its lesson and refocus ourselves to live gracefully in whatever comes next. I phrase it this way: for every loss, there is a gain. For every gain, there must be a loss. Until we learn that there are no losses, only gains. We are tried by the losses and healed by the gains. If we only remain trapped in the pain and fear of the loss, the gain and its healing will never appear. Losses and gains are never individual. They may be centered in one of us, but the impact is felt by all of those with whom we live and work. The error we make many times is to become isolated in the loss and so we will disrupt, even destroy, the bonds of family and friendship that will help us through. Learning that the pain of loss is always shared, and providing us the capacity to reach out to others, is the first step towards the gain. Two years ago, everyone talked about the incredible real estate market and the financial opportunities, telling stories about their investments, the private funds that they were in and the great counselors that they had, and in the midst of the conversation someone would say, “You know, we’re in a bubble and one day, it’s going to burst.” But the behavior continued without change. Speaking with those same people after 2008, I asked them why, if they had been so smart and careful in amassing their investment portfolios, had they had become so ‘stupid.’ When the signs of the crash began why didn’t they change and save themselves? Most people didn’t believe it was really happening. Now, many come to me in for counseling, to try and understand how they got themselves in this situation. And what I’ve discovered since then is the following. We no longer understand our relationship to money and finance. Most of us, even those in the business of finance and investment, are themselves overwhelmed by the amount of activity and information we are bombarded with, moment to moment that flows through the financial world. All of us

were looking for the right place to put our assets, so that we could get the best return, an advisor who could assess the market with great intelligence, luck or an unusually broad view of market trends. We wanted that person to be our guide and do the work for us. How is it that we have come to surrender the trust in our own minds and decisionmaking abilities, and to place that trust so completely in others who have led us to the enormous disaster that we, as individuals and institutions, find ourselves in today? There are those who hold that greed drove us all “like lemmings into the sea,” and led us consistently to bad investments that we believed we could keep selling off to other people. Others believed that the institutions in which they trusted would “never let them down,” and that somehow they were going to be safe and protected. While others believed that they would see disaster coming and be able to pull themselves out before it happened. And last of all, the ones who now believe that all of this was intentional— planned in the minds of an unrelated group of individuals and institutions who saw an opportunity in an unregulated market to conceive of the greatest con game in the world. I tend to accept the latter statement. The success of a con game lies not only in the artfulness of the con man (woman or institution) but also in the intentional gullibility of the mark. What makes the con successful is the belief that the mark is getting a deal that nobody else could ever get. This greatest of con games took in the whole world. Nations, governments, financial institutions, big and small investors and government protection systems were all part of the con. It seemed impossible to imagine that anybody could fool all of the collective wisdom that was focused on the market. We all believed that being vigilant we could protect ourselves from the con man. In truth, the government and the business community had set us up by deregulating the finance industry and inviting the con man in. To understand how we came to suspend our sense of self-preservation and

buy in to the con, we must look at a couple of factors. MONEY - Capital was created in order to substitute for the barter. Money became the symbol of value contained in an object held somewhere else in trust, and was never intended to be a possession itself. In the transformation of the psychology of money, it has now become the greatest of all possessions. “Money” used to mean some precious bullion or stones that had intrinsic value of their own. Today, money is a value held in an ownership that has no physical quality. What money can buy has become the symbol of how much money you own instead of the other way around. Looking rich is not the same as being rich, and money becomes the means by which you can look to be something that you’re not. Its value is a fantasy—a shadow that cloaks the unmet needs of the self to make you look and feel greater than you are, while hiding your own inner fears that you are not what you project. The American economy used to be a balance between manufacturer and consumer. Now, the American economy is almost all consumerism and is based on that psychology of illusion. The more things you own, the more secure you are about yourself and your place in society. The establishment of limitless credit enabled that fantasy to come to fulfillment. You can buy as much as you need to make you feel good and you can avoid paying the bill. It’s true that you really don’t have to pay the bill if you can cycle debt into debt into debt, but if one day, as happened a little over two years ago, the bills get called… then the system collapses. FULFILLING THE DREAM - To fulfill the American dream, you must own your own home… but even that is a fantasy because it is the lending institution that owns the home, not those who live in it. As real estate values rose to unreal levels, providing inflated equity, it became a simple device to draw everyone who had that dream into the con game of thinking they could buy a house without paying for it. The bad loans made to financially-incapable debtors

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became a way of fulfilling this American dream. As the illusion dissipated, so did the dream of home ownership. What is amazing is that people invested without investigative background checks to find out if the business or the instruments were themselves reasonable and prudent. And yet while everyone was lending money to unqualified debtors, they felt they could escape from the bad loan by selling the paper to someone else, either in America or to another country. This was truly the “selling” of America. Not even the SEC, the Federal Reserve, Congress or the President was willing to intervene in this orgy of bad finance for fear of making it collapse and engendering a crisis. Why no intervention? Why, when whistleblowers tried to stop it, were they shut down and ignored? We all know that the power of those companies, financial houses and banks to manipulate the market was so profound that everyone believed that it was impossible for them to fail. To believe that something can’t fail is to live in the greatest of all fantasies. And what we’ve learned is that, in fact, it’s the opposite. The “big boys” are the most vulnerable to the collapse, because they are the ones that are the most overextended. THE BUSINESS DEAL - One of the fundamental premises of capital is the exchange of value. I give you something of value, and you return by giving me something of value. Capital is a mutual exchange in which some form of equity and balance sustains the quality and morality of the deal itself. But that principle had disappeared under the guise of the one-way deal. I make, and you make nothing. Or what you get in the deal doesn’t matter to me at all. For example, I lend you money to buy your dream house until you find that you can’t fulfill the loan and the loaner takes back your house. There is a principle in Jewish business ethics from Talmud that says, “When one gains, the other does not lose.” That means that business deals are not combat, nor a zerosum game, and that all partners in it must come out with something of value. In that

exchange, not only do parties come out with something of physical value, but they also come out with a sense of self-respect. This kind of deal is based on the premise that no information is withheld from either party so that all decisions are made in full knowledge of the ramifications of the decisions. This teaches that the ultimate value of a good business deal is the recognition and support of the value of every person involved. There is no business that is not personal and there is no business deal that has no ethical value. WINNER TAKES ALL - What led to our collapse was that the business dealing was no longer a mutuality of exchange between people who respected each other but rather was a con game, where one person was the mark. By being given a bad loan, sold bad paper, or being urged to invest in valueless equities, our financial system became like the Old West idea of winner-takes-all. If you could win, you were right. It didn’t matter what happened to the loser. The real value of winning is not the money but the act of winning itself. Being a “winner” provides a sense of power and invulnerability that is euphoric. We became addicted to the psychology of the business deal as winning versus losing. When we win, we feel power over the loser. There are many people in America today who feel like losers when they are not. NOBODY KNOWS IT ALL - Investment gurus, either as individuals or institutions, became the soothsayers, psychics, and fortune tellers of our time. They became wisdom figures to whom we abdicated our choices and believed all of their analyses and promises. It is a profound help to see that the wealthy and wise took as big of a beating in this collapse as the average investor. At some point we all search for a parental image to make decisions for us; therefore, we abdicate our decision-making and do what we are told. It has been tragic to see those who had amassed significant personal assets and have lost them while trusting in a person or an institution. They were wise enough to amass it and yet not wise enough to keep it. Whether it was Lehman Brothers or Bernie

Madoff, we surrendered all skepticism about reported profits in order to believe in the fortunes we were told that we were making. The truth is that there were many people in finance who would not work against the system and who tried to get their clients to be part of the con. They were ordered by their superiors to sell the financial instruments that they themselves had set up to collapse. KEEPING SECRETS - The unregulated market has generally proven the downfall of American finance and capital. Only transparency makes it possible for true regulation to continue and maintain the market’s health. The deregulated market relies on profits from individuals, who will set up the con game in which there is no real transparency, and rely on the greed, the dreams and the gullibility of the investor. BACK TO BASICS - As those of us who live and/or work in these insecure financial times know, we must change the way that we do business. We must understand and reinvest in the concept of equitable exchange of value. We must participate in full disclosure of all the information we have. The institutions in which we work cannot bet against the success of their own product. The institutions can’t create a structure for insolvent business agreements, which are then resold, carrying bloated equity. It is time for the individual investment counselor, broker and consultant to make a commitment to the well-being of the person whose account they represent rather than to the success of the institution or business for which they work. We now live in a climate in which there is little trust for anyone who works in finance. The beginning of good business lies in trust. Mutual trust begins the healing from tragic loss—trust in ourselves and those with whom we share our lives. The trust that, at the heart of the business agreement, is the principle that while one gains, the other does not lose. n

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LEGAL • TAX • ACCOUNTING

A Clean Balance Sheet Can Help a Company in More Ways Than One Companies can help their cause with more than just investor relations

hen publicly-traded companies try to achieve break-through performance and increase their stock price, they generally focus first on improving operations or public relations. An area often overlooked is financial reporting. Managers too often ignore the importance of having a strong balance sheet. Without having a clean balance sheet, however, achieving the aforementioned goals often is futile. A balance sheet tells a lot about the health of a company, especially its liquidity and solvency, two areas that investors are keen on. Carrying more debt on the balance sheet will require the company to use more working capital and revenue to pay off that debt. Using cash to service debt siphons away money that can be used to re-invest in the overall growth of the company. In some cases, high debt levels will force companies to issue more shares to raise money for working capital. Issuing shares is dilutive to the company and drives the stock price lower. A company with high debt is like a person with a lot of credit cards. People with high credit card debt will need to use a higher proportion of their personal earnings to pay off that debt. Hence, individuals or

By James DePelisi

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families with a lot of credit card debt often see their living standards decline. The same idea applies to a publicly-traded company. What is even more concerning about a company carrying excessive debt (compared to revenue or cash reserves on their balance sheet) is that the company attracts the wrong kind of people to its stock. Most Wall Street analysts gauge the success of a company based on its ability to generate high earnings per share (EPS) and return on equity (ROE). Interest expenses associated with debt can hurt earnings per share. Additionally, one of the quickest ways to gauge whether a company is an asset creator, cash consumer, or debt accumulator is to look at the return on equity. Wall Street typically does not place a high value on stocks of companies with significant debt on the balance sheet, a low ROE, and a low EPS. Traders and investors calculate the likelihood that the price of such stocks will go down instead of up. In many cases, the negative outlook attracts short sellers to a company’s stock. Even when a company cannot post positive earnings, short sellers in a company’s stock will not be frightened by the risk of having to cover their short selling positions. Ultimately, this drives micro‑cap stocks down to penny stocks. What then is the answer? Companies need to rid their balance sheet of unnecessary debt. If the perfect situation of zero debt on the balance sheet is unrealistic, a company should try at least to have more cash or revenue compared to debt on the balance sheet. How do companies clean up their balance sheet? They do so by restructuring the existing debt.

There are several ways to restructure debt: 1. If cash is not an issue, the company can negotiate with note holders to retire the debt with cash. In some cases, the company can convince note holders to accept a settlement at a discount. 2. If a company is cash-strapped, it can give stock to note holders in exchange for their debt. 3. Contingent on its asset base, a company can swap convertible debt into bank debt to reduce the overall debt on the balance sheet. The company uses no cash, and the notes have more intrinsic value backed by the assets of the company. 4. The company can negotiate with note holders to extend maturity dates of the principal and/or interest payments. A company with a clean balance sheet can put itself in a better position to create opportunities for the future. This helps a company in more ways than one, especially if it can post positive earnings per share and return on equity. n

About the Author James DePelisi is the president and founder of LDV Capital Management, a registered investment advisory firm based in Florida. LDV Capital Management offers investment banking services with a focus on balance sheet clean-up, institutional capitalization, fairness opinions, valuations, financial advisory, and merger and acquisition work. The company also provides services for financial statement preparation for 10Q,10K,S-1,S-3,and Form 10 filings. More information about the company can be obtained by calling (954) 746-3117 or sending an e-mail to Jim@ LdvCapitalManagement.com. The firm’s Web site is www.LdvCapitalManagement.com. Copyright 2010, LDV Capital Management

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LEGAL • TAX • ACCOUNTING

Tax Benefits of Investing in Green Energy Projects L

aunching your own investment management business in the green energy marketplace can be rewarding. There are many green energy tax breaks and some expire soon. In this article, we discuss how active and passive investors can take advantage of these tax benefits.

Investors in green businesses should learn to sort the hype from truth. The government has enacted many tax breaks for the green-energy industry. Unfortunately, the tax breaks are complex and often are overlooked. If you’re interested in taking on a green-energy project or investing in one, consider these tax-saving ideas. The key is learning about the many tax breaks available for green-energy undertakings. Green-energy projects resemble hedgefund structures in legal form, but have a far more complicated business model. Green energy co-generation facilities are expensive, long-term ventures, requiring community approval, modern design, complex installation, efficient operations, and guaranteed power-purchase agreements with local utilities.

By Robert A. Green, CPA

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Our “Green Energy Active Investors” program is an add-on module to a traditional investment-management business structure. With a private-investment limited liability company (LLC) structure, you can allocate many tax breaks to active investors in a separate LLC class, and counterbalance it by allocating more cash flow to passive investors. Internal Revenue Code, Section 469 limits passive-loss deductions to passive-activity income. Most green-energy projects generate

losses in the early years. Suspending those tax breaks is inefficient and unattractive. Rather than doing so, you can set up a vehicle such as an LLC that is intended for active investors only. Passive investors can buy into a green-energy fund instead. Active investors have the opportunity to satisfy the IRS’s rules for “material participation,” which navigates around Section 469 passive-activity loss rules. That allows active investors to use pass-through tax breaks, including green-energy and other business tax breaks. The only caveat for using tax breaks and tax losses is that active investors must have sufficient cost basis in the project. Active business owners in pass-through vehicles can report tax losses only up to their cost basis; excess losses are carried forward to future years. Active investors can build up their cost basis in later years by contributing additional capital in the form of personal or business expenses incurred in the project. Active investors may incur expenses, including travel, meals, entertainment, sup-

As a tax writer in the trading and hedgefund industries, I have an interest in going green for my own social and business purposes. Decades ago, I discovered a way to overcome IRS Section 469 passive-activity loss limitations, a tax change that slowed the private syndication business in real estate and film (the old tax shelters). I created “active investors,” allowing investors to overcome passive-activity rules. This concept is helpful to green-energy syndications too.

Active investors

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plies, home-office expenses, dues, publications, research, furniture, fixtures and equipment, professional fees, and more. These expenses can be contributed to the company and added to the investor’s cost basis. Active investors can deduct these expenses on their individual tax return (Schedule E) as “unreimbursed partnership expenses” (UPE). This is safer than deducting such expenses at the company level. If the active investor is overly aggressive on expenses, he/she will not put the LLC vehicle or other investors at risk. This applies to material participation standards, as well. Each investor needs to make that assessment and is responsible for that determination, not the LLC. Consider setting up special-purpose greenenergy investment funds (Green Fund LLCs). You can have multiple classes of LLC membership interests. Each green energy project should be owned in a special-purchase vehicle formed in a state or city; we’ll call it the “Project LLC.” The Green Fund LLC can own a portion of the Project LLC to get pass-through tax breaks, or it can own the equipment and lease it to the Project LLC. In addition, you can set up a Management Company LLC to service the Green Fund LLC and Project LLC. You can earn and collect management and performance fees. Special-purpose local Active Investor LLC vehicles can be set up too. These can own interests in the Green Fund LLC, Project LLC, and Management Company LLC, if desired.

vehicles in local communities where a green energy project is to be located. Recruit active investors from local builders, architects, contractors, attorneys, accountants, doctors, quasi-town officials, politicians, media owners, promoters, and other local professionals. These VIPs can help convince their neighbors to vote “yes” on green-energy projects. Give your local active investors the lion’s share of the up front tax breaks. (Remember, active investors need to have a cost basis to reap these tax benefits.) They will put up some cash and incur their own expenses, providing tax savings even beyond the green-energy tax breaks. The green-energy tax breaks offset the cash investment; along with the active-investor tax breaks, this makes the investment a home run. And, local active investors can help overcome the NIMBY problem.

Green-energy tax breaks

Often, these projects run into obstacles from people in various communities who take the “not in my back yard” (NIMBY) stance. Although many Americans may embrace the green energy agenda, far too many don’t want a green energy project in their neighborhood. This is where the active investors come into play. You can set up active-investor

Green-energy incentives are available from many sources: federal, state, county, and local governments; quasi-governmental organizations dedicated to making greenenergy projects happen; utilities offering co-generation guaranteed power purchase agreements; private green energy investment funds; and more. For current federal incentives, see the U.S. Department of Energy (USDE) page “Tax Breaks for Businesses, Utilities, and Governments” at http://www.energy.gov/ additionaltaxbreaks.htm and http://www. energy.gov/media/HR_1424.pdf. For state, county, and local incentives, see “The Database of State Incentives for Renewable Energy” (DSIRE) at http://www.dsireusa. org/. Federal incentives generally include tax credits for electricity generation using wind, refined coal, geothermal, biomass, solar, and combined heat and power systems. In some cases, a subsidy can replace a credit. Tax credit bonds are attractive too. Public sector bond issuers can obtain financing at zero percent interest. Bond investors receive

Recruit active investors to overcome “not in my back yard” resistance

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tax credits in lieu of bond interest payments. The Recovery Act materially expanded the national limits on bond principal. Find out if your project qualifies for this type of financing incentive and the limit available in your state. Although there’s a long list of incentives, note that some have short expiration dates when you consider the long timetable for making a green-energy project operational. This highlights the inherent problems with tax incentives. Can businesses count on an extension of these breaks?

Co-generation guaranteed power purchase agreements The most important concern of any new business is generating cash flow. Co-generation guaranteed power purchase agreements (PPAs) address this issue. A utility provider is a valued partner. It can offer specifications and a coveted co-generation guaranteed PPA to automatically buy all the power you generate at a fair and regulated price for resale to their customers. Connect to their grid, turn the switch on, and you’re in business. Power purchase agreements vary by utility and state. Before you consider a local project, check the available agreements in your targeted communities. Speak with your local utilities about becoming partners. Learn more about PPAs at http://en.wikipedia. org/wiki/Power_Purchase_Agreement. However, it’s crucial to know the risks. Co-generation revenues and tax incentives are only tapped when a project is approved and underway. Significant development costs before this time may not be recouped if the project never becomes operational.

Bottom line Think green: consider a green-energy project, go green, and make some greens. The tax incentives can be like picking fruit off a tree. n

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The Compliance Corner S

o, you fancy yourself to be an investment banker…

Effective May 2010, FINRA Requires Investment Bankers to Pass the Series 79 Examination Much discussion has been centered on the types of services that would require the S-79 license by a registered representative. To understand the limits of any registration, follow the money. If you are getting paid for advising on a transaction, you need the S-79. If you are going to handle a capital raise, you’ll need the S-7 or S-62 to receive commissions. Check with your broker-dealer to determine your firm’s particular require-

ments. Keep in mind that your brokerdealer would need either to be a registered underwriter to handle a public offering, or be cleared to handle an offering exempt from registration, such as a Regulation D private placement. When using the services of a registered broker-dealer for an offering, issuers should comply with all federal and state securities regulations. Don’t forget that issuers are required to submit Form D detailing any private offering. As financial regulation winds its way through Congress and as states become more active in the regulation of private placements, being registered with a broker-dealer and using a broker-dealer for capital raises appear to be a given. Companies needing to raise capital or obtain investment banking services would do well to hire only professionals affiliated with a FINRA broker-dealer.

Risk Management and Compliance

SEC Approves Amendments Permitting FINRA to Halt Trading of Securities when a Primary Listing Market Has Issued a Trading Pause Due to Excessive Market Volatility On June 10, 2010, the Securities and Exchange Commission (SEC) approved an amendment to FINRA Rule 6121 to permit FINRA to halt trading of individual securities whenever the primary listing market has issued a trading pause in that security due to a move of 10 percent or more from a sale in a preceding five-minute period (the tradingpause rule). This rule change was a part of a coordinated effort among FINRA, the SEC, and other self-regulatory organizations to halt potentially destabilizing market volatility, such as the type of sudden price declines that were experienced on the afternoon of May 6, 2010. Details are contained in FINRA Regulatory Notice 10-30. n

About the Author Much has been spoken and written recently about risk management. How does a firm manage its risk? How does a registered representative manage his or her risk? How does an issuer manage its risk? In today’s environment, the management of risks takes on many and varied forms – regulatory risk, financial risk, and public relations risk. Being in compliance with a regulation does not mean that you are proactively managing risks. Regulations do not address risk management. Registered representatives, broker-dealers, and issuers must develop risk management plans.

by Chet Hebert

www.microcapreview.com

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 Regulation S-P compliance. For more information about the firm, please visit www.thecompliancedepartment.com or call Chet at (303) 339-9870.

Micro-Cap Review Magazine

V I E W P O I N T S by Jack Leslie

Ombudsman In light of the environmental issues confronting this country, this monthâ&#x20AC;&#x2122;s column is dedicated to saving trees. Each year broker dealers send documents with thousands of pages to FINRA for review. How much of this waste can be avoided? Is it really necessary to have all of the paperwork which only contributes to redundancy, storage problems, and lost documents? I realize that FINRA is in the land of excess called Washington, D.C. It is quite ironic that none of FINRAâ&#x20AC;&#x2122;s paper filing requirements is mentioned on government environmental panels. If microfilm can be brought back to the private sector, there would be less need for paper and the greenhouse effect might be slowed down a bit. The issue over the use of microfilm was once about the dangers of chemicals. All of that has changed; microfilm can now be processed without them. Just imagine the benefit to the broker dealers who monitor e-mails. Today they are able to have an electronic file that is secure and which cannot be altered. Mention this idea to the stodgy regulators and watch them scowl. They want you to experience the frustration by having you do it their way. The regulators probably have never written a ticket and do not know what it is like to work under strict deadlines. What they might not know is that microfilm is still being used to archive government documents. In the interest of our planet, let us urge them to adopt electronic filings to conserve paper. By doing this, not only will we save trees, but also we will use less toxic ink and will have a lesser need for carbon credits. Do we need to continue to increase global awareness to these mollycoddled members of the human race? Instead of just handing money to unemployed people, we ought to have them hold signs on street corners educating people on how to conserve. The person with the most unique idea should be given a bonus. We should encourage store owners to have contests, plant trees, or encourage community participation. We ought to be doing something positive for our children. Readers may ask what all of this have to do with due diligence? Well, if we donâ&#x20AC;&#x2122;t do our due diligence on the environmental problems facing us, then who will? n

nstead of just handing

money to unemployed people, we ought to have them hold signs on street corners educating people on how to conserve.

Micro-Cap Review Magazine

www.microcapreview.com

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