micro-cap review spring 2010
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Micro-Cap Review Magazine Archives Spring 2010TRANSCRIPT
UCORE’S BOKAN MINE Largest U.S. Heavy
Rare Earth Deposit:Critical to American Clean Energy
Quarter 2 • 2010 microcapreview.com
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MICRO-CAP REVIEWInvesting in the Green EconomyBy Todd Pitcher [6] Geothermal Energy-Heating UpBy Larry Turel [37] Jatropha’s Place in the Biofuels RaceBy Lissa Swihart [44]
Tax Benefits of Green Energy ProjectsBy Robert Green [66]
Special Green Issue
neah power. always onTM.
22118 20th Ave SE Suite 142
Bothell WA 98021
Phone: 425-424-3324
Fax: 425-483-8454
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.
www.neahpower.com (NPWZ.OB)
Startup of the Year
Top 100 Young Innovators
Patented, award-winning technology Multiple US and international patents, highly awarded technology
Neah Infinity eLTM
• 25W, 50W, 100W, 8 hr systems
• Customizable power and output specifications
• Unique non-air breathing capability
50
Product offerings Contact [email protected] for more information.
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
www.microcapreview.com Micro-Cap Review Magazine 3
E D I T O R I A L
This Publication is not to be construed, under any circumstances, by implication or otherwise, as an offer to sell or a solicitation to buy or trade in any com-modities or securities herein named. Micro-Cap Review Magazine and its employees are not, nor do they claim to be registered investment advisors or bro-ker/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
Here in this issue is our long awaited
coverage of the green sector of the
micro-cap market. The green sec-
tor covers an array of topics, including job cre-
ation, water conservation, alternative energy
projects, political initiatives, new inventions,
economic growth, saving the planet, pollution
reduction, energy-saving products, tax incen-
tives, 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, govern-
ment initiatives, samples of companies and
their future prospects. As publishers we recog-
nize 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 mem-
bers, investment bankers, stockbrokers, high
net worth individuals, and money managers
worldwide. Today’s new “green” micro-cap
emerging growth companies may be tomor-
row’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 writ-
ten by experts who have all contributed this
information for our mutual benefit.
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 remem-
ber some of those names, such as Amgen,
Genentech, and Biosphere. They started in
exactly the same way as today’s green com-
panies, as micro-cap companies. The green
market potential is even larger than the bio-
tech 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 pharmaceu-
tical 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 cor-
porate 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 con-
tribution 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
www.microcapreview.com
Micro-cap ReviewP.O. Box 4216Metuchen, NJ 08840-1848T 732-603-1250F 212-202-6020
SNN Incorporated23705 Vanowen St #333West Hills, CA 91307
PUBLISHERWesley [email protected]
Sheldon [email protected]
EDITORRonald [email protected]
WRITERSGordon ChiuJames DePelisiMichael FulpShelley GoldbergRobert GreenRobert HaagChet HebertJordan KimmelSheldon KraftJack LeslieLarry MayDaniel MurphyM.C. Elvis OxleyPaul Pelosi, Jr.Todd PitcherStephen RobbinsMarshall StermanLissa SwihartLarry TurelSteven Witherly
ACCOUNTINGJennifer [email protected]
ADVERTISINGVong [email protected]
BUSINESS DEVELOPMENT
CIRCULATIONJackie [email protected]
Suki [email protected]
GRAPHIC PRODUCTIONTony [email protected]
WEBMASTERKelvin [email protected]
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 Micro-Cap Review Magazine or any of its staff or authors is responsible for omissions or information that is inaccurate or misrepresented
to the magazine.
www.microcapreview.com Micro-Cap Review Magazine 5
C O N T E N T S
WWW.MICROCAPREVIEW.COM
Q UA RT E R 2 2 0 1 0
Featured Articles
32 Green Paradigm Shift Technologies by Gordon Chiu34 Uranium: The New Green Metal by Michael Fulp37 Geothermal Energy-Heating Up by Larry Turel44 Jatropha’s Place in the Biofuels Race by Lissa Swihart46 Wealth from Waste by Steven Witherly & Larry May
Finance & Investments
6 Investing in the Green Economy by Todd Pitcher18 Clean Tech-The Technology Eco-Boom by Jordan Kimmel24 China’s US-Stock Exchange Listed Cleantech Companies by Robert Haag28 Ask Mr. Wallstreet-Micro-cap Capital Formation by Sheldon “Shelly” Kraft29 The Challenges of Green Investing by Shelley Goldberg
Comics
35 Wall Street Chicken
Profiled Companies
12 Neah Power Systems14 Ucore Rare Metals21 VisEnergy42 Private Company Marketplace50 Converted Organics56 Terrasphere
Viewpoints
10 A Challenge to All Entrepreneurs by Sheldon “Shelly” Kraft57 Government Budget Focus by M.C. Elvis Oxley & Daniel Murphy59 Getting Jobs and Money into the Economy by Marshall Sterman60 Green Jobs by Paul Pelosi, Jr.61 Overcoming Loss by Stephen Robbins70 Ombudsman by Jack Leslie
Legal, Tax & Accounting
65 Clean Balance Sheet Can Help a Company in More Ways than One by James DePelisi66 Tax Benefits of Green Energy Projects by Robert Green69 Compliance Corner by Chet Hebert
6 Micro-Cap Review Magazine www.microcapreview.com
• 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 commit-
ted 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 bil-
lion to clean-technology investments by 2013.
Investing in the Green economyPromises, Pitfalls, and Profits
Tens 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
F I N A N c E
www.microcapreview.com Micro-Cap Review Magazine 7
• China could end up spending $440 bil-
lion 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 govern-
ments 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 per-
cent today, and will account for 31 percent
by 2030. However, renewable energy must
account for 40 percent by 2030, if govern-
ments are to hit their targets.
The list goes on. These data points sup-
port 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 oppor-
tunity is poignant. The range of potential
investments in various segments of renew-
able energy and clean technology is broad.
StIll tIme to Get In early…
but watch your Step.
A fundamental way to make money in the
financial markets is to find out where “every-
one” 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 under-
standing 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 bil-
lions 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 per-
formance over the past 24 months? At what
point do sectors like solar and wind come
back into favor and begin to outperform?
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 win-
ners in the long-term. These companies
will continue to have access to the capital
markets and will have sufficiently strong bal-
ance 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 alarm-
ing frequency. Many companies with leading
positions today may lose their edge tomor-
row 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 compa-
nies integrating downstream, unless there is
actually a plan to “own” the customer. Too
many midstream firms think the easiest way
Looking for the next
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www.microcapreview.com Micro-Cap Review Magazine 9
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-per-
watt 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 newcom-
ers. The market is mature, and the incum-
bents 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, geo-
graphic, or customer base). These firms may
be purchased by an incumbent anyway.
• Potential upside exists in the demand
management, controls, and efficiency mar-
ket. The low-hanging fruit of the green econ-
omy 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 them-
selves with a strong client base for developing
recurring revenues.
• In biofuels, investors should avoid ‘gen-
eration 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 feed-
stock perspective, regardless of the actual
substance to the food-fuel debate, the bot-
tom 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 invest-
ment for growth investors. The most appeal-
ing model is one which is diversified and
encompasses developing, owning, operating,
technology licensing, EPC, and even consult-
ing. 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 car-
ries. Recovery heat energy firms tend to gen-
erate 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 incred-
ible 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.
This greatly increases the risk profile of ener-
gy 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 alterna-tive energy and clean technology-focused profes-sional 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
10 Micro-Cap Review Magazine www.microcapreview.com
a challenge to all entrepreneurs
V I E W P O I N T S
This 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.
by ShELDON “ShELLy” KRAFT
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 happen-
ing 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 spill-
ing 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 disappear-
ing; 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 sce-
narios on every offshore oil rig and establish
procedures when dealing with such disasters.
Where are the answers? This is a great chal-
lenge 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
Whoever has the answer and can have it tested, perfected, and put into the market will be richly rewarded.
12 Micro-Cap Review Magazine www.microcapreview.com
the need for power Neah Power Systems
PROFILED cOMPANIES
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
Portable electronic devices have
become ever-present and have an
ever-growing need – reliable power.
Laptop computers, mobile phones, and por-
table 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-the-
grid” power solutions.
The need for portable power has been pri-
marily met by lithium-ion batteries. The draw-
backs 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 con-
cerns. Manufacturers are increasingly turn-
ing to fuel cells as a replacement to battery
power.
Fuel cells generate power by the electro-
chemical conversion of a fuel. The advantag-
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, environmen-
tally 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 introduc-
tion in the 1960s, they continue to have
significant technical and commercial limita-
tions. PEMs require access to air to produce
needed chemical reactions. Environmental
factors, including water and pollution, can
reduce the effectiveness, reliability, and dura-
tion of the power supply.
Neah Power has developed an innova-
tive technology that eliminates the primary
drawbacks to PEM-based fuel cells and bat-
teries. Neah Power has created a porous
silicon design that uses a liquid electrolyte,
which allows the fuel cell to operate in non-
air environments. This can be particularly
useful in naval, aerospace, or military appli-
cations 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 interna-
tional patents, and the technology has won
multiple awards. Most recently the com-
pany 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 electro-
lyte 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 avail-
able 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-
figure 1: Compact, high power -density, silicon fuel cell
figure 2: Neah uses cost effective tech-nologies like atomic layer deposition, injection molding, and wire bonding
www.microcapreview.com Micro-Cap Review Magazine 13
tions, including the fuel crossover contami-
nation, 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 tech-
nology. Neah Power’s revolutionary tech-
nology replaces the PEM and uses a liquid
electrolyte with a silicon electrode structure.
Neah Power fuel cells can maintain its effi-
cacy for longer durations while operating in
a far greater range of environments.
Instead of using a two-dimensional elec-
trode surface, the silicon fuel cell uses a three-
dimensional 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 assem-
bled 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 prevent-
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 manu-
facture 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 infra-
structure of the semiconductor processing
industry. Thus, Neah Power can take advan-
tage of proven technologies, such as atomic
layer deposition, injection molding, and wire
bonding. This arrangement allows for favor-
able 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
impact of using fossil fuels or toxic chemi-
cals 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 with-
out access to the traditional power grid.
avaIlable productS
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 con-
ditioning 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-the-
grid power systems. n
Disclaimer: This corporate profile is based upon informa-tion 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 adverto-rial 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 contrac-tual difficulties, demand for the Issuer’s common stock, and the company’s ability to obtain future financing. Micro-cap Review Magazine may have received pay-ment 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.
figure 3: Neah Infinity eLTM line of fuel cells available in 5W, 50W, 100W, 8 hr systems
figure 4: Neah Hot & ColdTM line of direct current air conditioning available from 5000 BTU to 18000 BTU
14 Micro-Cap Review Magazine www.microcapreview.com
a rare opportunity
PROFILED cOMPANIES
ucore rare metals tackles a u.S. Supply crisis in the Green energy & high technology metals Sector
Rising from a rainy and windswept
inlet in Southeast Alaska is a fore-
boding 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 min-
ing 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 com-
mittee 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 mate-
rials 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 characteris-
tics – such as thermal properties and super
conductivity – have made them absolutely
essential to high tech and green technol-
ogy applications in the modern world.” With
such unpronounceable names as Europium,
Gadolinium, Terbium, and Dysprosium,
they’re an unusual combination of the seem-
ingly exotic and the absolutely indispensible,
and they’re central to the ongoing competi-
tive 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 met-
als from world markets has created a flurry
of investment interest. Fact of the matter is
that you cannot have a ‘clean-tech revolu-
tion’ without access to these technology met-
als.” That announcement served as a warning
shot from China to the West, and the race
was on for the United States to find replace-
ment 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 proj-
ect is one of very few contenders capable of
meeting a rapidly approaching supply gap,
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16 Micro-Cap Review Magazine www.microcapreview.com
as China shuts down rare earth metals sup-
plies 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
The United States is the world’s largest con-
sumer 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 met-
als 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 cen-
tury, 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 unex-
pected 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 cut-
ting back on rare earth metals exports in the
near term. U.S.-based manufacturers, how-
ever, 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 rein-
vigorate the U.S. high technology metals sec-
tor (introduced to the media as the proposed
“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 implica-
tions 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 pro-
duction at Mountain Pass, California. The
owner of that facility, Molycorp Minerals
LLC, has received a great deal of press cover-
age 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 met-
als 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 counter-
part with the largest historical HREE deposit.
So, between these two companies, the United
www.microcapreview.com Micro-Cap Review Magazine 17
States has the potential for complete self suf-
ficiency across the full spectrum of rare earth
elements: both LREEs and HREEs.”
“The United States is moving quickly
toward eliminating its dependence on non-
domestic rare earth metals supplies,” contin-
ues 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 competi-
tion. So, the case for an independent mine-to-
market rare earth metals industry in the States
is gaining a great deal of momentum.”
the alaSkan advantaGe
“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 stag-
ing 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 sus-
tainable 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 com-
pliant HREE deposit in the States.”
“But more important still is Bokan’s
American location from a political, com-
petitive, 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 non-
domestic sources is strong, to say the least.”
McKenzie emphasizes that Alaska has been
proactive in getting Bokan back into produc-
tion 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 addi-
tion to other HREEs, drill assays have indi-
cated anomalously high levels of Terbium
and Dysprosium. These are among the most
valuable metals known to man, and con-
sidered by many to be the “miracle REEs,”
essential to everything from green technolo-
gies, to medical applications, to military and
industrial uses. Their presence makes Bokan
a rarity among rare earth metals deposits
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 pro-
gram 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 mani-
fest. “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 informa-tion 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 adverto-rial 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.
18 Micro-Cap Review Magazine www.microcapreview.com
Consumers and domestic auto manufactur-
ers 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 environ-
ment 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 jobs-
right 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 unem-
ployment rate was higher than it is today. In
fact in 1981 the entire country was in much
worse shape than it is today. The unemploy-
ment 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 great-
est periods of prosperity and wealth cre-
ation 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.
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 inex-haustible 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-BoomThere 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 compre-hensive energy policy.
by JORDAN KIMMEL
20 Micro-Cap Review Magazine www.microcapreview.com
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 tech-
nologies 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 expec-
tations. 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 indi-
vidual companies within each sector that
have the best combination of value, growth
and momentum. The list was not intended
as a buy list- just a list of the top ranked
companies according to the Magnet model.
It was interesting to see how many of the top
ranked companies are in the energy sector-
and 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 thou-
sand 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 engi-
neers 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 blossom-
ing you know you may be onto something.
There is new interest in investing in compa-
nies 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 man-ages customer accounts at their affiliate National Asset Management. He is the author of the recently released book, The Magnet Method of Investing, and can he be found and contacted through his website
www.magnetinvesting.com.
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.
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.
www.microcapreview.com Micro-Cap Review Magazine 21
PROFILED cOMPANIES
Simplifying Sustainability
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.
At present, most organizations are faced
with the dual task of delivering energy effi-
ciencies against financial and environmental
goals; however, the implementation of a tac-
tical 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 prod-
ucts from one source rather than multiple
parties.
As stated within the news release by
President Obama and Secretary Chu,
“Residential and commercial buildings con-
sume 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 emis-
sions 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 abil-
ity 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
“One 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 direc-
tion, from an emphasis on energy produc-
tion 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 underfund-
ed 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 oppor-
tunities 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 effective-
ness of this shift. The economic downturn
has virtually halted new construction and
shifted the emphasis on the retrofit market.
Companies are clearly focused on sustain-
able 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.
visenergy, Inc.
22 Micro-Cap Review Magazine www.microcapreview.com
footprint, meet regulatory compliance, and
ultimately increase asset value by offering
a comprehensive energy management pro-
gram and an optimized renewable energy
plan.
VisEnergy has a significant head start
in this area with over six percent mar-
ket share in New Jersey, one of the lead-
ing solar producing states in the country.
With unparalleled 300 percent year-over-
year growth in revenues for the past six
years, VisEnergy is one of the best posi-
tioned 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, engineer-
ing, design, implementation, and continu-
ous full-service commissioning. VisEnergy
currently shares the spotlight with a handful
of potential competitive companies, includ-
ing Renewable Energy Installers and Energy
Efficiency Vendors.
VisEnergy distances itself from the more
single-focused service providers by deliver-
ing true, long-term benefits to customers
with a combination of industry best prac-
tices, experienced professionals, and best-in-
class technology. At the core, the company’s
energy monitoring technology significantly
reduces building energy costs, energy con-
sumption, 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 finan-
cial 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, procure-
ment, and construction (EPC) firms of pho-
tovoltaics, VisEnergy uses only proven tech-
nologies to deliver successful solar power
system solutions. The company prides itself
on delivering the highest quality products
coupled with timely and professionally man-
aged 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 combina-
tion of industry prowess, domain expertise,
technology, best practices, and experienced
professionals deliver maximum value to cus-
tomers.
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 benchmark-
ing and monitoring all energy usage, you
can quickly determine meaningful savings
opportunities. If you apply the same logic of
monitoring and understanding of produc-
tion maximization of free renewable power,
you have a powerful ability to recognize sus-
tainable financial win-win results.”
VisEnergy’s energy lifecycle manage-
ment, continuous commissioning services,
and renewable solar energy products enable
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 informa-tion 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 adverto-rial 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.
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.
www.microcapreview.com Micro-Cap Review Magazine 23
Micro-Cap Review Magazine announces introduction of
its First Resource Issue
For information: 818-730-6000 or [email protected]
snnwire.com microcapreview.com
The issue will featuremicro-cap resource companies including exploration,
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TSX_TSXV_Cleantech_Ad_Quart_vertical.qxd:Layout 1 31/05/10 10:50 Page 1
Dr. John L. FaesselON THE MARKET
7685 Caminito CoromandelLa Jolla, CA 92037
(858) 587 [email protected]
24 Micro-Cap Review Magazine www.microcapreview.com
China is not only the most populous nation
in the world, but also the fastest grow-
ing major economy. More than any other
nation, it needs clean technology to sus-
tain and safeguard its future development.
The Chinese government has demonstrated
great foresight and vigor by enacting poli-
cies 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 man-
dated 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 reduc-
tion 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
F I N A N c E
China’s Cleantech Companies Forge a Path to Sustainable GrowthChina’s position in the clean technology (cleantech) indus-
try 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
www.microcapreview.com Micro-Cap Review Magazine 25
be between $500 billion and $1 trillion annu-
ally, or as much as 15 percent of China’s fore-
casted GDP in 2013. With the positive incen-
tives 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 tech-
nology, industrial waste management, and
biodiesel, a renewable and clean-burning bio-
degradable fuel. Many of China’s cleantech
companies are listed on U.S. stock exchang-
es, 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 pro-
ducer of humic acid-based organic fertil-
izers 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 lithium-
based 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 compa-
nies by market capitalization are: Suntech
Power Holdings Co. Ltd. (NYSE:STP), a
leading designer, developer, and manufac-
turer of photovoltaic (PV) products world-
wide; Trina Solar (NYSE:TSL), a leading
manufacturer of solar PV products, includ-
ing ingots, wafers, cells, and PV modules;
and Yingli Green Energy Holding Co. Ltd.
(NYSE:YGE), a leading manufacturer and
seller of PV components, including mul-
ticrystalline polysilicon ingots, wafers, PV
cells, PV modules, and integrated PV sys-
tems. 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 com-
panies 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 High-
Tech 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 facili-
ties with greater energy efficiency.
According to The Cleantech Group and
Deloitte, a record number of clean technol-
ogy investment deals were completed in the
first quarter of 2010. Clean technology ven-
ture 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 sec-
tors were transportation, solar, and energy
efficiency technologies. Chinese companies
raised $72 million in 10 disclosed rounds.
Although the total investment was approxi-
mately 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
Chinese cleantech companies are listed on
major stock exchanges. Many more com-
panies are waiting to list their shares in the
United States.
Cleantech companies in China haven’t
gone unnoticed by the world’s greatest inves-
tor. 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 Faw-
Volkswagen 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 becom-
ing 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 compa-
nies, 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 [email protected]. 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 com-panies. 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.
26 Micro-Cap Review Magazine www.microcapreview.com
31 chinese uS-listed cleantech companies
A-Power Energy Generation Systems, Ltd.
(NASDAQ:APWR) is a leading provider of dis-
tributed 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, manu-
facturer, and distributor of rechargeable Polymer
Lithium-Ion (PLI) batteries, and is a manufacturer
of electric vehicles.
China Agri-Business, Inc. (OTC: CHBU) is a manu-
facturer and distributor of solar water heaters and
space heating devices, and is a provider of renew-
able energy solutions in China.
China Agritech, Inc. (NASDAQ:CAGC) is engaged
in the development, manufacture, and distribu-
tion 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 agri-
cultural 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 distribu-
tion 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 sys-
tems 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 elec-
trical 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 certi-
fied by the Chinese government as “Green Food
Production Materials.” The company produces
and distributes humic acid-based organic fer-
tilizers across China through a wholly-owned
subsidiary.
China Industrial Waste Management, Inc.
(OTC:CIWT) is engaged in the collection, treat-
ment, 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 distribution-
oriented 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 envi-
ronmentally friendly battery products and solu-
tions 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 dis-
tributes 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) sup-
plies 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 lead-
ing China-based supplier of domestic water treat-
ment equipment. Duoyuan’s products address the
key steps in the water treatment process, such as
filtration, water softening, water-sediment separa-
tion, 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 ben-
efit from favorable Chinese government policies,
including tax benefits and other incentives.
New Energy Systems Group (OTC: NEWN) is a
vertically integrated, original design manufac-
turer and distributor of lithium ion batteries and
backup power systems.
ReneSola Ltd. (NYSE:SOL) is a leading global manu-
facturer 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 sav-
ings 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 capital-
ization of over $2.5 billion. Suntech is a worldwide
leader in the design and manufacture of innova-
tive 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 integrat-
ed 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 manufactur-
ing company specializing in products for custom-
ers 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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28 Micro-Cap Review Magazine www.microcapreview.com
As head of the company, a micro-
cap 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 borrow-
ers 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 increas-
ingly have become missing in action. The dis-
appearance of banks from the capital forma-
tion 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 exper-
tise, persistence, and great advice from trusted
advisers and professionals having the com-
pany’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 inves-
tors. Companies indicate exactly how they
intend to grow the company, pay back inves-
tors, and show that every dollar received
will have a substantial return on investment.
Executives at these companies work relent-
lessly to trim the fat and show investors how
frugal companies spend and how they gener-
ate 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, suc-
cessful CEOs are straight-talkers; they pro-
vide 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 homeown-
ers for purchasing new energy reduction
technology, and many reimbursement pro-
grams 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 compa-
nies 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 warm-
ing 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 emerg-
ing 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 com-
panies?” n
F I N A N c E
A S K M R . W A L L S T R E E T
The Micro-Cap Capital Formation Process
by ShELDON “ShELLy” KRAFT
www.microcapreview.com Micro-Cap Review Magazine 29
Projects aided by government stimulus pack-ages 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 electric-ity 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 com-panies directly or via an investment manager, each route presents its own set of challenges. An investor who chooses to construct a port-folio of individual green investments, either in listed or non-listed companies, should be aware of the following issues:
1) Access to information: Many pure-play green investments are micro or small-cap 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 small-
cap companies tend to trade in light volume,
making liquidity a concern.
3) Access to credit: Obtaining credit con-
tinues to be a challenge for start-up and early
stage companies. Additionally, navigating
the mix of private and public funding sourc-
es 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 long-
biased 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 effec-
tive 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:
F I N A N c E
Finding the right investment or choosing the talent to find it
The Challenges of Green Investing
by ShELLEy gOLDbERg
Opportunities for investment in the green space abound and are multiplying globally, whether in renewable energy,
sustainable or clean technology.
30 Micro-Cap Review Magazine www.microcapreview.com
1) Macro thinkers: A manager must have
a solid grasp of the global macro environ-
ment to compliment a bottom-up invest-
ment approach. An in-depth knowledge
of the green space and respective invest-
ments, carries little weight when correla-
tions approach 1.0 or 100 percent and when
market beta is high. A macro approach is
particularly crucial in times of market bub-
bles, 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 indus-
trials with green subsidiaries. A special-
ist’s knowledge of a conglomerate’s ancillary
investment in wind turbine blade manu-
facturing, 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 overval-
ued 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 com-
modities, 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 technolo-
gists: Great bottom-up investors may be
exceptional at analyzing balance sheets, debt
ratios, and cash flows, as well as assess-
ing management; yet such investors gener-
ally 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, meteorolo-
gists, 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 knowl-
edgeable about legal issues in a number of
areas: environmental and energy, intellectual
property and patents, public policy, litiga-
tion, 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 require-
ments, 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 invest-
ments 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 port-
folio. In general, the more successful managers
are running actively managed and diversified
portfolios. The following section provides a list
of the available investment options:
prIvate eQuIty / venture
capItal
• Best suited for longer-term plays where
liquidity and lock-ups are less of a concern
• 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 environ-
ments
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 dili-
gent investment manager oversight. Following
these steps is key toward keeping green invest-
ments not only in the green, but profitable. n
about the author
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
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32 Micro-Cap Review Magazine www.microcapreview.com
Today’s green living is bigger and more
sophisticated than people realize. The health
and environmental issues confronting peo-
ple around the world has spawned a slew of
innovative companies. Revolutionary break-
throughs 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 tech-
nologies (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 cre-
ate a substantial shift (verifiable by the tech-
nology, science, and management).
5) Possess scalable business operations.
GpSt bIotechnoloGy
Until recently, patients with advanced pros-
tate 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 can-
cer 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 cel-
lular 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, scien-
tists, and physicians are taught these Eastern
medical principles early on? Further, per-
sonalized 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
F E AT U R E D A R T I c L E
Green Paradigm Shift TechnologiesIn 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.
by gORDON chIU
www.microcapreview.com Micro-Cap Review Magazine 33
example of personalized medicine and tech-
nology 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 pros-
tate cancer had few treatment options; the
few that were available often did not extend
patients’ lives. The Provenge vaccine, how-
ever, 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 capi-
talization of $400 million, despite the com-
pany 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 mar-
ket capitalization of over $7.2 billion, an 18
times increase in value.
Numerous Dendreon-like companies
from start-ups to small-caps in the biotech-
nology sector will arise. Venture capital-
ists, 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 technolo-
gies to understand, GPST biotechnology will
play an important role in medical health care
in the near future.
GpSt In the water InduStry
Some people have called it global climate
change. Others call it hype. One thing is
certain. Without proper management, bio-
logical, 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/sup-
ported transmittable diseases (WR/STDs)
have threatened to decimate humanity at
epidemic and pandemic proportions on sev-
eral 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 experi-
ence 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 unpre-
pared. Relying solely on ultraviolet radia-
tion and chlorination to disinfect drink-
ing 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
about the author
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, derma-tology, 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, devel-oped, 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 doc-torate 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 equip-ment) for emerging countries that cannot afford to maintain armies of physicians across numerous sub-specialties. His years of experience and con-tinuous involvement have created deep relationships within the scientific, business, and medical commu-nities. Dr. Chiu developed and owns methodologies called directed combinatorial algorithmic libraries (D.C.A.L.) that are used in various commercial appli-cations, composition development, and research.
Disclosure: Dr. Chiu does not hold an investment posi-tion in Dendreon Corporation. He has been appointed as an independent adviser to SNN.
34 Micro-Cap Review Magazine www.microcapreview.com
However, there is now good reason to
consider uranium “green.” Nuclear power
plants produce electricity with only a min-
ute 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 col-
lapsed 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-
F E AT U R E D A R T I c L E
Uranium: The New Green MetalUranium 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
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 govern-
ment 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 per-
centage is projected to grow substantially
over the next two decades. There are cur-
rently 56 new nuclear reactors under con-
struction 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 larg-
est), Russia, Niger, Uzbekistan, China, and
Ukraine.
36 Micro-Cap Review Magazine www.microcapreview.com
This is not an all-star cast of model gov-
ernments. Kazakhstan is increasingly nation-
alizing 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 over-
threw 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 ura-
nium 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 revital-
izing our domestic uranium mining indus-
try. 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 mid-
2007. 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 drill-
ing.”
However, I am unwilling to take those
sorts of risks in the highly sensitive and geo-
politically 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 prov-
ince in the world, Saskatchewan’s Athabasca
Basin; the world’s second largest produc-
er, New Mexico’s Grants Mineral Belt; the
Wyoming Basins; and the South Texas
Uranium district.
In my opinion, the junior uranium sec-
tor 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 pro-
file, and decide if there are companies in this
space that are worthy of your investment. n
about the author
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: [email protected]
Disclaimer: I am not a certified financial analyst, bro-ker, 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 solicita-tion 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 responsi-bility 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 con-tained 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.
www.microcapreview.com Micro-Cap Review Magazine 37
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 world-
wide 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 short-
fall. 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-
F E AT U R E D A R T I c L E
Finding the right investment or choosing the talent to find it
Geothermal Energy- Heating Up
by LARRy TUREL
Geothermal 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 geother-mal energy for heating bath water and ancient Romans used it for space heating.
Today, geothermal energy is used for gener-
ating electricity. Geothermal plants of vari-
ous types are being built around the world.
Generation of geothermal energy in the
United States is subject to the same regula-
tions 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 reli-
ability. Worldwide geothermal power plants
produce over 12 gigawatts (one gigawatt
38 Micro-Cap Review Magazine www.microcapreview.com
nic activity, oceanic trench formation, and
mountain-building. Even cold ground con-
tains heat, which can be extracted by using a
geothermal heat pump. The use of geother-
mal energy for heating homes and buildings
is a rapidly growing market, which is esti-
mated to grow by over 10 percent annually.
Closed-loop geothermal heat pumps cir-
culate a carrier fluid (most often a water/
anti-freeze solution) through pipes buried
in the ground. As the fluid circulates under-
ground it absorbs heat and brings the now
warmer fluid to an electric heat pump which
extracts the heat from the fluid. The remain-
ing 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 conserva-
tion of natural resources and produces mini-
mal 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 renew-
able because it is derived from the nearly
infinite heat supply generated by the ongo-
ing process at the molten core of the plan-
et. According to the Geothermal Energy
Association, the heat continuously flowing
from the earth core is estimated to be equiv-
alent to 42,000 GW of power (20+ times
today’s global electricity generation). If har-
nessed properly, geothermal could become
a material contributor to global electricity
generation. The earth’s natural heat produc-
es 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 subter-
ranean temperatures at a depth of six kilo-
meters (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 electric-
ity. 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.
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 sul-
fide (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 tempera-
ture geothermal fluids (above 350 °F) to be
40 Micro-Cap Review Magazine www.microcapreview.com
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 pres-
sure to drive the turbine and produce more
power.
enhanced Geothermal
SyStemS (eGS)
With the rising popularity of geothermal
energy as an alternative to fossil fuels, signifi-
cant amount of capital has been invested in
research and development of new technolo-
gies. Although not commercially viable as
yet, enhanced geothermal systems (EGS) are
designed to extract heat from areas with low
permeability and porosity, which would sub-
stantially 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 perme-
ability and porosity. In a recent major report
entitled “The Future of Geothermal Energy,”
Massachusetts Institute of Technology esti-
mated that EGS could provide up to 100 GW
of new geothermal capacity annually.
free Green enerGy llc
Free Green Energy LLC is a non-utility
power producer located in Houston, Texas.
The company plans to make use of two sepa-
rate 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 gener-
ate 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 pro-
duce 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 fed-
eral 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
exhibit 3: Binary-Cycle Power Plant – U.S. Department of Energy
exhibit 2
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 hydrocar-
bon 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.
www.microcapreview.com Micro-Cap Review Magazine 41
(50% of 85%). At the maximum allowable
depreciate rate of 50 percent, the first year
depreciation amount on a 10 MW of capac-
ity is $12,500,000.
3) Intangible Completion Costs – If the
well produces commercial oil and gas associ-
ated 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 partici-
pants 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 com-
modity.
6) Carbon Credits – Carbon credits pro-
vide 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 trad-
ing 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.
the future IS now
According to John Doerr, a pioneer ven-
ture capitalist whose firm bankrolled Sun,
Google, Compaq, and Symantec, “The mar-
ket 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 invest-
ment of more than $35 billion when com-
pleted. “California could achieve its 2020
goal for global warming emissions reduc-
tions just by keeping energy demand level
and replacing coal-fired generation with
geothermal,” said Karl Gawell, GEA’s execu-
tive director.
Geothermal power generation is con-
centrated mostly in the U.S. South and
Southwest. In these regions the number
of projects is increasing at a rate rang-
ing 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 acceler-
ated 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, sustain-
able energy sources, such as solar, wind, and
geothermal. With the national generating
capacity currently around one million mega-
watts, this will increase the renewable por-
tion 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 human-
ity 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 invest-ment 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 securi-ties and investment banking business. He has advised public and private companies to develop and execute on business plans. Further, he has helped many cli-ents secure funding using bridge loans, private place-ments, 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 proper-ties, 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 trad-ed 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 busi-ness administration with a minor in economics.
42 Micro-Cap Review Magazine www.microcapreview.com
the private company marketplace
PROFILED cOMPANIES
an alternative financing tool
Capital formation has not worked
well for emerging companies seek-
ing 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 deriva-
tive products appear to have replaced an
efficient pricing mechanism for individual
issues. Growing companies looking for capi-
tal cannot turn to the security industry as
they once did. The volatility of traded securi-
ties 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 compa-
nies doing private capital raises) and the
accredited investor community.
In the current environment, private capi-
tal 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 illiq-
uid securities or Web portals that listed avail-
able 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 effi-
cient 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 inves-
tors. 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 mem-
bers 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 inter-
act 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 effi-
ciently to potential investors and to provide
a medium for them to communicate directly
with a company. With the tools provided by
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 cur-
rent stock offerings. Companies have a plat-
form 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 infor-mation provided by the issuer or company representa-tive. 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 com-pany profiled.
Safe Harbor Statement: The statements in this adver-torial or profile relating to future products, partner-ships, 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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44 Micro-Cap Review Magazine www.microcapreview.com
F E AT U R E D A R T I c L E
Jatropha’s Place in the Biofuels RaceJatropha, a biofuel feedstock, could change the way the world
thinks about energy. Pitted against the most viable alterna-tive energy sources on the planet, Jatropha has the potential to compete in one of today’s fastest growing industries.
With government mandates to reduce the
global carbon footprint, the biofuels indus-
try 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 “die-
sel plant,” is an oil-bearing, sub-tropical,
drought-resistant shrub capable of growing
in challenging environments. When grown
in the right climate, Jatropha produces non-
edible 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 tradi-
tional 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
by LISSA SWIhART
www.microcapreview.com Micro-Cap Review Magazine 45
biofuel and a pulp residue or seedcake is left
behind, which can be made into either fertil-
izer 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 drop-
in 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 domi-
nated the world of biofuels until scientists,
environmentalists, and human rights advo-
cates took issue with the effects of food
versus fuel. Prices of these crops were driven
up because of the demands of the oil indus-
try. 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 invest-
ment into the production of ‘drop-in’ fuel
technologies and refinery processes to meet
rising demands for the integration of bio-
mass 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 dol-
lars 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 pub-
lished 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 compa-
nies 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 quanti-
ties 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
quoted Wagner Vendrame, the princi-
pal 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 ver-
ify 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 head-
quartered 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 com-
mercial 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 infra-
structure, 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 [email protected],
or visit http://www.bedfordbiofuels.com/
welcome/microcapreview/. n
46 Micro-Cap Review Magazine www.microcapreview.com
wealth from waste
F E AT U R E D A R T I c L E
nutraceutical Ingredients from food production waste Streams
The U.S. food industry is a giant with
annual sales approaching one tril-
lion 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 by-
products 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 peo-
ple’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 osteo-
arthritis and improving mood energy and
cognitive functions. In some cases, these
ingredients can substitute for over-the-
counter 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 trans-
form someone else’s garbage into profits.
by STEVEN WIThERLyAND LARRy MAy, M.D.
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.
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48 Micro-Cap Review Magazine www.microcapreview.com
ancIent waSte Stream
problem
Cheese production used to be an envi-
ronmental hazard. When cheese is manu-
factured, cow or goat’s milk is coagulated
with an enzyme (rennet) that separates the
casein (cheese) from the whey protein frac-
tion (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 com-
ponents (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. lac-
toperoxidase) with unique disease fighting
properties.
Today the whey protein industry is worth
billions of dollars with numerous companies
leading the way in whey protein extrac-
tions and derivatives (called hydrolysates).
For example, Davisco International, a fam-
ily-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 hydroly-
sate (Biozate 1) is easily absorbed, promotes
lean muscle mass, and enhances the meta-
bolic rate. Another innovative whey fraction
is called glycomacropepide (GMP), which
has been shown to contribute to a feeling of
fullness or enhanced satiety.
ShrImp and ShellfISh waSte
StreamS
Chitin is the name of a long chain biopoly-
mer found in the protective shells (exoskel-
etons) 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 indus-
tries—printing, leather curing, water puri-
fication, 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 chemi-
cally treated (deacetylated) to open up the
molecules to bind to fatty materials. A recent
meta-analysis of six studies showed signifi-
cant reductions in a fatty material known as
cholesterol.
Glucosamine, the popular dietary treat-
ment 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 sub-
sequent acid hydrolysis step, thus making
glucosamine a product suitable for vegetar-
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 devel-
oped 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 asso-
ciated 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 antioxi-
dants 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 trans-
formed the olive water into a highly concen-
trated 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
www.microcapreview.com Micro-Cap Review Magazine 49
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 wait-
ing to be tapped.
To use rice bran it must first be stabi-
lized 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 stabiliz-
ing 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 pow-
dered 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 poly-
phenolic (antioxidant) substances.
wIne makInG 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 fermen-
tation of wine making. Wine is fermented
from grapes with seeds and skins kept in tact.
Beneficial antioxidant polyphenols are even-
tually 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
extract (GSE). The company’s brand called
MegaNatural™ is made from unferment-
ed 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 con-
tribute to improved cardiovascular health,
improved skin tone, reduced blood pressure,
and enhanced mental alertness. Grape seed
extract actually crosses the blood-brain bar-
rier.
Although grape seed extract is preferred
in its native liquid form, many other parts
of the grape lend itself to additional nutra-
ceuticals, 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
Although ketchup makes French fries taste
great, the production of America’s favorite
condiment creates multiple waste streams
from the washing, peeling, and seed extrac-
tion of tomato paste.
The chemical compound that makes
tomatoes and watermelon bright red is the
straight chain carotenoid known as lyco-
pene. This potent fat-soluble antioxidant has
numerous health benefits, including boost-
ing the immune systems and protecting the
skin from harmful radiation from the sun.
Several long-term epidemiological studies
suggest a connection between tomato con-
sumption and lowered risk of prostate can-
cer and coronary heart disease.
Lycopene is relatively expensive to make
synthetically. Many methods have been
developed to extract lycopene from the tre-
mendous 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 comple-
ment the antioxidant action of lycopene
itself. Such nutritional cofactors—phytoene,
phytofluene, beta-carotene, and vitamin E—
greatly enhance the absorption of the lyco-
pene, 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 pine-
apple. 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 pal-
metto, which supports prostate health, are
extracted from noxious weeds.
future dIrectIonS
Advances in separation and extraction tech-
nology promise to add many new healthy
ingredients to an already expanding list of
nutritional phytochemicals. With the world-
wide 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 sci-ence 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 antihang-over drink called Resurrection.
Dr. Larry May graduated Phi Beta Kappa from Harvard University with a bachelor’s degree in eco-nomics 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 medi-cal 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.
50 Micro-Cap Review Magazine www.microcapreview.com
converted organics Inc. (NASDAQ: COIN)
PROFILED cOMPANIES
Growing a Greener future from the Ground up
One of the most valuable and over-
looked resources available today
is food waste. Food waste is often
viewed as a liability, because it usually ends
up in landfills where the waste decom-
poses 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 - valu-
able resources that are renewable and envi-
ronmentally safe.
are used in the retail lawn and garden, profes-
sional turf, and agriculture markets.
Converted Organics intends to build, own,
and operate food-waste-to-fertilizer manu-
facturing plants near large U.S. cities that
generate high volumes of food waste. The
company’s manufacturing plants can oper-
ate as perpetual urban recycling facilities:
they never fill-up and don’t pollute.
Currently Converted Organics oper-
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, all-
natural fertilizers. The company’s products
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 liq-uid 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 manufac-turing 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 mar-kets.
31 million tons of food waste is disposed of annually in U.S. landfills.
COMPANY TIMELINE
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Our lifelong support.
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52 Micro-Cap Review Magazine www.microcapreview.com
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www.microcapreview.com Micro-Cap Review Magazine 53
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 gen-
erated by grocery stores, food processors,
and hospitality venues. Since Converted
Organics offers a lower “tip” fee than land-
fills charge, waste haulers have an incen-
tive to bring their food waste to Converted
Organics’ facility. Within six days of receiv-
ing the food waste, Converted Organics con-
verts 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 agree-
ment with MassOrganics LLC, which will
install, operate, and use the HTLC® tech-
nology to manufacture organic fertiliz-
ers in Sutton, MA. Converted Organics is
also developing smaller capacity operating
units, named the Scalable Modular AeRobic
Technology (SMART) units, which the com-
pany will design, build, and sell to third par-
ties 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
Each year in the United States, 31 million
tons of food waste is disposed of in land-
fills. Herein lies the problem: when food
waste is land-filled, it decomposes anaerobi-
cally (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 recy-
cling, but is also helping to replace harm-
ful synthetic fertilizers. The production of
synthetic fertilizers consumes vast amounts
of energy and generates unwanted CO2 emis-
sions. To produce one ton of synthetic fertil-
izer 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’ pro-
cess is a well documented microbial diges-
tion 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 fer-
tilizer 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 speed-
ing 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 unpro-
cessed 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 fertiliz-
ers for their lawns at retail lawn and garden
stores. More consumers are buying all-natu-
ral, 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 sell-
ing 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 con-
sumer 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 fertil-
izer programs. Until recently, the organic
options available to professional lawn care
companies have been mainly comprised of
chicken waste or bio-solids (treated sewer
http://www.epa.gov/epawaste/conserve/materials/organics/food/fd-basic.htm
54 Micro-Cap Review Magazine www.microcapreview.com
sludge) fertilizers. Both have inherent weak-
nesses (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 water-
ways with unwanted chemicals. Golf cours-
es are making the shift towards natural-
based 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 fungi-
cide use by up to 50 percent. In short,
Converted Organics fertilizers enable golf
course superintendents to decrease chemical
inputs while improving turf quality, envi-
ronmental 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 acre-
age from conventional to organic produc-
tion 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 fertil-
izers to maximize the quality and quantity
of yields and minimize costs. About 23 mil-
lion tons of liquid fertilizer are used in the
U.S. agriculture market annually. Converted
Organics fertilizers enable growers to pro-
duce 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 offer-
ing a replacement for synthetic fertilizers.
GrowInG Green
Converted Organics is seeking to transform
how food waste is perceived and managed,
and how plants and crops are cultivated.
Holding strong to the belief that waste is
a valuable resource, Converted Organics is
acquiring businesses and other clean tech-
nologies that align with the company’s mis-
sion to convert waste materials into high-
quality, 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’ acquisi-
tion of Heartland’s technology helps diversi-
fy 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 [email protected]. n
Disclaimer: This corporate profile is based upon infor-mation provided by the issuer or company representa-tive. 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 com-pany profiled.
Safe Harbor Statement: The statements in this adver-torial or profile relating to future products, partner-ships, 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.
1 ton of synthetic fertilizer = 4.6 tons of CO2 from the burning of natural gas
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56 Micro-Cap Review Magazine www.microcapreview.com
PROFILED cOMPANIES
IntroductIon
People around the world are seeking high qual-
ity, locally produced food that is free of pesti-
cides and other chemicals. Additionally, eco-
nomic, 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 revolution-
izing the way people grow food. The com-
pany partners with investors and entrepre-
neurs to solve food production problems
on a commercial scale by creating the ideal
environment for plant production.
company
Founded in 2003, TerraSphere Systems, LLC
designs and builds highly efficient vertical
growth systems in compact, safe, pollutant-
free facilities. TerraSphere’s state-of-the-art
technology is fully contained, which means
crops can be grown year-round in any loca-
tion using precise combinations of light,
water, and nutrients to maximize produc-
tion. TerraSphere currently operates a facili-
ty 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
revenue in three ways: 1) licensing fees and
royalties; 2) sale of equipment; and 3) prod-
uct sales.
technoloGy
TerraSphere employs an automated, soft-
ware-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 multi-
directional growth.
advantaGeS
TerraSphere offers many benefits over tradi-
tional growing methods, including yields of
up to ten times greater than those of conven-
tional crop production methods. This urban
agricultural model allows locally grown, pes-
ticide-free produce to be cultivated closer to
population centers, resulting in fresher pro-
duce in stores, lower supply chain costs, and
reduced carbon emissions. The controlled
growing environment offers many other ben-
efits: it protects crops from weather-related
problems; eliminates the need for synthetic
pesticides, herbicides, and fungicides; reduces
nitrate run-off; and preserves natural resourc-
es owing to reduced farmland use.
GaInInG Ground
TerraSphere has been developing its pro-
prietary indoor growing system for the past
seven years. The company has completed a
number of transactions, including a partner-
ship with the Squamish Nation and Choices
Markets, British Columbia’s leading organic
foods grocer.
As a pioneer in alternative agriculture
production, TerraSphere provides a sustain-
able 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@terrasphere-
systems.com. n
Disclaimer: This corporate profile is based upon infor-mation provided by the issuer or company representa-tive. 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 com-pany profiled.
Safe Harbor Statement: The statements in this adver-torial or profile relating to future products, partner-ships, 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.
terrasphere Systems, llc
www.microcapreview.com Micro-Cap Review Magazine 57
V I E W P O I N T S
Smart Grid and Alternative Energy
Government Budget Focus
by M.c. ELVIS OxLEy & DANIEL R. MURPhy
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 manage-
ment system and demand response pro-
grams. 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-
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 com-
prise two percent of today’s total generation
within the United States. Until the federal gov-
ernment 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 technol-
ogy 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)
The 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.
58 Micro-Cap Review Magazine www.microcapreview.com
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 elec-
tric cooperatives that many companies have
found very difficult to serve. Many coop-
eratives 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 coop-
eratives—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 under-
served 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 com-
municating that the large west coast integra-
tors 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 com-
munity, and service to family. Two of HEP’s
board members served as multiple term
governors of rural states. Both former gov-
ernors 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
in energy are viable today. The smart grid
and energy efficiency sectors are proving
results immediately versus the more long-
term 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 legisla-
tion 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 ([email protected]).
www.microcapreview.com Micro-Cap Review Magazine 59
V I E W P O I N T S
Getting Jobs and Money into the Economy
by MARShALL STERMAN
Rather than continuing to fund politically
motivated pet projects, the Treasury’s print-
ing 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 judg-
ment on the merits. What is important is that
investor money is equity and the U.S. tax-
payer 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
$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 rebuild-
ing 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.
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 repre-
sentatives (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 sys-
tem winnowed out the small broker dealer
and any source of debt that didn’t require
attorneys and accountants charging at least
There are no magic bullets or cure alls for the current eco-nomic 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.
60 Micro-Cap Review Magazine www.microcapreview.com
V I E W P O I N T S
Green JobsAttracting Innovation and Growing the Work Force
Governments and communities con-
tinue to rise out from the finan-
cial 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 aris-
en to bring forth a more energy-efficient, cost
effective, and environmentally-friendly busi-
ness environment. Green workforce refers to
and an all employees focused on promoting
energy efficiency efforts, the creation of elec-
tric 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 mov-
ing towards a “green” economy will and can
exceed the costs of the investment required
in order for it to exist. This has already hap-
pened in the past few years with the roll-
out 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 cer-
tainly motivated by environmental concerns.
The 80 percent which followed were driven
by different kinds of incentives. The remain-
ing 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 govern-
ments 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
In the future, a significant driver of green
jobs will be corporations eager to gain a
competitive advantage by investing in proj-
ects which reduce costs, increase revenues,
and achieve sustainability goals. Even during
periods of economic slowdown, corpora-
tions are under pressure by their consum-
er networks to provide greener products,
reduce resources consumption, and increase
efficiencies.
Hardships caused by spikes in commod-
ity prices have forced businesses to imple-
ment programs to protect against worldwide
demand for oil and other energy sourc-
es. Success against the most pressing eco-
nomic and environmental challenges of our
times depends on an unprecedented level of
collaboration among citizens, local busi-
nesses, 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, manu-
facture, 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
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 par-
ticular, has become established as a leader
in the environmental world due to suc-
cessful 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 invest-
ments for innovative ventures and the mar-
ketplace 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 expand-
ed 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 pub-
lic buildings.
by PAUL F. PELOSI, JR.
www.microcapreview.com Micro-Cap Review Magazine 61
V I E W P O I N T S
“Overcoming Loss”
RAbbI STEPhEN RObbINS, PSy.D.
ment and career to death and mourning. So
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 ill-
prepared 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
It’s not just that I lost assets, just like all of
you, but also because I have spent almost
fifty years as Rabbi and psychologist help-
ing 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 busi-
nesses through the transition of difficult
losses, sales and foreclosures. I even have
worked helping family businesses through
the complexity of communication and deci-
sion-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-
Why is a Rabbi writing a column in a financial publication? Because I am so well acquainted with loss, both person-
ally 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.
62 Micro-Cap Review Magazine www.microcapreview.com
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 finan-
cial 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 invest-
ment, 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 per-
son 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 decision-
making 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 institu-
tions 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, finan-
cial 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 pro-
tect 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 pos-
sessions. “Money” used to mean some pre-
cious 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 bal-
ance between manufacturer and consumer.
Now, the American economy is almost all
consumerism and is based on that psychol-
ogy 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 hap-
pened a little over two years ago, the bills get
called… then the system collapses.
FULFILLING THE DREAM - To ful-
fill the American dream, you must own
your own home… but even that is a fan-
tasy 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
64 Micro-Cap Review Magazine www.microcapreview.com
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 will-
ing to intervene in this orgy of bad finance
for fear of making it collapse and engender-
ing a crisis.
Why no intervention? Why, when whistle-
blowers 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 fanta-
sies. 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 fun-
damental 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 zero-
sum 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 psy-
chology of the business deal as winning ver-
sus 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 for-
tune tellers of our time. They became wis-
dom 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 beat-
ing 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 sys-
tem 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 trans-
parency makes it possible for true regula-
tion 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 transpar-
ency, 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 rein-
vest in the concept of equitable exchange of
value. We must participate in full disclosure
of all the information we have. The institu-
tions in which we work cannot bet against
the success of their own product. The insti-
tutions 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 trag-
ic 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
www.microcapreview.com Micro-Cap Review Magazine 65
LEgAL • TAx • AccOUNTINg
A Clean Balance Sheet Can Help a Company in More Ways Than One
by JAMES DEPELISI
Companies can help their cause with more than just investor relations
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 prin-
cipal 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 adviso-ry 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 prepara-tion 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 [email protected]. The firm’s Web site is www.LdvCapitalManagement.com.
Copyright 2010, LDV Capital Management
When 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
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 suc-
cess 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 accumula-
tor 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 likeli-
hood that the price of such stocks will go down
instead of up. In many cases, the negative out-
look 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 rev-
enue compared to debt on the balance sheet.
How do companies clean up their balance
sheet? They do so by restructuring the exist-
ing debt.
66 Micro-Cap Review Magazine www.microcapreview.com
LEgAL • TAx • AccOUNTINg
Tax Benefits of Investing in Green Energy ProjectsLaunching 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.
by RObERT A. gREEN, cPA
Investors in green businesses should learn
to sort the hype from truth. The govern-
ment has enacted many tax breaks for the
green-energy industry. Unfortunately, the
tax breaks are complex and often are over-
looked. 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 hedge-
fund structures in legal form, but have a far
more complicated business model. Green
energy co-generation facilities are expen-
sive, long-term ventures, requiring com-
munity approval, modern design, complex
installation, efficient operations, and guar-
anteed power-purchase agreements with
local utilities.
losses in the early years. Suspending those
tax breaks is inefficient and unattractive.
Rather than doing so, you can set up a vehi-
cle 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 participa-
tion,” 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 hedge-
fund industries, I have an interest in going
green for my own social and business pur-
poses. 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 over-
come passive-activity rules. This concept is
helpful to green-energy syndications too.
actIve InveStorS
Our “Green Energy Active Investors” pro-
gram 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 sepa-
rate LLC class, and counterbalance it by allo-
cating more cash flow to passive investors.
Internal Revenue Code, Section 469 limits
passive-loss deductions to passive-activity
income. Most green-energy projects generate
68 Micro-Cap Review Magazine www.microcapreview.com
plies, home-office expenses, dues, publica-
tions, research, furniture, fixtures and equip-
ment, 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 “unre-
imbursed 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 stan-
dards, as well. Each investor needs to make
that assessment and is responsible for that
determination, not the LLC.
Consider setting up special-purpose green-
energy investment funds (Green Fund LLCs).
You can have multiple classes of LLC mem-
bership interests. Each green energy proj-
ect 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.
recruIt actIve InveStorS
to overcome “not In my
back yard” reSIStance
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 neigh-
borhood.
This is where the active investors come
into play. You can set up active-investor
vehicles in local communities where a green
energy project is to be located. Recruit active
investors from local builders, architects, con-
tractors, attorneys, accountants, doctors,
quasi-town officials, politicians, media own-
ers, promoters, and other local professionals.
These VIPs can help convince their neigh-
bors 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 expens-
es, providing tax savings even beyond the
green-energy tax breaks. The green-ener-
gy 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
Green-energy incentives are available from
many sources: federal, state, county, and
local governments; quasi-governmental
organizations dedicated to making green-
energy 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
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 aGree-
mentS
The most important concern of any new busi-
ness 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 gen-
erate 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 proj-
ect, 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 proj-
ect, go green, and make some greens. The tax
incentives can be like picking fruit off a tree. n
www.microcapreview.com Micro-Cap Review Magazine 69
So, 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 broker-
dealer 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 detail-
ing any private offering.
As financial regulation winds its way
through Congress and as states become more
active in the regulation of private place-
ments, 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 profes-
sionals affiliated with a FINRA broker-dealer.
rISk manaGement and
complIance
Much has been spoken and written recently
about risk management. How does a firm
manage its risk? How does a registered rep-
resentative 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.
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 securi-
ties 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 trading-
pause 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
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, out-sourced back-office processing, and branch office audit services, including AML and Regulation S-P compli-ance. For more information about the firm, please visit www.thecompliancedepartment.com or call Chet at (303) 339-9870.
by chET hEbERT
The Compliance Corner
LEgAL • TAx • AccOUNTINg
70 Micro-Cap Review Magazine www.microcapreview.com
In light of the environmental issues confronting this country, this month’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 FINRA’s paper filing requirements is mentioned on government environ-
mental 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 con-
tests, plant trees, or encourage community participation. We ought to be doing some-
thing positive for our children.
Readers may ask what all of this have to do with due diligence? Well, if we don’t do
our due diligence on the environmental problems facing us, then who will? n
ombudsman
V I E W P O I N T S
Instead of
just handing
money to
unemployed
people, we ought
to have them
hold signs on
street corners
educating
people on how
to conserve.
by JAcK LESLIE
VisEnergyinc.com
SIMPLIFIYINGSUSTAINABILITY
Providing Comprehensive Energy Management Solutions and Renewable Energy Lifecycle Management to help reclaim building operations and ultimately revive asset value
By Concentric Research LLC
Converted Organics™ is committed to sustainable products and practices that help, not hurt, the environment. But we’re all about delivering ROI to our investors, too. That’s why we continue to acquire green businesses and clean technologies—including multiple major transactions in 2010 alone—that will build our company, attract new customers and support long-term growth and profi tability.
Isn’t it great when doing the right thing is good business, too?
FREE 2010 ANALYST REPORT
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Get your complimentary copy of the CONCENTRIC RESEARCH LLC report by visiting WWW.CONVERTEDORGANICS.COM/MICRO or calling 877-665-0444.
© 2010 Converted O
rganics Inc. All rights reserved.
Single Page Bleed: 8.75” W x 11.25” H • Trim Size: 8.5” W x 11” H • Live Area: 7.75” W x 10.25” H • 4C ProcessMicro-Cap Review Magazine • June 2010 • Outside Back Cover