Novo Grass Roots Research Report
Upcoming SlideShare
Loading in...5
×

Like this? Share it with your network

Share

Novo Grass Roots Research Report

  • 585 views
Uploaded on

An independent report on Novo Energies

An independent report on Novo Energies

  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Be the first to comment
    Be the first to like this
No Downloads

Views

Total Views
585
On Slideshare
570
From Embeds
15
Number of Embeds
4

Actions

Shares
Downloads
0
Comments
0
Likes
0

Embeds 15

http://www.linkedin.com 8
http://www.lmodules.com 5
http://in.linkedin.com 1
https://www.linkedin.com 1

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
    No notes for slide

Transcript

  • 1. ! www.grassrootsrd.com Telephone: (415) 454-6985 ! June 30, 2009 Symbol NVNC Exchange NASDAQ Recommendation BUY Current Price 0.20 52 Week High/Low 0.25/0.03 Avg daily volume (3 mo.) 9,000 Shares Outstanding 24.92M Current Market Value 5.00M Beta (36 Month) Average 2.90 Cohen!Price!Target!Index in!$ Cohen!Short"Term!Price!Target!Index !! !0.36 Cohen!Medium"Term!Price!Target!Index !! !0.71 Cohen!Long"Term!Price!Target!Index !! !1.25 INVESTMENT THESIS AND RECOMMENDATION Novo Energies Corporation (OTCBB: NVNC) is an exciting renewable energy company. The Company, through its subsidiary WTL Renewable Energy Corporation, has developed and designed an effective and novel proprietary process which combines thermolysis and gasification to transform plastics and tires to liquid fuels. This will ensure positive fuel plant conversion economics because gasification is likely to reduce the energy required to convert waste to liquid fuels. Secondly, use of plastics and tires also ensures abundant raw material supply. Both these factors should boost the Company’s margins. On our top-line scenario, we expect the Company to benefit from multiple sources of revenues including sales of liquid fuels and other by-products. The Company intends to become a leader in the waste to energy industry. The alternative energy industry is likely to grow exponentially over the next couple of decades as a major worldwide impetus is provided to reduce depletion of natural resources and reduce dependence on foreign oil. Revenues are expected to grow from $5.7 million for FYE March 31, 2010 to more than $570.0 million by FYE 2016. The Company will have to raise cash to reach our forecasts. We believe Novo Energies is a compelling opportunity for risk-averse investors. Copyright © 2009 by Grass Roots Research and Distribution, Inc. All rights reserved. This report may not be reproduced.
  • 2. Grass Roots Research and Distribution, Inc. ! EXECUTIVE SUMMARY ! Novo Energies Corporation (OTCBB: NVNC) is focused on converting plastics and tire waste to liquid fuels such as diesel, gasoline and fuel additives, thus expanding its presence in the alternative energy industry. ! The Company plans to build small local industrial plants designed to transform residual plastics and tires to valuable liquid Low Carbon Fuels such as diesel, gasoline and fuel additives. ! The Company’s subsidiary, WTL Renewable Energy Corporation, has developed and designed an effective and novel proprietary process which combines thermolysis and gasification to transform plastics and synthetic tires to liquid fuels such as diesel, gasoline and fuel additives. ! The U.S. government is encouraging more economical renewable energy sources due to its growing concern over the impact of conventional fuels on the environment. These concerns, coupled with factors such as depleting oil reserves, combine to drive demand for renewable energy sources. ! Spurred by growing political concerns in Middle East, increase in demand for oil from developing nations and rising oil prices, have led to alternative fuels quickly becoming vital to domestic energy supplies. ! As a result, the projected growth for this new and exciting business opportunity of conversion of waste-to-liquid fuel is estimated at 10% to 50% per year. Novo Energies plans to capitalize on this impending growth in demand for alternative fuels. ! The Company is in a better position to benefit from the projected growth in demand for alternative energy sources, as it plans to use the abundant supplies of plastic and tire as its raw material sources. Financial Forecasts and Valuation ! We project revenues of $5.7 million for FYE 2010 and more than $570 million by 2016. These projections are based on the Company’s plant construction schedule, sustained level of capital expenditure and pipeline of opportunities. The Company will have to raise cash to meet our forecasts. ! Our short-term price target of $0.36 is derived using the multiple based valuation approach which uses the Price-to-Earnings and Price-to-Book Value ratios. This represents an upside potential of 80% over the current market price of $0.20. ! We have our targeted multiple approach of valuation to derive our intermediate term price target. Based targeted Price-to-Earnings and Price-to-Sales ratios and Base Case financial forecasts, the Novo common stock is valued at $0.71. ! We have valued the stock using our Discounted Cash Flow (DCF) method to arrive at long-term price target of $1.25, reflecting forward P/E multiples of 29.5x and 16.3x our estimated FYE 2010 EPS and FYE 2011 EPS, respectively. Copyright © 2009 by Grass Roots Research and Distribution, Inc. All rights reserved. This report may not be reproduced. Page 2 of 19
  • 3. Grass Roots Research and Distribution, Inc. ! ABOUT THE COMPANY Novo Energies Corporation (OTCBB: NVNC) is focused on expanding its presence in the renewable energy sector by developing and implementing solutions and technology. The Company’s mission is to develop such solutions while maintaining its commitment to conserve energy, natural resources and help reduce pollutants and unwanted biological agents. The Company’s subsidiary, WTL Renewable Energy Corporation, has developed and designed an effective and novel proprietary process which combines thermolysis and gasification to transform plastics and synthetic tires to liquid fuels such as diesel, gasoline and fuel additives. The Company plans to build small local industrial plants designed to transform residual plastics and tires to valuable liquid Low Carbon Fuels such as diesel, gasoline and fuel additives. UNDERSTANDING WASTE-TO-LIQUID SOLUTION Waste-to-Liquid (WTL) or energy-from-waste (WtE) is the process of creating energy in the form of electricity or heat from waste sources. It is a form of energy recovery that produces electricity using various processes such as: ! Gasification (produces combustible gas, hydrogen, synthetic fuels) ! Thermal Depolymerization (produces synthetic crude oil, which can be further refined) ! Pyrolysis (produces combustible tar/bio-oil and chars) ! Plasma arc gasification (PGP) or plasma gasification process (produces rich syngas including hydrogen and carbon monoxide usable for fuel cells or generating electricity to drive the plasma arch, usable vitrified silicate and metal ingots, salt and sulphur) ADVANTAGE OF WASTE-TO-LIQUID SOLUTION These non-polluting waste-to-Low Carbon Fuels facilities will be able to provide energy to nations seeking independence from petroleum-based fuels, while also helping solve those nation’s environmental problems. The exhibit below highlights the advantage of waste-to-liquid opportunity when compared to other conventional source of energy: Copyright © 2009 by Grass Roots Research and Distribution, Inc. All rights reserved. This report may not be reproduced. Page 3 of 19
  • 4. Grass Roots Research and Distribution, Inc. ! Figure 1: Overview of Competitive Advantages of WTL Solution Source: Company Presentation ! Renewable Source of Energy – produced from plastic and tire waste ! Superior Economics – when compared to other renewable energy sources, waste-to-liquid is a cost effective source of energy ! Abundance Raw Material Supply – unlike other raw materials used for renewable energy, this solution uses plastic and tire wastes which are readily available ! Landfill Development – dramatically extending the useful life by radically reducing the volume of recyclable waste being dumped and ultimately reducing the size of the existing landfill ! Reducing Foreign Oil Dependency – providing self-sufficient fuel sources of synthetic fuels in- country ! Local Economics – creating local jobs, development of economically disadvantaged, generating tax revenue to the community and energy savings for consumers. Copyright © 2009 by Grass Roots Research and Distribution, Inc. All rights reserved. This report may not be reproduced. Page 4 of 19
  • 5. Grass Roots Research and Distribution, Inc. ! COMPANY BUSINESS MODEL Novo Energies plans to use plastic and tire as raw material to convert the same to liquid fuels provides two-fold advantages as shown below: Figure 2: Waste-to-Liquid Opportunity - Advantages Source: Company Presentation The Company’s business model is based primarily on revenues from the sale of fuel and other by- products such as steel plates and carbon black. Copyright © 2009 by Grass Roots Research and Distribution, Inc. All rights reserved. This report may not be reproduced. Page 5 of 19
  • 6. Grass Roots Research and Distribution, Inc. ! Figure 3: Proposed Business Approach Source: Company Presentation The key to Novo’s business model is the use of right technology and process. The Company proposes to combine the gasification and thermolysis processes in a novel manner as it will be able to achieve the desired level of fuel production with initial levels of energy required for the process being generated from gasification. Figure 4: Plastic Waste-to-Liquid Fuel Process Source: Company Presentation Copyright © 2009 by Grass Roots Research and Distribution, Inc. All rights reserved. This report may not be reproduced. Page 6 of 19
  • 7. Grass Roots Research and Distribution, Inc. ! Figure 5: Tire Waste-to-Liquid Process Source: Company Presentation Copyright © 2009 by Grass Roots Research and Distribution, Inc. All rights reserved. This report may not be reproduced. Page 7 of 19
  • 8. Grass Roots Research and Distribution, Inc. ! COMPANY GROWTH DRIVERS Figure 6: Novo’s Growth and Value Drivers Unique! Huge! Experienced! Innovative! Business! Industry! Management! Technology! Model Opportunity! Team! •Conversion!of!plastic! •Company!plans!to! •World!energy! •Proactive!and! and!tire!waste!to! use!a!combination!of! demand!expected!to! forward!looking! liquid!fuels Gasification!and! grow!by!44%!over!the! management!team! •Reduces!waste!and! Thermolysis. period!between!2006" with!significant! converts!the!same!to! •Increases!the!net!fuel! 2030 experience!in!this! energy production!in!the! •Renewed!focus!on! field. •Abundant!raw! entire!process alternative!energy! •Company!well!placed! material!availability sources!to!reduce! for!strong!and!rapid! •Multiple!sources!of! foreign!dependence growth. revenues Source: Cohen Research FINANCIAL FORECASTS Figure 7: Revenue Forecasts – Base Case all!figures!in!$!million 2010E 2011E 2012E 2013E 2014E 2015E 2016E Plastic!Segment !"#$%&'()*+,&"-&.%$/#0 &&&&&&&&&&&&&&&& 123 &&&&&&&&&&&&&&&& 423 &&&&&&&&&&&&&1323 &&&&&&&&&&&&&5423 &&&&&&&&&&&&&4323 &&&&&&&&&&&&&6423 &&&&&&&&&&&13323 7+8+/(+0&9+,&9%$/# &&&&&&&&&&&&&&&& 525 &&&&&&&&&&&&&&&& 525 &&&&&&&&&&&&&&&& 525 &&&&&&&&&&&&&&&& 525 &&&&&&&&&&&&&&&& 525 &&&&&&&&&&&&&&&& 525 &&&&&&&&&&&&&&&& 525 %!growth 323: 323: 323: 323: 323: 323: TOTAL!REVENUES &&&&&&&&&&&&&&&& 525 &&&&&&&&&&&&&1123 &&&&&&&&&&&&&5523 &&&&&&&&&&&&&4423 &&&&&&&&&&&11323 &&&&&&&&&&&1;423 &&&&&&&&&&&55323 Tire!Segment !"#$%&'()*+,&"-&.%$/#0 &&&&&&&&&&&&&&&& 123 &&&&&&&&&&&&&&&& 423 &&&&&&&&&&&&&1323 &&&&&&&&&&&&&5423 &&&&&&&&&&&&&4323 &&&&&&&&&&&&&6423 &&&&&&&&&&&13323 7+8+/(+0&9+,&9%$/# &&&&&&&&&&&&&&&& <24 &&&&&&&&&&&&&&&& <24 &&&&&&&&&&&&&&&& <24 &&&&&&&&&&&&&&&& <24 &&&&&&&&&&&&&&&& <24 &&&&&&&&&&&&&&&& <24 &&&&&&&&&&&&&&&& <24 %!growth 323: 323: 323: 323: 323: 323: TOTAL!REVENUES &&&&&&&&&&&&&&&& <24 &&&&&&&&&&&&&1624 &&&&&&&&&&&&&<423 &&&&&&&&&&&&&=624 &&&&&&&&&&&16423 &&&&&&&&&&&5;524 &&&&&&&&&&&<4323 TOTAL!REVENUES &&&&&&&&&&&&&&&& 426 &&&&&&&&&&&&&5=24 &&&&&&&&&&&&&4623 &&&&&&&&&&&1>524 &&&&&&&&&&&5=423 &&&&&&&&&&&>5624 &&&&&&&&&&&46323 Figure 8: Sales, Earnings and Margin Forecasts – Base Case all!figures!in!$!million 2010E 2011E 2012E 2013E 2014E 2015E 2016E 7+8+/(+0 &&&&&&&&&&&&&&&& 426 &&&&&&&&&&&&&5=24 &&&&&&&&&&&&&4623 &&&&&&&&&&&1>524 &&&&&&&&&&&5=423 &&&&&&&&&&&>5624 &&&&&&&&&&&46323 %!growth 0.0% 400.0% 100.0% 150.0% 100.0% 50.0% 33.3% ?,"00&.,"-@# &&&&&&&&&&&&&&&& >2< &&&&&&&&&&&&&512> &&&&&&&&&&&&&>52= &&&&&&&&&&&13;2A &&&&&&&&&&&51<2= &&&&&&&&&&&<532; &&&&&&&&&&&>5624 Gross!Profit!Margin 75.0% 75.0% 75.0% 75.0% 75.0% 75.0% 75.0% BCD!EF &&&&&&&&&&&&&&&& 52< &&&&&&&&&&&&&1126 &&&&&&&&&&&&&5<24 &&&&&&&&&&&&&4=2; &&&&&&&&&&&1162< &&&&&&&&&&&1642A &&&&&&&&&&&5<>24 EBITDA!Margin 41.1% 41.1% 41.1% 41.1% 41.1% 41.1% 41.1% '+#&.,"-@# &&&&&&&&&&&&&&&& 123 &&&&&&&&&&&&&&&& ;26 &&&&&&&&&&&&&1126 &&&&&&&&&&&&&542; &&&&&&&&&&&&&>A26 &&&&&&&&&&&&&6324 &&&&&&&&&&&&&A52= Net!Profit!Margin 17.4% 23.4% 20.6% 18.0% 17.4% 16.5% 16.3% B$,/@/G0&.+,&HI$,+&J&C$0@K&L&E@%(#+M &&&&&&&&&&&32355 &&&&&&&&&&&321>A &&&&&&&&&&&325;5 &&&&&&&&&&&3246< &&&&&&&&&&&12111 &&&&&&&&&&&1246= &&&&&&&&&&&52364 N,++&O$0I&N%"P&#"&N@,) &&&&&&&&&&&&&&Q62;R &&&&&&&&&&&&&&Q<2;R &&&&&&&&&&&& Q1;25R &&&&&&&&&&&& Q<32=R &&&&&&&&&&&& Q<>2>R &&&&&&&&&&&&&1>24 &&&&&&&&&&&&&;<2> Strong focus on commercialization of superior technology platform and potential build-up of new facilities will result in projected revenues of $5.7 million for FYE 2010 and $28.5 million in FYE 2011. Copyright © 2009 by Grass Roots Research and Distribution, Inc. All rights reserved. This report may not be reproduced. Page 8 of 19
  • 9. Grass Roots Research and Distribution, Inc. ! With financing, we project revenues to grow thereafter from $57.0 million in FYE 2012 to $570.0 million by FYE 2016. The key driver for this growth is the continued demand for alternative energy solutions. Due to its multiple sources of revenues and constant nature of business operations we expect Novo’s gross margins to remain constant throughout our forecast period (Management Guidance). However, as the Company constructs larger projects, we expect operating expenses to increase at a decreasing rate, resulting in higher operating and net profit margins. The robust industry demand coupled with continuous focus on cost effective and efficient energy solutions will drive Novo’s operations in North America. Growth prospects are impressive and depend on the successful fund raising by the Company. VALUATION SHORT TERM PRICE TARGET $0.36 We have valued the stock using Multiple Based Valuation Methodology to derive our short-term target price. This method uses the industry average 2009E Price-to-Equity and Price-to-Book Value multiple. Our formula is shown below. Figure 9: Short-Term Multiple-based Valuation Description Market!Cap!($Mn) Price!to!Earnings Price!To!Bk.!Val S$0#+&T$/$G+)+/#U&D/K2 1<2A3C &&&&&&&&&&&&&&&&&&&&&&&&1<2A &&&&&&&&&&&&&&&&&&&&&&&&&&& 52> 7+9(*%@K&H+,8@K+0&D/K2 A23;C &&&&&&&&&&&&&&&&&&&&&&&&4<2> &&&&&&&&&&&&&&&&&&&&&&&&&&& 125 H#+,@KVK%+&D/K2 >2<3C &&&&&&&&&&&&&&&&&&&&&&&&5=25 &&&&&&&&&&&&&&&&&&&&&&&&&&& ;2< S$0#+&O"//+K#@"/0&D/K2 12A4C &&&&&&&&&&&&&&&&&&&&&&&&162< &&&&&&&&&&&&&&&&&&&&&&&&&&& 124 O%+$/&W$,*",0&D/K2 1256C &&&&&&&&&&&&&&&&&&&&&&&&5>23 &&&&&&&&&&&&&&&&&&&&&&&&&&& 52A Average!Ratios!(used!for!valuation) !!!!!!!!!!!!!!!!!!!!!!!27.4 !!!!!!!!!!!!!!!!!!!!!!!!!!2.9 '"8"&B/+,G@+0 B.H&Q5313B&J&5315BR &&&&&&&&&&&&&&&&&&&&&&&&&&&321 C""X&Y$%(+&Q5313B&J&5315BR &&&&&&&&&&&&&&&&&&&&&&&&1323 Market!Cap!based!on!"! !!!!!!!!!!!!!!!!!!!!!!!!!!4.0 !!!!!!!!!!!!!!!!!!!!!!!28.5 HI$,+0&Z(#0#$/M@/G &&&&&&&&&&&&&&&&&&&&&&&&>>26 &&&&&&&&&&&&&&&&&&&&&&&&>>26 Price!Target!based!on!" !!!!!!!!!!!!!!!!!!!!!!!0.09 !!!!!!!!!!!!!!!!!!!!!!!0.64 Short!Term!Target!Price !!!!!!!!!!!!!!!!!!!!!!!0.36 INTERMEDIATE TERM PRICE TARGET $0.71 Our Intermediate term price valuation methodology is based on Multiple Based Valuation Methodology. Note: for companies such as Novo which are still in early inception stages, we use the expected multiple method to derive our intermediate term price target. Copyright © 2009 by Grass Roots Research and Distribution, Inc. All rights reserved. This report may not be reproduced. Page 9 of 19
  • 10. Grass Roots Research and Distribution, Inc. ! Figure 10: Intermediate Term Multiple-based Valuation Methodology Description Price!to!Earnings Price!To!Bk.!Val B[9+K#+M&D/M(0#,V&F8+,$G+&J&531< &&&&&&&&&&&&&&&&&&&&&&1=254 &&&&&&&&&&&&&&&&&&&&&&&&12A1 '"8"&B/+,G@+0&J&531< &&&&&&&&&&&&&&&&&&&&&&&&3246 &&&&&&&&&&&&&&&&&&&&&&>42;1 Market!Cap.!2013 !!!!!!!!!!!!!!!!!!!!! 10.45 !!!!!!!!!!!!!!!!!!!!! 86.93 HI$,+0&Z(#0#$/M@/G &&&&&&&&&&&&&&&&&&&&&&>>263 &&&&&&&&&&&&&&&&&&&&&&>>263 Price!Target !!!!!!!!!!!!!!!!!!!!!!!0.23 !!!!!!!!!!!!!!!!!!!!!!!1.94 Average!Price!in!2013 !!!!!!!!!!!!!!!!!!!!!!!1.09 E@0K"(/#&N$K#", &&&&&&&&&&&&&&&&&&&&&&&&32<4 Intermediate!Term!Target!Price !!!!!!!!!!!!!!!!!!!!!!!0.71 LONG TERM PRICE TARGET $1.07-$1.47 We have used our Discounted Cash Flow (DCF) method of valuation to create our Long-term per Share Price Target. Using an assumed cost of equity of 20%, our Base Case target price is a conservative $1.25 per share. Note our three assumed cases: Base, Optimistic, and Pessimistic. Figure 11: Discounted Cash Flow Method of Valuation – Base Case all!figures!in!$!million 2010E 2011E 2012E 2013E 2014E 2015E 2016E '+#&D/K")+ &&&&&&&&&&&&&&&& 123 &&&&&&&&&&&&&&&& ;26 &&&&&&&&&&&&&1126 &&&&&&&&&&&&&542; &&&&&&&&&&&&&>A26 &&&&&&&&&&&&&6324 &&&&&&&&&&&&&A52= E+9,+K@$#@"/ &&&&&&&&&&&&&&&& 125 &&&&&&&&&&&&&&&& <2> &&&&&&&&&&&&&&&& =2< &&&&&&&&&&&&&1=2A &&&&&&&&&&&&&<A2A &&&&&&&&&&&&&;;21 &&&&&&&&&&&&&A52< D/#+,+0#&."0#&!$[ &&&&&&&&&&&&&&&J &&&&&&&&&&&&&&&& 32> &&&&&&&&&&&&&&&& 125 &&&&&&&&&&&&&&&& 525 &&&&&&&&&&&&&&&& >24 &&&&&&&&&&&&&&&& ;2< &&&&&&&&&&&&&&&& ;2= NOPLAT !!!!!!!!!!!!!!!2.2 !!!!!!!!!!!!10.5 !!!!!!!!!!!!21.2 !!!!!!!!!!!!46.7 !!!!!!!!!!!!94.0 !!!!!!!!!! 142.9 !!!!!!!!!! 191.8 OI$/G+&@/&S",X@/G&O$9@#$% &&&&&&&&&&&&&&Q<26R &&&&&&&&&&&&&&&& 626 &&&&&&&&&&&&Q132>R &&&&&&&&&&&&&&&& 124 &&&&&&&&&&&&&&&& 524 &&&&&&&&&&&&&&&& 524 &&&&&&&&&&&&&&&& 524 O$9@#$%&B[9+/M@#(,+ &&&&&&&&&&&&&&Q;25R &&&&&&&&&&&& Q512=R &&&&&&&&&&&&Q5623R &&&&&&&&&&&&Q6A23R &&&&&&&&&Q1<123R &&&&&&&&&Q1<123R &&&&&&&&&Q1<123R Free!Cash!Flow!to!Firm!(FCF) !!!!!!!!!!!!!(7.6) !!!!!!!!!!!!!(3.6) !!!!!!!!!!! (16.2) !!!!!!!!!!! (30.8) !!!!!!!!!!! (34.4) !!!!!!!!!!!!14.5 !!!!!!!!!!!!63.4 Present!Value!of!FCF !!!!!!!!!!!!!(6.4) !!!!!!!!!!!!!(2.9) !!!!!!!!!!! (11.3) !!!!!!!!!!! (19.3) !!!!!!!!!!! (18.9) !!!!!!!!!!!!!!!6.6 !!!!!!!!!!!!23.1 SFOO 5323: 112A: 1526: 152>: 152=: 1>21: 1424: O"0#&"-&B(@#V 53: !+,)@/$%&?,"P#I&7$#+ 4: !+,)@/$%&Y$%(+ &&&&&&&&&&&5<12; Present!Value!of!Terminal!Value !!!!!!!!!!!!84.5 Total!Enterprise!Value! !!!!!!!!!!!!55.5 ]+00^&'+#&E+*# &&&&&&&&&&&&&325> Total!Project!Equity!Value !!!!!!!!!!!!55.7 !"#$%&HI$,+0&Z(#0#$/M@/G &&&&&&&&&&&&&>>26 Per!Share!Price!Target $!!!!!!!!!!1.25 Copyright © 2009 by Grass Roots Research and Distribution, Inc. All rights reserved. This report may not be reproduced. Page 10 of 19
  • 11. Grass Roots Research and Distribution, Inc. ! Figure 12: Range of Long-term Target Price based on range of Discount Rate Long!Term!Price!Target!Range!" Range!of!Cost!of!Equity 3.00! 2.50! 2.00! in!US$ 1.50! 1.00! 0.50! " 22.0% 21.0% 20.0% 19.0% 18.0% Optimistic!Case 1.18! 1.42! 1.72! 2.07! 2.49! Base!Case 0.78! 1.00! 1.25! 1.54! 1.90! Pessimistic!Case 0.43! 0.61! 0.82! 1.08! 1.38! Figure 13: Range of Long-term Target Price based on range of Terminal Growth Rate Long!Term!Price!Target!Range!" Range!of!Terminal! Growth!Rate 2.40! 2.20! 2.00! 1.80! 1.60! in!US$ 1.40! 1.20! 1.00! 0.80! 0.60! 0.40! 3.0% 4.0% 5.0% 6.0% 7.0% Optimistic!Case 1.40! 1.55! 1.72! 1.92! 2.17! Base!Case 0.91! 1.07! 1.25! 1.47! 1.74! Pessimistic!Case 0.49! 0.64! 0.82! 1.05! 1.33! We believe all our price targets are conservative because our forecast for Novo’s revenues in 2009 and 2010 is based on minimal investment in capital generating assets i.e. plants. Any additional capital expenditure will add to the top-line and bottom line, thus resulting in potentially higher share prices. As a practical matter, if Novo receives between $8-$10 million of funding, the stock could trade at significantly higher prices in the immediate term. Copyright © 2009 by Grass Roots Research and Distribution, Inc. All rights reserved. This report may not be reproduced. Page 11 of 19
  • 12. Grass Roots Research and Distribution, Inc. ! COHEN GROWTH DRIVER ANALYSIS Figure 14: Cohen Growth Driver Analysis – Base Case all!figures!in!$!million 2010E 2011E 2012E 2013E 2014E 2015E 2016E 7+8+/(+0 &&&&&&&&&&&&&&&& 426 &&&&&&&&&&&&&5=24 &&&&&&&&&&&&&4623 &&&&&&&&&&&1>524 &&&&&&&&&&&5=423 &&&&&&&&&&&>5624 &&&&&&&&&&&46323 ?,"00&T$,G@/ 6423: 6423: 6423: 6423: 6423: 6423: 6423: Z9+,$#@/G&T$,G@/ >121: >121: >121: >121: >121: >121: >121: '+#&T$,G@/&J&D/K")+&F8$@%2&!"&HI,+I"%M+,0 162>: 5<2>: 532;: 1=23: 162>: 1;24: 1;2<: B.H&J&E@%(#+M &&&&&&&&&&&&&3235 &&&&&&&&&&&&&3214 &&&&&&&&&&&&&325; &&&&&&&&&&&&&3246 &&&&&&&&&&&&&1211 &&&&&&&&&&&&&124= &&&&&&&&&&&&&523= BCD!EF &&&&&&&&&&&&&&&& 52< &&&&&&&&&&&&&1126 &&&&&&&&&&&&&5<24 &&&&&&&&&&&&&4=2; &&&&&&&&&&&1162< &&&&&&&&&&&1642A &&&&&&&&&&&5<>24 N,++&O$0I&N%"P &&&&&&&&&&&&&&Q;2>R &&&&&&&&&&&&&&Q52AR &&&&&&&&&&&& Q112<R &&&&&&&&&&&& Q1A2<R &&&&&&&&&&&& Q1=2AR &&&&&&&&&&&&&&&& ;2; &&&&&&&&&&&&&5<21 O$0I &&&&&&&&&&&&&&&& 325 &&&&&&&&&&&&&&&& A2< &&&&&&&&&&&&&&&& <25 &&&&&&&&&&&&&&&& 62= &&&&&&&&&&&&&1A26 &&&&&&&&&&&&&>;25 &&&&&&&&&&&&&A62A S",X@/G&O$9@#$% &&&&&&&&&&&&&&Q<26R &&&&&&&&&&&& Q112>R &&&&&&&&&&&&&&Q123R &&&&&&&&&&&&&&Q524R &&&&&&&&&&&&&&Q421R &&&&&&&&&&&&&&Q62;R &&&&&&&&&&&& Q1321R ]"/G&!+,)&E+*# &&&&&&&&&&&&&&&J &&&&&&&&&&&&&1<24 &&&&&&&&&&&&&542< &&&&&&&&&&&&&;>2; &&&&&&&&&&&11=2< &&&&&&&&&&&1<A24 &&&&&&&&&&&1<624 !"#$%&E+*# &&&&&&&&&&&&&&&J &&&&&&&&&&&&&1<24 &&&&&&&&&&&&&542< &&&&&&&&&&&&&;>2; &&&&&&&&&&&11=2< &&&&&&&&&&&1<A24 &&&&&&&&&&&1<624 !"#$%&F00+#0 &&&&&&&&&&&&&&&& ;21 &&&&&&&&&&&&&<625 &&&&&&&&&&&&&4>24 &&&&&&&&&&&1<<23 &&&&&&&&&&&54A23 &&&&&&&&&&&<6<24 &&&&&&&&&&&>=621 EHZ &&&&&&&&&&&&&<;24 &&&&&&&&&&&&&<;24 &&&&&&&&&&&&&<;24 &&&&&&&&&&&&&<;24 &&&&&&&&&&&&&<;24 &&&&&&&&&&&&&<;24 &&&&&&&&&&&&&<;24 D/8+/#",V&!(,/0 &&&&&&&&&&&&&<;24 &&&&&&&&&&&&&<;24 &&&&&&&&&&&&&<;24 &&&&&&&&&&&&&<;24 &&&&&&&&&&&&&<;24 &&&&&&&&&&&&&<;24 &&&&&&&&&&&&&<;24 N@[+M&F00+#&!(,/0 &&&&&&&&& <A6235 &&&&&&&&& <4=2;3 &&&&&&&&& <4521A &&&&&&&&& <><25< &&&&&&&&& <<A2<A &&&&&&&&& <<=211 &&&&&&&&& <<62>; O$0I&OVK%+ &&&&&&&&&&&&&&&& 325 &&&&&&&&&&&&&&&& 325 &&&&&&&&&&&&&&&& 12< &&&&&&&&&&&&&&&& 12< &&&&&&&&&&&&&&&& 12< &&&&&&&&&&&&&&&& 12< &&&&&&&&&&&&&&&& 12< Annual!Change,!Turns! 2010E 2011E 2012E 2013E 2014E 2015E 2016E 7+8+/(+0 >3323: 13323: 14323: 13323: 4323: <<2<: ?,"00&T$,G@/ 323: 323: 323: 323: 323: 323: Z9+,$#@/G&T$,G@/ 323: 323: 323: 323: 323: 323: '+#&T$,G@/ <<2A: J1523: J152;: J<23: J42<: J12>: B.H&J&E@%(#+M 4;A24: 6;21: 11=2>: A>23: >523: <124: BCD!EF >3323: 13323: 14323: 13323: 4323: <<2<: N,++&O$0I&N%"P J4>2A: 5A>21: 6324: J52<: J1<>2=: 54523: O$0I <=1<2;: J;426: 1>>23: 14<21: 1<423: 11523: S",X@/G&O$9@#$% 53A2;: JA121: 14323: 13323: 4323: <<2<: ]"/G&!+,)&E+*# 323: =62=: 14423: =<23: 162A: J12>: !"#$%&E+*# 323: =62=: 14423: =<23: 162A: J12>: !"#$%&F00+#0 43=2<: >;2<: 1>>25: A>2=: >>25: <32>: EHZ 323: 323: 323: 323: 323: 323: D/8+/#",V&!(,/0 323: 323: 323: 323: 323: 323: N@[+M&F00+#&!(,/0 JA26: J12=: J524: J121: J32>: J325: O$0I&OVK%+ <42<: 43A2A: 323: 323: 323: 323: The Cohen Growth Drivers Model is an intelligent road map used by many securities analysts to analyze the forecasted growth of a given company. We expect significant top-line growth driven by the Company’s expected plant commercialization. We believe our estimates are conservative as they are based on the current capital spending capacity of the Company and do not include any additional capital expenditure the Company may have in due course. Also, gross and operating margin projections are kept constant. Copyright © 2009 by Grass Roots Research and Distribution, Inc. All rights reserved. This report may not be reproduced. Page 12 of 19
  • 13. Grass Roots Research and Distribution, Inc. ! CONCLUSION Novo Energies is an exciting alternative energy company. The Company’s core business of converting waste materials such as plastic and tire to liquid fuels utilizing a suite of proprietary technologies targets significant corporate growth. The Company has a robust business model built on multiple sources of revenues and positive energy conversion economics. Along with a majority revenues from oil and liquid fuel sales, the top-line should benefit from income from sale of by-products. Further, the Company plans to use a combination of gasification and thermolysis technologies, resulting in better conversion economics. This in our view is a unique business model as it allows the Company to become a low cost producer of alternative energies. The alternative energy industry is expected to expand to over $40 billion in the next couple of years. We expect significant growth potential for the Company’s products, especially after the Company acquires an equity partner to support its expansion plans. Revenues are expected to grow from $5.7 million for Fiscal Year End (FYE) December 31, 2009 to more than $570.0 million by FYE 2015. The Company will have to acquire considerable funding to meet our projections. We believe the Company’s strong management team, robust revenue streams and growth potential in its marketplace makes the stock a potential valuable investment proposition. The Company will have to raise funds to meet our projections. Novo Energies provides an exciting long term investment opportunity. RS/Grass Roots Distribution Research Copyright © 2009 by Grass Roots Research and Distribution, Inc. All rights reserved. This report may not be reproduced. Page 13 of 19
  • 14. Grass Roots Research and Distribution, Inc. ! LATEST PRESS RELEASE Atlantic Wine Agencies, Inc. (to Be Known as Novo Energies Corporation) Appoints New President and Chief Operations Officer NEW YORK, NY -- (Marketwire) -- 05/08/09 -- Atlantic Wine Agencies, Inc. (OTCBB: AWIN), a publicly traded Company listed on the Over the Counter Market (OTCBB) under the symbol "AWIN," announced today that: (i) it has begun taking the necessary steps to change its name to Novo Energies Corporation and (ii) Mr. Andre L'Heureux has been appointed as our new President and Chief Operations Officer effective today. Mr. L'Heureux has over 25 years of experience in the chemical and biotechnological sector. He will be responsible for the planning, implementation and production of Novo Energies' first operating plastics and synthetic tire depolymerization plants in Quebec, Canada, the first such plant in Quebec. Novo Energies has developed a proprietary waste to liquid renewable energy solution. Previously, Mr. L'Heureux was the President of Chemco Inc., a private chemical company for industrial water treatment products. Mr. L'Heureux has been a researcher in the development of polymer and biopolymer products. In 1984, he finished his studies as mechanical technologist from Limoilou College. Mr. L'Heureux continued his studies in the field of business administration at the University of Quebec. Novo Energies Corporation Chairman and Chief Executive Officer Antonio Treminio stated: "It is a pleasure to have Mr. Andre L'Heureux join our management team. Andre's extensive experience in the field, vision and 'can do' attitude will help us build a world-class business providing an alternative and effective solution to the global energy crises." Mr. Andre L'Heureux commented: "It is with great pleasure that I accept these responsibilities and look forward to working with the current management team to meet our objectives in the most efficient and effective way possible. We are currently facing a global crises where our natural resources are been constantly depleted and unless we act today and start implementing new renewable solutions, our future generations and ourselves may face irreversible consequences affecting our natural environment." More information will be provided as the Company progresses with its developments. About Atlantic Wine Agencies, Inc. (to be known as Novo Energies Corporation) is a public company trading on the Over the Counter Bulletin Board Market ("OTCBB") headquartered in New York. The Company's new mission is to continue expanding within the renewable energy sector by developing and implementing renewable energy solutions while maintaining its commitment to conserve energy, natural resources and help reduce pollutants and unwanted biological agents. Copyright © 2009 by Grass Roots Research and Distribution, Inc. All rights reserved. This report may not be reproduced. Page 14 of 19
  • 15. Grass Roots Research and Distribution, Inc. ! FINANCIAL EXHIBITS Income Statement – Base Case all!figures!in!$!million 2010E 2011E 2012E 2013E 2014E 2015E 2016E Revenues !!!!!!!!!!!!!!!5.7 !!!!!!!!!!!!28.5 !!!!!!!!!!!!57.0 !!!!!!!!!! 142.5 !!!!!!!!!! 285.0 !!!!!!!!!! 427.5 !!!!!!!!!! 570.0 O"0#&"-&?""M0&H"%M &&&&&&&&&&&&&&&&12> &&&&&&&&&&&&&&&& 621 &&&&&&&&&&&&&1>2< &&&&&&&&&&&&&<42; &&&&&&&&&&&&&612< &&&&&&&&&&&13;2A &&&&&&&&&&&1>524 Gross!Profit !!!!!!!!!!!!!!!4.3 !!!!!!!!!!!!21.4 !!!!!!!!!!!!42.8 !!!!!!!!!! 106.9 !!!!!!!!!! 213.8 !!!!!!!!!! 320.6 !!!!!!!!!! 427.5 H+%%@/G&$/M&FM)@/&B[9+/0+0 &&&&&&&&&&&&&&&&12A &&&&&&&&&&&&&&&& A26 &&&&&&&&&&&&&1A2< &&&&&&&&&&&&&>=2< &&&&&&&&&&&&&A;24 &&&&&&&&&&&1>>2= &&&&&&&&&&&1A<23 Operating!Profit/!EBITDA !!!!!!!!!!!!!!!2.3 !!!!!!!!!!!!11.7 !!!!!!!!!!!!23.5 !!!!!!!!!!!!58.6 !!!!!!!!!! 117.3 !!!!!!!!!! 175.9 !!!!!!!!!! 234.5 E+9,+K@$#@"/&$/M&F)",#@_$#@"/ &&&&&&&&&&&&&&&&125 &&&&&&&&&&&&&&&& <2> &&&&&&&&&&&&&&&& =2< &&&&&&&&&&&&&1=2A &&&&&&&&&&&&&<A2A &&&&&&&&&&&&&;;21 &&&&&&&&&&&&&A52< EBIT !!!!!!!!!!!!!!!1.1 !!!!!!!!!!!!!!!8.3 !!!!!!!!!!!!15.2 !!!!!!!!!!!!39.7 !!!!!!!!!!!!77.4 !!!!!!!!!! 109.8 !!!!!!!!!! 142.2 D/#+,+0#&B[9+/0+U&'+# &&&&&&&&&&&&&&&J &&&&&&&&&&&&&&&& 324 &&&&&&&&&&&&&&&& 12> &&&&&&&&&&&&&&&& <21 &&&&&&&&&&&&&&&& ;2> A23 &&&&&&&&&&&&&&&& &&&&&&&&&&&&&&&& A26 Z#I+,&D/K")+&QB[9+/0+0R &&&&&&&&&&&&&&&J &&&&&&&&&&&&&&&J &&&&&&&&&&&&&&&J &&&&&&&&&&&&&&&J &&&&&&&&&&&&&&&J &&&&&&&&&&&&&&&J &&&&&&&&&&&&&&&J EBT !!!!!!!!!!!!!!!1.1 !!!!!!!!!!!!!!!7.8 !!!!!!!!!!!!13.8 !!!!!!!!!!!!36.6 !!!!!!!!!!!!70.9 !!!!!!!!!! 100.8 !!!!!!!!!! 132.5 .,"8@0@"/&-",&!$[$#@"/ &&&&&&&&&&&&&&&&321 &&&&&&&&&&&&&&&& 125 &&&&&&&&&&&&&&&& 521 &&&&&&&&&&&&&1123 &&&&&&&&&&&&&512< &&&&&&&&&&&&&<325 &&&&&&&&&&&&&<A2= Net!Profit !!!!!!!!!!!!!!!1.0 !!!!!!!!!!!!!!!6.7 !!!!!!!!!!!!11.7 !!!!!!!!!!!!25.6 !!!!!!!!!!!!49.7 !!!!!!!!!!!!70.5 !!!!!!!!!!!!92.8 HI$,+0&Z(#0#$/M@/G&J&C$0@K &&&&&&&&&&&&&>>26 &&&&&&&&&&&&&>>26 &&&&&&&&&&&&&>>26 &&&&&&&&&&&&&>>26 &&&&&&&&&&&&&>>26 &&&&&&&&&&&&&>>26 &&&&&&&&&&&&&>>26 HI$,+0&Z(#0#$/M@/G&J&E@%(#+M &&&&&&&&&&&&&>>26 &&&&&&&&&&&&&>>26 &&&&&&&&&&&&&>>26 &&&&&&&&&&&&&>>26 &&&&&&&&&&&&&>>26 &&&&&&&&&&&&&>>26 &&&&&&&&&&&&&>>26 B.H&J&C$0@K &&&&&&&&&&&32355 &&&&&&&&&&&321>A &&&&&&&&&&&325;5 &&&&&&&&&&&3246< &&&&&&&&&&&12111 &&&&&&&&&&&1246= &&&&&&&&&&&52364 B.H&J&E@%(#+M &&&&&&&&&&&32355 &&&&&&&&&&&321>A &&&&&&&&&&&325;5 &&&&&&&&&&&3246< &&&&&&&&&&&12111 &&&&&&&&&&&1246= &&&&&&&&&&&52364 Copyright © 2009 by Grass Roots Research and Distribution, Inc. All rights reserved. This report may not be reproduced. Page 15 of 19
  • 16. Grass Roots Research and Distribution, Inc. ! Balance Sheet – Base Case all!figures!in!$!million 2010E 2011E 2012E 2013E 2014E 2015E 2016E ASSETS O$0I &&&&&&&&&&&&&&&& 325 &&&&&&&&&&&&&&&& A2< &&&&&&&&&&&&&&&& <25 &&&&&&&&&&&&&&&& 62= &&&&&&&&&&&&&1A26 &&&&&&&&&&&&&>;25 &&&&&&&&&&&&&A62A D/8+/#",V &&&&&&&&&&&&&&&&321 &&&&&&&&&&&&&&&& 326 &&&&&&&&&&&&&&&& 12> &&&&&&&&&&&&&&&& <2; &&&&&&&&&&&&&&&& 621 &&&&&&&&&&&&&1326 &&&&&&&&&&&&&1>2< FKK"(/#&7+K+@8$*%+0 &&&&&&&&&&&&&&&&32; &&&&&&&&&&&&&&&& 52A &&&&&&&&&&&&&&&& 426 &&&&&&&&&&&&&1>2< &&&&&&&&&&&&&5=24 &&&&&&&&&&&&&>52= &&&&&&&&&&&&&4623 Z#I+,&O(,,+/#&F00+#0 &&&&&&&&&&&&&&&&321 &&&&&&&&&&&&&&&& 324 &&&&&&&&&&&&&&&& 123 &&&&&&&&&&&&&&&& 52> &&&&&&&&&&&&&&&& >2= &&&&&&&&&&&&&&&& 625 &&&&&&&&&&&&&&&& A26 Total!Current!Assets !!!!!!!!!!!!!!!1.0 !!!!!!!!!!!!13.3 !!!!!!!!!!!!11.3 !!!!!!!!!!!!28.0 !!!!!!!!!!!!60.1 !!!!!!!!!! 106.9 !!!!!!!!!! 178.8 .,"9+,#VU&.%$/#&$/M&B(@9)+/#U&?,"00 &&&&&&&&&&&&&&&&;25 &&&&&&&&&&&&&5=23 &&&&&&&&&&&&&4423 &&&&&&&&&&&1<>23 &&&&&&&&&&&5;423 &&&&&&&&&&&<A;23 &&&&&&&&&&&45623 .,"9+,#VU&.%$/#&$/M&B(@9)+/#U&'+# &&&&&&&&&&&&&&&&423 &&&&&&&&&&&&&5<2< &&&&&&&&&&&&&>523 &&&&&&&&&&&13521 &&&&&&&&&&&1A<25 &&&&&&&&&&&54=21 &&&&&&&&&&&5A;2= N@/$/K@/G&N++0&%+00&FKK2&F)",#@_$#@"/ &&&&&&&&&&&&&&&J &&&&&&&&&&&&&&&J &&&&&&&&&&&&&&&J &&&&&&&&&&&&&&&J &&&&&&&&&&&&&&&J &&&&&&&&&&&&&&&J &&&&&&&&&&&&&&&J Z#I+,0 &&&&&&&&&&&&&&&& 321 &&&&&&&&&&&&&&&& 32; &&&&&&&&&&&&&&&& 121 &&&&&&&&&&&&&&&& 52A &&&&&&&&&&&&&&&& 426 &&&&&&&&&&&&&&&& =2; &&&&&&&&&&&&&112> Total!Assets !!!!!!!!!!!!!!!6.1 !!!!!!!!!!!!37.2 !!!!!!!!!!!!54.5 !!!!!!!!!! 133.0 !!!!!!!!!! 259.0 !!!!!!!!!! 373.5 !!!!!!!!!! 487.1 LIABILITIES FKK"(/#0&.$V$*%+ &&&&&&&&&&&&&&&&<24 &&&&&&&&&&&&&1<23 &&&&&&&&&&&&&&&& >2< &&&&&&&&&&&&&1326 &&&&&&&&&&&&&512> &&&&&&&&&&&&&<521 &&&&&&&&&&&&&>52= FKK,(+M&B[9+/0+0 &&&&&&&&&&&&&&&&325 &&&&&&&&&&&&&&&& 123 &&&&&&&&&&&&&&&& 12A &&&&&&&&&&&&&&&& >2= &&&&&&&&&&&&&&&& A26 &&&&&&&&&&&&&1>24 &&&&&&&&&&&&&1A2< Z#I+,0 &&&&&&&&&&&&&&&& 32= &&&&&&&&&&&&&&&& 12> &&&&&&&&&&&&&&&& 52A &&&&&&&&&&&&&&&& 625 &&&&&&&&&&&&&1>24 &&&&&&&&&&&&&5126 &&&&&&&&&&&&&5A23 Total!Current!Liabilities !!!!!!!!!!!!!!!4.5 !!!!!!!!!!!!15.5 !!!!!!!!!!!!!!!9.1 !!!!!!!!!!!!22.8 !!!!!!!!!!!!45.5 !!!!!!!!!!!!68.3 !!!!!!!!!!!!91.0 ]"/GJ!+,)&E+*# &&&&&&&&&&&&&&&J &&&&&&&&&&&&&1<24 &&&&&&&&&&&&&542< &&&&&&&&&&&&&;>2; &&&&&&&&&&&11=2< &&&&&&&&&&&1<A24 &&&&&&&&&&&1<624 Total!Liabilities !!!!!!!!!!!!!!!4.5 !!!!!!!!!!!!28.9 !!!!!!!!!!!!34.4 !!!!!!!!!!!!87.4 !!!!!!!!!! 163.8 !!!!!!!!!! 207.7 !!!!!!!!!! 228.5 O"))"/&H#"KX &&&&&&&&&&&&&&&& 323 &&&&&&&&&&&&&&&& 323 &&&&&&&&&&&&&&&& 323 &&&&&&&&&&&&&&&& 323 &&&&&&&&&&&&&&&& 323 &&&&&&&&&&&&&&&& 323 &&&&&&&&&&&&&&&& 323 .,+-+,,+M&H#"KX &&&&&&&&&&&&&&&J &&&&&&&&&&&&&&&J &&&&&&&&&&&&&&&J &&&&&&&&&&&&&&&J &&&&&&&&&&&&&&&J &&&&&&&&&&&&&&&J &&&&&&&&&&&&&&&J FMM@#@"/$%&.$@M&@/&O$9@#$% &&&&&&&&&&&&&1;2> &&&&&&&&&&&&&1;2> &&&&&&&&&&&&&1;2> &&&&&&&&&&&&&1;2> &&&&&&&&&&&&&1;2> &&&&&&&&&&&&&1;2> &&&&&&&&&&&&&1;2> 7+#$@/+M&B$,/@/G0 &&&&&&&&&&&&Q1>2=R &&&&&&&&&&&&&&Q=21R &&&&&&&&&&&&&&&& <2; &&&&&&&&&&&&&5A25 &&&&&&&&&&&&&6=2= &&&&&&&&&&&1>A2> &&&&&&&&&&&5>521 Total!Shareholders!Equity! !!!!!!!!!!!!!!!1.6 !!!!!!!!!!!!!!!8.3 !!!!!!!!!!!!20.0 !!!!!!!!!!!!45.6 !!!!!!!!!!!!95.3 !!!!!!!!!! 165.8 !!!!!!!!!! 258.6 Total!Liabilities,!Shareholders!Equity,!MI !!!!!!!!!!!!!!!6.1 !!!!!!!!!!!!37.2 !!!!!!!!!!!!54.5 !!!!!!!!!! 133.0 !!!!!!!!!! 259.0 !!!!!!!!!! 373.5 !!!!!!!!!! 487.0 Cash Flow Statement – Base Case all!figures!in!$!million 2010E 2011E 2012E 2013E 2014E 2015E 2016E Operating!Activity '+#&D/K")+ &&&&&&&&&&&&&&&& 123 &&&&&&&&&&&&&&&& ;26 &&&&&&&&&&&&&1126 &&&&&&&&&&&&&542; &&&&&&&&&&&&&>A26 &&&&&&&&&&&&&6324 &&&&&&&&&&&&&A52= FMM^&E+9,+K@$#@"/&$/M&F)",#@_$#@"/ &&&&&&&&&&&&&&&&125 &&&&&&&&&&&&&&&& <2> &&&&&&&&&&&&&&&& =2< &&&&&&&&&&&&&1=2A &&&&&&&&&&&&&<A2A &&&&&&&&&&&&&;;21 &&&&&&&&&&&&&A52< ]+00^&OI$/G+&@/&S",X@/G&O$9@#$% &&&&&&&&&&&&&&Q<26R &&&&&&&&&&&&&&&& 626 &&&&&&&&&&&& Q132>R &&&&&&&&&&&&&&&& 124 &&&&&&&&&&&&&&&& 524 &&&&&&&&&&&&&&&& 524 &&&&&&&&&&&&&&&& 524 Cash!Flow!from!Operating!Activities !!!!!!!!!!!!!(1.4) !!!!!!!!!!!!17.8 !!!!!!!!!!!!!!!9.6 !!!!!!!!!!!!46.0 !!!!!!!!!!!!92.1 !!!!!!!!!! 139.2 !!!!!!!!!! 187.6 Investing!Activity D/8+0#)+/#&@/&..LB &&&&&&&&&&&&&&Q;25R &&&&&&&&&&&&Q512=R &&&&&&&&&&&&Q5623R &&&&&&&&&&&&Q6A23R &&&&&&&&&Q1<123R &&&&&&&&&Q1<123R &&&&&&&&&Q1<123R FK(@0@#@"/0 &&&&&&&&&&&&&&&J &&&&&&&&&&&&&&&J &&&&&&&&&&&&&&&J &&&&&&&&&&&&&&&J &&&&&&&&&&&&&&&J &&&&&&&&&&&&&&&J &&&&&&&&&&&&&&&J Z#I+,&D/8+0#@/G&O$0I&D/-%"P&`&Z(#-%"P &&&&&&&&&&&&&&Q321R &&&&&&&&&&&&&&Q324R &&&&&&&&&&&&&&Q32;R &&&&&&&&&&&&&&Q126R &&&&&&&&&&&&&&Q52AR &&&&&&&&&&&&&&Q52AR &&&&&&&&&&&&&&Q52AR Cash!Flow!from!Investing!Activities !!!!!!!!!!!!!(6.3) !!!!!!!!!!! (22.3) !!!!!!!!!!! (27.6) !!!!!!!!!!! (80.7) !!!!!!!!(133.9) !!!!!!!!(133.9) !!!!!!!!(133.9) Financing!Activity D/K,+$0+&QE+K,+$0+R&@/&E+*# &&&&&&&&&&&&&&&J &&&&&&&&&&&&&1<24 &&&&&&&&&&&&&112A &&&&&&&&&&&&&<A2< &&&&&&&&&&&&&4<26 &&&&&&&&&&&&&5125 &&&&&&&&&&&&&&Q523R D/K,+$0+&QE+K,+$0+R&@/&B(@#V &&&&&&&&&&&&&&&&=23 &&&&&&&&&&&&&&&J &&&&&&&&&&&&&&&J &&&&&&&&&&&&&&&J &&&&&&&&&&&&&&&J &&&&&&&&&&&&&&&J &&&&&&&&&&&&&&&J Cash!Flow!from!Financing!Activities !!!!!!!!!!!!!!!8.0 !!!!!!!!!!!!13.5 !!!!!!!!!!!!11.9 !!!!!!!!!!!!39.3 !!!!!!!!!!!!53.7 !!!!!!!!!!!!21.2 !!!!!!!!!!!!!(2.0) '+#&OI$/G+&@/&O$0I !!!!!!!!!!!!!!!0.2 !!!!!!!!!!!!!!!9.0 !!!!!!!!!!!!!(6.1) !!!!!!!!!!!!!!!4.6 !!!!!!!!!!!!11.9 !!!!!!!!!!!!26.5 !!!!!!!!!!!!51.7 Opening!Cash!Balance !!!!!!!!!!!!!!! " !!!!!!!!!!!!!!!0.2 !!!!!!!!!!!!!!!9.3 !!!!!!!!!!!!!!!3.2 !!!!!!!!!!!!!!!7.8 !!!!!!!!!!!!19.7 !!!!!!!!!!!!46.2 Ending!Cash!Balance !!!!!!!!!!!!!!!0.2 !!!!!!!!!!!!!!!9.3 !!!!!!!!!!!!!!!3.2 !!!!!!!!!!!!!!!7.8 !!!!!!!!!!!!19.7 !!!!!!!!!!!!46.2 !!!!!!!!!!!!97.9 Copyright © 2009 by Grass Roots Research and Distribution, Inc. All rights reserved. This report may not be reproduced. Page 16 of 19
  • 17. Grass Roots Research and Distribution, Inc. ! Financial Summary – Base Case Sales!Matrics 2010E 2011E 2012E 2013E 2014E 2015E 2016E H?F&`&H$%+0&Q:R <<2A: <<2A: <<2A: <<2A: <<2A: <<2A: <<2A: 7+K+@8$*%+0&`&H$%+0&Q:R 1323: 1323: 1323: 1323: 1323: 1323: 1323: D/8+/#",V&`&H$%+0&Q:R 524: 524: 524: 524: 524: 524: 524: H$%+0&9+,&E"%%$,&"-&D/8+/#",V >323 >323 >323 >323 >323 >323 >323 H$%+0&9+,&E"%%$,&"-&'+#&.%$/# 121 125 12> 12> 124 126 12A 7+K+@8$*%+0&9+,&M$V&"-&H$%+0 &&&&&&&&&&<;24 &&&&&&&&&& <;24 &&&&&&&&&& <;24 &&&&&&&&&&<;24 &&&&&&&&&& <;24 &&&&&&&&& <;24 &&&&&&&&& <;24 Profitability!Metrics 2010E 2011E 2012E 2013E 2014E 2015E 2016E ?,"00&.,"-@#&T$,G@/ 6423: 6423: 6423: 6423: 6423: 6423: 6423: .,+&!$[&.,"-@#&T$,G@/ 1A2>: 5624: 5>25: 5426: 5>2A: 5<2;: 5<25: '+#&.,"-@#&T$,G@/ 162>: 5<2>: 532;: 1=23: 162>: 1;24: 1;2<: .$V"(#&7$#@" 323: 323: 323: 323: 323: 323: 323: D/#+,+0#&O"8+,$G+ /2$2 &&&&&&&&&&1;2; &&&&&&&&&& 1321 &&&&&&&&&&112; &&&&&&&&&& 1121 &&&&&&&&& 1125 &&&&&&&&& 1<26 !$[&7$#+ 13: 14: 14: <3: <3: <3: <3: Performance!Metrics 2010E 2011E 2012E 2013E 2014E 2015E 2016E 7+#(,/&"/&B(@#V&Q7ZBR ;121: =32>: 4=2;: 4;21: 4521: >524: <42A: 7+#(,/&"/&F00+#0&Q7ZFR <=2<: <124: ><21: >>21: >42<: >621: >=21: 7+#(,/&"/&D/8+0#+M&O$9@#$%&Q7ZDR 1>>25: 4<2=: 4126: 4<25: 4>2A: 462;: 4A25: Efficiency!Metrics 2010E 2011E 2012E 2013E 2014E 2015E 2016E 7+K+@8$*%+&!(,/"8+, &&&&&&&&&&1323 &&&&&&&&&& 1323 &&&&&&&&&& 1323 &&&&&&&&&&1323 &&&&&&&&&& 1323 &&&&&&&&& 1323 &&&&&&&&& 1323 D/8+/#",V&!(,/"8+, &&&&&&&&&&1323 &&&&&&&&&& 1323 &&&&&&&&&& 1323 &&&&&&&&&&1323 &&&&&&&&&& 1323 &&&&&&&&& 1323 &&&&&&&&& 1323 !"#$%&F00+#&!(,/"8+, &&&&&&&&&&&&32A &&&&&&&&&&&&&32= &&&&&&&&&&&&& 123 &&&&&&&&&&&&&121 &&&&&&&&&&&&&121 &&&&&&&&&&&& 121 &&&&&&&&&&&&125 E$V0&"-&OZ?H&@/&D/8+/#",V &&&&&&&&&&&J &&&&&&&&&&&&J &&&&&&&&&&&&J &&&&&&&&&&&&J &&&&&&&&&&&&J &&&&&&&&&&&J &&&&&&&&&&&J Per!Share!Data 2010E 2011E 2012E 2013E 2014E 2015E 2016E H$%+0&9+,&HI$,+ &&&&&&&&&&321< &&&&&&&&&& 32;> &&&&&&&&&& 125= &&&&&&&&&& <21A &&&&&&&&&&;2<= &&&&&&&&& A24; &&&&&&&15264 O$0I&J&9+,&HI$,+ &&&&&&&&&&3231 &&&&&&&&&& 3251 &&&&&&&&&& 3236 &&&&&&&&&& 3216 &&&&&&&&&&32>> &&&&&&&&& 123< &&&&&&&&& 521A O(,,+/#&F00+#0&9+,&HI$,+ &&&&&&&&&&3235 &&&&&&&&&& 32<3 &&&&&&&&&& 3254 &&&&&&&&&& 32;< &&&&&&&&&&12<> &&&&&&&&& 52<A &&&&&&&&& >233 !"#$%&F00+#0&9+,&HI$,+ &&&&&&&&&&321> &&&&&&&&&& 32=< &&&&&&&&&& 1255 &&&&&&&&&& 52A6 &&&&&&&&&&42=3 &&&&&&&&& =2<; &&&&&&&132A3 !$/G@*%+&C""X&Y$%(+&9+,&HI$,+ &&&&&&&&&&323> &&&&&&&&&& 321A &&&&&&&&&& 32>4 &&&&&&&&&& 1235 &&&&&&&&&&521< &&&&&&&&& <261 &&&&&&&&& 426= ]"/G&!+,)&E+*#&J&9+,&HI$,+ &&&&&&&&&&&J &&&&&&&&&& 32<3 &&&&&&&&&& 3246 &&&&&&&&&& 12>4 &&&&&&&&&&52;4 &&&&&&&&& <215 &&&&&&&&& <23= S",X@/G&O$9@#$%&9+,&HI$,+ &&&&&&&&Q323=R &&&&&&&&& Q325;R &&&&&&&&& Q3235R &&&&&&&&& Q323;R &&&&&&&&& Q3211R &&&&&&&& Q3216R &&&&&&&& Q325<R N,++&O$0I&N%"P&9+,&HI$,+ &&&&&&&&Q321>R &&&&&&&&& Q323;R &&&&&&&&& Q3254R &&&&&&&&& Q32><R &&&&&&&&& Q32>5R &&&&&&&&& 3214 &&&&&&&&& 3245 Price/!Earnings 2010E 2011E 2012E 2013E 2014E 2015E 2016E .,@K+&B$,/@/G0&7$#@"&J&O%"0@/G&.,@K+ &&&&&&&&&&&&A23 &&&&&&&&&&&&& 12< &&&&&&&&&&&&& 32= &&&&&&&&&&&&& 32< &&&&&&&&&&&&& 325 &&&&&&&&&&&& 321 &&&&&&&&&&&& 321 .,@K+&#"&O$0I&B$,/@/G0 &&&&&&&&&&&&>23 &&&&&&&&&&&&& 32A &&&&&&&&&&&&& 32> &&&&&&&&&&&&& 325 &&&&&&&&&&&&& 321 &&&&&&&&&&&& 321 &&&&&&&&&&&& 323 Valuation!Metrics 2010E 2011E 2012E 2013E 2014E 2015E 2016E .,@K+&#"&H$%+0 &&&&&&&&&&&&12; &&&&&&&&&&&&& 32< &&&&&&&&&&&&& 325 &&&&&&&&&&&&& 321 &&&&&&&&&&&&& 323 &&&&&&&&&&&& 323 &&&&&&&&&&&& 323 .,@K+&#"&!$/G@*%+&C""X&Y$%(+&J&7$#@" &&&&&&&&&&&&424 &&&&&&&&&&&&& 121 &&&&&&&&&&&&& 32> &&&&&&&&&&&&& 325 &&&&&&&&&&&&& 321 &&&&&&&&&&&& 321 &&&&&&&&&&&& 323 .,@K+&#"&O$0I&N%"P&J&7$#@" &&&&&&&&&&Q;25R &&&&&&&&&&&&& 324 &&&&&&&&&&&&& 32A &&&&&&&&&&&&& 325 &&&&&&&&&&&&& 321 &&&&&&&&&&&& 321 &&&&&&&&&&&& 323 .,@K+&#"&N,++&O$0I&N%"P&J&7$#@" &&&&&&&&&&Q125R &&&&&&&&&&& Q524R &&&&&&&&&&& Q32;R &&&&&&&&&&&Q32<R &&&&&&&&&&& Q32<R &&&&&&&&&&&& 32; &&&&&&&&&&&& 321 .,@K+&#"&B(@#V &&&&&&&&&&&&424 &&&&&&&&&&&&& 121 &&&&&&&&&&&&& 32> &&&&&&&&&&&&& 325 &&&&&&&&&&&&& 321 &&&&&&&&&&&& 321 &&&&&&&&&&&& 323 Copyright © 2009 by Grass Roots Research and Distribution, Inc. All rights reserved. This report may not be reproduced. Page 17 of 19
  • 18. Grass Roots Research and Distribution, Inc. ! Disclaimer: Grass Roots Research and Distribution, Inc. Grass Roots Research and Distribution, Inc. (GRRD) distributes research and other information purchased and compiled from outside sources and analysts. This report/release/advertisement is an advertisement and is for general information purposes only. Do not base any investment decision on information in this report. All information herein should be viewed as a commercial advertisement and is not intended to be used for investment advice. GRRD complies with current securities laws, regulations and ethical standards as related to GRRD’s compliance requirements. GRRD intends to comply with any new securities laws, federal and state regulations that might be promulgated in the future. Ethical standards are the foundation of those laws and regulations we follow. GRRD is not a member of any association for other research providers. GRRD is not a registered investment advisor and is not qualified to give investment advice. GRRD and its outside sources use certain financial data derived from the U.S. Securities and Exchange Commission (SEC) filings, financial information supplied by the company to GRRD and data compiled by other vendors. Certain pink sheet stocks may or may not have audited financial statements. GRRD and its data vendors do not warranty that such SEC filing data and other compiled data is accurate. GRRD advises recipients of all such data to be validated from the issuing company including all statistical information derived from SEC filings, from data sources or financial information and data from the issuing company contained herein. The reader should verify all claims and do his/her own research and due diligence before investing in any securities mentioned. Neither GRRD, its outside sources, nor any data vendor shall be held liable for any misinformation or errors contained in any SEC filing data or compiled data from issuing companies or from various data feeds. Guests of GRRD’s website, readers of GRRD’s distributed report/release/advertisements, and other interested parties assume full responsibility for the accuracy of all SEC filing data, compiled data from other sources including data from the issuing company, and are urged to confirm that data with the specific issuing company. GRRD will not be liable to any person or entity for the quality, accuracy, completeness, reliability or timeliness of information in this report/release/advertisement, or for any direct, indirect, consequential, incidental, special or punitive damages that may arise out of the use of information, products or services from any person or entity including but not limited to lost profits, loss of opportunities, trading losses, and damages that may result from any incompleteness or inaccuracy in any of Grass Roots Research and Distribution, Inc’s profiled companies. GRRD, the issuing company, its analysts, outside sources, investor awareness groups and its data vendors do not assume any responsibility or liability for any investor decision made as a result of accessing fundamental and/or financial data from GRRD’s various data vendors. Pink Sheet companies may not have reported full financial information and audited financial information to the SEC. GRRD’s outside analysts and sources attempt to compile financial information from Pink Sheet companies. This information may or may not be reliable and/or accurate. Readers of this report/release/advertisement are encouraged to research all financial information on Pink Sheet companies and are urged not to rely on any financial information in this report/release/advertisement. GRRD encourages its readers and visitors to its website to invest carefully and read the investor information available on the web sites of the Securities and Exchange Commission ("SEC") at www.sec.gov and/or the National Association of Securities Dealers ("NASD") at www.nasd.com. Investors interested in purchasing securities are advised to contact the company directly, read the Prospectus, 10K, 10Q other relevant public documents in full, request company financial information and to conduct their own research and due diligence. Investing in securities is speculative and carries a high degree of risk including potential bankruptcy, fraud, and trading manipulation. Investors can lose their entire investment. Investors are encouraged to seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report/release/advertisement and should understand that statements regarding future prospects may not be realized. Investors are encouraged to consult with their financial advisors and/or conduct their own due diligence prior to making an investment in any of GRRD’s) featured companies. Under no circumstances is this report/release/advertisement to be used or considered as an offer to sell or a solicitation of any offer to buy any security or other debt instruments, or any options, futures or other derivatives related to such securities herein. GRRD and its affiliates, outside sources, investor awareness selling groups, directors, officers, principals and employees may trade for their own accounts, have long or short positions in the Company’s securities, and effect securities transactions of the issuer’s securities at any time. When paid in stock, GRRD its affiliates, directors, officers, outside sources, investor awareness groups and employees may liquidate shares at any time or hold for investment purposes. Such securities transactions might result in volatile market price changes and might create a conflict of interest to remain objective in GRRD’s communication with profiled companies. GRRD does not supervise any outside analyst and does not guarantee any report/release/advertisement to be error-free or factually accurate. Outside analysts may at their discretion use the Cohen Financial and Valuation Model for statistical purposes in preparing their independent research. Research reports include forecasted valuations and forecasted price targets that are accepted securities analysis protocol in the academic community. These valuations are academically defensible and include assumptions that the Company will raise capital to meet the analyst’s projections. These price targets, the Cohen Financial and Valuation Model and valuations, including business prospects, are theory and should not be relied upon for investment decisions. There is no guarantee that the predicted business results for the Company will be met. Under NASD Rule 2711, GRRD is not defined as a financial analyst. Conclusions prepared by outside analysts are deemed to be reasonable at the time of issuance of the report. All decisions are made by the outside analyst and are independent of outside parties or influence. Neither the analyst's compensation nor the compensation received by GRRD is related to the specific recommendations or views contained in this report/release/advertisement or note, nor is it related to price performance or volume of shares traded in the referenced security. GRRD and it is outside sources have no firsthand knowledge of any profiled company’s capabilities, intent, resources, financing, operations, politics, inner workings, plans, management competence and decisions, internal corporate goals, nor their ability to reach their corporate goals. GRRD or its affiliates may from time to time perform consulting or other services for, or solicit consulting or other business from any entity mentioned in this report/release/advertisement. Consulting agreements that GRRD may have with a given company are not related to research or distribution of research. This report/release/advertisement does not have regard to the specific investment objective, financial situation, suitability, and the particular need of any specific person who may receive this report/release/advertisement. Investors should note that income from such securities, if any, may fluctuate and that each security's price or value may rise or fall substantially. Accordingly, investors may receive back less than originally invested, or lose their entire investment. Past performance is not indicative of future performance. GRRD has not entered into a soft dollar agreement with the referred to Company. GRRD does not currently have an investment banking relationship with the Company, or a finder's fee agreement with the Company. The Private Securities Litigation Reform Act of 1995 provides investors a 'safe harbor' in regard to forward-looking statements. GRRD cautions all investors that such forward-looking statements in this report/release/advertisement are not guarantees of future performance. Unknown risk, including bankruptcy, uncertainties, fraud, stock manipulation as well as other uncontrollable or unknown factors may cause actual results to materially differ from the results, performance or expectations expressed or implied by such forward-looking statements. Smaller companies may have a higher likelihood of filing for bankruptcy. Investors are urged to do their own research regarding the dangers of a potential bankruptcy filing. The enclosed researched company may have to raise additional capital to remain solvent and to meet forecasted valuation and price projections in this report/release/advertisement. Investor awareness distribution programs can materially affect the price of the company’s stock. When used, the words "anticipate," "believe," "estimate," "expect," and similar expressions as they relate to the Company or its management are intended to identify such forward-looking statements. The Company's actual results, performance or achievements could differ materially from the results expressed in, or implied by these forward looking statements. Further management discussion of risks and uncertainties can be found in the Company's quarterly filing with the Securities Exchange Commission and other periodic SEC filings. Readers hereby acknowledge that any reliance upon any materials shall be at the reader's sole risk. GRRD distributes its research reports through the research distribution Copyright © 2009 by Grass Roots Research and Distribution, Inc. All rights reserved. This report may not be reproduced. Page 18 of 19
  • 19. Grass Roots Research and Distribution, Inc. ! network available to research firms, and by investor awareness advertising programs to various types of investors. Recipients of such distribution may be short term investors such as day traders, traders, retail investors, institutions, and/or long term risk adverse retail and institutional investors. GRRD reserves the right, in its sole discretion, at any time, and without any obligation, to make improvements to, or correct any error or omission(s) in any portion of the service or the materials. The service and the materials are provided by GRRD on an 'as is' basis. GRRD expressly disclaims any and all warranties, express or implied, including without limitation warranties or merchantability and fitness for a particular purpose, with respect to the service or any materials and products. This report/release/advertisement has been prepared in accordance with the SEC’s rules and amendments, Oct 23, 2000, regarding 17 CFR Parts, 240, 243 and 249, (Selective Disclosure and Insider Trading), Regulation FD (Fair Disclosure), 10b5-1, 10b5-2, NASD Rules 2250, 2420, 2710 and 2711 and the Can-Spam Act of 2003. GRRD is sometimes paid in cash, stock, warrants, options or other securities in lieu of or in addition to GRRD ’s stated compensation schedule. GRRD has been compensated $7,500 for this report/release/advertisement. This document shall not be copied nor reproduced in any form without the expressed written and authorized consent of GRRD. Copyright: Grass Roots Research and Distribution, Inc. (www.GrassRootsRD.com), D. Paul Cohen Copyright © 2009 by Grass Roots Research and Distribution, Inc. All rights reserved. This report may not be reproduced. Page 19 of 19