Will do some modeling on NATR and CMT and see what the trends look like based on trailing quarters and growth strategies.

Some investors might be concerned that fluctuations in the price of corn could adversely impact BORN.  I believe such fears would be unfounded.  BORN’s production facilities are located in the northeast region in one of the largest corn production provinces in China. The province produces the lowest priced corn in the region. Further, the Company enters Corn Sourcing Agreements with local farmers to engage them to purchase corn during the harvest season and store it for delivery during the non-harvest season. This enables BORN to secure a stable supply and lower cost of corn. Finally, to the extent corn prices did increase YTD 2010 BORN was able to easily pass the increased cost on to its customers.

The production facilities are also located in close proximity to large and mid-sized local “Baijiu” distillers so the Company has easy access to the distillers and potential new customers. BORN produces high quality products that are in demand. They regularly sell 90% of their production in advance and sell the rest when produced. BORN has been operating at 95%+ capacity and selling everything they produce.

Investors should not view BORN as a typical commodity business.  BORN provides edible alcohol for “Baijiu”, the drink of choice in China.  Annual consumption of Baijiu is steadily increasing in line with economic expansion and increased standards of living.  Consumption of Baijiu is generally associated with higher standards of living. There is no denying the standard of living is improving for untold millions of Chinese consumers and that trend is likely to continue if not accelerate.

BORN is a classic defensive stock that will do well in almost any economic environment.  The Company produces products and by-products that will be in high demand in China in good times and bad. One thing we can count on people doing anywhere in the world is having a drink to celebrate good times or to drown their sorrows!  Chinese consumers have had much to celebrate.

When I think of penny stocks I tend to assume the company’s are risky start-up or early stage ventures not businesses with a solid history of growth and earnings.  AKRK is an established business that has grown organically and is seeking the capital through a secondary offering that will allow management to complete the acquisition of additional cork forest acreage and factory and other fixed assets needed to increase production capacity.  The acquisitions are all under contract management just needs to capital to close the deals.  The transactions will facilitate accelerated growth. 

The following table reflects actual operating data for the two years ended Dec. 31, 2007 and 2008 and my estimate for 2009.  Note that operating results in QIV 2008 and QI 2009 were below trend due to the sharp contraction in worldwide economic activity that took place during that period.  The Company’s operating results showed sharp improvement in QII and QIII 2009.  My QIV 2009 estimate is only 20% more than Asia Cork generated in Q IV 2007 so I think it is reasonable.

If my 2009 estimate is in line with actual results AKRK is selling at less than 7x eps.  Given the Company’s solid business model and management’s plans to grow the business it is hard to imagine this stock staying under $1 for much longer.  I believe patience will pay off with Asia Cork and longer term investors will do very well.

If AKRK does a secondary offering the benefits will far outweigh the negative impact of dilution.  A successful offering will provide the capital necessary to complete several pending transactions to acquire additional cork forest acreage and production assets.  The acquisitions would vertically integrate operations resulting in greater operational efficiencies, increased profit margins and the capacity to aggressively increase international distribution.  In addition, the offering would trigger the conversion of the Ancora Greater China Fund promissory note to equity resolving the $700,000 debt issue and making Ancora a major shareholder.  Having a prestigious investor like Ancora with a large equity stake in the Company has to help.  Finally, a secondary offering would broaden the shareholder base which would be supported by Global Arena Capital Corp. the investment banking firm retained by Asia Cork to do the offering.   Essentially the offering would provide the funds needed to jumpstart the business and kick AKRK to the next level. 

The biggest unknown for now is how long it will take the Company to complete the offering especially since a Form S-3 filing with the SEC is probably required.   The SEC might require the Form 10K be filed before the S-3 which could push the offering off until April.  Who knows though, the offering might happen next week.  However long the process takes though, the wait will be well worth it.