On the Asian Front

China Information (NASDAQ:CNIT) ($1.98) - On April 11, 2013 GeoInvesting published some due diligence findings on Perfect World Co (NASDAQ:PWRD). Part of our bullish thesis was based on the fact that FOSUN, a company with a good track record of investing in U.S. listed Chinese companies, has taken a large stake in PWRD shares.

Upon further due diligence we noticed that FOSUN has also taken a stake in shares of CNIT. Through a 13G filed on February 13th 2012 FOSUN disclosed that it holds a 9.49% stake in CNIT (5.2 million shares). FOSUN disclosed its initial ownership in CNIT through the ownership of 4.3 million shares on June 20th 2012.

While GeoInvesting has not performed any due diligence on CNIT we will establish a small position in its shares, on FOSUN's coattails.

From a fundamental point of view CNIT has reported losses and lackluster revenue growth for several quarters. CNIT management claims that it is in the midst of restructuring operations to put the company on the path of growth.

The tangible book value of CNIT is $5.50.

Investors should keep in mind the CNIT shares have spiked several times since March, only to see shares pull back.

New High Research

Ari Network Services (OOTC:ARIS.OB) ($2.75)

We will start actively tracking ARIS, a company that develops software solutions connecting consumers, dealers, distributors, and manufacturers in selected vertical markets.

Shares hit a new high May 3rd 2013 on news that its division targeting the auto-motive tire industry experienced revenue growth of 25% in March. These revenue gains are being driven by a November 8th 2012 acquisition of one of its leading competitors. We do not know how much of the company's revenues are derived from the tire segment. However, the company has disclosed that the recent acquisition will double the size of its website business which accounted for 25% of its total revenue pre acquisition but comprise the majority of the company's overall revenues post acquisition.

ARIS reported 2012 revenues of $22.5 million (similar to revenues in 2010 and 2011). We estimate that the acquisition will allow ARIS to achieve 2013 revenues of $30 million leading to a marketable increase in the company's quarterly revenue run rate to at least $8 million, which is well above the company's quarterly run rate of $5 to $5.9 million experienced over the last 3 years.

GeoInvesting also noticed that an investment company filed a 13D disclosing its shares in ARIS and may seek to engage in discussions with other shareholders and/or with management and the board of directors of the Issuer concerning the business, operations or future plans of the Issuer.

Mechanical Tech (OOTC:MKTY.PK) ($0.68)

MKTY shares have risen from $0.18 on March 22nd to its current price of $0.68 on the heels of a March 21st 2013 press release which contained clues that the company has addressed problems that has hampered revenue growth and the attainment of profitability over the last couple of years specifically, heading into the 2012 4th quarter the company had experienced losses for 6 straight quarters

However, it appears that the company reported 2012 4th quarter EPS of $0.12, albeit it on lower revenues ($2.4 versus $3.3 million). We are encouraged that the company has been able to achieve profitability at a level where it had previously reported losses.

Management commentary insinuates that the positive momentum will continue into 2013. If the company can maintain the level of profitability achieved in its 4th quarter 2012 we believe the stock should easily eclipse $1.

The company is engaged in the design, manufacture, and sale of test and measurement instruments and systems through its subsidiary MTI Instruments, Inc. MTI Instrument's products use a comprehensive array of technologies to solve complex, real world applications in numerous industries including manufacturing, semiconductor, solar, commercial and military aviation, automotive and data storage.

GeoInvesting will look to establish position today ahead of first quarter 2013 results. We will attempt to interview management.

Hydromer (OOTC:HYDI.PK) ($1.99)

The following comments buried in the HYDI's December 31st 10Q will lead us to track the story.

"The Company is nearing a return to profitability. Cost management and revenue growth are the key factors and while we did not reach the same revenue levels achieved a year ago, it is certainly within reach. During the past few years, the Company's R&D resources were dedicated to its T-HEXX Animal Health product line as that could yield the quickest revenue return (as compared with the much longer term human medical product line). Some of the recent developments in the T-HEXX product line are being rolled out into the market."

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Disclosure: I am long [[CNIT]], [[MKTY.PK]].

Additional disclosure: This information has previously been provided to GeoInvesting's Premium members around today's Market Open.You agree that you shall not republish or redistribute in any medium any information on the GeoInvesting website without our express written authorization. You acknowledge that GeoInvesting is not registered as an exchange, broker-dealer or investment advisor under any federal or state securities laws, and that GeoInvesting has not provided you with any individualized investment advice or information. Nothing in the website should be construed to be an offer or sale of any security. You should consult your financial advisor before making any investment decision or engaging in any securities transaction as investing in any securities mentioned in the website may or may not be suitable to you or for your particular circumstances. GeoInvesting, its affiliates, and the third party information providers providing content to the website may hold short positions, long positions or options in securities mentioned in the website and related documents and otherwise may effect purchase or sale transactions in such securities.GeoInvesting, its affiliates, and the information providers make no warranties, express or implied, as to the accuracy, adequacy or completeness of any of the information contained in the website. All such materials are provided to you on an ‘as is’ basis, without any warranties as to merchantability or fitness neither for a particular purpose or use nor with respect to the results which may be obtained from the use of such materials. GeoInvesting, its affiliates, and the information providers shall have no responsibility or liability for any errors or omissions nor shall they be liable for any damages, whether direct or indirect, special or consequential even if they have been advised of the possibility of such damages. In no event shall the liability of GeoInvesting, any of its affiliates, or the information providers pursuant to any cause of action, whether in contract, tort, or otherwise exceed the fee paid by you for access to such materials in the month in which such cause of action is alleged to have arisen. Furthermore, GeoInvesting shall have no responsibility or liability for delays or failures due to circumstances beyond its control.

For your review we have uploaded our footage overlapping the time LPH claims they made their videos. What took LPH 8 days to fabricate only took us only a few hours to upload. As you will see our cameras pick up a good deal of traffic passing by the facility but no trucks ever entering or exiting the facility to fuel, refuting LPH's fake videos that show tanker trucks entering and exiting the facility (on the right side of their videos). The trucks in the LPH videos were around long enough for our cameras to have picked up the lights and fueling activity.

• LPH Taiyuan Main Entrance 12-09-2012, 18:30 to 19:00
• LPH Taiyuan Main Entrance 12-11-2012, 19:45 to 20:15

Furthermore, note the almost total blackness behind the retail gas station in our videos. As you can see by the bright headlights on the passing vehicles and the lights in the ceiling of the retail gas station, our cameras would easily detect the light from tanker truck headlights fueling, weighing and circling around behind the retail gas station.

LPH today took another failed attempt to perpetuate, rather than to admit to its fraud.

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Have a great day and Happy Investing!

The GeoTeam

True Owner and Legal Representative of the Ping Yi Mine Speaks Out to Expose L&L Fraud

Since our initial report on January 17, 2012, the GeoTeam has continued to develop even more conclusive proof to support its case that L & L Energy never purchased the Ping Yi Mine on November 1st, 2009, which they claim represented 37% or their production capacity in 2010. After the Chinese New Year holiday, we contacted Mr. Hu Shiwei and Mr. Zhang Baoguo, the Ping Yi Mine owners, who control a combined 70% of its equity. They were enraged by the fraudulent activities of LLEN and said that they never transferred their interests of Ping Yi Mine to LLEN and/or its affiliated identities. The true owners of Ping Yi Mine provided the following:

• A video made by Mr. Hu Shiwei, The executive partner and legal representative of the Ping Yi Mine, in the office of the Notary Public showing the original business license and mining permit of Ping Yi Mine. In this video he also explained, with a written statement, the true ownership structure of Ping Yi Mine and other relevant matters. The gravity of the matter really hit home when he stated:
  
  • LLEN's claimed USD 3.9 million transaction to purchase the Ping Yi Mine never occurred. Mr. Hu Shiwei referred to this phantom transaction as a total scandal.
  • He and his partners reserve the right to sue LLEN regarding the infringement of their interests.
  • They strongly condemn the fraudulent activity of LLEN.
• NOTARIZED copies of the original identity card of Mr. Hu Shiwei, the Ping Yi Mine business license and the Ping Yi Mine mining permit which exactly match the current SAIC file on record.
• A notarized letter executed by Ping Yi Mine Legal Representative and Executive Partner Hu Shiwei stating that LLEN does not and never did own the Ping Yi Mine.

Upon our request, on Feb. 12, 2012, Mr. Hu Shiwei visited the Fuyuan County Notary Office, Yunan Province, which is the closest notary office to his home address, No. 17, Qingxi Road, Fuyuan County, Qujing City, Yunan province (see the ID Card of Mr. Hu Shiwei below).

As the legal representative and executive partner of the Ping Yi Mine, Mr. Hu Shiwei possesses all of the standard documents of the Ping Yi Mine. He provided a notary public clerk with the original business license, mining permit and his own identity card. The clerk made copies of these documents and notarized that these copies are the same as the original documents as seen below.

Furthermore, before the notary public, Mr. Hu Shiwei also executed a written statement (Declaration) which translates exactly as follows:

We, Pan County Pingguan Ping Yi Mine, with registered address Yiche village, Pingguan town, Pan County, Liupanshui City, Guizhou Province,are a legal partnership. Our registered capital is RMB fifty million and the registered partners are Zhang Baoguo (40%), Hu Shiwei (30%), Liu Shuangyou (16%) and Chen Honglin (14%). Hu Shiwei is the legal representative and executive partner of Pan County Pingguan Ping Yi Mine.

L&L Energy Inc., Fuyuan County Baoxing Economic & Trade Co., Ltd. and/or their related identities and/or persons did not acquire any of our interests, are not and did not become our shareholders, investors and/or partners.

Also provided is a notarized document that states the Notary witnessed the executed, enclosed and chopped declaration as seen below.

To further dispel LLEN management's multi-year hoax, Mr. Hu Shiwei also made a short video where he showed the original business license and mining permit of Ping Yi Mine and explained with a written statement the ownership structure of Ping Yi Mine and other relevant matters.

On February 7, 2012, we also obtained another copy of Ping Yi Mine's SAIC file. Based on the SAIC file, the 2011 annual inspection date mentioned in the SAIC file is June 14, 2011, which is the same as the annual inspection date on the business license disclosed by Mr. Hu Shiwei and notarized by the notary public. All other information in the SAIC file is also the same as the information shown on the NOTARIZED business license and/or in the written statement.

In our initial report issued on January 17, 2012, we disclosed that the Ping Yi Mine was listed for sale on multiple web sites in China (and still is as of today). We also showed that the Ping Yi Mine SAIC file we obtained on January 13, 2012 revealed that L&L is not the true owner of Ping Yi mine.

LLEN's response to our report should make even the most blindly bullish investors' hearts skip a beat. They:

• didn't marshal their lawyers and auditors who asserted that the mine's ownership couldn't be in doubt.
• didn't offer any evidence proving that the sales postings were a hoax.
• didn't offer any documents rebutting the GeoTeam's findings.

Instead, LLEN issued a brief press release on Jan 17, 2012 claiming that our conclusions were wrong and stating that the Ping Yi Mine was indeed owned by them. In defense of management's integrity and its investors' capital, this is the sum total of what LLEN had to say for itself:

"L&L had not posted Ping Yi for sale and that the company never authorized or prepared such sale notices. Accordingly, the Company does not know the source of such notices."

LLEN, to be clear, is resorting to grade school word games.

LLEN is asking its investors, auditors and regulators to accept that one of its key operating assets was wrongfully put up for sale and that it took no action to stop it or even attempt to figure out who was doing this to them. The GeoTeam is fairly confident that if someone tried to put Berkshire Hathaway's Geico unit up for sale, or Goldman Sachs' trading operations, they might at least try to get to the bottom of it, if only for appearance's sake. To that end, the statement from Ed Moy, L&L Board Director and Vice President, is surely one for the record books:

"Last April, I led investors on a tour of our operations in Yunnan and Guizhou Provinces of China, which included a visit to Ping Yi Mine. Investors had a chance to meet and talk with our staff and local mine management. I can therefore confirm our ownership of Ping Yi Mine."

In other words, Ed Moy only confirms that the mine exists (a fact we have never disputed) taking this to mean that LLEN owns the property.

Well, we have performed the simple steps that Ed and institutional investors should have taken to verify who really owns the mine. We will let investors decide who has provided the most compelling evidence:

1. Ed's tour?
2. LLEN's completely unacceptable press release? or
3. Our government documents, transcripts, recorded conversations, notarized statements from the true owners of the Ping Yi mine and a video by the legal representative and executive partner of the Ping Yi Mine.

CONCLUSION

Our view is simplicity itself: LLEN has been making up wide swaths of its public filings for several years in a profoundly audacious bid to mislead investors, its auditors, NASDAQ and the SEC. They have been discovered and called out; all that remains is the day of reckoning for their Ping Yi Mine hoax. To date, many China Hybrids and their management teams have escaped criminal liability because they were entirely based in China. LLEN is different since it is a U.S. domiciled company with active headquarters on these shores and management directly subject to U.S. legal enforcement. Investors should be aware of the recent developments regarding the FBI's involvement in the Chinese RTO market.

Disclosure: I am short [[LLEN]].

The Mining Permit number issue in no way unsubstantiates our findings. Our research is based on a mountain of findings.

1. Our research was performed using the official Business License and Mining Permit posted by the owner. Website postings are secondary to our conclusions, except for the sale information itself.
2. We have obtained an official chopped SAIC filing of the Ping Yi Mine that clearly shows that LLEN does not own this mine.
3. Most importantly, the press release issued by LLEN on Jan 17, 2012 states that, "Regarding the sale notices mentioned by GeoInvesting in its article, the Company never authorized or prepared such sale notices. Accordingly, the Company does not know the source of such notices." In other words, it does not dispute that the Ping Yi Mine is for sale.
4. The only issue regarding the difference in addresses is that the owner refers to the older address of Ping Yi Mine (we will address below).
5. We note that outside of a possible typo or human error regarding the Mining Permit number, there are no discrepancies in our argument about the ownership of Ping Yi Mine.

We stand by our conclusion that LLEN does not and never did own the Ping Yi Mine. Investors who do not embrace this conclusion are grasping for strings and playing a dangerous game.

For more detail on the mining permit and issue about the address, please read the following explanation:

In this detailed sales post, the sale representative posted the map of Ping Yi Mine, the business license of Ping Yi Mine and the Mining Permit of the Ping Yi Mine (http://www.worldmr.net/Exhibition/ForeCastList/Info/2011-10-11/112458.shtml). The Mining Permit is as follows:

The first paragraph of the introduction of the Ping Yi Mine in the same sales post states:

"平关平迤煤矿位于盘县平关镇三道沟境内，距平关约10Km ，有简易的公路相通，距红果镇约25 Km，交通较为方便。根据贵州省国土资源厅颁布发的采矿许可证（证号：5200000711358）划定的矿界，采矿权范围由8个拐点圈定，矿区面积为2.2694平方公里，开采标高2250m-2100m。"

Translated into English:

"Pingguan Ping yi Mine locates at Sandaogou, Pinguan town, Pan County. It is around 10 km away from Pingguan and there is a low level paved road links Pingguan to the Mine. It is around 25 km away from Hongguo twon and the transportation is very convenient. Based on the mine map in the mining permit issued by Natural Resource Bureau of Guizhou province (No. 5200000711358), eight coordinates defines the scale of the mine with the 2.2694 m2 and the exploration depth is 2250-2210 m."

Apparently, there are two discrepancies between the web sales posting of the Ping Yi Mine and the posted business license and mining permit of Ping Yi Mine.

"Sandaogou Pingguan Town" vs. "Yiche village, Pingguan Town" in the Business License

"No. 5200000711358" vs.

In the SAIC file, there is a corporate change page as follows:

This corporate change clearly explained that the Ping Yi Mine moved from Sandaogou to the current address, Yiche village. It is reasonable to believe that when the owners wrote the sale posting, they made a mistake and used the old address on the sale post.

When the owners wrote the sale posting, they used the Mining Permit number "No. 5200000711358", rather than the , which Ping Yi Mine obtained on Aug. 2008 and is disclosed in the official mining permit in the same sale posting. There are several reasons for this mistake:

1. A typo
2. Before Aug. 2008, Ping Yi Mine had another Mining Permit, which may have carried the number "No. 5200000711358".

This does not debunk our finding that LLEN does not own Ping Yi Mine, which is clearly shown in the SAIC file.