TWST: What are the legal and consulting services provided by Guzov Ofsink?

Mr. Ofsink: We practice in the following four core practice areas: corporate and securities, litigation and arbitration, real estate, and trusts and estates. My focus is on a full range of corporate and securities services, which include public offerings, reverse mergers, M&A transactions, as well as corporate and compliance consulting and general corporate transactional and other legal work.

TWST: What is an alternative IPO, and why are companies increasingly looking towards alternatives as means by which they are going public?

Mr. Ofsink: An alternative IPO is typically a reverse merger. There is a confluence of events right now, which have led to their popularity. Number one, the SEC recently changed the rules to specifically recognize reverse mergers and to say that as long as you file full prospectus disclosure as you would in an IPO, you can proceed with a reverse merger. Second, reverse mergers are beneficial to investment bankers because they don't have to get their compensation approved by the NASD as they would in an IPO. Third, reverse mergers are beneficial to issuers because they get the money that they need faster.  Fourth, reverse mergers are beneficial to investors because their exit event comes sooner than it would with an IPO.

TWST: It seems to me that there's been a lot of growth in this industry over the last year to 18 months? Who is doing the deals? And can we get a handle on who is responsible for bringing a lot of these companies public?

Mr. Ofsink: In the past, it's been the case where it's been smaller companies and smaller firms doing reverse mergers, but what I am seeing recently is that larger companies and larger firms are getting into it as well. In the past, they may not have become involved in these transactions. Now, with the SEC's changes to the prevailing rules and requirement of full prospectus disclosure, I think that has opened the floodgates if you will.

TWST: Your bio says you are an expert in complex securities and corporate transactions. Could you provide us an example of a complex transaction?

Mr. Ofsink: A lot of the transactions that we get involved in require a lot of structuring and restructuring, both on the legal front and the accounting front, and it's especially true of the transactions that we do with Chinese companies. Typically the company in China needs to be restructured before even the reverse merger can move forward, which can be complicated in and of itself.

TWST: Why do companies in China need to be restructured before they can move on with a reverse merger or any other kind of IPO for that matter?

Mr. Ofsink: There are a lot of restrictions under Chinese law that need to be structured around. For instance, you can't do a share exchange directly with a Chinese company. Therefore, there are often elaborate and complicated contractual structures that are necessary.

TWST: Why is China a factor in the marketplace?

Mr. Ofsink: The Chinese economy is growing at a pretty rapid pace. There are just a lot of companies in China that are very profitable and are able to take advantage of lower costs, particularly lower costs of labor.  Because of their profitability and the volume of business that they do, they make attractive candidates to go public.

TWST: What is the attraction on the part of Chinese companies to going public in this manner?

Mr. Ofsink: I believe the attraction on the part of Chinese companies is the same as it is with companies anywhere. Even though you may have a very profitable company, when you are growing, you can experience a working capital crunch so to speak, where you're just trying to keep up with the pace of orders and have exhausted all available bank lines creating a need for equity capital. Also, because of currency restrictions, in China there are a lot of people who are unable to get money out of China and going public is a good way for them to do that.

TWST: How do they accomplish that by going public?

Mr. Ofsink: By going public, they transfer their ownership of the company in China to ownership of a U.S. company with stock they can sell at any time.

TWST: So, it's not the cash that they have in their bank account so to speak?

Mr. Ofsink: Right, it is stock in a brokerage account.

TWST: Are there any Chinese deals in the marketplace today that you think represent best practices for the industry?

Mr. Ofsink: The best way to do these deals, and the way that we like to do them, is that we close everything at the same time: the acquisition of the shell, the reverse merger, the restructuring of the company and the financing. In this way the company can go on a road show beforehand, and they will know what valuations are realistic, they will know how much money they're going to get, and a hard closing date can be set, which everybody can agree to and which everybody can work together to achieve.

TWST: How difficult is it to open a line of communications with Chinese companies?

Mr. Ofsink: It is very difficult.  There are a lot of moving parts when you have all those things closing at the same time. As far as communication, we have several Chinese attorneys who are both attorneys in China and here, and we regularly have people at these companies in China on the ground to be able to coordinate things from there.

TWST: Have you found that Chinese companies have been more open as time has progressed or is it still the same kind of quiet, close-knit nature over there?

Mr. Ofsink: I think that it's getting better, and when you structure the deal so that there is a hard closing date and the money is available, everybody is incentivized to disclose all necessary information.

TWST: What are the Chinese industries that have been most successful in going public in the United States, is it old economy industries or is it new economy type industries?

Mr. Ofsink: To some extent, it's every industry, but what I am seeing is that the brick-and-mortar type companies are the ones that really look the most attractive because of their lower cost structures. You have companies that maybe make wire or engine blocks that in the US wouldn't be all that attractive, but in China they're extremely attractive because they're just very profitable.

TWST: Are those companies successfully going public in the United States? Is that the type of companies investors should be looking at?

Mr. Ofsink: Yes, absolutely. A manufacturing company that's very profitable with a solid customer base, from what we've seen, is an attractive candidate to go public and make decent public companies.

TWST: Are these companies working in the after-market to make sure that they're expanding their shareholder base and potential investors know their stories?

Mr. Ofsink: Some of them do and some of them don't, I think it's like anything else in that respect. I happen to think that it is very important because investors have a wide range of choices of things to invest in and companies need a way to differentiate themselves.

TWST: Who are buying these deals, is it retail investors, hedge funds, or international investors?

Mr. Ofsink: What I am seeing really are a lot of institutional investors in these things. I am not seeing a lot of individual, retail investors.

TWST: Typically, do they go public on the Bulletin Board or are they choosing formalized exchanges?

Mr. Ofsink: Typically, they're going public on the Bulletin Board, and then, shortly thereafter, they are looking to go to the AMEX or the NASDAQ.

TWST: Are there any differences in corporate governance in regards to these companies as compared to small companies in the US?

Mr. Ofsink: I think they're very similar. The companies that we work with in the US and the companies we work with in China are private companies which are not always very focused on corporate governance.  There is always a learning curve when you are dealing with a private company, no matter where it is.

TWST: Are there any specific attributes to Chinese companies that US investors need to be aware of that are different than their US counterparts?

Mr. Ofsink: I don't think that there are that many differences, but I think that when you're looking at a company that's trading, you want to look at it closely to make sure that the company has the right structure. I see a lot of deals out there where people have tried to do a direct share exchange with a Chinese company and the company may not have the correct business licenses in China, and these are things that you want to ask about to make sure that it's a company you should be investing in.

TWST: How does an investor perform some basic due diligence?

Mr. Ofsink: I think the first place to look obviously is in the filings that the company makes, and a lot of the filings that I see out there really don't have any detail at all about the means by which the company went public - that may be a little bit of a warning sign that it might not be a good company to invest in. I think you need a very detailed disclosure about the way the company went public and what business licenses are obtained and what approvals are obtained in China, for instance, from the commercial bureau, where it's located, and from the state administration or foreign exchange.  Those are the things that can give you comfort.

TWST: Is shell quality an issue with these companies?

Mr. Ofsink: Shell quality is always an issue. We've dealt with situations where shells have had liabilities that people weren't aware of where Directors have come forward claiming that they were still Directors even though it had been represented that they were not. Due diligence on the shell is critical.

TWST: By all accounts, last year was a great year for Chinese IPOs and Chinese reverse mergers, will China continue to be a factor looking forward?

Mr. Ofsink: It definitely will. The Chinese economy is continuing to grow, more and more companies in China are considering going public, and the capital markets in China are really, at this point, inadequate to be able to get these companies the capital they need.

TWST: Thank you.

Mr. Ofsink: Thank you.