The CEO (Mr. Lv) has good experience in the coal business, and (as previously mentioned) good political connections. The political connections are also important in that it is a huge incentive for him to "do the right thing" when it comes to the ownership structure of the company, and staying loyal to the US shareholders. You don't want to betray the trust of the president of China.
He essentially boot strapped the start up of Hongli (the operating company in China), and when the Pingdingshan government mad a new requirement for the efficiency of coal furnaces, he decided to take the company public to raise the funds for expansion. The benefit to us is that it should be wildly profitable...
...from the 10k "The Pingdingshan Bureau of Land and Resources is requiring coking factories with a furnace height of less than 4.3 meters to phase out their operations in the next two to three years. As the two sets of coking furnaces in our existing coking plant are 3 meters in height, we plan to upgrade and retrofit them to 5.5 meters in height in the next two years. Our new coking facility will also have furnaces that exceed these regulatory standards"
So, the US investors foot the $70M to build the new facility, and then get to share in the profit of it.
It's essentially an existing company wildly expanding, hence an IPO (in the form of a reverse merger) to fund that expansion. The good news, is that at the current share price, the company is undervalued BEFORE expansion.
And I haven't even mentioned the extra coal mines they're getting...
My feelings - the CEO of SCOK came to Washington with the president of China indicating the best connections. I feel there is alot of work associated with making the mines safer. Unfortunately, nothing is ever 100% in this business. Under the circumstances, management is doing the best it can. Now that there are some mines working and the coke plant is near completion, earnings should rapidly rise. The rapid fall is manipulation. When the shorts are compelled to cover, the price will rise - I hope!!!!