Dr. James Young reports

MICROCOAL ENTERS INTO JOINT VENTURE AGREEMENT FOR CHINA

Microcoal Technologies Inc. has signed a joint venture agreement with an affiliate of Jiu Feng Investments Inc., a Hong Kong-based private company.

Under the terms of the agreement, Microcoal and the joint venture partner have agreed to form a corporation domiciled in Hong Kong (JVCo), in which Microcoal will enjoy a 51-per-cent equity interest and majority position on its board of directors. JVCo is expected to carry on its activities throughout China, Hong Kong, Taiwan, Macau and South Korea, and its key functions are planned to include:

• Operating an approximate 11,000-square-metre Microcoal complex in Songjiang Industrial Park, Shanghai. The complex, which was recently officially completed at an estimated cost to Jiu Feng of over $19-million (U.S.), includes: (1) a research and development facility featuring a Microcoal batch oven system, dedicated power supply and transformer, coal storage area, analytical laboratory, and is designed to be capable of supporting a planned commercial-scale operating reactor tower; and (2) a promotional showroom featuring scale models of the Microcoal equipment and data/conference rooms for sharing data with potential customers;
• Sourcing and testing various coal samples from Asian markets to identify coals that can derive the greatest added value from the Microcoal process;
• Hiring personnel to develop business opportunities with state-owned and private utilities in Asia (particularly China);
• Promoting the Microcoal technology in China, and generating access to Asia's capital markets and investors through a second Microcoal office in Hongqiao, Shanghai.

As consideration for the substantial asset and financial contributions from Jiu Feng in connection with, and in contemplation of, the joint venture, Microcoal has agreed to issue a total of up to 10 million common shares to the joint venture partner, six million of which shall be payable on closing of the joint venture and the balance no later than 120 days following closing, assuming the joint venture partner performs as required under the agreement.

The agreement has an initial term of five years, and shall automatically renew for a subsequent five-year period unless either party terminates at least six months prior to the end of the initial term. However, subject to customary termination rights, only the joint venture partner will be entitled to terminate the agreement during the initial term if the aggregate revenues of JVCo exceed $100-million (U.S.) in that period.

Lawrence Siegel, Microcoal's chief executive officer, commented: "In anticipation of its official opening, the complex has already hosted senior delegations from China's largest power utility companies, including China Petroleum & Chemical Corp. (Sinopec). These delegations were invited to live demonstrations of the Microcoal technology and witnessed successful dehydration of a variety of low-rank coal. Following these initial tests, we have received an invitation from Sinopec to sign a memorandum of understanding to escalate batch testing to full-scale commercial studies. These valuable data, which are already being implemented into the company's research and development program in the United Sates, are supporting the company's primary goal to complete Microcoal's generation 2.0 series of reactors in Virginia in 2015."

Dr. James Young, Microcoal's chairman, further stated: "This achievement would not have been possible without the tireless effort and support from Jiu Feng, particularly its CEO, who has helped successfully develop major business opportunities in China's state-owned sector, and in a very short time, has allowed Microcoal to attract technical talent and potential customers from a variety of industries in China. Now that the complex in Songjiang is constructed and operational, the company looks forward to generating a database of how coals from Asia behave when treated with Microcoal, and using these data to further optimize the technology and strengthen our goal to generate commercial revenues."

Closing of the joint venture is subject to a number of conditions, including receipt of all necessary regulatory approvals and the execution of certain ancillary agreements, including a lease agreement in respect of the complex and a technology licence agreement in respect of the Microcoal technology.

We seek Safe Harbor.