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Developing the New & High-Tech Industries – Welcome to the Nano-Age

The Story for the Establishment of Cross Ocean Lab, “COL”

This is a presentation of Professor Hsiao Chung–No’s background of who left a committed career in education to play a critical role in establishing a US Nano-Materials Group. Over the past 10 years, this group has made a distinctive contribution to nanomaterial research and its application to surface engineering technology. An enabling factor in this venture is the contribution of previous and current scientists associated with the US Nano Group. It is noted that most of these scientists graduated from China’s Peking University, Tsinghua University, and prestigious universities in other countries. Working within a highly collaborative environment in various locations, these scientists have proved a valued asset in commercializing nanomaterials and nanocoating surface engineering technology. Intriguingly, it is pioneering R&D conducted at the University of Connecticut that lead to establishing the US Nano Group. Professor Peter R. Strutt, as director, obtained funding from Connecticut Innovations Inc. to establish a prototype facility for large quantity nanopowder production and nanocoating. The R&D innovations included tungsten carbide-cobalt and ceramic nanocoatings and a thermal plasma “solution spray” nanocoating technology.

In view of Professor Hsiao contributions and achievements one might ask why he is enthusiastic about creating another company namely, Cross Ocean Laboratories. LLC? This is indeed an interesting story; it originally started when Professor Hsiao worked with Mr. Li An-Min of Shanxi in the export of Shanxi metallurgical coke. Mr. Li, who possesses the unique culture characteristics of “Shanxi merchant of combined enthusiasm and helpfulness, brought up and interesting point when conversing with Professor Hsiao. This was in pointing out that since US Nano Materials coating treatment had been applied in industrial coatings, why was it not possible to apply suitable nanocoatings to the skin of human face or body? Unanticipated raising of this possibility is intriguing, since US Nano Materials Group had not previously considered nanocoating technology as applied to this new direction type of development. Although Professor Hsiao, as a professional economist, could not authoritatively respond to Mr. Li, he said the “this should be feasible!” In the meantime however, Professor Hsiao together with some of his colleagues established Inframat Corporation. Later this was reorganized as the US Nano Group, Inc. consists of Inframat and the US Nancorp, Inc. An important conclusion to be drawn from the preceding is the distinctive advantages gained from interactions between technological, economic and business professionals. This has led Inframat to walk on the road of success.

In pursuing the potentialities of the cosmetic market, Mr. Li introduced his friend, Dr. Wang Wending to Professor Hsiao. Dr. Wang, again, is a Chinese American who also came from Shanxi Province and is one of the world leading experts in cosmetics formulation and production. Later, in 2007 Professor Hsiao was invited to meet Dr. Wang in New York City. In coming to the meeting, Professor Hsiao bought a copy of the Wall Street Journal where one headline summarized the success story of the skin specialist, Dr. Perricone. This report described Dr. Perricone success in taking care of his patients while also making money by selling his own brand name of skin care product to his patients. The report included a description of how Dr. Perricone established “Perricone Cosmetic Product lines” that is now globally recognized. His prescription, known as “Cosmeceuticals” contains high-end drug elements unobtainable at supermarkets but only at beauty salons and clinics. According to the WSJ report, Perricone cosmetics have world-wide sales.

Interestingly, on meeting the tall figure of Dr. Wang in New York, Professor Hsiao immedialely was struck by his strong Shanxi tone and accent. It was Professor Hsiao who first commented “I have heard that you are expert on cosmetics, do you know Dr. Perricone?”. While saying this, he handed Dr. Wang a copy of the Wall Street Journal article. Dr. Wang’s response was “Oh! All functional Cosmetics he sold are my formula!”. After this meeting Professor Hsiao and Dr. Wang interacted in an unbreakable friendship ever since. It is intriguing to follow the career of Dr. Wang as his vigorous efforts for a career in the United States is indeed like a dream story itself.

Originally, in August 1988, Dr. Wang and his wife, Dr. Linda Liang, graduated from the China Academy of Science (“CAS”) with doctoral degrees in theoretical chemistry. At that time, Dr. Li Yuan-Zhe, the Nobel Prize winner in physical chemistry of 1988, visited CAS for an academic report. Upon listening in Dr. Li’s lecture, Dr. Wang asked him some physical chemistry related questions. Apparently, Dr. Li felt that Dr. Wang had already had pretty good understanding about the field of physical chemistry. Surprisingly he asked Dr. Wang: “Would you be interested to go to Harvard University for post graduate study?”

Dr. Wang happily agreed and consequently he and his wife, both with recommendations from Dr. Li Yuan-Zhe, went Harvard’s Physical Chemistry Laboratory in August, 1988 where equally surprising he decided to spent only one year. When questioned about this point by Professor Hsiao, Dr. Wang responded that the reason was simple, since Harvard was not giving him the opportunity to concentrate on the applications in physical chemistry, especially, for product research and development. This was the area that greatly excited him and he thought is some form of pharmaceutical company was more likely to present the opportunity for which he was seeking’

In the summer, 1989, Dr. Wang left Harvard and joined Advanced Bioscience Laboratories, Inc. (ABL), a Michigan-based biotechnology company where he believed he could do stimulating work by applying theoretical chemistry concepts. However, he soon discovered that this company provided this opportunity despite the fact that were over 50 scientists, mostly with Ph. D’s in its R and D division. Apparently, all the scientists were working on protein isolation from blood samples on his/her own project with no knowledge of aspect their colleagues were working on. As a result, Dr. Wang felt no fun at all, and he decided to resign from the Company. Fortunately, however, Dr. Wang met an American investor who greatly admired his unusual ability in product development. They decided to set up a joint venture company in which the investor was willing to invest one million U. S. dollars for the new entity.

Altair Pharmaceutical Co.

In founding Altair the natural question was the new company role in the marketplace. Altair at that time was mainly focused on research and product development. The Owner of the company figured it out that to make one product, the cost of that product would be no more than, say, $50,000.00, but it would cost at least $15,000.00 to $20,000.00 for competitive pharmaceutical companies to make it by themselves. Therefore, the owner felt that their products had necessary markets.

It was decided that the company would locate at Long Island, New York, near Dr. Wang’s residence. Basically, in terms of facility construction, all they needed was a clean room where Dr. Wang would have a place for product development and his ability and imaginative power would be brought into full play. Utilizing this facility, Altair, under Dr. Wang’s leadership developed a series of functional cosmetics, mainly; Hair Cares, Skin Cares, Nail Cares, and Sunscreen. In addition, Dr. Wang developed several leading brand names, including Dr. Perricone Cosmetic Product Lines, Dr. Brandt Cosmetic Product Lines. These products are still widely popular in the global market. After several years’ operation, Altair’s business operations became progressively more profitable. In reward for his dedication and contribution to the Company Dr. Wang was paid with a high salary but not given authority with management rights. Eventually, Dr. Wang invited Professor Hsiao for lunch where he expressed his willingness to establish a new company where he was willing to work under Professor Hsiao’s leadership in a new. Interestingly, the original investor appreciated Dr. Wang’s position and the fact that his initial investment of $ 1 million dollars investment was now worth more than several million dollars within less than 8 years. This noteworthy accomplishment was partially due to the investor’s contribution in market development and sales, and partially due to Dr. Wang’s Technology support.

When Dr. Wang decided to leave Altair, the vigorous original investor, with great foresight found a new buyer for Altair with a signed agreement for a deal of $80,000,000. However, in spite of his astuteness, careful calculation, and strict budgeting, the new investor had neglected one thing, that was the criticality of Dr. Wang’s innovative abilities in Altair’s business success.

The Establishment of Cosmetic Technologies, Inc.

Bearing in mind Chinese concepts of “humanism” of the Confucian School, and the modern “View of Science Development”, Dr. Wang and Professor Hsiao established Cosmetic Technologies, Inc. “CMT” in 2006. The business operation model is “one center, two basic points”. Naturally, an important question is what would be the market value of “CMT”? Actually, the value of “CMT” had already had an objective market value record of $80, 000,000. When Altair was sold at the time of the transaction, Dr. Wang just left Altair and he joined “CMT”. In other words, the new buyer who paid $80,000,000 for Altair without Dr. Wang made an unwise investment decision by purchasing the company without having Dr. Wang’s expertise. Therefore, the market value of “CMT” would be at least $80,000,000. Actually, it is possible that the market valuation might well exceeded this amount as CMT has developed and perfect the following series of products, including:

1. Under- eye treatment gel,

2. Eyelid wrinkled remover lotion,

3. All-around eye wrinkle remover,

4. Peptide facial lift,

5. Skin lightening – OTC,

6. Skin lightening lotion,

7. Diabetic moisturizer cream,

8. Diabetic moisturizer lotion,

9. Nano Soothe Eye Drops,

10. Nano Sunscreen Lotion SPF65

Finally, Cross Ocean Lab, LLC is Established

After great success of Cosmetic business, We expanded business to five key areas including Cosmetics and Opthelmic Drugs, Wireless Communications, Nano Sensor Technologies, Solid Oxide Fuel Cells and NanoTech & City Environmental Treatment as shown in diagram.

[pic]

Each Division of COL has leading experts experienced in both research and patented technologies for production. Specifically,

• Cosmetics and Opthalmic Drugs Division is developing custom formulated skin care treatments and other health and beauty products. We are the brains behind some of the best performing health and beauty products in the world today. Common characteristics of our product and service offerings encompass impact, innovation, speed, and quality. We offer a full-range of services to dermatologists, consumer packaged goods companies, retailers, and other distribution partners, including:

o Product ideation and development

o Regulatory testing and approval

o Global production and distribution

• Wireless Communication Division is the growing world leader in antenna, RF circuit and module and wireless device development. Our engineers mostly are doctored and have over 10 years experience in industry and academia. In the past years, we have been worked on over 100 products for different customers, published over 100 papers and filed over 60 patents. Currently we are doing Antenna and RF technology consulting and consumer antenna, RF module and wireless device development as following:

o Mobile device antenna and RF design

o Cellular phone based Things to Net wireless devices

o Near field communication, HF and UHF RFID, and wireless charging.

o Human wearable antennas for carry-on wireless devices from MHz to GHz

o Vehicle or yacht mounted wireless satellite TV antenna system

o LTE and GPS signal boosters for weak signal environment

• Nano Sensor Technologies Division

• Solid Oxide Fuel Cells Division

• NanoTech & City Environment Treatment Division

From all the above, you can see that COL is an Intellectual Property ("IP") and IP intensive high-tech company. Its business operational model is quite different from the conventional one. Please see the "Triangle Diagram" below.

Fig. 16. Comparison of the Business Model Between Intellectual Property & IP High-Tech Intensive Co. and Conventional Co.

From the business model, you can see that the structure of COL is an upside down triangle . it looks like "Tou is Heavy and Jiao is Light ", "Tou" means "Head" and "Jiao " means "Feet". Literally, it means that the top head is market "pull" and customer "pull". Next, it is public or private creates demand. As to the bottom, it is the factories that have spread both oceans --Pacific and Atlantic.

In 1946, Stalin made announcement to all the former Soviet Union citizens, saying: When Soviet can produce 50,000,000 MT of raw iron, 60,000,000 MT steel, 500,000,000 coal, and 600,000 MT petroleum, Soviet Union will get rid of all the hardships and misfortune. As early as 1944, Winston Churchill had spoken to the guests of Harvard University: "What dominant a nation that shall lead the nation would be the nation that poses the intelligence." [1] . Churchill might have forecasted that during the 21 century, there would be full of intelligence power of new and high-tech oriented technology.

The former Secretary of Treasure, Larry Summers has pointed out that the fundamental change is simply "from the production of physical materials transform to knowledge production on the basis of application." Dr. M. Blair and Dr. S. Walkman of Brooking Institute have concluded their view: "The intangible assets and the value of market service constitute the US domestic production for more than 2/3. [ 2 ].

Change from the macro accounting field, Thomas Stewart proposed in his “Wealth of Knowledge”, he pointed out that the value of the tangible assets of a company, such as land, building, factory, facilities and other balanced assets in comparison with the unrecorded assets, its value is much smaller. What are the intellectual assets? So-called intelligible assets are simply the capital of the intellectual right, including knowledge assets; it includes knowledge assets that can be transferred to profit. Paul Romer pointed out in 1998 [4] that “ We are no longer a recognized machine factory and nature resources are key for improving the level of living standard. It is only if a company can discover and plan to convert and transform assets into products that our material living standards can be improved.

The problem is how to measure the value of the intangible assets on the company's accounting book. For example, in addition to the wireless antenna project, COL has many products in the field of medicament for the eyes, i.e. ointment or eye drops. This project is leading by Dr. Peter Wang, the world leading scientist in the field. COL poses the producing a series of experts with the capability of producing various medicaments for eyes, ranging from A to Z. At present, COL has at least 10 - 20 products that are ready to get in production, and there 20-40 products are in the process of research and development. However, before the products are in the market place there is no sales record on the balance sheet of the company. At the same time, even the multi-national company like the Pfizer drug manufacturing, they might have one drug that has complete clinical testing and it will bring huge revenue for the company, however, before the products are sold, there is no sales records in the company's book.

When the economics are transferred from conventional based to knowledge-oriented activities, we will observe that the company organization structure business model and its development strategy will correspondingly change. A knowledge and technology intensive company is different from a convention-manufacturing firm such as steel mill. This may be further explained by Fig. 16 where the management structure looks like an inverted triangle in the right hand side of the diagram.

This is different from the conventional company, where the wide triangular represents all the production factories. Our focus of production is to push ahead with marketing activities.

Interestingly, recent reports from the World Journal indicating that there is a well-known management expert in shanghai. He has recently visited Haier Company at Qingdao Shandong Province. Haier is a world class manufacturing firm, their main product lines are the refrigerators. Upon his visited at Haier, the management expert made off-hand remarks about Haier's management structure. He said:

"Haier's management is an up-side triangle! "

What a coincidence! Haier is located at Qing Dao, Shandong, China. ("Dao") in English means "island". While Cross Ocean Lab is located at Long Island, New York in the United States. "Island" in Chinese, it means "Dao”.

Therefore, Haier is located at Qing Dao, Shandong Province. Cross Ocean Lab is located at Long Island, New York. Qing Dao (Island) and Long Island (Dao) are be separated from "thousand crags and torrents; numerous mountain, and rivers; a long and arduous journey, stride over Pacific Ocean and Atlantic Ocean.

COL personnel have never visited Haier and we have never met Mr. Zhang, Ruimin, the world-renowned entrepreneur; versus, Mr. Zhang never visited COL, he has also never visited Long Island. If so, why would our two companies have the same business model structure and almost identical "up side triangle”?

This puzzle is an unaccountable puzzle. Perhaps, we can pursue from the "Culture" and the" science development point of view" to search for an answer. Qing Dao is at Shandong Province that was the origin of "Kong-Meng zhi dao" ---- the doctrine of Confucius and Mencius (a school of thought in the Spring and Autumn and Warring State Periods, 770 -- 221 BC.)

When Kong Zhi looked up and looked down, he saw Qingdao's rivers, mountains and flow water, market push and the customers pull. By using the partner's professional marketing judgment and factory's production supply that has made Haier's serious refrigerator products to be sold all over global, this is the expert's description of Haier's " Up-side triangle". (See Fig. 16).

References:

1. Churchill, Winston. 1944, Onward to Victory, Boston: Little Brown.

2. Blair, Margaret M., and Wallman, Steven, 2011, Unseen Wealth Washington, D.C.: Brookings Institution Press.

3. Stewart, Thomas A. 2001. The Wealth of Knowledge, New York: Doubleday.

4. Romer, Paul, 1988, “The Soft Revolution: Achieving Growth by Managing Intangible,” Journal of Applied Corporation Finance, Vol. 11, Number 2 pp. 9-14.

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