I was convinced we had entered the Chinese Century and a Resource Boom of note was about to ensue … I took a MAD plunge.

In what seems all but farcical now, I would sit in coffee shops around the city with a wireless keyboard in hand and a Palm Pilot (remember those?) and write / type.

Half insane from worry about how to feed the family, I would write about this strange land, her abundance of metallic shiny objects and all those little mining companies to speculate on for BONANZA.

Over the next few years I traveled around the country, got involved in tiny Uranium, Iron, Copper and Gold miners.

Recounting this story brings back fond memories but I do so because I smell the scent of yet another Resource Boom a headin’ our way.

You will recall I was listing out the lessons I had learned from my dismal investment failures through the narrative of a manager due diligence exercise … Wendywood Partners (names changed to protect the innocent and not-so innocent).

To continue … we move on to discuss the 2 main assets we were looking at gaining exposure thru Wendywood, by virtue of their ownership in a loan to own strategy.

Bloem was founded in 1988 by Gary and Brad Bloem in Kill Devil Hills, NC. The Bloem brothers remind us of another brother combo in flight history … the venerable Wright brothers.

A gyro-copter is kind of like a helicopter in that it can hover and doesn’t need a runway and kind of like an airplane in that it has short wings and an engine at the back for propulsion.

Helicopters are versatile but dangerous. Their rotor is turned by an engine. If that engine fails the helicopter spins out of control into the ground … something we’ve all seen on tv.

A gyrocopter has a rotor that turns through centrifugal force generated by the plane moving slowly forward. If the engine fails on a gyro-copter it merely glides down to the ground.

In 2003 the US Department of Defense Advanced Research Projects Agency (DARPA) selected Bloem to design a proof of concept high speed, long range, vertical takeoff and landing (VTOL) aircraft for use in search and rescue.  The goals include VTOL, 1,000 lb useful load, 1,000 nautical mile range, and speeds of to 400 mph, over twice the speed of typical helicopters - Bloem dutifully complied.

The basic gyro-copter model is priced just shy of $1m per unit versus a helicopter equivalent of $4m (source: RHOTHETA). Ongoing maintenance costs are also significantly lower.

The cash flows are 33/33/33. That is 33% payable on order, 33% payable when manufacturing begins and 33% on delivery.

If we assume a 100 unit order such as those proposed by Emerging sovereign militaries that’s $30m instant cash flow!

Since all the R&D is done, Bloem is on a small annual cash burn consisting entirely of general expenses, marketing and sales.

For environmental reasons, governments around the world mandate the PPM (parts per million) of sulfur content permissible in different types of hydrocarbon liquid fuels.

The process by which a refiner currently removes sulfur from fuels is called oxidative desulfurization and currently entails injecting a cutting agent into the fuel (Hydrogen) and heating to high temperatures until the sulfur evaporates off.

SFT have developed a unique patented method for reducing sulfur content of liquid hydrocarbon fuels in a cost effective manner to achieve mandated sulfur levels.

The process has been validated on diesel, kerosene and jet fuel by the Yakshamush National Laboratory. The largest lab in the USA owned and operated by the US department of energy.

To remove the sulfur, SFT fuel is first oxidized with hydrogen peroxide which operates much like OxiClean on a stain and then other proprietary chemicals are added. The fuel is heated to a lower temperature which is safer and requires lower initial capex.

Currently SFT have a test facility in Boise, ID for Kerosene and they are constructing a similar plant for Diesel.

Interested parties include Malaysian Oil, Santos Oil Company , Emerald Oil Distributor -- a JV would probably entail a per barrel license agreement.

Sure Wendywood contains other funds … 20% to be exact in an eclectic mix of distressed, restructuring managers. But it's the 80% we’re playing for. Which, by the way, is why we don’t get hung up on investing in a fund of funds, a manager or SMA or whatever … our litmus test, as long as we can access our investment thesis at a reasonable price.

Our capacity originates from some existing LPs that need the liquidity and wanted us to replace their capital.

Aside from a minor (uhmm) 35% mark-up at the end of 2015 - a consequence of a stock swap involving the funding of the drone division - we are now playing for the next Dude & Phillips valuation.

We believe those will both be partially re-addressed at the next valuation because the companies are beginning to generate cash flow and have shown the ability to raise further equity through us and others.

The exit of these investments is expected to be a 2018 or 2019 event and will entail one or all of the following:

For their troubles Wayward IV LP is sitting on a $155m+ uncollected performance fee. Uncollected until they turn the investment back into cash … I’d call that a STRONG alignment of interests!

Having the right ingredients doesn't always make a great cake. Wendywood has the right mix of characters, conditions and catalysts. But we have to be vigilant in the bake!

Thank you for reading my post. I regularly write about private market opportunities and trends. If you would like to read my regular posts feel free to also connect on LinkedIn, Twitter or via Atlanta Capital Group Investment Management.

Nothing in this article should be interpreted as a recommendation to buy any security. Please conduct your own due diligence.

Greg Silberman is the Chief Investment Officer of Atlanta Capital Group Investment Management [ACGIM]. Atlanta Capital Group Investment Management specializes in creating custom private market solutions for RIA/Family Office clients.