MicroCap Review Q2 2022 by Planet MicroCap Review Magazine

Q2 - 2022

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Microcap Review T h e O f f i c i a l M a g a z i n e o f t h e M i c r oC a p S to c k M a r k e t S i n c e 2 0 0 6

F E AT U R E

Investing globally: why investors and issuers are looking abroad with • Thomas Bachrach, PFH Capital • Jason Hirschman, Hudson 215 Capital • Delilah Panino, TSX & TSX Venture • Perth Tolle, Life + Liberty Indexes

2 2 | Beware of Buying Biotech on the Bottom: Life Science Investing in 2022

Has the Definition of ‘Value Investing’ Changed?

F E AT U R E

by Tobias Carlisle

b y A b i g a i l Si ru s a n d Dav i d Sa b l e , Spe ci a l Si t uat i o n s L i f e Sci e n c e s F u n d

2 8 | Global Cannabis in 2022 b y E mi l y Pa x hi a a n d M o rg a n Pa x hi a , P o s e i d o n A ss e t Man ag e m e n t

8 2 | Fund Manager Q&A with Tavi Costa 17 Kraken Robotics Inc. (TSX-V: PNG) / (OTCQB: KRKNF)

32 U.S. Global Investors, Inc. (NASDAQ: GROW)

26 Vision Marine Technologies Inc. (NASDAQ: VMAR)

42-53 MCRI Q2 2022 Constituent List

T H E

M I C ROCA P

L ITIG ATOR S

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Market Maker DTC Eligibility

DWAC Deposits Certificate Deposits Form 211 Applications OTCQB/OTCQB/OTC/Pink Sheets 818 - 907 - 1505 cs@GlendaleSecurities.com www.GlendaleSecurities.com Eric Flesche

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Microcap Review In Loving Memory of Our Precious Daughter, and Sister, Sammi Kane Kraft Published Since 2006

www.SNN.Network Follow us: @StockNewsNow SNN Inc. 4055 Redwood Ave. Suite 133 Los Angeles, CA 90066 www.SNN.network PUBLISHER Robert K. Kraft, MBA SNN Chief Executive Officer, Executive Editor & Director rkraft@snnwire.com Shelly Kraft SNN Founder, Publisher Emeritus skraft@snnwire.com Lynda Lou “Lulu” Kraft SNN President & Director lkkraft@snnwire.com ASIAN PACIFIC CORRESPONDENT Leslie Richardson SNN Compliance and due diligence administration Jack Leslie chairman of snn advisory board Dr. Leonard Makowka ADVERTISING and Sales info@snnwire.com GRAPHIC PRODUCTION Unitron Media Corp info@unitronmedia.com SNN CONFERENCES info@snnwire.com ©Copyright 2022 by MicroCap Review Magazine Inc. All Rights Reserved. Reproduction without permission of the Publisher is prohibited. The publishers and editors are not responsible for unsolicited materials. Every effort has been made to assure that all Information presented in this issue is accurate and neither MicroCap Review Magazine or any of its staff or authors is responsible for omissions or information that is inaccurate or misrepresented to the magazine. MicroCap Review Magazine is owned and operated by SNN Inc. This publication and its contents are not to be construed, under any circumstances, as an offer to sell or a solicitation to buy or effect transactions in any securities. No investment advice is provided or should be construed to be provided herein. MicroCap Review Magazine and its owners, employees and affiliates are not, nor do any of them claim to be, registered broker-dealers or registered investment advisors. This publication may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. Such forward-looking statements of or concerning the companies mentioned herein are subject to numerous uncertainties and risk factors, including uncertainties and risk factors that may not be set forth herein, which could cause actual results to differ materially from those stated herein. Accordingly, readers are cautioned not to place undue reliance on such forward-looking statements. This publication undertakes no obligation to update any forward-looking statements that may be contained herein. MicroCap Review Magazine, its owners, employees, affiliates and their families may have investments in companies featured in this publication, may purchase securities of companies featured in this publication and may sell securities of companies featured in this publication, at any time and from time to time. However, it is the general policy of this publication that such persons will refrain from engaging in any pre-publication transactions in securities of companies featured in this publication until two trading days following the publication date. This publication may contain company advertisements/advertorials indicated as such. Information about a company contained in an advertisement/advertorial has been furnished by the company, the publisher has not made any independent investigation of the accuracy of any such information and no warranty of the accuracy of any such information is provided by this publication, its owners, employees and affiliates. Pursuant to Section 17(b) of the Securities Act of 1933, as amended, in situations where the publisher has received consideration for the advertisement/advertorial of a company or security, the amount and nature of such consideration will be disclosed in print. Readers should always conduct their own due diligence before making any investment decision regarding the companies and securities mentioned in this publication. Investment in securities generally, and many of the companies and securities mentioned in this publication from time to time, are speculative and carry a high degree of risk. The disclaimers set forth at http://www.microcapreview.com/disclaimer/ - disclaimer are incorporated herein by this reference.

E d i tor i al

s we get bombarded with market information and intel in the news, social media, newsletters, TV ads, YouTube etc. we have to keep our own perspective in mind, which is, how does what’s happening in the stock market affect microcap stocks? How do we manage the holdings in our portfolio? How do we make our decisions of whether we should buy, sell or hold? As investors we do need to decipher pertinent details from the noise of those trying to sell us their ideas. Picking up morsels of truth is still relevant to our decision making which brings me to the point of staying in our lane, picking sources we trust with a history of accuracy, doing this will do more to protect our self-made directives while resisting a constant repetitive barrage of attempted paid influences. Pundits in the microcap world often preach doing your homework, believe in your own methods, stick to your plan, learn from your mistakes, and build your sensibility to maintain focus. I believe for the most part they are correct. However, it’s quite difficult to locate non-biased information during our searching for it and even harder to interpret incoming information when it finds you. Although I am a market traditionalist and since I historically lean on using my own common sense, this method may be costly since it also embeds learning from one’s own mistakes. For example, for generations investors relied on their stockbroker or wealth advisor to “trust” their advice, timing, ideas, guidance and performance. For better or for worse this marriage could have been a very successful marriage, oh by the way, the Internet, social media, relentless advertising, and regulatory intervention changed everything. The advent of discount brokering, and millennial DIY activity gave investors the power of making decisions but added the need for discipline, research, and trial & error. As far as I’m concerned and in my opinion, I would rather fail or succeed because of my own decisions rather than being led to slaughter and placing blame elsewhere. Like everything in the Stock Market, MicroCaps are down. As of EOD on June 17, 2022, the MicroCap Review (MCRI), our proprietary MicroCap index tracking MicroCap performance, is down 26.73% YTD; the only index we track that is doing worse is NASDAQ, which is down 31.36% YTD. I don’t want to spend time in this editorial discussing why; I highly recommend tuning into Planet MicroCap Podcast to hear what my guests have to say about the matter. The real question is, well, now what? The summer is an opportune time to start reflecting on what your financial goals are for the near and long term using some of the data enclosed in this issue of the magazine, as well as macro data/indicators. Few things we are certain of right now: liquidity has dried up, interest rates have gone up (and probably will continue to) in order to rein in inflation, high flying growth names have taken it on the chin. There’s actually a bunch of things that we’re now certain of, but at the end of the day, despite rising inflation, this may sound otherworldly these days, but CASH IS STILL CASH. Having cash to deploy in times like these is where the greats have made names for themselves. At least for me, especially if we are going to continue to see declines, not just in MicroCaps, but overall markets, is when I’m reflecting on how I want to deploy cash that will set me up for financial independence in the next 10-15-20 years. We don’t have all the answers, however, by reading this issue of the magazine, I hope that you’re able to walk away with a few nuggets that can help you on your path to financial independence. MicroCap Review Magazine 5

CONTENTS Fe atu r es 10

Investing Globally: Why Investors and Issuers are Looking Abroad With Thomas Bachrach, PFH Capital; Jason Hirschman, Hudson 215 Capital; Delilah Panino, TSX & TSX Venture; and Perth Tolle, Life + Liberty Indexes

Has the definition of “Value Investing” Changed? by Tobias Carlisle, Acquirers Funds

Ins ights 8

Ask Mr. Wallstreet: Should I Buy, Sell or Hold? by Shelly Kraft

Market Maker Corner: Payment for Order Flow by Eric Flesche, Glendale Securities

My Love Affair with Global Investing

Fund Manager Q&A with Tavi Costa

by Brandon Mackie, Private Investor

DTC Eligibility by Erik Nelson, Coral Capital Advisors

Financing MicroCap Biotechs

EVs – Silver to Play a Minor or Major Role? by David Morgan, The Morgan Report

Beware of Buying Biotech on the Bottom by David Sable and Abigail Sirus, Special Situations Life Sciences Fund

by John Bonfiglio, PhD MBA, Independent Board Director

What is the Role of a MicroCap CFO? by Wesley Ramjeet, PPMT Group

Lake Resources: Aligning Operations to Power North America’s EV Revolution

The Micro-Cap Report 2022: Half Year Review by Lucosky Brookman LLP

Pinchuk LLP

In Remembrance: Igor Levental

How EOS® Can Improve Employee Retention by Jackie Kibler

Overview of the MicroCap Review Index (MCRI™)

Legal Corner: Vast Changes to Microcap Financing Part II by Jon Uretsky, Esq., PULLP

How Public Relations Can Support MicroCap and SmallCap Companies

Global Cannabis in 2022 by Emily Paxhia and Morgan Paxhia, Poseidon Asset Management

Accounting Corner: CFO Ultimate Stress Test by Drew Bernstein, CPA, Marcum Bernstein &

by Shelly Kraft, SNN, and Roger Pondel, PondelWilkinson

Global Electrification for All Vehicles No Longer a Thing of the Future

Making Seats for Female Board Members by Diane Yoo

Battery Metals OvervIew by Gavin Wendt, MineLife

Asia Corner: Hong Kong IPO Market Hits Dry Spell by Leslie Richardson

6 MicroCap Review Magazine

Profiled Companies 17

Kraken Robotics Inc. (TSX-V: PNG) / (OTCQB: KRKNF)

26 Vision Marine Technologies, Inc. (NASDAQ: VMAR)

32 U.S. Global Investors, Inc. (NASDAQ: GROW)

42-53 MCRI Q2 2022 Constituent List

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I n Rememb r a n c e

Igor Levental mining sage with deep passion for arts and learning BY: ANTHONY VACCARO, JUNE 20, 2022

The mining universe has lost not only a wise and generous leader, but also a true renaissance man. Igor Levental, president of The Electrum Group and director of Novagold Resources and Gatos Silver, passed away suddenly and unexpectedly on June 10. Igor’s mining career spanned more than 30 years, where he held numerous board and senior roles and was actively involved in many of our industry’s more notable deals and development projects. For those of us who had the good fortune to spend time in his company — and there were many, as Igor went out of his way to make time for people — we quickly saw that this was a rare individual. His depth of knowledge, not only about mining but also cinema, opera, music, books, and pretty much any other subject that could arise, was matched only by his friendliness, humility and incredible sense of humour. He was also a keen student of mining history, and was for myself a great source for background and colour about some of the liveliest people and most important deals in our industry’s long history. Dr. Thomas Kaplan, Novagold’s chairman, wrote a worthy tribute to Igor entitled “Onwards and Upwards: A Tribute to a Cherished Friend, Igor Levental.” Out of the many strong memories, this one in particular stands out: Among so many wonderful vignettes, on one especially memorable occasion, while serving as my plus-one for the screening of a Woody Allen movie, I introduced him to the virtuoso artist. I left them alone, and when I returned found Igor and Woody deeply immersed in the nuances of Ingmar Bergman’s character studies. This epitomized the

Igor Levental. Busath Photography

quintessential Igor, and my eyes are brimming from this image. Reminiscing upon it now, I last said goodbye to Igor in Salt Lake City in May with my planting a big parting kiss on his forehead — a tradition we maintained for years. He chuckled, and his smile was beatific. Igor was a positive force in life, and in our industry. We were indeed very fortunate to benefit from that force in innumerable ways, both small and large. Our deepest condolences go to his family, his wife Jessica Levental, sons Casey, Misha and Misha’s wife Evan, and Igor’s father Mr. Genady Levental. We will do our part to let Igor live on by acting with integrity, thoughtfulness and attentiveness towards those around us, and in doing so he will continue to enhance this industry through us. Contributions in Igor’s memory can be made to Hillel 818, Panthera, or the Colorado Mining Association Education Foundation.

Originally published in The Northern Miner on June 20, 2022, authored by Anthony Vaccaro.

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MicroCap Review Magazine 7

ins i ghts

// By Shelly Kraft

AsK Mr. Wallstreet Should I Buy, Sell or Hold?

Pundits in the microcap world often preach doing your homework, believe in your own methods, stick to your plan, learn from your mistakes, and build your sensibility to maintain focus. I believe for the most part they are correct. However, it’s quite difficult to locate non-biased information during our searching for it and even harder to interpret incoming information when it finds you. Although I am a market traditionalist and since I historically lean on using my own common sense, this method may be costly since it also embeds learning from one’s own mistakes. For example, for generations investors relied on their stockbroker or wealth advisor to “trust” their advice, timing, ideas, guidance and performance. For better or for worse this marriage could have been a very successful

marriage, oh by the way, the Internet, social media, relentless advertising, and regulatory intervention changed everything. The advent of discount brokering, and millennial DIY activity gave investors the power of making decisions but added the need for discipline, research, and trial & error. As far as I’m concerned and, in my opinion, I would rather fail or succeed because of my own decisions rather than being led to slaughter and placing blame elsewhere. Ask Mr. Wallstreet is Shelly Kraft. He began on Wall Street in 1984 as a penny stockbroker, investment banker, rising to President of Emanuel & Company, a boutique IPO underwriter and microcap market maker.

Note: This article is not an attempt to provide investment advice. The content is purely the author’s personal opinions and should not be considered advice of any kind. Investors are advised to conduct their own research or seek the advice of a registered investment professional.

8 MicroCap Review Magazine

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Fe atu re

Investing Globally Why Investors and Issuers are Looking Abroad

Over the last 5-10 years, U.S. MicroCap investors and the general U.S. investment community have been looking for investing opportunities abroad.

here’s nothing new about that statement. We’ve done a number of interviews on Planet MicroCap Podcast with U.S. investors who have found value accretive investments in Canada, Australia, Israel, Poland, London, etc… The most obvious question to answer here is - well, why? Why are U.S. investors choosing to invest globally? This trend is not limited to U.S. investors; U.S. microcap companies have been increasingly looking to go public on foreign exchanges. Why is this happening? Using the TSX-V as an example, we seek to figure out why. And finally, for those who are noticing this trend and also want to start looking globally, why it’s important to focus on “Free-er” economies.

To help me answer these questions, I’ve enlisted the help of my colleagues to provide their insights: Thomas Bachrach, Jason Hirschman, Delilah Panino and Perth Tolle. Why are U.S. investors choosing to invest globally?

Thomas J. Bachrach Principal at PFH Capital

One, if you look at a broad cross section of valuation measures, the US has clearly been one of the most expensively priced markets in the world in recent years. There is an ample supply of high quality businesses overseas, yet inadequate investor demand often depresses valuations beyond what is reasonable.

Two, anecdotally, I find the micro/small cap space to be far less efficient outside the US. Even the most obscure microcap in the US seems to have dozens

10 MicroCap Review Magazine

of small investors following it closely. Overseas, it can be hard to find more than one or two peers following a name. All else equal, I’d rather fish a pond with less fisherman standing around, even if the water is a little murky. I’ll add to this all that believe the risks of investing overseas can easily be exaggerated, with home bias often the bigger risk to the average US investor. Some cite poor corporate governance overseas, though I am not sure the US is materially better after what we’ve witnessed the last half decade. Geopolitical risk is of course elevated in many jurisdictions outside the US, but that is a risk that can be largely diversified away by monitoring country/region exposures. ••• There are no certainties in the stock market but there are nearcertainties. Here are two of them: equity investors love Munger quotes and adore sports references. Listen to Charlie who said, “The first rule of fishing is fish where the fish are.” Now for the sports allegory: Which NBA Jason Hirschman general manager do you think has the better chance of fielding Principal, Hudson 215 Capital a top notch team? GM #1 who exclusively scouts and drafts American players? Or GM #2 who sifts through both domestic and international prospects with the hope of identifying great talent like Giannis Antetokounmpo (Greece) or Luka Doncic (Slovenia)?

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If you don’t know the difference between an Antetokounmpo and an antelope or understand phishing more than fishing, please do one more thing before shifting your attention to the next article. Close your eyes and imagine the freedom and funds you would have if you invested in an Endor AG (Germany) or XPEL Inc. (originally listed on the TSX Venture in Canada) or Fortnox AB (Sweden) as microcaps before they blossomed into multi-bagger success stories. Investing is hard enough already without constructing artificial walls that separate you from exciting opportunities. Sweden, Germany, Canada and others like Australia operate under the rule of law, produce competent shareholder friendly management teams, and offer Western level consumer markets. Often these potential small companies are ignored or underfollowed so you can buy them at a lower multiple of EBITDA or sales than comparable USA-based firms. Some service or are located in the United States despite a foreign listing (like XPEL); many

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welcome conversations with American investors and speak workable or fluent English. As a younger (and poorer) man I dismissed Canada’s software rollup Constellation Software for years because I arrogantly thought, “What do Canadians know about acquiring software companies? Maple syrup rollup count me in … software deals - leave that to us Americans.” Fortunately, I learned my lesson and purchased as much XPEL as possible while it traded on the Canadian junior exchange prior to uplisting on the NASDAQ. I fished where the fish were and drafted my Anteokounmpo in XPEL. Now I don’t have to close my eyes to imagine freedom and funds because other people’s fantasy existence is my reality. All thanks to investing globally in microcap names. Jason Hirschman and Hudson 215 Capital is a shareholder of XPEL, Inc.

•••

MicroCap Review Magazine 11

Why are U.S. (and global) issuers now starting to seek public listings abroad, particularly via Canadian exchanges? With the increasing globalization of capital markets and decentralized financing solutions, CEOs of US high growth companies are looking at all of their capital raising options, including public offerings in foreign markets. In Canada, the number of US companies going public on the various exchanges has increased Delilah Panino significantly in the past few years. In Vice President, U.S. 2021, 25 US companies went public Capital Formation Toronto Stock Exchange on Toronto Stock Exchange (TSX) / TSX Venture Exchange and TSX Venture Exchange (TSXV), up 150% from the prior year and representing diverse industry sectors. Companies such as The Planting Hope Company (TSXV:MYLK), a Chicago-based milk alternative company, Sabio Holdings (TSXV:SBIO), an LA-based marketing data company, and Champion Gaming (TSXV:WAGR), a sports data and analytics company in Kentucky, all took advantage of the opportunity to access capital in Canada last year. The value proposition for US companies to list in Canada continues to be going public earlier than is typically seen on the US exchanges. TSX and TSXV are well regulated public venture capital markets that can be attractive alternatives to private venture capital and a stepping stone to a senior US exchange listing. Last year, US companies on TSX and TSXV raised $1.6 billion and 45 TSX and TSXV companies dual listed on NYSE or Nasdaq. Ultimately, this is driven by the demand of investors trading on TSX and TSXV as they are also looking to diversify their investment portfolios outside of domestic issuers. Global investors have the unique opportunity to invest in early stage high growth companies in such trending sectors as cryptocurrency, esports and gaming, and renewable energy. For US companies, the right investor base just might be in Canada. The author does not own any of the stocks mentioned in this article.

•••

12 MicroCap Review Magazine

If you want to start looking globally, why it’s important to focus on “Free-er” economies. How should we think about investing in what some are calling, “a new world order” with the demonstrable, horrific invasion of Ukraine by Russia? Emerging markets investors, like microcap investors, seek to capture high growth from a low base. In the hunt for the growth stories of the future, we believe it is advantageous to focus on freer economies because they tend to enjoy 1) better incentives for productivity, 2) lower expropriation risk, and 3) favorable demographics. Better Incentives for Productivity

Perth Tolle Founder at Life + Liberty Indexes

In an unfree economy, a powerful few, typically wielding power through the state, decide who can participate in the market, and tend to make rules to keep out fair competition. High taxes, burdensome regulations, and government scrutiny on successful businesses all work together to disincentivize productivity and keeping the few in power. In such an environment, wealth cannot be created, it can only be transferred. Innovators are constrained by high barriers to entry, and success is a zero sum game. In a freer economy, new ideas compete on a more level playing field, and succeed by providing value to others in the market, not by the favor of the state. Anyone with an idea that provides a benefit to customers at a competitive price can create wealth. Companies are incentivized to prioritize stakeholder interests above those of the state. Lower taxes, lighter regulations, and less government interference in private market activity all work together to incentivize creativity and innovation. Lower Expropriation Risk Akin to having a quality factor on the country level, freer economies are the safe havens of EM. Freer economies have stronger institutions and rule of law, individual and investor protections, and checks and balances on government power, such as freedom of expression, press, movement and assembly. As

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a result, there is lower risk of shareholder value destruction due to expropriation. In EM, expropriation risk can happen in many ways. In the last few months, Sisi has thrown a father and son in jail for refusing to hand over their business (Juhayna) to the Egyptian army – expropriation by force; Putin has invaded a peaceful independent country, triggering a worldwide response that rendered Russian securities worthless – expropriation by sanctions; and China has cracked down on their star sectors in the name of common prosperity – expropriation by government interference. Unthinkable just recently, investors are aware of expropriation risk like never before.

In a world where freedom levels are rapidly diverging, countries with higher relative freedom levels – better incentives for productivity, lower expropriation risk, and favorable demographics, among other beneficial outcomes – are ground zero for the growth stories of the next decade.

Favorable Demographics Freer economies tend to use their capital more efficiently, and experience less capital flight and capital destruction – including both human and economic capital. As a result, freer countries tend to have more favorable demographic outlooks. China’s reproductive policies and repression of minorities have led to its having the worst demographic outlook in the world. Russia’s war crimes are also causing loss of life, capital flight, and capital destruction on a mass scale. In contrast, Poland is welcoming a large inflow of Ukrainian refugees, likely to strengthen their productivity in coming years. Estonia, with its technological leadership and digital citizenship, is considered the silicon valley of Europe for its start-up culture. And smaller Asian countries like Indonesia, Malaysia, Thailand, and Philippines, with relatively favorable demographics and more business friendly policies, are well positioned to benefit from the global move to diversify manufacturing supply chains out of China.

unfree countries like Russia, China, Turkey and Egypt, and 2) having higher allocations to freer EMs like Taiwan, South Korea, Chile and Poland. Continued outperformance is never guaranteed, but we will continue to deliver exposure to the freest EMs. Other Beneficial Outcomes of Freedom Besides the aforementioned benefits, freer economies also enjoy higher life expectancy, lower infant mortality, higher income per capita, lower poverty rates, higher GDP growth, lower corruption, and higher gender equality. Moreover, we find that when the G on the country level is in place, in the form of higher freedom scores, the E, S, and G on the security level tends to fall in place as well. Without any ESG screening on the security level, our freedom-weighted FRDM index has an “A” rating for ESG from MSCI. As our investors have pointed out, it’s a way to incorporate ESG in a way that doesn’t detract from returns. To the contrary.

The FRDM Index Solution The freedom-weighted FRDM index is a freedom weighted EM equity strategy that uses third-party quantitative personal and economic freedom metrics as primary factors in the investment process. So far, the relative outperformance has been stark. The FRDM index strategy is up 28% since its inception (5/23/2019), while EEM is up 13% for the same time period. The outperformance is due to 1) avoiding

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MicroCap Review Magazine 13

ins i ghts

// By Brandon Mackie

My Love Affair with Global Investing You’ve probably heard the advice… invest in your own backyard.

ou know the companies. You’ve used their products. You can phone up management.

Makes sense doesn’t it? Well the problem with investing in your own backyard is… so can your neighbors. And often that means more eyeballs, more competition, and higher prices – which as an investor is the last thing you want. I’ve lived my whole life in the United States. And I’ll let you in on a secret… I haven’t owned a US-listed stock in over 11 years. My love affair with global investing started in 2013 with an obscure Swedish stock. The company was called Kopparbergs Bryggeri. They brewed hard pear cider and I knew this could be a very good business at scale. And here was Kopperbergs trading at 4 times free cash flow, growing double-digits each year. I even found their pear cider at a pub in town – it was darn good. The company’s reports were all in Swedish. It traded on an obscure exchange called the Nordic Growth Market (NGM) – a collection of mostly 30 Nordic biotech companies. And when I phoned my broker at Fidelity, I was told he’d have the order delivered… by hand. I’d hear back in a few days if I got a fill.

14 MicroCap Review Magazine

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This was all music to my ears. I had a good feeling why the stock was so mispriced. Kopparbergs went on to 10x that year on strong results and market discovery. I was hooked. Next my interest turned north, to Canada. Same language, same time zones, and mispriced stocks? What’s not to love!?

1) Less Competition The US is the largest stock market in the world. Nearly every US-based investor invests in domestic stocks (well except me of course). But on top of that, many foreign investors will buy in their home market and in the US. This dynamic piles on the competition and is why you shouldn’t be afraid to look elsewhere. 2) Access to earlier stage companies

This time it was a small company called XPEL Technologies (XPEL). My colleague Paul Andreola mentioned he’d found it at $.14. It now traded around $1.15. The company was growing triple digits and still trading at a single-digit P/E ratio.

While the US Venture Capital industry has been a boon for tech entrepreneurs – it’s been bad for the average investor.

This company was literally in my backyard. I was living in Houston at the time, they were down the road in San Antonio. I visited management and felt their growth was just beginning.

Intel (INTL) went public in 1974 at a 4 million valuation. It was a microcap (even in today’s dollars). You don’t see many opportunities like that in the US these days.

I went to buy, delighted to find them trading with an obscure listing in Canada (DAP.U). I bought all I could at the time.

But in other markets like Canada with less developed VC industries, promising growth companies often have no choice but to fund themselves in the public markets.

Though I sold far too soon, XPEL touched over $100 last year after uplisting to the NASDAQ and continuing to execute – a 700+-bagger for anyone fortunate enough to find it early and hold on for dear life. Then it was Hamilton Thorne (HTL), an innovative Boston-based life sciences company. The company’s ticker was stuck in Canada where it was left for dead by the analysts. I liked the growth potential and participated in a small private placement at $.10 CAD in early 2014. A few years later the company attracted a few sophisticated US-based life science investors and the company began getting attention. It now trades around $2.00 CAD. I still own all my shares. I went on to start a newsletter Smallcap Discoveries with Paul called Small Discoveries – all about highlighting the global investing opportunity in nonresource Canadian stocks. And yet after all these years, and after discovering many more 10-baggers, it amazes me how few investors give global investing a serious look.

And that means you the investor has access to growth companies far sooner than you’d typically find in the US. 3) Access to growing markets The US has seen fabulous growth over the last 100 years. But will it continue? With real GDP growth in the low single-digits, other global markets – particularly in Asia – can offer investors access to higher growth rates. As they say, a rising tide lifts all boats. And when you invest in a growing market, picking winning stocks becomes that much easier. Happy hunting. And happy translating! -Brandon

I’ll leave you with 3 reasons why global investing can beat the market – if you’re willing to leave the comfort of your backyard. Note: This article is not an attempt to provide investment advice. The content is purely the author’s personal opinions and should not be considered advice of any kind. Investors are advised to conduct their own research or seek the advice of a registered investment professional.

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MicroCap Review Magazine 15

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CONNECT.TODAY 16 MicroCap Review Magazine

Kraken Robotics Inc. (TSX-V: PNG) / (OTCQB: KRKNF) INVESTOR OVERVIEW

COMPANY OVERVIEW

(Data compiled as of market close on May 27, 2022)

SUMMARY Share Price ($)

0.355

Market Cap ($M)

71.4

52-Week Low/High ($)

0.32 / 0.66

Shares on Issue (M)

201.2

Warrants (M)

10.0

Options (M)

13.8

Fully Diluted Shares (M)

225.0

Volume Weekly (M)

Kraken Robotics Inc. (TSX-V: PNG) / (OTCQB: KRKNF) is a marine technology company providing advanced sonar and laser systems and subsea power solutions for Unmanned Underwater Vehicles for military and commercial applications. Kraken’s series of SAS products, AquaPix®, offers comparable performance to existing highend military systems at a fraction of the cost. As a result of the acquisition of PanGeo Subsea in 2021, Kraken now provides subsea Robotics as a Service capabilities including geophysical surveys, sonar surveys, and 3D laser inspections.

12-MONTH SHARE PRICE CHART

0.5

FINANCIAL STATEMENT OVERVIEW Currency

$CAD

Cash ($m)

1.2

Debt ($m)

11.1

1Q ’22 Revenue ($M)

5.5

1Q’22 Net Profit/Loss($ ($M)

-2.6

TOP 5 INSIDER HOLDINGS (basic)

Karl Kenny

12.0

Ocean Infinity Ltd

10.6

Greg Raid

2.4

Tocqueville Asset Management

1.7

Lawrence Puddister

0.9

Total Insider shareholdings

MANAGEMENT & CONTACTS CORPORATE FOCUS Sector

Technology

Key Product/Market

Marine technology

SENIOR MANAGEMENT & CONTACT CEO Name Investor Relations Name IR Email Address Headquarters Location Website/URL

Karl Kenny Sophic Capital investors@krakenrobotics.com Newfoundland, Canada http://www.krakenrobotics.com

ANALYST COMMENT provided by Independent Investment Research The company delivered strong FY21 results with revenue for the year ended December 2021 of $25.7m, a 109% increase on FY20 revenue. The company delivered the growth despite the global supply chain issues. Growth was driven by the delivery of a minehunting system to the Remontowa shipyard for the Polish Navy, the continued work with the Royal Danish Navy on multiple minehunting systems, the addition of PanGeo Subsea in July 2021 and multiple deliveries of our AquaPix® synthetic aperture sonar and SeaPower™ batteries. Despite the revenue growth the company reported a net loss of $3.5m. The company is forecasting FY22 revenue to be in the range of $36m-42m, a 40%-53% increase on FY21. Adjusted EBITDA is forecast to be in the range of $5m-$7m in FY22, more than double FY21, with the company on the path to becoming profitable.

Please visit the company’s website for more information:

www.krakenrobotics.com Note: This article has been undertaken by Independent Investment Research LLC (CRD#299837) & Independent Investment Research (Aust.) Pty Limited (Lic. No. 001242826), a corporate authorized representative of Australian Financial Services Licensee (AFSL no. 410381) (“IIR”). Any opinion contained in the article is unsolicited general information only. The reader of the article should seek advice from a qualified wealth adviser. This publication is not and should not be construed as, an offer to sell or the solicitation of an offer to purchase or subscribe for any investment, nor should it be construed as a recommendation. This material contains forward-looking statements. In addition, from time to time, we or our representatives may make forward-looking statements orally or in writing. We base these forward-looking statements on our expectations and projections about future events, which we derive from the information currently available to us. Such forward-looking statements relate to future events or our future performance, including: our financial performance and projections; our growth in revenue and earnings; and our business prospects and opportunities. You can identify forward-looking statements by those that are not historical in nature, particularly those that use terminology such as “may,” “should,” “expects,” “anticipates,” “contemplates,” “estimates,” “believes,” “plans,” “projected,” “predicts,” “potential,” or “hopes” or the negative of these or similar terms. In evaluating these forward-looking statements, you should consider various factors, including: our ability to change the direction of the Company; our ability to keep pace with new technology and changing market needs; and the competitive environment of our business. These and other factors may cause our actual results to differ materially from any forward-looking statement. Forward-looking statements are only predictions. The forward-looking events discussed in this document and other statements made from time to time by us or our representatives, may not occur, and actual events and results may differ materially and are subject to risks, uncertainties and assumptions about us. We are not obligated to publicly update or revise any forward-looking statement, whether as a result of uncertainties and assumptions, the forward-looking events discussed in this document and other statements made from time to time by us or our representatives might not occur.

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MicroCap Review Magazine 17

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// By David Morgan

EVs – Silver to play a minor or major role? Almost everyone now knows the term EV means electric vehicle. Elon Musk has brought about massive attention to electric vehicles. But it wasn’t an easy ride. Tesla was not an overnight success. The company was founded in 2003 by two Silicon Valley engineers, Martin Eberhard and Marc Tarpenning, who wanted to prove that “electric vehicles can be better, quicker and more fun to drive than gasoline cars.”

he seeds of the company go back to 1990 when Tarpenning met Eberhard, who at that time was an engineer at Wyse Technology, and they became good friends. The two had much in common, including a passion for starting companies; one that they soon launched was NuvoMedia, which released the Rocket eBook in 1998.

Elon, being the visionary, saw the potential and bought the company. Recently, Mr. Musk has stated he might be interested in buying a mining company. Why? Because EVs take massive amounts of minerals, everything from Rare Earths to silver. Silver is an essential part of electric car parts; silver is used in the EV manufacturing process because of its chemical properties. Silver has a very high corrosion resistance (important for battery making, which involves the use of corrosive acids), and is also a stellar conductor of electricity. Some silver bugs have overstated the case for silver needed as the world is asked to shift to EVs. First, car manufacturers use up to 55 million ounces of silver per year (that’s over 3 million pounds!). It’s

18 MicroCap Review Magazine

estimated that hybrid vehicles use anywhere from 18 to 34 grams of silver per vehicle. But EV’s need as much as 25-50 grams for each vehicle. Some of the key features in EVs that require silver for conducting purposes include an EV’s infotainment system, electric power steering, and even safety features such as automatic braking and airbags. The renewable energy industry might even affect the price of silver as demand increases. It’s predicted that there will be over 120 million EVs on our national highways by the year 2030, which means that carmakers will start becoming more conscious of the way they use silver in manufacturing, which is ongoing. As an aside, solar uses about 100 million ounces of silver per year. However, solar panels are at least twice as efficient as they were in the year 2000. If this “thrifting” (continual improvement) of silver had not taken place, the silver market would be in a very serious deficit by now.

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Forward looking investors have asked me, Do electric vehicles make silver the investment of the decade? Before we look at silver as an investment and its potential, we need to understand the EV market better. The real story on EVs is batteries. What is so interesting about batteries is the fact that nothing comes close to silver as far as a battery is concerned! Silver oxide acts as the positive electrode and zinc the negative electrode. Therefore, it is also called a “silver-zinc battery.” This battery has many advantages compared to its equivalents. It is much more durable, has a very high energy-to-weight ratio, and can tolerate high current loads. Silver oxide battery is considered one of the best batteries if you must compare it with other types of batteries. You must prefer a silver oxide battery over an alkaline battery due to its major features and better use. The high energy density of silver oxide batteries

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attracted interest from a range of industries, particularly military and aerospace. According to the Silver Institute, the military and aerospace utilized silver-zinc in a range of applications and undertook a considerable amount of research and development to further develop the technology. The National Aeronautics and Space Administration (NASA) became increasingly involved in the development of a rechargeable version of silver-zinc. While NASA was ultimately not able to improve on the most used rechargeable nickel-cadmium technology at the time, their R&D efforts led to high density silver-zinc cells, one-third of the size of anything else available. Even though a silver-based battery is superior in many ways, it will not be used as the power basis for EVs. The use currency is Lithium and in fact not the most efficient lithium battery available, due to cost. The market for silver-based batteries remains singleuse silver oxide button cell batteries in devices such

MicroCap Review Magazine 19

With this potential range, and a capacity to endure 1,000 cycles, this new solid-state cell could make a car last for 800,000 km (497,000 mi) as a standard.

as quartz watches, hearing aids, and medical applications. Lithium-based batteries can be prone to leakage and, in rare cases, thermal runaway, which can cause lithium-ion batteries to catch fire. Under normal conditions of use, silver oxide batteries are non-toxic. However, before we dismiss silver totally as the power source for EVs we need to inform our readers that some researchers from the Samsung Advanced Institute of Technology (SAIT) and the Samsung R&D Institute Japan (SRJ) have used a very thin silvercarbon film (Ag-C) in a prototype pouch cell. This announcement was made in 2020. We are guessing that this design is probably the adequate format for a solid-state battery. The silver-carbon film is extremely thin. It was crucial to make the anode thinner and to increase energy density. Anyway, the silver-carbon film has the purpose of preventing dendrite formation. Dendrites are needle-like crystals that form on anodes and damage the battery. Another significant advantage the Ag-C film offered relates to the size of the cell, which is around 50 percent smaller in terms of volume than an equivalent lithium-ion battery. Less volume means less weight. Weight is a key factor in all EVs! Anytime weight can be reduced the performance and range improve.

car last for 800,000 km (497,000 mi) as a standard. In March of 2022, Samsung SDI announced they had started building a new pilot assembly line in South Korea that’ll produce the first prototypes of its solid state batteries. At this point, it’s too early to tell how soon Samsung or any of the other battery manufacturers will put their designs into full-scale production for an EV. However, the pace at which the tech is developing, we expect to see solid state batteries in electric cars by the end of this decade in 2030. Initially, solid state battery powered EVs could be more expensive to buy than those with conventional batteries. Other than Samsung SDI, battery manufacturers such as QuantumScape and even carmakers such as Toyota and Dongfeng Motor are working on the upcoming tech. This means that future EVs will get better range than we see today, and charging times are likely to improve as well. The bottom line is that EV’s use roughly twice the amount of silver that an internal combustion engine uses without using silver-based batteries as the power source. If the Samsung technology proves itself and it moves into EV’s around 2030, you might consider the value of silver for our high-tech world, versus the fact silver is at an inflation adjusted low for the past thousand years. Wouldn’t it make a lot of sense to have the best conductor of electricity (silver) power your new EV? Further, assuming recycling is possible, driving a car that increases in value because the batteries are increasing in value could prove profitable. David Morgan is the publisher of the Morgan Report, found at www. TheMorganReport.com. This website offers three levels of service for investors in the resource sector. Although considered a leading voice in the silver industry, TMR focuses on the entire sector having been first in rare earths, cobalt, and cyanide free recycling. Visit the About tab on the website and view The Four Horsemen film for free. This documentary is must viewing for people during these fast changing times.

The researchers claim that an EV with such batteries could have a range of 800 km (497 mi). It is not clear if it could reach that with a battery pack equivalent in size to that used by a Tesla, for example, or with a smaller one. With this potential range, and a capacity to endure 1,000 cycles, this new solid-state cell could make a Note: This article is not an attempt to provide investment advice. The content is purely the author’s personal opinions and should not be considered advice of any kind. Investors are advised to conduct their own research or seek the advice of a registered investment professional. David Morgan does not own any of the stocks mentioned in this article.

20 MicroCap Review Magazine

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MicroCap Review Magazine 21

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// By David Sable and Abigail Sirus

Beware of Buying Biotech on the Bottom Life Science Investing in 2022

Greetings from the epicenter of a biotech bear market. To our rational, valuation-conscious, general investor friends who figure that at this point, the biotech sector — having been cut in half over the past year - must be a pretty attractive place to look for new names, right?

n theory, yes, but step lightly. Let us offer up two pieces of advice. 1) Mind your cap structure 2) Trust analyst reports for “who”, “what,” “where” and “when”, but not for “why.” And definitely not for “how much.”

We’ll start with capital structure. Some of the more eye-rolling moments in meetings with company management teams occur when CEOs argue that the stock market grossly undervalues their company. Sometimes they’re right. But more often, the market has rationally chosen to ignore the value of the underlying assets of the company, instead focusing (correctly) on the stock price as an entity in and of itself. A share of common stock should represent ownership of a percentage of the assets of the issuing company, or a percentage of the discounted future cash flows of the company. But sometimes a share of stock is a just a share of stock: a free-floating financial widget whose value floats merrily along, ignorant of any value added to the company’s assets. In these cases, the company’s management, board

22 MicroCap Review Magazine

of directors and the investment bankers advising the company have inadvertently conspired to weaken the connection between company progress and movements in the share price, by burdening the company with a poor capital structure. The cap structure of a company is the combination of debt and equity used to build and grow it. A clean, logical cap structure tells a story of prudent financial management; transparent ownership; and proper alignment of the incentives of management, equity owners and debt holders. A poorly constructed cap structure attests to haphazard and careless company financing, a condition that can make an otherwise interesting company completely un-investable. And when are management teams and boards of directors most vulnerable to a poorly-constructed term sheet? When the capital markets are reluctant to finance difficult-tovalue companies, like pre-revenue biotech. A common component of the black-hole capital structures that come out of “creative financing” during down markets are large pools of warrants from secondary stock sales. Warrants are call options issued by the company —usually with strike prices 10 to 15 percent higher than the price of the stock when

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issued— with five-year expiration dates. In theory, the warrants provide the basis for subsequent financing; if the stock rises, making the warrants “in the money,” the holders exercise the warrants and purchase stock from the company at a discount. In reality, only a small percentage of these are exercised before their expiration date. The rest are kept in a portfolio and often used as the basis for a hedged short sale. In very volatile sectors, like the life sciences sector in which I invest (at the time of writing the 30 day rolling volatility of S&P Biotech ETF “XBI” was 48.396), the ability to strictly define the exposure of a stock sold short is unusual and the opportunity to hedge a portfolio with defined risk is very valuable. If portfolio managers own warrants and sell the stock short, they risk nothing more than the strike price of the warrants for each share sold short. If the stock runs, managers can easily cover. Even better, if managers sell the stock short and the stock price drops, they can cover the short sale in the open market, reap the profits from the trade and still own the

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warrant. When the shares rise again the process can be repeated, each time with a well-quantified risk. When a large number of warrant holders hedge their portfolios in a similar way, the underlying stock has difficulty rising too far above the strike price of the warrant. This should be preventable. The five-year duration is an industry standard for no obvious reason. Limiting the duration of warrants to six or 12 months would remove this unintended derivatization of the company’s stock. But that is the board’s responsibility. Our responsibility as investors is to avoid situations where the value the company may create flows to everyone but us, the holders of the common stock. Speaking of common stock and how much it is worth, let’s turn to piece of advice #2: Ignore. Biotech. Price. Targets. Consider a publicly-traded biotechnology company, which we’ll call Science Project Inc. (SPI)— a real company that I am disguising with a made-up name

MicroCap Review Magazine 23

and ticker symbol. SPI announced its quarterly results a ways back. The five investment bank research analysts who cover the company each published a research report interpreting the announcement and each reaffirmed 12-month price targets which ranged from $8 to $14 a share, significantly higher than the $5.35 market price at the time of the announcement. SPI has a proprietary drug discovery platform and partnerships with five larger pharmaceutical companies, and it also plans to develop drug candidates independently. None of the partnered or internal drug candidates have been tested on humans yet, and none will generate sales for years. The analysts derive their price targets by estimating the future cash generation for each product in development and then what that flow of money would be worth as a lump sum today. In doing this “present value” calculation, the analysts adjust future revenue estimates by guessing a peak sales year, multiplying that year’s sales by 15 to 20 and then discounting this figure by 35 to 50 percent to reflect the risk that the predictions will be inaccurate. The analysts then add together the present values for a sum-of-the-parts target price. When performed on a portfolio of low-risk bonds, this exercise— formally called a discounted cashflow analysis or DCF— is precise and accurate. When applied to company earnings, the analysis, while still precise, becomes increasingly inaccurate as inputs into the equation become more variable. DCF is most helpful when analyzing companies with fixed prices, steady earnings and predictable growth. The opposite is true for companies with uncertain pricing, difficult-to-predict markets, long development stages and huge optionality. Developmentstage biotechnology is the most difficult sector for this type of analysis. Let’s return to SPI. Between now and the predicted arrival of sales revenue, each of the company’s products will face a series of clinical and regulatory tests. Failure during any of these stages can drop the value of that drug candidate to zero. SPI’s product pipeline could ultimately be worth nothing. DCF price targets trivialize the complexity of placing a value on this type of company. Analysts can justify

any number they wish with their sums of estimates, guesses and discretionary variables force-fed into an otherwise straightforward formula. As a life sciences investment team, we know many biotechnology equity analysts. We frequently rely on their reports to answer the who, what, when and where questions of due diligence. They work tirelessly, addressing the often-conflicting pulls from colleagues in banking, clients on the buy-side and management teams from the companies they cover. They are superbly trained, many with PhD’s in the sciences or engineering and are all smart enough to recognize the futility of building a seemingly precise model on guesstimates and almost random variables. But it’s part of their job, and they do it as methodically as they can. But the laws of math, statistics and probability yield to no one, PhD or not. So let’s be honest: price targets for pre-revenue biotech companies like our SPI are exercises in precise inaccuracy, not the type of evidence that we as investors want to rely upon to make rational, datadriven decisions in a down market from which not all companies will rebound when the market does. David Sable MD directs healthcare and life science investing for the Special Situations Funds and is portfolio manager for the Special Situations Life Sciences Fund and Life Sciences Innovation Venture Capital funds. After graduating from the Wharton School and the University of Pennsylvania School of Medicine, he trained in obstetrics and gynecology at New York Hospital - Cornell Medical Center, and in reproductive endocrinology at the Brigham and Women’s Hospital. He co-founded and served as director of the Institute for Reproductive Medicine and Science at Saint Barnabas Medical Center in New Jersey, was founder of Assisted Reproductive Medical Technologies, which was acquired by Saint Barnabas in 1999, and cofounder of Reprogenetics, acquired by Cooper Surgical in 2015. After leaving clinical medicine, Dr. Sable managed a proprietary healthcare portfolio at Deutsche Bank before joining the Special Situations Funds. Dr. Sable is an adjunct in the department of biology at Columbia University, and teaches “Entrepreneurship in Biotechnology” at Columbia’s Graduate School of Arts and Sciences. He serves on the boards of directors for Hamilton Thorne Ltd, MedAnswers Inc, and Celmatix Inc, and is a clincal advisory board member and board observer for TMRW Life Sciences. He previously served as a board member for Ohana Biosciences, Genenews Inc, for the nonprofit advocacy organization RESOLVE, on the medical advisory board for Progyny Inc and on the scientific advisory board of Ovascience Inc. In addition to his academic publications, he has written for the Newark Star-Ledger, Yoga Journal, Xconomy, Genetic Engineering and Biotechnology News, the Timmerman Report, Wharton Magazine, and Forbes. Abigail Sirus is a member of the life sciences investment team for the Special Situations Funds. After graduating from Boston College, Abigail joined IBM as a technology consultant focused on blockchain implementations for healthcare and life sciences clients. Abigail was IBM lead for the FDA DSCSA Blockchain Interoperability Pilot collaboration with KPMG, Merck, and Walmart, and for the New York State Excelsior Pass Project (COVID-19 HealthPass) which used blockchain for digital identity validation, then joined. IBM’s Alternative Monetization team which monetizes IP assets across IBM’s business units and was part of a core team that provided strategy and M&A activities for emerging technologies like blockchain and quantum computing. https://biot4180.weebly.com

24 MicroCap Review Magazine

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For more information, please call 212-332-2980 or visit www.SNN.Network www.tuesdayschildren.org. MicroCap Review Magazine

Vision Marine Technologies Inc. (NASDAQ: VMAR) INVESTOR OVERVIEW (Data compiled as of market close on May 20, 2022)

SUMMARY Share Price ($)

4.23

Market Cap ($M)

35.37

52-Week Low/High ($)

3.70 / 11.99

Shares on Issue (M)

Vision Marine Technologies Inc. designs, develops, and manufactures fully electric outboard powertrain systems, the E-Motion™ 180E and electric boats in Canada, the United States, and internationally. Revenue is generated through various channels – Direct sales of the E-Motion™ 180E powertrain to Original Equipment Manufacturers (OEMs), Sale of Electric Boats to consumers and Electric Boats rental operations, located in Newport Beach, California, with the rental business expanding to Diana Beach, Florida.

8.4

Warrants (M)

0.15

Options (M)

1.7

Fully Diluted Shares (M)

10.3

Volume Weekly (M)

Vision Marine strives to change and be a contributing factor in fighting the problem of waterway pollution by disrupting the boating industry with electric power, contributing to zero pollution, zero emission, wave less water, and a noiseless environment.

0.04

12-MONTH SHARE PRICE CHART

FINANCIAL STATEMENT OVERVIEW Currency

$CAD

Cash ($m)

9.76

Debt ($m)

0.2

FY21 Revenue ($M)

3.5

FY21 Net Profit/Loss ($M)

-15.1

TOP INSIDER HOLDINGS (basic)

9134-0489 Quebec Inc.

25.6

Alexandre Mongeon

16.3

Patrick Bobby

12.9

Robert Ghetti

12.8

ANALYST COMMENT provided by Independent Investment Research

MANAGEMENT & CONTACTS CORPORATE FOCUS Sector

Consumer Cyclical

Key Product/Market

Recreational boats

SENIOR MANAGEMENT & CONTACT CEO Name Alexandre Mongeon Investor Relations Name Bruce Nurse IR Email Address bn@v-mti.com Phone Number 303-919-2913 Headquarters Location Quebec, Canada Website/URL http://www.investors.visionmarinetechnologies.com/

The company listed in November 2020, raising US$27.6m through the issue of 2.76m shares at $10 per share. The company’s flagship outboard motor, E-motion, is the first fully electric purpose-built outboard powertrain system with 180hp. The company has partnered with Octillion Power Systems to develop proprietary high density batteries for its E-motion powertrain system and Weismann Marine, LLC to design and develop a lower unit assembly for the E-motion 180hp outboard propulsion system. The lower unit is expected to reduce power loss through the gear system, reduce hydrodynamic drag and mitigate operational gear noise. After being adversely impacted by COVID-19, the company is seeking to grow its sales as well as expand its high margin rental business which has offset the decline in boat sales in recent times.

Please visit the company’s website for more information:

www.visionmarinetechnologies.com/ COMPANY OVERVIEW

Note: This article has been undertaken by Independent Investment Research LLC (CRD#299837) & Independent Investment Research (Aust.) Pty Limited (Lic. No. 001242826), a corporate authorized representative of Australian Financial Services Licensee (AFSL no. 410381) (“IIR”). Any opinion contained in the article is unsolicited general information only. The reader of the article should seek advice from a qualified wealth adviser. This publication is not and should not be construed as, an offer to sell or the solicitation of an offer to purchase or subscribe for any investment, nor should it be construed as a recommendation. This material contains forward-looking statements. In addition, from time to time, we or our representatives may make forward-looking statements orally or in writing. We base these forward-looking statements on our expectations and projections about future events, which we derive from the information currently available to us. Such forward-looking statements relate to future events or our future performance, including: our financial performance and projections; our growth in revenue and earnings; and our business prospects and opportunities. You can identify forward-looking statements by those that are not historical in nature, particularly those that use terminology such as “may,” “should,” “expects,” “anticipates,” “contemplates,” “estimates,” “believes,” “plans,” “projected,” “predicts,” “potential,” or “hopes” or the negative of these or similar terms. In evaluating these forward-looking statements, you should consider various factors, including: our ability to change the direction of the Company; our ability to keep pace with new technology and changing market needs; and the competitive environment of our business. These and other factors may cause our actual results to differ materially from any forward-looking statement. Forward-looking statements are only predictions. The forward-looking events discussed in this document and other statements made from time to time by us or our representatives, may not occur, and actual events and results may differ materially and are subject to risks, uncertainties and assumptions about us. We are not obligated to publicly update or revise any forward-looking statement, whether as a result of uncertainties and assumptions, the forward-looking events discussed in this document and other statements made from time to time by us or our representatives might not occur. The company paid consideration to SNN or its affiliates for this article.

26 MicroCap Review Magazine

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MicroCap Review Magazine 27

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// By Emily Paxhia and Morgan Paxhia

Global Cannabis in 2022

A Tale of the Half and Half Not

e are quickly reaching the halfway point in 2022. The first half of the year will not be missed but should not be forgotten. Cannabis investors experienced a multi-pronged set of headwinds: •• a deepening equity bear market/continued decline in capital flows •• rampant cost inflation & supply chain disruptions plus deflationary pricing of cannabis •• sequential softness in growth with operators and analysts continuing to adjust future expec-

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tations •• A largely incapable federal government of accomplishing even the most simplistic opportunities that the majority of their constituents support. •• a very challenging macro backdrop with many risk assets suffering from excessive valuations and a federal reserve finally waking up Any one of these issues would prove to be challenging in an emerging market like cannabis, but together they present a dynamic most investors have not dealt with

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before. Warren Buffett and Charlie Munger have been known to say that investors should not be owning equities if they are unable to tolerate a 50% decline. The challenge is, many investors today have not experienced that or seem to forget that can happen. Periods like this are very challenging mentally and emotionally. We are seeing a lot of people exiting the sector as they are not willing or able to tolerate the short term pain any longer. This is sad to see but this is a human behavior that has and will continue to repeat itself. As we say at Poseidon, the only way is through. Some of the first half headwinds may start to subside in the back half of 2022. We are not holding our breath for any federal progress with cannabis but we are watching closely regarding an industry led lawsuit against the federal government. That action merits attention, which was an effective way for Draft Kings to open up online gambling as a states’ rights matter. We see a Supreme Court with a very conservative, constitutionalism focused bench being receptive to the states’ rights matters like cannabis. Price deflation is likely a long term theme for the global cannabis industry until operators learn to better plan/manage their vertical integration versus wholesale. Too much supply means lower prices. However, US sales growth seems to have troughed in 1Q, especially for those operators with exposure to New Jersey. Legacy markets have been overcoming the elevated sales levels during COVID and could see some growth green shoots as well, especially those with growing consumer access to legal cannabis. International has the benefit of coming off a low base, meaning revenues are still small relative to the US market and have a lot of market share growth potential on their horizon with improving access across Europe. We see this growth as evidenced by public companies with exposures in countries such as Germany and Israel. It is very important to remember that cannabis is a regulatory driven growth industry, meaning as more laws are passed, more growth follows. Regulations are a key factor to the cannabis economic cycle, which means we can see some potential countercyclical behavior as growth opens despite a potential recessionary macro backdrop. Consumer behavior and buying changes as it relates to the macro environment. We have also seen consumption of cannabis increase when consumers are not going to dinner as much or traveling as much and have more time on their hands. This could feed into more than currently expected growth in the back half of this year but it

is too early to have much confidence there yet. We’ll continue to watch the various data sources in cannabis and macro economic data for insights there. There is an ocean of opportunity in cannabis for those willing to look beyond their shadows and see what is out there on the horizon. Emily Paxhia is a co-founder and Managing Partner of Poseidon. Emily has reviewed thousands of companies in the cannabis industry and has worked with countless founders in many capacities. She had helped to shape founders’ pitch preparations, their go-to-market strategies/ product launches, and advised on day-to-day business operations. Emily has held board seats for multiple portfolio companies and participates as an adviser to multiple teams. Extremely active in the investment decision making and ongoing investment oversight processes, she works closely with her partners to create meaningful deal structures, ensuring that proper governance is carried out at the company level. Further, Emily has dedicated time and energy to supporting policy groups and has served on the Board of Directors of the Marijuana Policy Project. She also currently serves on the Board of Athletes for CARE and The Initiative. Emily has over 10 years of experience working as a consultant and researcher, and as such, has become an expert at extracting actionable insights from research and applying them to make corporations function more efficiently and successfully. She also leverages this experience to engage in detailed market analysis for determination around product-market fit and potential scalability. Emily graduated from New York University with an M.A. in Psychology in 2008. She graduated from Skidmore College with a B.A. in Psychology in 2002. Morgan Paxhia is a co-founder and Managing Partner of Poseidon, one of the longest running funds in the cannabis industry. With over ten years experience in investing and finance, Morgan has developed a deep understanding of individual company analysis, portfolio construction, and risk mitigation. Since 2012, he has dedicated his investment focus primarily to the cannabis industry. Given the limited amount of information in this emerging vertical, the lack of institutional research, and relative industry immaturity, Morgan embraces an active approach of working closely with companies. He utilizes a “boots on the ground” methodology to better understand individual companies and the industry. Through his extensive travel across the US and Canada, reviewing hundreds of business plans and overseeing several existing cannabis investments, Morgan has developed Poseidon’s investment methodology tailored specific to the business of cannabis. Poseidon’s proprietary process is driven by the time spent in the industry and the considerable data collected over the last several years. He has created frameworks for analysis depending on sub-sector, company stage, and participation across the capital spectrum through our database of contacts, valuations, metrics, and other relevant factors. Morgan started his investment career at UBS Financial Services working in a Wealth Management/ Investment Banking hybrid training program. The training brought a wide range of first hand experience working through several facets of the organization, including advisory teams managing assets for high net worth individuals and municipal bonds trading. Following UBS, Morgan transitioned to a Providence-based Registered Investment Advisor as an Investment Consultant. During that time, he worked under the partners of the firm doing fundamental portfolio management. Morgan graduated from the University of Rhode Island with a B.S. in Applied Mathematics in 2005. Website: www.PoseidonAssetManagement.com

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MicroCap Review Magazine 29

o Interact with our retail broker/dealer/banking network to facilitate the Company to potential Media Networks and set up small group Dinner.

o Develop plans for aggressive outbound media outreach, when requested, including existing shareholders, potential institutional and retail shareholders to ingest companies media.

o Continue periodic meetings, with locations to be determined, with Media Anchors and Producers.

o Work with management to develop a clear comparison of the firm's results to those of similar companies or competitors;

o Leverage relationships with media and financial journalists to effectively communicate the Company’s message; Including but not limited to, Cheddar, Fox Business News, TD Ameritrade Network, Yahoo Finance, Nasdaq Marketsite, Jane King Media, Modern Wall Street

o Position the management to effectively demonstrate the Company’s strategies and objectives so that companies interviews are clear & effective.

o Work with Company to develop a full release calendar, timing releases and important press announcements for utmost effectiveness; o Coordinate additional relationships with the goal of creating media awareness for the company; o 24 h hour situational crisis management with a concise strategy. Assist in addressing issues such as product recalls, contract losses, regulatory actions, litigation, loss of key employees, and all Major Media actions.

o Pinpointing of the proper media outlets to meet – and even the right individuals within those firms for maximizing interviews. o Monthly analysis of who is watching interviews, along with commentary on the ‘why’ behind these moves. o Context around effective interviews, i.e. how does it pertain to what we are seeing amongst peers, the sector and the broader market. The qualitative analysis that comes from this assessment provides company with insight into why Media Networks are doing what they are doing within their respective sector, allowing them to have more pointed conversations with these Media Professionals and be more efficient with their time spent.

MONEY BALL NETWORKS Money Ball Networks collaborates with premier investment banks, prominent broker-dealers, boutique research firms, and corporate professionals to provide an upscale experience for industry events. Our venues include A-list entertainment, top-shelf food & drink amidst alluring ambiance. MONEYBALLNETWORKS.COM

30 MicroCap Review Magazine

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uhhm.org | @uhhmuseum THE OFFICIAL RECORD OF HIP HOP

Please join us in this historic and momentous endeavor to build the first Hip Hop museum from the ground up,

The Universal Hip Hop Museum! BECOME A MEMBER AND A SIGNIFICANT PART OF THE UNIVERSAL HIP HOP MUSEUM FAMILY. MEMBERS ENJOY EXCLUSIVE BENEFITS.

DONATE AND BECOME A MEMBER! Join at uhhm.org/support-the-museum/uhhm_membership/ If you are interested in donating an actual piece of Hip Hop history, then please email archivesmgmt@uhhm.org. We want to make sure your contribution to The Official Record of Hip Hop is archived and can be shared with future generations. The Universal Hip Hop Museum is a registered 501(c)(3) not for profit charity of New York State. MicroCap Review Magazine 31 www.SNN.Network

U.S. Global Investors, Inc. (NASDAQ: GROW) INVESTOR OVERVIEW

COMPANY OVERVIEW

(Data compiled as of market close on May 20 2022)

SUMMARY Share Price ($)

4.71

Market Cap ($M)

60.8

52-Week Low/High ($)

4.13 / 6.88

Shares on Issue (M)

12.9

Warrants (M)

Options (M)

Fully Diluted Shares (M)

12.9

Volume Weekly (M)

U.S. Global Investors, Inc. is a boutique investment management firm specializing in actively managed equity and bond strategies, and has a longstanding history of expertise in gold and precious metals, natural resources, airlines and emerging markets. The company offers eight no-load mutual funds and three exchange-traded funds (ETFs), in a variety of niche global industries. As of 31 March 2022, the company and its subsidiaries reported average assets under management of $4.1 billion.

12-MONTH SHARE PRICE CHART

0.2

FINANCIAL STATEMENT OVERVIEW Currency

$USD

Cash ($m)

26.77

Debt ($m)

0.0

FY21 Revenue ($M)

21.65

FY21 Net Profit/Loss ($M)

31.96

TOP 5 INSIDER HOLDINGS (basic)

Frank Holmes

The Vanguard Group, Inc.

Royce Investment Partners

4.67

Perritt Capital Management, Inc.

4.44

Heartland Advisors, Inc.

3.48

Total Insider shareholdings

17.8

MANAGEMENT & CONTACTS CORPORATE FOCUS Sector

Financial Services

Key Product/Market

Asset Management

SENIOR MANAGEMENT & CONTACT CEO Name Investor Relations Name IR Email Address Headquarters Location Website/URL

Frank Holmes Holly Schoenfeldt info@usfunds.com San Antonio, Texas http://www.usfunds.com

ANALYST COMMENT provided by Independent Investment Research The Company has been increasing its cash position for the past 18 months, and it is accomplishing this in part through its investments in HIVE Blockchain Technologies Ltd. (“HIVE”), a Vancouverbased technology firm that is involved in the mining of Bitcoin and Ethereum. The investments in HIVE include 8.0% interestbearing unsecured convertible debentures, payable in quarterly installments. The company is choosing to receive the cash in quarterly installments rather than convert them into HIVE shares with the company seeking to build up cash to $30m for future growth opportunities and to manage future economic downturns. The company continues to expand its product offering with the launch of the new smart-beta 2.0 ETF, the U.S. Global Sea to Sky Cargo ETF (SEA) during the March quarter, along with the company’s airlines ETF, the U.S. Global Jets ETF (JETS), recently receiving approval by Ameriprise Financial. The company has increased its share purchase program to $5.0m. The Company strategically repurchases stock on down days using an algorithm.

Please visit the company’s website for more information:

www.usfunds.com Note: This article has been undertaken by Independent Investment Research LLC (CRD#299837) & Independent Investment Research (Aust.) Pty Limited (Lic. No. 001242826), a corporate authorized representative of Australian Financial Services Licensee (AFSL no. 410381) (“IIR”). Any opinion contained in the article is unsolicited general information only. The reader of the article should seek advice from a qualified wealth adviser. This publication is not and should not be construed as, an offer to sell or the solicitation of an offer to purchase or subscribe for any investment, nor should it be construed as a recommendation. This material contains forward-looking statements. In addition, from time to time, we or our representatives may make forward-looking statements orally or in writing. We base these forward-looking statements on our expectations and projections about future events, which we derive from the information currently available to us. Such forward-looking statements relate to future events or our future performance, including: our financial performance and projections; our growth in revenue and earnings; and our business prospects and opportunities. You can identify forward-looking statements by those that are not historical in nature, particularly those that use terminology such as “may,” “should,” “expects,” “anticipates,” “contemplates,” “estimates,” “believes,” “plans,” “projected,” “predicts,” “potential,” or “hopes” or the negative of these or similar terms. In evaluating these forward-looking statements, you should consider various factors, including: our ability to change the direction of the Company; our ability to keep pace with new technology and changing market needs; and the competitive environment of our business. These and other factors may cause our actual results to differ materially from any forward-looking statement. Forward-looking statements are only predictions. The forward-looking events discussed in this document and other statements made from time to time by us or our representatives, may not occur, and actual events and results may differ materially and are subject to risks, uncertainties and assumptions about us. We are not obligated to publicly update or revise any forward-looking statement, whether as a result of uncertainties and assumptions, the forward-looking events discussed in this document and other statements made from time to time by us or our representatives might not occur. The company paid consideration to SNN or its affiliates for this article.

32 MicroCap Review Magazine

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Ac co u n ti n g CORNE R

// By Drew Bernstein, CPA

CFO Ultimate Stress Test Recently, my conversations with clients have centered on one topic: What the heck is going on with this economy?

n the one hand, you have a technology darling like Tesla announcing layoffs of 10% of their staff. But just try ordering one of their cars, and you will have to wait 3-6 months to take delivery.

America’s businesses currently have over 11 million job openings — more than twice the number of people seeking jobs. Yet, venture capitalists are

34 MicroCap Review Magazine

telling their companies they need to take a scalpel to staff because “winter is coming.” CFOs who honed their craft over the past decade are facing raging inflation, global commodity shocks, and rising interest rates. Most “old hands” who have experienced this kind of macro environment retired decades ago.

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The message sending a chill up the spine of senior management: “The 1970s are calling, and they say everything you ever learned is irrelevant.” To survive this stress test, CFOs must learn and adapt at lightning speed. Here are a few lessons to keep in mind.

Companies must constantly evaluate pricing, sourcing strategies, and supply contracts to maintain their margins and keep revenues flowing.

Capital has a cost. Since the global financial crisis in 2008, we have been living through an unprecedented experiment in monetary policy that, over time, skewed corporate decision-making. “Quantitative easing,” or QE, flooded financial institutions with more liquidity than they could deploy through traditional channels. At the same time, the Fed has held interest rates close to zero to support the fragile recovery from the GFC and the subsequent pandemic. What was the result? Investors piled into a range of speculative assets and businesses whose economics were unproven but had the lure of potentially high returns. Growth was privileged over profits. And “story stocks” tapped a geyser of capital at nominal cost. Today, the Federal Reserve has made it clear we are in for a series of painful rate hikes. Yields are soaring. We have gone from QE forever to QE cold turkey. In other words, capital again has a cost. In this environment, companies need to be much more strategic about how they invest in growth, when they tap the capital markets, and what they say to investors about capital allocation. CFOs can expect a barrage of questions about how the company will manage its liquidity and the thresholds applied to capital expenditure, marketing expense, and M & A decisions. Companies must also present a clear runway to transition from growthat-any-cost to profitable growth. Or, as Uber’s CEO, Dara Khosrowshahi, put it, “We have to make sure our unit economics work before we go big.” In an environment of capital scarcity, going big and blind means going under. But companies that can clearly explain how they plan to earn their cost of capital will enjoy a substantial competitive advantage.

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Stay nimble. The past twelve months have underscored the importance of remaining flexible within a clear strategic framework. Producer price index (PPI) inflation is running at double digits. Energy costs spiked by 60% in just a year. Rolling lockdowns have roiled supply chains as China seeks to maintain “zero COVID” against new strains bent on spreading COVID everywhere. A five-year plan may become irrelevant in this environment before the ink is dry. Companies must constantly evaluate pricing, sourcing strategies, and supply contracts to maintain their margins and keep revenues flowing. Fail to adjust or employ the wrong hedging strategy, and your P&L can turn upside down in a heartbeat. CFOs need to embrace this turbulence as a test of their mettle. Labor shortages can spur accelerated product and service automation or reengineering to reduce labor content. The resiliency of supply chains now must be given equal weight with efficiency and cost considerations. CFOs need to be able to create dynamic forecasts and supply senior leaders with real-time data required to pivot on a dime as market conditions change. How do we protect our margins while ensuring continuity with suppliers? How do we create a business plan able to thrive under multiple scenarios? CFOs need to step into the role of a master tactician, laying out a range of options to traverse market storms and bring the company safely to port.

MicroCap Review Magazine 35

If the current bout of monetary tightening and asset deflation devolves into a full-blown recession, CFOs may be tempted to look at employees as cost items on a spreadsheet that need to be shed. This would be a huge mistake.

Focus on talent. Over the past twelve months, management has had to contend with what the media dubbed “the Great Resignation,” in which many employees reconsidered their previous relationships to work. Remote work, flexible hours, job hopping, and bidding wars for top talent were the order of the day. Fast forward a few months, the media is sounding the war drums of an impending recession, employees are bracing for potential layoffs, and CEOs are talking about getting lean. If the current bout of monetary tightening and asset deflation devolves into a full-blown recession, CFOs may be tempted to look at employees as cost items on a spreadsheet that need to be shed. This would be a huge mistake. Even if the business environment softens, demographics are not on employers’ side, as a declining working age population and restricted immigration make skilled labor in short supply. Rather than slashing indiscriminately, CFOs need to partner with HR to align short-term staffing adjustments to the business’s strategic needs. Who are the top contributors of value in our business? What talent will be most difficult to replace as demand recovers? How can we increase the stickiness of employees’ relationship with the company and our strategic goals?

the best in the industry. Just as you will never forget how friends and family react during a crisis, your company’s response to a downturn will send lasting messages to your team. Just as CFOs need to gird themselves for the ultimate stress test, investors should be watching the companies they follow for signals about management’s ability to weather the storm that may be just over the horizon. Are they calm, determined, and able to articulate a clear action plan? Or are their communications jittery, reactive, verging on panic? The answer to that question reveals much about the companies on which you want to bet. Drew Bernstein, Co-Managing Partner Marcum Bernstein & Pinchuk (MBP)– a leader in SEC audit, accounting and consulting services to Chinese companies seeking access to capital markets. In 1983, Drew Bernstein co-founded Bernstein & Pinchuk. Additionally, he co-founded MarcumBP, which is a member of the Marcum Group and an affiliate of Marcum LLP, a leading U.S. accounting and advisory firm. Both firms have multiple offices within the United States and Asia. Bernstein is a distinguished expert with deep knowledge of the China and U.S. financial ecosystem with experience extending across Asia, Europe and Africa. Industry experience encompasses technology, retail, manufacturing, hospitality, pharmaceutical and real estate. Bernstein directs a global team, featuring highly trained PCAOB and SEC accounting experts and financial consultants working in New York as well as Beijing, Tianjin, Shanghai, Shenzhen, Hangzhou, and Guangzhou. Additionally, Bernstein is considered a valuable thought leader and news commentator. He has published articles for Forbes.com and China Daily and is a frequently called upon source by prominent media such as China Global Television Network, CNBC, Bloomberg TV, The Financial Times, The South China Morning Post, The Wall Street Journal, Yahoo! Finance, and more regarding Chinese IPOs, China’s economic growth, investment appetite, innovation trends, corporate governance, SEC regulations and more. Bernstein graduated from the University of Maryland with a B.S. in Accounting. Currently, he resides in New York City with his wife and children. About MBP Marcum Bernstein & Pinchuk LLP (MBP) offers specialized audit and advisory services to support SPAC sponsors and SPAC targets in Asia. MBP and its parent company, Marcum LLP, have been involved in more SPAC transactions than any other audit firm. MBP is the only audit firm to have a dedicated SPAC team for Asia. MBP performs all audits for Marcum in Greater China, and MBP is a top-five auditor for Chinese companies listed in the United States. The dedicated SPAC team has worked with SPAC sponsors, underwriters, and targets. MBP draws on wide-ranging experience with the initial public offerings and subsequent business transactions forged by such companies. MBP has designed its audit platform to deliver the technical expertise, efficiency, and urgency required by SPAC IPOs. This includes high-quality, PCAOB-compliant audits for private Asian companies that are contemplating entering a SPAC merger. Website: U.S.: https://www.marcumbp.com; China: https://cn.marcumbp.com

The primary business of every business is to generate, nurture, and sustain the talent required to be Note: This article is not an attempt to provide investment advice. The content is purely the author’s personal opinions and should not be considered advice of any kind. Investors are advised to conduct their own research or seek the advice of a registered investment professional.

36 MicroCap Review Magazine

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A FUTURE IGNITED BY SPORT Sport creates purpose and fuels dreams. That’s why the Challenged Athletes Foundation is committed to providing athletes of all abilities access to life-changing adaptive sports equipment, coaching, and competition expenses. CAF is igniting futures through sport. As we move into this new year, CAF is ready to deliver more impact, create more invaluable opportunities for mentorship, and strengthen our adaptive athlete community. Sport empowers lives. Donate today at www.donateCAF.com

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challengedathletes.org l 501(c)(3) Tax ID #33-0739596 MicroCap Review Magazine 37

ins i ghts

// By Jackie Kibler

How EOS® Can Improve Employee Retention Holding on to the best employees is a top priority for every business—and if you run one, you know how expensive it is to find, evaluate, and train a new hire.

ood retention strategies are essential but aren’t always given the attention they deserve. Sometimes a great employee quits, and the rest of the team must scramble to fill the sudden void. It’s not easy, and it hurts productivity and slows growth.

As a Certified EOS Implementer® I’ve seen first-hand examples of how EOS has improved my clients’ employee retention rates. I’d like to share some of them with you. When the going gets tough… Everyone loves to be part of a winning organization. Entrepreneurs usually start running EOS to make an already-successful business even more successful. During times of growth, employees might be too busy or too engaged to think about finding a different job. But what happens when the work slows down? When the pandemic began, one of my clients found out. A big slice of their business comes from restaurant and entertainment venues owners. So, as you might expect, many of their clients stopped calling—and stopped paying when the lockdowns began. Our mid-year quarterly meeting in 2020 began with a room of unhappy faces. One employee had already quit, and they were desperate to keep the

38 MicroCap Review Magazine

rest of their team together through the downturn. Their Visionary saw the energy in the room and declared: “We’re going to keep everybody, and we’re going to keep them happy.”

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For each of the quarterly rocks they chose in that meeting, they asked if it would help retention. If it didn’t, they punted it to the next quarter. They also doubled down on Delegate and Elevate™. Their Visionary said: “If we can’t grow from outside, let’s grow from inside.” Opening up employees to shape their own path through the slowdown unleashed potential they didn’t know they had. As a result, they kept their people while kick-starting growth sooner than anticipated. Hire for values Retaining employees is easier if they’re a great fit from the beginning. One of the first things an EOS business does is identify its Core Values. We start with Core Values because they are foundational to everything a company does, including hiring. A poor value fit probably means that the employee will quit. I’ve seen it happen many times as clients begin to fully embrace Core Values that someone on the team doesn’t share. This is a normal part of the process, and ultimately it’s good for everyone. On the other hand, a great value fit enables employees to thrive by making them feel at home in the culture. A new hire who shares the company’s Core Values will automatically pull in the right direction. To keep it going, I encourage clients to make a habit of revisiting their Core Values with their team. For example, one of my clients likes to discuss one of their Core Values at every all-hands meeting. Their Integrator says it has paid dividends. “We have a challenging client who doesn’t share our Core Values at all,” he told me. “Keeping our team focused on the values we share keeps each other feeling good when the client relationship feels strained.” The benefits of clarity Visionaries love to work without limits and thrive when they have the freedom to explore new ideas. However, what they sometimes forget is that not everyone is a Visionary: many people do their best work within a clear framework.

Think of EOS as a framework of frameworks. The topmost level provides a structure for thinking about the entire business with tools like the Accountability Chart and the V/TO™. In addition, the system provides similar structures for distinct business units and even the specific seats within the organization. Dialing in the details of those seats is a great way to retain those employees who do best with structure. I saw this play out as a client began their EOS journey. At the start, their Visionary wanted everyone at his business to create their dream job. Each employee offered ideas, and at first, it seemed great, but before long, the team began to notice that significant work wasn’t getting done on time, making everyone unhappy. Their Integrator pointed out that a lot of their employees were struggling. “We’ve asked them to reinvent themselves, but they just want to follow instructions,” he said. So they threw out the “dream jobs” plan and focused on carefully defining the role of each employee’s seat. “I was worried my team would be upset about the change,” the Visionary told me. “I was shocked when they thanked me instead.” Use EOS to build a thriving workforce What retention strategies are you using to keep your team happy and motivated? Let’s start a conversation. You can reach me through my website or by visiting me on LinkedIn. Jackie Kibler grew up in an entrepreneurial family with her father in the music and entertainment business. Her father had a passion for music and like many entrepreneurs, wasn’t able to create a solid business infrastructure to grow the business. At a very early age, Jackie realized her passion was to help business owners get more from their businesses. After college, Jackie worked for larger companies like Dun and Bradstreet, Wells Fargo, Corporate Executive Board and Vistage Worldwide to learn best practices. She progressed through the leadership ranks and over the next 25 years, quickly became known as the “go-to person” for underperforming offices, regions, or companies using a strategic mix of goal setting, process development, and personal accountability. At Vistage Worldwide, and partnered with over 100 entrepreneurial CEOs to help them improve their businesses. Within 12 months her region improved in rankings from #10 to #2 nationally. It was there that she learned about EOS and when she read the book Traction, she immediately aligned. It was everything she had done, in a proven process that was being used globally with entrepreneurs in all types of businesses.

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MicroCap Review Magazine 39

Overview of the MicroCap Review Index (MCRI™) The MCRI is as pure an index for microcap stocks as can be. We believe the MCRI provides a much more accurate, in-depth, benchmark of the microcap stock universe, with equal weighting given across the board, regardless of size.

ost of the other microcap indices are market cap weighted, giving preference to larger companies with higher trading volumes, and are reconstituted bi-annually or annually, versus quarterly.

•• On the final day of the quarter, all public companies: ºº Between $10 and $300 million in Market Capitalization ºº Share price equal to or greater than $0.10 •• Filed a 10Q or 10K in the preceding quarter

Why MCRI In my experience in the MicroCap space, the idea of “discovery” has been a singular driving force for me. Whether its helping folks discover new MicroCap investing strategies or discover new companies that may not show on their screen. Criteria •• U.S. (NYSE/AMEX, NASDAQ, OTCM) or Canada (TSX, TSX Venture, CSE, NEO) •• Primary Listing only (meaning, primary symbol dual-listed companies

Microcap Review INDEX 40 MicroCap Review Magazine

From there, the index comprises the Top 30 companies from each sector based on 90-day share price appreciation. At most, MCRI will consist of 330 constituents, all equally weighted. While you may expect most, if not all, the Top 30 for each sector will have positive share price appreciation for the quarter, but that’s not always the case, and in my opinion what makes MCRI the purest index for MicroCaps.

Microcap Review INDEX www.SNN.Network

Q2 2022 Key Data Points

Microcap Review INDEX www.SNN.Network

Microcap Review INDEX MicroCap Review Magazine 41

Microcap Review INDEX Q2 2022 Constituent List

Microcap Review INDEX AACG

ATA Creativity Global

Consumer Defensive https://ir.atai.net.cn/

AAME Atlantic American Corporation Financial Services https://www.atlam.com/

ACU

ADN

Microcap Review INDEX ANTE AirNet Technology Inc. Communication Services http://ir.airnetgroup.cn/

AP Ampco-Pittsburgh Corporation Industrials http://ampcopgh.com/

Acme United Corporation

AQMS Aqua Metals Inc.

Advent Technologies Holdings Inc.

ARKR

Consumer Defensive https://www.acmeunited.com/

Utilities https://www.advent.energy/

Industrials https://www.aquametals.com/

Ark Restaurants Corp.

Consumer Cyclical https://arkrestaurants.com/

AEI Alset Ehome International Inc.

ARL American Realty Investors Inc.

AGN:CNX Algernon Pharmaceuticals Inc.

ART:CA ARHT Media Inc.

AGRI AgriFORCE Growing Systems Ltd.

ARTW Art’s-Way Manufacturing Co. Inc.

AKT.A:CA Akita Drilling Ltd.

ASC Ardmore Shipping Corporation

Real Estate https://www.alsetehomeintl.com/

Healthcare https://algernonpharmaceuticals.com/

Consumer Defensive https://agriforcegs.com/

Energy https://www.akita-drilling.com/

Real Estate http://www.americanrealtyinvest.com/

Technology https://arhtmedia.com/

Industrials https://artsway-mfg.com/

Industrials https://ardmoreshipping.com/

Alico, Inc.

ASRT Assertio Holdings, Inc.

ALCU:CNX Alpha Copper Corp.

ATIF ATIF Holdings Limited

ALJJ ALJ Regional Holdings Inc.

ATX:CA ATEX Resources Inc.

ALOT AstroNova Inc.

AUUD Auddia Inc.

ALPA:CNX Alpha Metaverse Technologies Inc.

AXAS Abraxas Petroleum Corporation

AMPY Amplify Energy Corp.

AXIS:CA Axis Auto Finance Inc.

ALCO

Consumer Defensive https://www.alicoinc.com/

Basic Materials https://alphacopper.com/

Industrials https://aljregionalholdings.com/

Technology https://astronovainc.com/

Communication Services http://www.alphametaverse.com/

Energy https://www.amplifyenergy.com/home/default.aspx

Healthcare https://www.assertiotx.com/

Financial Services https://ir.atifchina.com/

Basic Materials https://www.atexresources.com/

Technology https://auddiainc.com/

Energy http://www.abraxaspetroleum.com/

Financial Services https://www.axisfinancegroup.com/

Note: As of rebalance date 04/01/2022, please see SNN’s criteria for inclusion in the MicroCap Review Index here: https://snn.network/key-criteria

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Microcap Review INDEX Q2 2022 Constituent List

Microcap Review INDEX

AXL:CA Arrow Exploration Corp.

BLCM Bellicum Pharmaceuticals Inc.

AXR AMREP Corporation

BRAG:CA Bragg Gaming Group Inc.

AZS:CA Arizona Silver Exploration Inc.

BRE:CA Bridgemarq Real Estate Services Inc.

BABY:CA Else Nutrition Holdings Inc.

BRFH Barfresh Food Group Inc.

BBGI Beasley Broadcast Group Inc.

BSFC

BBTV:CA BBTV Holdings Inc.

BSK:CA Blue Sky Uranium Corp.

BCML BayCom Corp.

BTCS

BCU:CA Bell Copper Corporation

BTN Ballantyne Strong Inc.

BDL Flanigan’s Enterprises Inc.

BULL:CNX Canadian Palladium Resources Inc.

BEEM Beam Global

CAAS

BELFB Bel Fuse Inc.

CAPT:CA Capitan Mining Inc.

BGI Birks Group Inc.

CBIT:CA Cathedra Bitcoin Inc.

BHAT Blue Hat Interactive Entertainment Technology

CC:CNX Core Assets Corp.

Energy https://arrowexploration.ca/

Real Estate https://amrepcorp.com/

Basic Materials https://arizonasilverexploration.com/

Consumer Defensive https://elsenutrition.com/

Communication Services https://bbgi.com/

Communication Services https://investors.bbtv.com/overview/default.aspx

Financial Services https://www.unitedbusinessbank.com/

Basic Materials https://www.bellcopper.net/

Consumer Cyclical https://www.flanigans.net/investors/

Technology https://beamforall.com/

Technology https://www.belfuse.com/

Consumer Cyclical https://www.maisonbirks.com/en_us/investor-relations

Communication Services https://ir.bluehatgroup.com/

Healthcare https://www.bellicum.com/

Communication Services https://www.bragg.games/

Real Estate https://www.bridgemarq.com/

Consumer Defensive https://www.barfresh.com/

Blue Star Foods Corp.

Consumer Defensive https://bluestarfoods.com/

Energy https://blueskyuranium.com/

BTCS Inc.

Financial Services https://www.btcs.com/

Consumer Cyclical https://ballantynestrong.com/

Basic Materials https://canadianpalladium.com/

China Automotive Systems Inc.

Consumer Cyclical can’t find website

Basic Materials https://capitanmining.com/

Financial Services https://www.cathedra.com/

Basic Materials https://coreassetscorp.com/

Note: As of rebalance date 04/01/2022, please see SNN’s criteria for inclusion in the MicroCap Review Index here: https://snn.network/key-criteria

www.SNN.Network

MicroCap Review Magazine 43

Microcap Review INDEX Q2 2022 Constituent List

Microcap Review INDEX

CCW:CA Canada Silver Cobalt Works Inc.

CLPS

CDZI Cadiz Inc.

CMC:CA

CELZ Creative Medical Technology Holdings Inc.

COE

Basic Materials https://canadasilvercobaltworks.com/

Utilities https://www.cadizinc.com/

Healthcare https://creativemedicaltechnology.com/

CET:CA

CFRX

CGRN

CHCI

CHMI

Cathedral Energy Services Ltd.

Energy https://www.cathedralenergyservices.com/

CKI:CA

CLEU

CLIR

CLPR

CPHC

ContraFect Corporation

Healthcare https://www.contrafect.com/

CPSH

Capstone Green Energy Corporation

Industrials https://www.capstonegreenenergy.com/

CTRM

Comstock Holding Companies Inc.

Real Estate https://comstockcompanies.com/

Cherry Hill Mortgage Investment Corporation

Real Estate https://www.chmireit.com/

CHNR

COMS

China Natural Resources Inc.

Basic Materials https://www.chnr.net/

Clarke Inc.

Consumer Cyclical https://www.clarkeinc.com/

China Liberal Education Holdings Limited

Consumer Defensive http://chinaliberal.com/

ClearSign Technologies Corporation

Industrials https://clearsign.com/

Clipper Realy Inc.

Real Estate https://www.clipperrealty.com/

CVCY

CVGI

CVW:CA

CWBK

CWCO

CYAN

DALN

CLPS Incorporation

Technology https://www.clpsglobal.com/

Cielo Waste Solutions Corp.

Industrials https://cielows.com/

China Online Education Group

Consumer Defensive http://ir.51talk.com/

ComSovereign Holding Corp.

Communication Services https://www.comsovereign.com/

Canterbury Park Holding Corporation

Consumer Cyclical https://www.canterburypark.com/investor-relations/

CPS Technologies Corp.

Technology https://cpstechnologysolutions.com/

Castor Maritime Inc.

Industrials https://castormaritime.com/

Central Valley Community Bancorp

Financial Services https://www.cvcb.com/

Commercial Vehicle Group Inc.

Consumer Cyclical https://cvgrp.com/

CVW CleanTech Inc.

Basic Materials https://cvwcleantech.com/

CW Bancorp

Financial Services https://www.cwbk.com/

Consolidated Water Co. Ltd.

Utilities https://cwco.com/

Cyanotech Corporation

Consumer Defensive https://www.cyanotech.com/

DallasNews Corporation

Communication Services https://www.dallasnewscorporation.com/

Note: As of rebalance date 04/01/2022, please see SNN’s criteria for inclusion in the MicroCap Review Index here: https://snn.network/key-criteria

44 MicroCap Review Magazine

www.SNN.Network

Microcap Review INDEX Q2 2022 Constituent List

Microcap Review INDEX DC.A:CA

DME:CA

DPRO:CNX

DTSS

DUO

DUOT

EBON

EDRY

EDT:CA

EDTK

Dundee Corporation

ELTK

Desert Mountain Energy Corp.

ENS:CA

Draganfly Inc.

ENSV

Drive Shack Inc.

EOG:CA

Datasea Inc.

EQOS

Fangdd Network Group Ltd.

ESEA

Duos Technologies Group

EVGN:CA

Ebang International Holdings Inc.

EXPR

EuroDry Ltd.

FBIZ

Spectral Medical Inc.

FDM:CNX

Skillful Craftsman Education Technology Limited

FGBI

Consumer Defensive https://www.dundeecorporation.com/home/default.aspx

Energy https://www.desertmountainenergy.com/

Industrials https://draganfly.com/

Consumer Cyclical https://www.driveshack.com/

Technology http://www.dataseainc.com/

Real Estate https://www.fangdd.com/

Technology https://www.duostechnologies.com/

Technology https://www.ebang.com.cn/about

Industrials http://www.eurodry.gr/

Healthcare https://spectraldx.com/

Consumer Defensive http://ir.kingwayup.com/

EIGR

ELA

Microcap Review INDEX

FHYD:CA

Eiger BioPharmaceuticals Inc.

Healthcare https://www.eigerbio.com/

FINW

Envela Corporation

Consumer Cyclical https://envela.com/

FLNT

Eltek Ltd.

Technology https://www.eltek.com/us/

E Split Corp.

Financial Services https://www.middlefield.com/

Enservco Corporation

Energy http://enservco.com/

Eco (Atlantic) Oil & Gas Ltd.

Energy https://www.ecooilandgas.com/

EQONEX Limited

Financial Services https://group.eqonex.com/

Euroseas Ltd.

Industrials http://www.euroseas.gr/

Evergen Infrastructure Corp.

Utilities https://www.evergeninfra.com/

Express Inc.

Consumer Cyclical https://www.express.com/

First Business Financial Services Inc.

Financial Services https://firstbusiness.bank/

Fandom Sports Media Corp.

Technology https://www.fandomesports.com/#/

First Guaranty Bancshares Inc.

Financial Services https://www.fgb.net/

First Hydrogen Corp.

Consumer Cyclical https://firsthydrogen.com/

FinWise Bancorp

Financial Services https://www.finwisebank.com/

Fluent Inc.

Communication Services https://investors.fluentco.com/

Note: As of rebalance date 04/01/2022, please see SNN’s criteria for inclusion in the MicroCap Review Index here: https://snn.network/key-criteria

www.SNN.Network

MicroCap Review Magazine 45

Microcap Review INDEX Q2 2022 Constituent List

Microcap Review INDEX FORD

FUNC

GBR

GCL:CA

GDC:CA

GFAI

GGE

GGI:CA

GH:CA

GIP:CA

GIPR

GIVX:CA

Microcap Review INDEX

Forward Industries Inc.

GMDA

First United Corporation

GMGI

New Concept Energy Inc.

GNE

Colabor Group Inc.

GNPX

Genesis Land Development Corp.

GNRS

Guardforce AI Co. Limited

GNUS

Green Giant Inc.

GQC:CA

Garibaldi Resources Corp.

GRB:CA

Gamehost Inc.

GRDM:CA

Green Impact Partners Inc.

GROW

Generation Income Properties Inc.

GTWO:CA

Givex Information Technology Group Limited

GVC:CA

Consumer Cyclical https://forwardindustries.com/

Financial Services https://mybank.com/

Real Estate http://www.newconceptenergy.com/

Consumer Defensive http://www.colabor.com/en/

Real Estate https://www.genesisland.com/

Industrials https://www.guardforceai.com/

Real Estate http://www.gge.com/

Basic Materials https://www.garibaldiresources.com/

Consumer Cyclical https://www.gamehost.ca/

Utilities https://www.greenipi.com/

Real Estate https://gipreit.com/

Technology https://www.givex.com/

GLAS.A.U:AQL Glass House Brands Inc. Healthcare https://www.glasshousebrands.com/

GVP

Gamida Cell Ltd.

Healthcare https://www.gamida-cell.com/

Golden Matrix Group Inc.

Communication Services https://goldenmatrix.com/

Genie Energy Ltd.

Utilities https://genie.com/

Genprex Inc.

Healthcare https://www.genprex.com/

The Greenrose Holding Company Inc.

Financial Services https://www.greenroseholdings.com/

Genius Brands International Inc.

Communication Services https://www.gnusbrands.com/

GoldQuest Mining Corp.

Basic Materials https://goldquestcorp.com/

Greenbriar Capital Corp.

Utilities https://greenbriarcapitalcorp.ca/

Grid Metals Corp.

Basic Materials https://gridmetalscorp.com/

U.S. Global Investors, Inc.

Financial Services https://www.usfunds.com/

G2 Goldfields Inc.

Basic Materials https://g2goldfields.com/

Glacier Media Inc.

Communication Services https://www.glaciermedia.ca/

GSE Solutions

Technology https://www.gses.com/

Note: As of rebalance date 04/01/2022, please see SNN’s criteria for inclusion in the MicroCap Review Index here: https://snn.network/key-criteria

46 MicroCap Review Magazine

www.SNN.Network

Microcap Review INDEX Q2 2022 Constituent List

Microcap Review INDEX GYRO

HBOR:CNX

HCDI

HELI:CA

HEO:CA

HHS

HME:CA

HMLP

HRTG

HSON

HTOO

HUSA

HYMC

HYW

Microcap Review INDEX

Gyrodyne LLC

IBEX

Harborside Inc.

IEI:CA

Harbor Custom Development Inc.

IIN

First Helium Inc.

IMRN

H2O Innovation Inc.

IMTE

Harte-Hanks, Inc.

INDO

Hemisphere Energy Corporation

INOD

Hoegh LNG Partners

INUV

Heritage Insurance Holdings, Inc.

ISSC

Hudson Global Inc.

IVQ:CA

Fusion Fuel Green PLC

IZEA

Houston American Energy Corp.

JAKK

Hycroft Mining

JE:CA

Hywin Holdings Ltd.

JFIN

Real Estate https://www.gyrodyne.com/

Healthcare https://www.investharborside.com/

Real Estate https://harborcustomhomes.com/

Basic Materials https://www.firsthelium.com/

Utilities https://www.h2oinnovation.com/

Communication Services https://www.hartehanks.com/

Energy https://www.hemisphereenergy.ca/

Energy https://www.hoeghlngpartners.com/home/default.aspx

Financial Services https://investors.heritagepci.com/

Industrials https://www.hudsonrpo.com/

Utilities https://ir.fusion-fuel.eu/

Energy https://houstonamerican.com/

Basic Materials http://www.hycroftmining.com/

Financial Services https://ir.hywinwealth.com/

ibex

Technology https://www.ibex.co/

Imperial Equities Inc.

Real Estate https://imperialequities.com/

IntriCon Corporation

Healthcare https://intricon.com/

Immuron Limited

Healthcare https://www.immuron.com.au/

Integrated Media Technology Limited

Technology https://www.imtechltd.com/

Indonesia Energy Corporation

Energy http://indo-energy.com/

Innodata Inc.

Technology https://innodata.com/

Inuvo Inc.

Communication Services https://inuvo.com/

Innovative Solutions and Support Inc.

Industrials https://innovative-ss.com/

Invesque Inc.

Real Estate https://www.invesque.com/

IZEA Worldwide Inc.

Communication Services https://izea.com/

JAKKS Pacific Inc.

Consumer Cyclical https://www.jakks.com/

Just Energy Group Inc.

Utilities https://justenergy.com/

Jiayin Group Inc.

Communication Services NO WEBSITE

Note: As of rebalance date 04/01/2022, please see SNN’s criteria for inclusion in the MicroCap Review Index here: https://snn.network/key-criteria

www.SNN.Network

MicroCap Review Magazine 47

Microcap Review INDEX Q2 2022 Constituent List

Microcap Review INDEX KAVL

KEI:CA

KEQU

KLXE

KPT:CA

KRKR

KRN:CA

LEJU

LGHL

LINC

Kaival Brands Innovations Group Inc.

LOAN

Kolibri Global Energy Inc.

LPCN

Kewaunee Scientific Corporation

LTBR

KLX Energy Services Holdings Inc.

LTRPA

KP Tissue Inc.

LUMO

36Kr Holdings Inc.

LWAY

Karnalyte Resources Inc.

MACK

Leju Holdings Limited

MAX:CA

Lion Group Holding Ltd.

MAYS

Lincoln Educational Services Corporation

MCHX

Consumer Defensive https://ir.kaivalbrands.com/overview/default.aspx

Energy https://www.kolibrienergy.com/

Consumer Cyclical http://www.kewaunee.com/

Energy https://klxenergy.com/

Consumer Defensive https://www.kptissueinc.com/home

Communication Services https://36kr.com/

Basic Materials http://karnalyte.com/

Real Estate https://www.leju.com/

Financial Services http://ir.liongrouphl.com/#/Overview

Consumer Defensive https://www.lincolntech.edu/

LITM

LIVE

LMNR

Microcap Review INDEX

MDJH

Snow Lake Resources Ltd.

Basic Materials https://snowlakelithium.com/

MEDS

Live Ventures Incorporated

Consumer Cyclical https://www.liveventures.com/

Limoneira Co

Consumer Defensive https://www.limoneira.com/

MFG:CA

Manhattan Bridge Capital Inc.

Real Estate https://manhattanbridgecapital.com/

Lipocine Inc.

Healthcare https://www.lipocine.com/

Lightbridge Corporation

Industrials https://www.ltbridge.com/

Liberty TripAdvisor Holdings, Inc.

Communication Services https://www.libertytripadvisorholdings.com/

Lumos Pharma Inc.

Healthcare https://lumos-pharma.com/

Lifeway Foods Inc.

Consumer Defensive https://lifewaykefir.com/

Merrimack Pharmaceuticals Inc.

Healthcare https://www.merrimack.com/

MAX Resource Corp.

Basic Materials https://www.maxresource.com/

J.W. Mays Inc.

Real Estate http://www.jwmays.com/

Marchex Inc.

Communication Services https://www.marchex.com/

MDJM Ltd.

Real Estate https://www.mdjhchina.com/

TRxADE Health Inc.

Communication Services https://investors.trxadegroup.com/

Mayfair Gold Corp.

Basic Materials https://mayfairgold.ca/

Note: As of rebalance date 04/01/2022, please see SNN’s criteria for inclusion in the MicroCap Review Index here: https://snn.network/key-criteria

48 MicroCap Review Magazine

www.SNN.Network

Microcap Review INDEX Q2 2022 Constituent List

Microcap Review INDEX MFIN

MINE:CA

MLP

MMLP

MOVE:AQL

MRM

MVMD:CNX

MXC

MXG:CA

MYNZ

NCMI

NCSM

NEN

NHTC

Microcap Review INDEX

Medallion Financial Corp.

NINE

Inomin Mines Inc.

NRSN

Maui Land & Pineapple Company Inc.

NTP

Martin Midstream Partners L.P.

NVOS

PowerTap Hydrogen Capital Corp.

OEG

MEDIROM Healthcare Technologies Inc.

OMEX

Mountain Valley MD Holdings Inc.

OMQS

Mexco Energy Corporation

ONDS

Maxim Power Corp.

OPTN

Mainz Biomed B.V.

PANL

National CineMedia Inc.

PAT:CA

NCS Multistage Holdings Inc.

PAYS

New England Realty Associates Limited

PBHC

Natural Health Trends Corp

PBPB

Financial Services http://www.medallion.com/

Basic Materials https://inominmines.com/

Real Estate https://www.mauiland.com/

Energy https://mmlp.com/home/default.aspx

Utilities https://powertapcapital.com/

Consumer Cyclical https://medirom.co.jp/

Healthcare https://www.mountainvalleymd.com/

Energy http://www.mexcoenergy.com/

Utilities https://maximpowercorp.com/

Healthcare https://mainzbiomed.com/

Communication Services https://www.ncm.com/

Energy https://www.ncsmultistage.com/

Real Estate https://www.thehamiltoncompany.com/

Consumer Cyclical https://www.naturalhealthtrendscorp.com/

Nine Energy Service Inc.

Energy https://nineenergyservice.com/

NeuroSense Therapeutics Ltd.

Healthcare http://www.neurosense-tx.com/

Nam Tai Property Inc.

Real Estate https://www.namtai.com/

Novo Integrated Sciences Inc.

Healthcare https://novointegrated.com/

Orbital Energy Group

Utilities https://www.orbitalenergygroup.com/

Odyssey Marine Exploration Inc.

Industrials https://www.odysseymarine.com/

OMNIQ Corp.

Technology https://www.omniq.com/

Ondas Holdings Inc.

Technology https://www.ondas.com/

OptiNose Inc.

Healthcare https://www.optinose.com/

Pangaea Logistics Solutions Ltd.

Industrials https://www.pangaeals.com/

Patriot One Technologies Inc.

Technology https://patriot1tech.com/investors/

Paysign Inc.

Industrials https://paysign.com/

Pathfinder Bancorp Inc.

Financial Services https://www.pathfinderbank.com/

Potbelly Corporation

Consumer Cyclical https://www.potbelly.com/

Note: As of rebalance date 04/01/2022, please see SNN’s criteria for inclusion in the MicroCap Review Index here: https://snn.network/key-criteria

www.SNN.Network

MicroCap Review Magazine 49

Microcap Review INDEX Q2 2022 Constituent List

Microcap Review INDEX PCYO

PEA:CA

PFMT

PHNM:CA

PLBC

PME

PMET:CNX

PNG:CA

PPR:CA

PRQ:CA

PSTI

Microcap Review INDEX

Pure Cycle Corporation

QNC:CA

Pieridae Energy Limited

QUIK

Performant Financial Corporation

QYOU:CA

Utilities https://www.purecyclewater.com/

Energy https://www.pieridaeenergy.com/

Industrials https://investors.performantcorp.com/investors/overview/ default.aspx

Phenom Resources Corp.

RAIL

Basic Materials https://www.phenomresources.com/

Plumas Bancorp

RAVE

Financial Services https://www.plumasbank.com/

Pingtan Marine Enterprise Ltd.

RBY:CA

Consumer Defensive https://www.ptmarine.com/

Patriot Battery Metals Inc.

RCMT

Basic Materials https://patriotbatterymetals.com/

Kraken Robotics Inc.

RDCM

Technology https://krakenrobotics.com/

Prairie Provident Resources Inc.

RDI

Energy https://www.ppr.ca/

Petrus Resources Ltd.

REDU

Energy https://www.petrusresources.com/

Pluristem Therapeutics Inc.

REFR

Healthcare https://www.pluristem.com/

Pintec Technology Holdings Limited

RGCO

Financial Services https://pintec.com/

Qudian Inc.

Financial Services https://ir.qudian.com/

RGD:CA

Quantum eMotion Corp.

Technology https://quantumemotion.com/

QuickLogic Corporation

Technology https://www.quicklogic.com/

Qyou Media Inc.

Communication Services https://www.qyoumedia.com/

FreightCar America Inc.

Industrials https://freightcaramerica.com/

Rave Restaurant Group Inc.

Consumer Cyclical https://www.raverg.com/company/

Rubellite Energy Inc.

Energy https://rubelliteenergy.com/

RCM Technologies Inc.

Industrials https://www.rcmt.com/

Radcom Ltd.

Communication Services https://radcom.com/investor-relations/

Reading International, Inc.

Communication Services https://www.readingrdi.com/

RISE Education Cayman Ltd.

Consumer Defensive https://ir.risecenter.com/

Research Frontiers Inc.

Technology https://www.smartglass.com/

RGC Resources, Inc.

Utilities https://www.rgcresources.com/

Reunion Gold Corporation

Basic Materials https://www.reuniongold.com/

Note: As of rebalance date 04/01/2022, please see SNN’s criteria for inclusion in the MicroCap Review Index here: https://snn.network/key-criteria

50 MicroCap Review Magazine

www.SNN.Network

Microcap Review INDEX Q2 2022 Constituent List

Microcap Review INDEX RGF

RGS

RIBT

RMCF

RVI

RVLP

RZE:CA

S:CA

SACH

SALM

SAMG

The Real Good Food Company Inc.

SDH

Regis Corporation

SELF

RiceBran Technologies

SFET

Rocky Mountain Chocolate Factory Inc.

SGA

Retail Value Inc.

SGLB

RVL Pharmaceuticals plc

SHIP

Razor Energy Corp.

SMHI

Sherritt International Corporation

SMM

Sachem Capital Corp.

SND

Salem Media Group Inc.

SOHO

Silvercret Asset Management Group Inc.

SOU:CA

Consumer Defensive https://realgoodfoods.com/

Consumer Cyclical https://www.regiscorp.com/

Consumer Defensive https://www.ricebrantech.com/

Consumer Defensive https://www.rmcf.com/

Real Estate https://retailvalueinc.com/

Healthcare https://www.rvlpharma.com/

Energy https://www.razor-energy.com/

Basic Materials https://www.sherritt.com/English/Home/default.aspx

Real Estate https://www.sachemcapitalcorp.com/

Communication Services https://salemmedia.com/

Financial Services https://www.silvercrestgroup.com/

SBEV

SBFM

Microcap Review INDEX

SPG:CA

Splash Beverage Group Inc.

Consumer Defensive https://splashbeveragegroup.com/

SRAX

Sunshine Biophara Inc.

Healthcare https://sunshinebiopharma.com/

SREV

Global Internet of People Inc.

Industrials https://www.sdh365.com/

Global Self Storage

Real Estate https://ir.globalselfstorage.us/

Safe-T Group Ltd.

Technology https://www.terrazone.io/

Saga Communications Inc.

Communication Services https://sagacom.com/

Sigma Labs Inc.

Technology https://sigmalabsinc.com/

Seanergy Maritime Holdings Corp.

Industrials https://www.seanergymaritime.com/en

SEACOR Marine Holdings Inc.

Industrials https://seacormarine.com/

Salient Partners, L.P.

Financial Services https://www.salientpartners.com/

Smart Sand, Inc.

Energy https://smartsand.com/

Sotherly Hotels Inc.

Real Estate https://sotherlyhotels.com/

Southern Energy Corp.

Energy http://southernenergycorp.com/

Spark Power Group Inc.

Utilities https://sparkpowercorp.com/

SRAX Inc.

Communication Services https://srax.com/

ServiceSource International Inc.

Technology https://ir.servicesource.com/

Note: As of rebalance date 04/01/2022, please see SNN’s criteria for inclusion in the MicroCap Review Index here: https://snn.network/key-criteria

www.SNN.Network

MicroCap Review Magazine 51

Microcap Review INDEX Q2 2022 Constituent List

Microcap Review INDEX SRTS

SSBK

STEP:CA

SURG

SXP:CA

SYPR

TBRD:CA

TCBS

TCF:CNX

TEDU

TGO:CA

TGOD:CNX

TISI

Microcap Review INDEX

Sensus Healthcare Inc.

TOPS

Southern States Bancshares Inc.

TRVI

STEP Energy Services Ltd.

TRZ:CA

SurgePays Inc.

TSQ

Supremex Inc.

TUSK

Sypris Solutions Inc.

TWIN

Thunderbird Entertainment Group

TWR:CA

Texas Community Bancshares Inc.

Trillion Energy International

URB.A:CA

Tarena International Inc.

UTI

TeraGo Inc.

VIA

Green Organic Dutchman Holdings Ltd.

VIAO

Team Inc.

VINO

Healthcare https://www.sensushealthcare.com/

Financial Services https://southernstatesbank.net/

Energy https://www.stepenergyservices.com/

Technology https://surgepays.com/

Consumer Cyclical https://www.supremex.com/

Consumer Cyclical https://www.sypris.com/

Communication Services https://thunderbird.tv/

Financial Services https://www.tx-communitybank.com/

Energy https://trillionenergy.com/

Consumer Defensive https://ir.tedu.cn/

Communication Services https://terago.ca/

Healthcare https://www.tgod.ca/

Industrials https://www.teaminc.com/

TOP Ships Inc.

Industrials https://www.topships.org/

Trevi Therapeutics Inc.

Healthcare https://www.trevitherapeutics.com/

Transat A.T. Inc.

Consumer Cyclical https://www.transat.com/en-CA?search=package

Townsquare Media inc.

Communication Services https://www.townsquaremedia.com/

Mammoth Energy Services Inc.

Industrials https://www.mammothenergy.com/

Twin Disc Incorporated

Industrials https://twindisc.com/

Tower Resources ltd.

Basic Materials https://www.towerresources.ca/

United-Guardian Inc.

Consumer Defensive https://u-g.com/

Urbana Corporation

Financial Services https://www.urbanacorp.com/

Universal Technical Institute Inc.

Consumer Defensive https://www.uti.edu/

Via Renewables, Inc.

Utilities https://viarenewables.com/

VIA optronics AG

Technology https://via-optronics.com/en/

Gaucho Group Holdings, Inc.

Real Estate https://www.gauchoholdings.com/

Note: As of rebalance date 04/01/2022, please see SNN’s criteria for inclusion in the MicroCap Review Index here: https://snn.network/key-criteria

52 MicroCap Review Magazine

www.SNN.Network

Microcap Review INDEX Q2 2022 Constituent List

Microcap Review INDEX VIRX

VLN:CA

VMAR

VWTR

VYGR

WAVE

WILC

WKSP

WRR:CA

WRX:CA

WVVI

XELB

XIN

Microcap Review INDEX

Viracta Therapeutics Inc.

XOP:CNX

Velan Inc.

XPL

Vision Marine Technologies Inc.

XTD:CA

Vidler Water Resources Inc.

YAK:CA

Voyager Therapeutics Inc.

YGR:CA

Eco Wave Power Global AB

G. Willi-Food International Ltd.

YORK:CA

Worksport Ltd.

Walker River Resources Corp.

YTRA

Western Resources Corp.

ZIVO

Willamette Valley Vineyards Inc.

ZOMD:CA

Healthcare https://www.viracta.com/

Industrials https://www.velan.com/

Consumer Cyclical https://visionmarinetechnologies.com/

Utilities http://www.vidlerwater.com/

Healthcare https://www.voyagertherapeutics.com/

Utilities https://www.ecowavepower.com/

Consumer Defensive http://willi-food.co.il/

Consumer Cyclical https://investworksport.com/

Basic Materials https://wrrgold.com/

Basic Materials https://www.westernresources.com/

Consumer Defensive https://www.wvv.com/

Canadian Overseas Petroleum Limited

Energy http://www.canoverseas.com/

Solitario Zinc Corp.

Basic Materials https://solitarioxr.com/

TDb Split Corp.

Financial Services https://www.quadravest.com/#!xtd-home/c1e63

Mongolia Growth Group Ltd.

Real Estate https://www.mongoliagrowthgroup.com/

Yangarra Resources Ltd.

Energy https://www.yangarra.ca/

Yunji Inc.

Consumer Cyclical https://investor.yunjiglobal.com/

York Harbour Metals Inc.

Basic Materials https://yorkharbourmetals.com/

17 Education & Technology Group Inc.

Consumer Defensive https://ir.17zuoye.com/

Yatra Online Inc.

Consumer Cyclical https://www.yatra.com/

Zivo Bioscience Inc.

Healthcare https://www.zivobioscience.com/

Zoomd Technologies Ltd.

Technology https://zoomd.com/

Xcel Brands Inc.

Consumer Cyclical https://xcelbrands.co/

Xinyuan Real Estate Co Ltd.

Real Estate http://www.xyre.com/

Note: As of rebalance date 04/01/2022, please see SNN’s criteria for inclusion in the MicroCap Review Index here: https://snn.network/key-criteria

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MicroCap Review Magazine 53

L E GA L CORN ER

// By Jon Uretsky, Esq.

Vast Changes to Microcap Financing Part II The SEC Strikes Back

In Q1’s Legal Corner, we said that vast changes would be coming to the structure of microcap financing – get ready because they’re here.

n my last article, I highlighted a string of enforcement actions the SEC had begun pursuing in 2019 against various lenders who all earned money in a similar way: sending funds to a microcap company in exchange for shares based on convertible debt, and then after a six-month waiting period, selling the suddenly unrestricted shares on the open market. This financing structure existed because, when it worked out, it was mutually beneficial for both the lender and the microcap company. Lenders saw large profits while these companies got financing they couldn’t get elsewhere. Sometimes, disputes, and thus litigation, was involved, and we have been on both sides of those disputes. More often than not, settlements were reached, and the company and lender worked together afterwards. This financing structure is hardly ideal, but it was “the done thing” in the microcap industry for decades. Critically, this financing structure, where lenders are seen as “traders,” instead of “dealers,” had been deemed legal for decades. That’s changing. We defended lenders against the SEC by arguing that the SEC should not be permitted to regulate by enforcement – arguing that the SEC can make rules if it wants to. Well, the SEC just did. As I discussed at the Planet Microcap Showcase, the SEC Commissioners just unanimously proposed rules that would change the letter of the law to further define a “dealer” and dealer activity. The SEC’s purported focus here was to “reflect Congress’ statutory intent” that firms who engage in important “liquidity-providing roles” in the securities markets should be registered.

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Prior to this rule, a dealer was someone “who engaged in the business of buying and selling securities for his own account.” An individual who bought and sold for his or her own account, but not as part of a regular business, fell under the trader exception and thus was not required to register and file with the SEC – which can often be an expensive process. Now, a dealer will be considered anyone who engages “in a routine pattern of buying and selling securities that has the effect of providing liquidity to other market participants.” How many funds does that include? All of them, perhaps? What does the SEC’s new definition mean, exactly? According to the SEC, the new definition of dealer sweeps in investors who, for example: •• Routinely make roughly comparable purchases and sales of the same or substantially similar securities in a day; or •• Routinely express trading interests that are at or near the best available prices on both sides of the market and that are communicated and represented in a way that make them accessible to other market participants; or •• Earn revenue primarily from capturing bid-ask spreads, by buying at the bid and selling at the offer, or from capturing any incentives offered by trading venues to liquid-supplying interests. Keep in mind that though the SEC provides these standards, it warns that no presumption should be

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made that certain persons are not dealers solely because those persons do not meet the standards of the rule. In other words, there is no safe harbor. There could be some light at the end of this tunnel, as the SEC included a provision for excluded persons against whom the new rules would not apply: persons who have or control total assets of less than $50 million. The SEC believes that individuals who are not part of a business, but are buying and selling securities with less than $50 million controlled, are less likely to pose the type of risk to the market – and other market participants – that the SEC is trying to address. What now? The net that the SEC’s new dealer definition casts is wide indeed, and as I’ve mentioned before, this will change how the microcap industry is financed. Here is what I see happening to this industry: •• Larger microcap lenders and issuers with deeper pockets might start looking at international exchanges instead of ones in the United States that are regulated by the SEC. Issuers can choose to list microcap securities internationally in, for example, the United Kingdom. The Financial Conduct Authority (“FCA”) regulates markets in the UK with less stringent listing requirements, where debt securities can be sold on an alternative market to qualified investors. And when microcap securities are listed internationally – what’s to stop the larger lenders from moving their money internationally as well? •• Smaller lenders could structure their funds differently to qualify as an “excluded person,” avoiding registration. However, the SEC may have anticipated this and as a result, clarified the definition of “own account” to now include “parallel account structure” which the SEC defines as “a structure in which one or more private funds (each a ‘parallel fund’), accounts, or other pools of assets (each a ‘parallel managed account’) managed by the same investment adviser pursue substantially the same investment objective and strategy and invest side by side in substantially the same positions as another parallel fund or parallel managed account.” In short, the SEC may come after lenders who have “parallel account structure,”

but what’s to stop these smaller lenders from structuring their operation to be owned by different individuals? •• As for the microcap companies themselves, this new definition could cause publicly listed microcap companies to go back to being private companies. Without the benefit of being a public company – i.e., being able to raise funds – what is the purpose of going through onerous public filing requirements? Other microcap companies may cease to exist at all without the necessary funding, causing lost jobs and generally stagnating microcap market activity. In the end, this rule may have the opposite effect the SEC intended, as those in the microcap industry with more funds may find alternatives and ways around the rule, while the smaller microcap companies – the very ones the SEC is seeking to protect with the new rules by “levelling the playing field” – will likely be hurt. With that said, experienced counsel can help navigate the process so you don’t end up one of those hurt by the SEC’s new rule. The SEC is providing a one-year compliance period from the effective date of any final rules adopted by the SEC, which will likely be sometime this summer. So you’ll have a year to figure it out. Retaining experienced microcap counsel like PULLP can help. We invite you to contact uretsky@pullp.com or call 212.571.1164 for a complimentary analysis. PULLP, “The Microcap Litigators” is one of the only law firms specializing in microcap litigation. Jon Uretsky is the founding and managing partner of PULLP. Mr. Uretsky has a broad multidisciplinary practice that includes extensive experience in litigation and dispute resolution, regulatory investigations (including FINRA and SEC matters like those described above). In addition, he counsels corporate boards, board committees (including special committees) as well as being a personal adviser to many entrepreneurs, business leaders and corporate executives. He has counseled clients on significant litigation, regulatory and transactional matters across multiple industry sectors. Additionally, the PULLP team has extensive experience negotiated mergers and acquisitions (including reverse mergers); domestic and cross-border investments/joint ventures; the representation of private equity; venture capital and other private investment funds; securities offerings; and private and public financings. www.PULLP.com Notes: 1. Special thanks to Anna Adelstein, Director of Litigation at PULLP, and Kayshana Mohanaraj, a Law Clerk at PULLP, for their assistance in researching and the preparation of this article, as well as their help in the many matters PULLP handles. 2. This article is not an attempt to provide investment advice. The content is purely the author’s personal opinions and should not be considered advice of any kind. Investors are advised to conduct their own research or seek the advice of a registered investment professional.

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ins i ghts

// By Shelly Kraft and Roger Pondel

How Public Relations Can Support MicroCap and SmallCap Companies A Q&A with PondelWilkinson’s Roger Pondel

While public companies of all sizes work hard to confront today’s unprecedented communications demands in a volatile marketplace, microcap and smallcap companies must work even harder to get their messages out.

hey have to compete for attention with bigger public companies, which by virtue of size alone, typically create more interest and news that commands wider attention. And many microcap and smallcap companies, with generally smaller corporate staffs, are just not able to put their best faces forward with messaging or use increasingly available communications tools. SNN’s Shelly Kraft recently sat down with veteran investor relations and public relations advisor Roger Pondel, CEO of PondelWilkinson Inc., to ask a few questions about the role public relations plays to support microcap and smallcap companies in the communications mix:

of disclosure. Public relations, at times working in concert with IR, typically reaches many audiences beyond the investment community. The true value of PR is best explained by comparing it to advertising. For instance, with advertising is a company talks about itself; with public relations, someone else talking about the company, whether it is a feature story in a news outlet, podcast or even on social media. This third-party dialogue creates a value for publicly traded and privately owned companies in terms of credibility and awareness, which build buzz and interest, ultimately circling back to an equity’s value proposition, and thereby generating interest among myriad audiences, including investors.

SK: To set the stage, what is public relations, and how does it differ from investor relations?

SK: Getting to the heart of the matter, how does PR differ for the microcap and smallcap company than it does for bigger-cap companies?

RP: For publicly traded companies, investor relations is a needed discipline for communicating with existing and prospective shareholders, while being sensitive to “materiality” and following the rules

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RP: Perhaps one of the biggest differences is that larger companies typically generate more organic news. For the microcap and smallcap company,

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there needs to be much more proactivity. That’s why a basic understanding of journalism and what constitutes news is imperative. Providing natural fodder for the media and more opportunities to get information out is a key component of performing public relations for smaller companies. PR professionals are trained to identify hidden nuggets of news and to develop ideas to create news and attention. PR pros also are knowledgeable in identifying and grabbing the attention of journalists, since they repeatedly serve as business news resources and know who to contact and how to do so. That all said, there is more to public relations than working with the news media, and that’s usually where creativity and communications skillsets come in vs. the more left-brain centric investor relations mindset. SK: Why should microcap and smallcap companies consider using public relations in the first place? RP: Public relations as a business discipline provides the microcap and smallcap company with a competitive edge, a boost, in getting its story out. It’s not really enough to prepare a press release on earnings or a new contract, distribute it via a wire service and hope for the best. Applying a public relations approach can help move that story beyond hope and enable it to get more traction. It also can help with marketing a company’s products and services, reaching customers and prospective customers. Investors really like that. Public relations also fortifies investor relations. For example, a CEO presenting at an investor conference certainly is taking advantage of an important forum that represents a critical tool of investor relations. But taking the essence of that presentation and getting it beyond the meeting room with the help of a public relations pro can pay bigger benefits and provide tangible ROI. SK: Should microcap and smallcap companies planning an IPO consider public relations before they start the process? RP: I would answer that with an emphatic YES. Especially for microcap and smallcap companies, which aren’t usually that well known in the first place, public relations can help a company gain notoriety, and with that, credibility. Both are important attributes when the investment banks approach prospective investors. Establishing a steady flow of news well in advance of filing the S1 and registering for an IPO also is critical. It will allow a continuation

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Just as an investor relations professional cannot – or should not – automatically be held responsible for a stock’s price, the PR professional should not automatically be expected to guarantee news coverage.

of news flow during the often long quiet period, which technically starts when earnest discussions begin with the bankers and lasts 25 days beyond the time a company begins public trading. But the left hand needs to know what the right hand is doing, meaning that PR must work hand-in-hand with IR ahead of an IPO. What to announce, when to announce it, and assuring that there will be no forward-looking statements in the CEO’s quote are imperatives that cannot be overlooked. Here’s where the public relations and investor relations folks must be 100 percent aligned. SK: How does a PR firm manage client expectations? In other words, what should a client expect from his PR firm? RP: Great question. Just as an investor relations professional cannot – or should not – automatically be held responsible for a stock’s price, the PR professional should not automatically be expected to guarantee news coverage. On the IR side, it’s up to the company to perform financially for enhanced valuation to occur. With regard to PR, it’s up to the company to perform operationally, i.e., with a great story, to attract attention. Just as with IR, it is up to the practitioner to get in front of investors communicating the company’s stellar financial performance, it is up to the PR pro to identify the right outlets and get the company covered. But PR is much more than press releases and news generation. Social media, speaking opportunities, email marketing, and website SEO are just a few of the many ways PR can help build awareness for a company.

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A good public relations firm regards itself as part of the management team. Just as a CEO would not consider hiring a key employee for a month, the same holds true when engaging a PR firm.

performance issues, either on behalf of the issuer or the PR firm. Our firm has been in the fortunate position of maintaining long client retention, with client and staff tenure averaging more than a decade. Our largest client today started with us as a classic microcap company more than 20 years ago, when it went public through a reverse merger. At that time, the company’s market cap was about $30 million, with about the same in annual sales. Today, its market cap is nearly $50 billion, with sales approaching $6 billion. The company’s graduation from the ranks of microcap took time and patience, persistent hard work, consistent performance and transparency in communications throughout the journey.

SK: What differentiates one PR firm from another?

SK: Does it make sense for a microcap or smallcap company to employee a full-time internal head of communications, blending both PR and IR disciplines?

RP: In a word – experience – especially when it comes to doing public relations for microcap and smallcap companies, or for that matter, for publicly traded companies of any size. The PR firm and its key executives who are assigned to the account should understand certain concepts that are unique to the publicly traded company… knowledge of “materiality” and basic familiarity with disclosure rules, including Regulation FD. Differentiation also should be viewed in terms of the public relations objectives. If the goal is merely product promotion, for example, an emphasis on digital communications and product marketing is critical. However, if the objective is corporate in nature, there is much more involved, and a PR firm should have an active working knowledge of traditional mass and business media, in addition to social and other key marketing functions. SK: How should an issuer allocate a PR budget? Monthly, annually? RP: Unless the subject is crisis communications or specifically event-driven, such as a product introduction, practicing public relations is a process, with many building blocks along the way, starting with development and articulation of key messages. A good public relations firm regards itself as part of the management team. Just as a CEO would not consider hiring a key employee for a month, the same holds true when engaging a PR firm. For an ongoing program, budget planning for a year is best, with controls built into the contract should chemistry not work out or in an unlikely scenario of

RP: I am admittedly biased, but my answer is probably not. For microcap companies in particular, and for most smallcap companies, there is typically not enough to do to warrant, or for a company to afford, a full-time internal public relations or investor relations position, let alone the ability to find a professional who is experienced and adept at both PR and IR. The benefits of engaging an outsourced firm – especially one that provides both PR and IR services – include access to highly experienced executives who have met many PR and IR challenges and who work day-to-day with client teams, journalists and investors. It also provides for easy collaboration under the same roof at the intersection of both disciplines. Roger Pondel is CEO of PondelWilkinson Inc., a full-service investor relations and strategic public relations firm that has earned a national reputation for innovative, aggressive, professional service. He can be reached at rpondel@pondel.com, or 310-279-5965. About PondelWilkinson and Roger Pondel PondelWilkinson Inc. is a venerable name in strategic public relations and investor relations. Founded in 1968 and under present management since 1989, the firm has earned a national reputation for innovative, professional service, providing clients with focused expertise, sound strategic counsel and results-driven program execution. PondelWilkinson’s quality client roster includes emerging and established publicly traded, pre-public and privately owned companies in diverse sectors. Roger Pondel and his team advise clients on day-to-day corporate public relations and investor relations strategies. Roger has been the architect of communications programs involving corporate transformations and restructurings, mergers and acquisitions, crises, litigation support and complex shareholder matters. Heading the firm since 1989, he previously was investor and public relations director of several publicly traded corporations. Early in his career, he was a reporter with the San Jose Mercury News.

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EVER WONDER WHERE THE PEOPLE WITH ALL THE ANSWERS, GET ALL THE ANSWERS?

Ask MARCUM

For More Information: CLICK HERE

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MicroCap Review Magazine 59

fe atu re

// By Tobias Carlisle

Has the definition of “value investing” changed? It’s been a tough run for value investors. Depending on how it’s measured, value has underperformed for about a decade.

he decade in the wilderness led many to abandon the strategy. Many others have drifted away from the strict implementation of it promoted by Benjamin Graham. They favor a modified version that embraces its spirit while ignoring some of its narrowest precepts. Does this mean the definition of “value investing” has changed?

Known as the Dean of Wall Street because he taught investing at Columbia while operating an investment practice, Graham authored the value investor’s bibles Security Analysis (1934) and The Intelligent Investor (1949). He was also famously Warren Buffett’s teacher. Graham promoted the idea of treating stocks as part ownership of businesses and ignoring price movements. Stocks could be bought only if they were undervalued on a conservative assessment of intrinsic value. He favored a valuation based on the liquidation value of a company—the dourest assessment of value—and a widely diversified portfolio. But Graham didn’t invent value investing—he codified it. There are many early examples of investors implementing what is clearly a value-type strategy. The great economist John Maynard Keynes is one such example. Buffett cited Keynes’s philosophy approvingly in his 1991 Berkshire Hathaway, Inc. Chairman’s Letter, quoting from a letter Keynes wrote to a business associate in 1934:1

1 Extracted from Concentrated Investing: Strategies of the World’s Greatest Concentrated Value Investors (2016) https://amzn.to/3qApGq1

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As time goes on, I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. Keynes was a contemporary of Graham’s but favored a more concentrated approach that relied on the performance of the business, rather than the value of the assets. Buffett’s evolution from a strict Grahamite investor to a Phil Fisher-influenced “franchise” investor, a strategy remarkably similar to the one Keynes finally adopted, is well documented.

business, and the defensibility of the business. None of that prevents a valuation based on robust growth when it’s warranted. All it suggests is that valuations that depend on a rapid improvement in business prospects should be subject to intense scrutiny and skepticism.

Modern value investors typically style themselves on the strategy adopted by Buffett and Keynes. They have two criticisms of Graham’s strategy. They point to the problems with book value as a proxy for intrinsic value. They also argue statistically cheap stocks—those on low multiples of assets or earnings—deserve to be cheap because they are bad businesses. Screening is so easy now that the market is picked over, they say. Only superior business analysis will lead to superior returns. And that means paying up for quality.

For a short time between 2018 and 2020 the prevailing attitude in the market was that only the highest growth stocks were worth buying. Damn the losses, so the theory went, and buy. The business would turn on the cash-flow spigot once it won its niche. Just look at Amazon. It lost money all the way to online shopping dominance. Given the number of observations in the sample—one—you might have been forgiven for some hesitation in extrapolating the idea that all the money-losers were going to lose their way to Amazon-like dominance. The base rates, after all, said take the under. But who looks at base rates when there’s money to be made? All we had to fear was the fear of missing out. And so, FOMO-ing at the mouth, investors paid 20, 30, 50 times sales for marginal businesses. Now, two years later many are chastened. They have rediscovered the reasons for Graham’s conservatism.

Many believe Graham was a captive of his time. He endured the Great Crash in 1929, so the argument goes, and was understandably conservative for the rest of his career. They may be surprised to learn that Graham also took a shot at old-fashioned book value in a 1932 Forbes article, writing, “It is undoubtedly true that the old-time investor laid too much stress upon book values and too little upon what the property could earn.”2 Book values have always been more favored by academics, who seek ease of calculation, than practitioners who seek returns.

The definition of value investing today is the same as it was in Graham’s day. Buy the businesses that will earn the most on capital and pay as little as possible for them. The implementation is hard because it’s hard to know what the future holds. Most businesses mean revert. Most earnings yields mean revert—sometimes the price goes up, sometimes the earnings go down. A portfolio of stocks that earn reasonable returns on investment bought at a price low enough to allow investors to participate in those returns will always do well given time.

In truth, the distinction between so-called Grahamite value investing and other forms of fundamental analysis has always been less about the precise metrics used to assess intrinsic value and more about the proper attitude to take when making the assessment. Graham has always emphasized a business-like approach to the appraisal, a margin of safety in the valuation, and the safety of principal. The second-order implications of that philosophy are conservatism in the valuation and financing of the

Tobias Carlisle provides a list of these types of stocks for free on his website, acquirersmultiple.com. He also runs two ETFs that implement a deep value strategy, the mid and large cap Acquirers Fund (ZIG), and the small and micro Roundhill Acquirers Fund (DEEP)

2 Graham, Benjamin, “Inflated Treasuries And Deflated Stockholders,” Forbes Magazine, (1932). https://www.forbes.com/2008/10/23/inflatedtreasuries-stockholders-cz_bg_1023forbesarchive.html?sh=b7b43d474647

www.acquirersfunds.com

Tobias Carlisle is founder and managing director of Acquirers Funds, LLC. He serves as portfolio manager of the firm’s deep value strategy. Tobias is the creator of The Acquirer’s Multiple®. He is also the author of the books The Acquirer’s Multiple (2017), Concentrated Investing (2016), Deep Value (2014), and Quantitative Value (2012). Tobias has extensive experience in investment management, business valuation, public company corporate governance, and corporate law.

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MicroCap Review Magazine 61

ins i ghts

Global Electrification for All Vehicles No Longer a Thing of the Future The global electrification of automobiles, trucks, buses, marine vessels, and in fact all vehicles, is no longer seen as a futuristic idea.

e are currently in the midst of one of the biggest global industrial and technological revolutions in history. Global mandates and regulation have solidified and further enabled carbon neutral goals. Electric vehicle (“EV”) sales have skyrocketed, charging infrastructure initiatives have been ramped up (and will accelerate greatly in coming years), and industry leaders have doubled down on their respective focus on improved battery technology. What was once thought of as a debatable endeavor has now caused mass acceptance and excitement in the marketplace.

The auto industry began its ascent towards electrification quite some time before the marine industry. Some of the auto industry’s biggest and most prestigious names have already planned to go completely electric within the next 5 or 10 years. JLR (Jaguar Land Rover) plans to sell only electric cars by 2025; Volvo plans to achieve that same goal by 2030; General Motors plans to go fully electric by 2035. Well-respected high-performance auto manufacturers Lotus and McLaren will no longer sell ICE powered sports cars by 2028. Volkswagen, 2021’s leading seller of EVs in Europe (with approximately 25% of the market), aims to have EVs account for at least half of its global production by 2030. Even luxury brands such as Lamborghini, Bentley, Porsche, and Ferrari, now have an expanding footprint in the electric sector. And of course, there’s Tesla. Additionally, major ground shipment logistics companies such as UPS, Amazon, and FedEx, have supported a

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E-MOTION™ 180E is the WORLD’S FIRST PERFORMANCE ELECTRIC PROPULSION ENGINE UNPARALLELED POWER & TORQUE •• EFFICIENT – MASSIVE FUEL SAVINGS •• PROPRIETARY UNION ASSEMBLY •• LOW MAINTENANCE COST •• RAPID, INEXPENSIVE CHARGING •• RANGE more cost effective and conscientious green future. In 2021, electric automobiles, including hybrid electric vehicles and plug-in-hybrid vehicles, made up 9.7% of US auto sales. This is nearly double 2020’s 5.4% number. Auto sales in general rose only 3.4% from 2020 to 2021. However, total sales growth for electric vehicles skyrocketed 85.9% year over year. In the first quarter of 2022, EV sales have soared, even with the overall industry reporting a

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15.3% decline in new vehicle sales. In 2021, the global electric boat and ship market reached a benchmark value of nearly $5 billion and is expected by many in the boating industry to reach well over $10 billion by 2027.

addition, Finland is the home to Nextfour Solutions, a company that Vision Marine has recently partnered with that has designed a unique and highly advanced navigation and entertainment system called the Q Display.

The exponential growth of the electric boat market can partly be attributed to the burgeoning global government mandates and restrictions surrounding gas and diesel engines (internal combustion engine, or ‘ICE’). In addition to the global “zero emission” initiative, astronomically high fuel costs have also played a large role.

As many boaters and marine industry OEMs move increasingly towards acceptance of electric transition of worldwide waterways, consumers are eagerly awaiting the mass production of high performance electric outboard and powertrain systems, much like consumer anticipation during the early stages of electric automobiles.

It is well known that Europe and North America have held the largest global market share in the electric boat market for quite some time, but smaller markets have also witnessed carbon neutral goals being fast tracked.

This is the perfect inflection point for Vision Marine Technologies, Inc. (VMAR-NASDAQ) to assert market dominance via it’s highly proprietary, 180E powertrain, which is the first fully electric high performance purpose built outboard powertrain system The E-Motion™ showcases immense power and torque, while also producing zero pollution, zero emission, a noiseless environment, requires very minimal maintenance, and more than a 90% reduction in in operating cost versus currently very expensive gasoline pump prices. It is the most technologically advanced electric outboard motor on the market, and to Vision Marine’s knowledge, there is no other electric outboard motor even close to market which rivals it. Vision Marine’s recent Manufacture and Supply Agreement (‘MSA’) with McLaren

The Port of Auckland in New Zealand has announced its goal of becoming a zero emissions harbor by 2040. Kenya’s fishing village Mbita, located in Lake Victoria (which is home to around 25,000 diesel powered boats) has recently been equipped with its first line of electric powered fishing boats by Dutch startup Asobo. Scandinavian countries have seen several startup electric boat manufacturers, including Candela, which has an electric ferry slated to commence operation next year in Sweden. In

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Engineering, a division of Linamar Corporation, will enable first mover advantage for the E-Motion™ to scale mass production, therefore readily available to serve major OEMs. Vision Marine’s CEO Alexandre Mongeon and co-founder, and his team have been developing an innovative cutting edge fully electric powertrain technology for the marine industry for years. Years ahead of the competition, Vision Marine has been at the forefront of the boating industry’s recent shift to electrification as the only company with a deep footprint into the high-performance electric powerboat market. Vision Marine’s focus has specifically been on the high-end outboard market, which will exhibit the fastest growth segment within the general outboard sales market. The E-Motion™180E is the world’s first electric propulsion engine providing what we believe to be the only ready for mass production high performance electric outboard that offers the exceptional speed and torque otherwise not available within the boating industry. The E-Motion™ is the first fully electric purpose-built outboard powertrain system that combines an advanced battery pack, inverter, and high efficiency motor with proprietary union assembly between the transmission and the electric motor design, utilizing

extensive control software. Our E-Motion™ and related technologies used in this powertrain system are uniquely designed to maximize efficiency, and as a result, enhance both range and performance. Virtually any powerboat can become fully electric by incorporating our disruptive powertrain technology. Vision Marine also designs, innovates, manufactures, and sells handcrafted, high performance, environmentally friendly, electric recreational power boats to customers. These boats can be found globally, branded, and ready for use at many other rental operations operated by both startups and large OEMs, for example, Freedom Boat Club, Carefree Boat Club, Aquatic on Lake Windermere, in England, Electric Boat Rentals of Bermuda, On A Boat in Melbourne, Australia, Yachtsy in Washington D.C., and Maine Electric Boats, to name just a few. Vision Marine’s boats can also be rented at prestigious hotels, such as Montage Palmetto Bluff in South Carolina, Grupo Vidanta in Mexico, Grand Palladium Hotel in Isla Mujeres, among others. For some of these businesses, Vision Marine’s boats are the cornerstone of their respective rental operations. www.visionmarinetechnologies.com The company paid consideration to SNN or its affiliates for this article.

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MicroCap Review Magazine 65

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// By Diane Yoo

Making Seats for Female Board Members Earlier this year, global HR giant Korn Ferry took note of what it called a “curious paradox,” writing: “Technology companies are some of the most innovative businesses in terms of strategies, products and services, but are among the least progressive when it comes to the number of women serving on their boards of directors.”

ccording to the firm’s research, less than 15 percent of the 1,000 or so corporate directors serving the country’s top 100 tech companies are women — far less than the 20 percent representing large companies overall. Moreover, 16 of the top 100 tech companies’ boards had no women members at all. Perhaps even more stunning is the underrepresentation of minorities on large corporate boards. A study by Institutional Shareholder Services, a company that advises large shareholders on corporate governance, found that just 1.5% of the 20,000 directors of the country’s 1,000 largest companies are black women. And the pace of change has been glacial, at best. From 2015-2020, the tech industry increased its share of board members who are underrepresented minorities by just 3.9%, a bit better than other industries, but still far short of what would be needed to make corporate governance truly diverse in our lifetimes.

As a minority woman, entrepreneur, and investor in Silicon Valley startups, I am often the only woman at the table. I have called out the toxic culture that prevents women from leaning in, or even being considered for a high-level position, many times. I’m concerned that the pandemic, which placed unique

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strains on working women and caused many to leave the workforce temporarily, will be used as an excuse to maintain the status quo. Change needs to accelerate, not stop, and men in particular must call out the double standard that we women face. This double-standard, expressed by so many euphemistic roadblocks that only women seem to hear — “show us proof”; “build a network and come back to us”; “you need more traction” and many others — has created huge discrepancies in the percentage of women (especially minority women) executives and entrepreneurs, the twin pools from which board members are culled from. Last week, Sheryl Sandberg of Meta Networks (formerly Facebook) quit the company after twelve years, apparently because she was feeling burned out. Sandberg proved that women could go toe-to-toe with the biggest empire builders in tech, while also becoming a best-selling author and role model for millions. It is my goal and the women I partner with to expand the room and opportunity for legacies such as this. As a tech venture capitalist, I seek out women founders, but men need to join me in this search. Unfortunately, there simply aren’t enough women already at the highest levels needed to pull the rest up without help from our male counterparts. This is

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not a philanthropic exercise. We women are natural leaders and born networkers. We thrive in disciplines like engineering and mathematics, but we also have that extra touch of empathy and appreciation for relationships that is so vital to team-building. Our dual roles as leaders and nurturers should not be seen as a weakness, but rather as a competitive advantage. According to Harvard Business Review, companies that place women in executive or senior leadership roles not only tend to provide a higher quality of consumer experiences, but are also more socially responsible and profitable overall. Companies cannot afford to lose talented executive women, yet there would be so many more if representation and the opportunity were there. This conversation is not one just about women, but about improving diversity, equity, and inclusion. As an Asian0 American woman, I can attest to the fact that, in a global industry like tech, we need as many voices as possible on board — and on the board. Diane Yoo Bio:Diane Yoo is a results-driven entrepreneur and venture capitalist with more than 15+ years of experience. As an accredited investor, she has invested in 35+ companies with a focus on diverse founders. She is in the 1% of Asian-American female founders who are also a partner. Diane has founded angel networks, venture funds, and investment networks. She is Founding Partner for a Medtech and Healthtech venture capital

firm in partnership with the largest medical center of the world. With VC and accelerator expertise, she works extensively with over 700+ global companies and her firm has deployed significant capital into the startup ecosystem. She now has become one of the only Asian- American women to run a Private Equity firm. She has launched numerous venture funds for over 15 universities across the US and has built a powerful co-investor US network with offices in Texas and New York. Diane is Co-founder of Global She Ventures, an accelerator in partnership with Rice University to catalyze global women entrepreneurs. Diane is also Co-founder to a national media platform, Identity Unveiled highlights trailblazing Asian American women who have broken barriers and become firsts in their industry. She is also an investment partner to several Silicon Valley funds including the largest women’s fund and the first FemTech fund in the nation.

Diane is an entrepreneur turned investor with experience in launching and founding Angel Funds, Investment Networks, private equity and Venture Capital. As Founding Partner, she secured a Venture Capital fund partnership with the world’s largest medical center. As the former Managing Director of The Rice Angel Network, Diane has expertise in operating funds. She is Also the founder of national pitch competitions in 10+ cities with a focus on creating impact for diverse entrepreneurs. With a history of operating funds and portfolio companies, Diane founded venture capital funds for over 12+ universities. With extensive experience advising over 100+ companies and 30+ venture backed investments, she serves as a mentor and investor to several nationally ranked top-tier accelerators. She is also Co-Founder and Partner to accelerators including Curated Advisors. Diane is also an investment partner to Silicon Valley funds including the largest women’s fund and the nation’s first FemTech fund. Additionally, she is a US partner to Korean government agency focusing on venture capital, acquisitions, and consulting early stage companies. Diane is national speaker on Venture Capital and Entrepreneurship. Her topics include “101 for Investors”, “Million Dollar Women”, and “Pitch Perfect”. Her publication has trended #1 for Venture Capital on Crunchbase and also spotlighted on numerous media outlets includingStartup Nation and Women 2.0. As an influencer, Diane serves on the official Forbes Business Council.

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ins i ghts

// By Gavin Wendt

Battery Metals Overview We are at an interesting point with respect to battery materials, especially with regards to demand-supply dynamics – and most importantly pricing. There are opposing views on where prices are headed, but irrespective of one’s position, it’s a discussion that’s certainly worth having.

ront and centre in the battery materials space has been lithium – which has been far and away the best-performing battery sector commodity. This positive momentum has flowed through

into the share price performances of lithium equities around the world – whether it be established producers or junior companies.

Source: International Energy Agency

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Russia’s war on Ukraine, combined with a surge in demand from car companies looking to secure supply for ever more ambitious EV growth plans, pushed the prices of raw materials such as nickel, lithium and cobalt to record levels during March. The major battery commodities can be summarised as follows: LITHIUM: Australia’s hard rock mines account for about half the world’s supply. Chile, where it’s harvested by pumping salt-rich brines from underground into vast evaporation ponds, is the No. 2 producer - and holds more than 40% of the world’s known reserves. China has more than half of all capacity for refining it into specialist battery chemicals. Almost $14 billion is needed to develop planned lithium production capacity by 2025, according to BloombergNEF. And money isn’t the only hurdle: Serbia in January blocked Rio Tinto Group’s plans to build Europe’s biggest lithium mine after running into public opposition over environmental concerns. NICKEL: The U.S. warned in a 2021 report of the prospect of large shortages of the highly purified, battery-grade type, known as class one nickel, in three to seven years because of a lack of enough specialized processing. Any trade curbs on Russia,

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which accounts for about 17% of production capacity, would add to pressure on prices. Indonesia, which holds almost a quarter of global nickel reserves, limited some exports a couple years ago and is now luring investments into higher-value processing, mainly from China. COBALT: More than two-thirds of the mined metal comes from the Democratic Republic of Congo (DRC), though Australia, Cuba and Canada are expanding capacity. The DRC has long faced allegations of corruption, human rights abuses and the use of child labour. Small-scale “artisanal” producers accounted for about 12% of the country’s output in 2020. China has little of the raw material but refining is concentrated there, with about 80% of global capacity. Capacity is growing elsewhere, though, including at Finland’s giant Kokkola refinery. GRAPHITE: Battery makers can use either a natural graphite extracted from mines to make anodes or a synthetic material that is typically more expensive but lasts longer, charges faster and improves safety. China accounts for about 60% of natural graphite production capacity and 90% for the synthetic. It also is a big source of the raw material, but new supplies are being developed in places including

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Tanzania, Madagascar and Canada. South Korea and Japan are alternative sources of processed materials. Tesla last year struck a deal with Syrah Resources, a supplier with a mine in Mozambique and a plant in Louisiana. Over recent weeks there has been an emergence of dissenting voices when it comes to the immediate price prospects of lithium in particular. Some banking analysts including UBS believe that the peak of the price craziness may be over. The price per kWh for a high-nickel NMC811 lithium-ion battery had fallen from $150 in March to $135 by the end of May. It is also estimated that the increase in raw material prices has now added $1,200, or roughly 3%, to the materials cost for a batteryelectric car compared with the price at end of last year. For as long as the car market remains undersupplied, manufacturers will likely be able to pass on the lion’s share of the cost burden. That means customers, for now anyway, are willing to pay the higher prices to get into a new car, which in turn means the car makers can progress with their electrification plans

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without worrying too much whether they will get a return on their investment. Elsewhere amongst the sceptics, US investment bank, Goldman Sachs, has gone even further – “calling the end of the bull market” on lithium. A recent Goldman Sachs report has referenced new investment, particularly in respect of Chinese breakthroughs in extraction of lithium from an alternative mineral called lepidolite. Also pushing the theme of lower pricing was news that Chinese battery and vehicle maker, BYD, was in talks to buy six lithium mines in Africa with the potential to provide the raw materials to eventually refine enough lithium to make 28 million EVs with a battery size of around 60kWh. In my view, Goldman’s prognosis is misplaced. Lithium sector fundamentals are far more positive that the sceptics are describing. For starters, lepidolite production is complicated and yet to be commercially proven on the scale necessary to make a meaningful impact in the battery sector. Furthermore, acquiring an undeveloped resource in Africa is very much a different story to actually pushing the button on a mining development. There are a

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lot of hurdles to be jumped through before African resource projects are commercialised. Just look at the iron ore space, where China has been trying for a couple of decades to break the market dominance of Australian and Brazilian iron ore suppliers, by developing projects in Africa. Quite simply, China’s African iron ore ambitions have been frustrated by uncertainty and massive capex requirements. And the anecdotal evidence from lithium producers tells a positive story on pricing and demand, not a negative one like the sceptics are suggesting. Producers are seeing end-users that are desperate to secure supply – shooting down the argument that there is a situation of oversupply in the market. For example, Pilbara Minerals (ASX: PLS) at a recent conference in Queensland, Australia pointed to ongoing strength in the auction prices that it is receiving via its website for spodumene concentrate. Quite simply, it cannot satisfy the demand from end-users that are clamouring for supply. In actual fact, most industry groups are modelling

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a significant lithium supply deficit of around 20% for the period 2023-2030. While the spot market might see some sort of easing in price, it’s important to note that the spot market reflects a very small amount of product that’s actually traded - most lithium is sold via contracts. Another Australian producer, Allkem (ASX: AKE), has just announced that the average price it would receive during the June quarter would be 14% above previous guidance at US$40,000/t on sales of ~3,500 tonnes. At current lithium prices, all producers are generating peak cycle returns, yet a recent retreat in share prices has resulted in implied pricing of $US18,435$US23,716/t LCE. Benchmark Minerals has pulled no punches when it comes to its analysis of the current view of lithium sector sceptics, commenting: “We’ve seen this before, we will see it again. Goldman Sachs: you can’t just add up all the lithium mine level potential and make an oversupply call. The speciality chemicals world is more nuanced than iron ore. It’s why the world doesn’t rely on investment banks for research anymore!”

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It’s important to bear in mind that the consequences of failure to produce enough lithium are potentially devastating. Global investment in EVs has grown faster than any other new-energy sector over the past few years, outstripping even wind and solar power. Along with higher prices of other raw materials, it is a reversal of years of falling prices as EVs race to become cost-competitive with gasoline-powered vehicles. If battery makers can’t get access to enough lithium, it would curb the expansion of cleanenergy vehicles, making it harder to meet global emissions targets.

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As is often the case in the resource sector, today’s price surge had its origins back in the period 20182020, when there was a substantial price slump. Back then, lithium prices halved in value, which in turn led to chronic underinvestment in new sources of supply. This all took place just as EV demand was taking off, amplified by the post-covid move towards EVs as part of mandated climate goals. For battery makers, these supply woes have been compounded by the covid pandemic and Russia’s war in Ukraine - impacting supplies of not only lithium but other ingredients they need - including nickel, graphite and cobalt.

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Tightening supply and higher prices have prompted a flurry of acquisitions and joint ventures as battery makers and automakers try to secure supplies, which has also unleashed a wave of resource nationalism among governments. As early as June last year, Fitch Solutions said lithium had become a “strategic mineral,” and warned of “rising government intervention.”

Much of the remaining supply comes from deposits of an igneous rock called spodumene, with Australia as the biggest miner. The ore is roasted and leached with sulfuric acid and the silvery-gray residue is typically shipped to China to be made into lithium hydroxide and lithium carbonate – compounds that can be combined with nickel or cobalt to make battery electrodes, or with solvents to make electrolytes.

To provide some sort of perspective on the scale of the industry, EVs and batteries drew $271 billion and $7.9 billion of investment respectively during 2021, according to BloombergNEF. The upstream part of the value chain has, on the other hand, attracted relatively low investment over the last five years, adding to supply problems.

The quickest way to increase supply is to ramp up output from these existing sources. Australia’s Pilbara aims to raise production capacity more than 50% by the September quarter by expanding its Pilgangoora mine in Western Australia, a project that includes Chinese partners Great Wall Motor Co. and CATL.

More than half of the global resources of lithium are located in what is known as the ‘lithium triangle’ between Argentina, Bolivia and Chile, where producers pump lithium-rich brine from underground lakes and allow the liquid to evaporate for 12-28 months to yield a slurry that can be profitably processed. Current technology recovers only about 50% of the lithium in the brine.

For many brine-lithium producers however, increasing output quickly is constrained by their permits and the time taken to let the liquid evaporate. Joe Lowry, founder of advisory firm Global Lithium, says it best: “There is plenty of lithium in the ground, but timely investment is the issue. “Tesla can build a gigafactory in about two years, cathode plants can be built in less time, but it can take up to 10 years to build a greenfield lithium brine project.”

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But lithium producers face an even bigger problem. Part of the reason consumers are prepared to pay a premium for an electric vehicle is that it’s better for the environment. But the lithium supply chain is far from green.

And then there are political factors that can hamper the development pipeline. Rio Tinto’s proposed $2.4 billion Jadar mine in western Serbia, which would be Europe’s biggest, has stalled due to community opposition. Rio says the mine, originally scheduled to open in 2026, would create more than 2,000 jobs and meet the highest environmental standards, including using recycled water and electric trucks. Elsewhere, Savannah Resources’ Barroso project in Portugal and Lithium Americas’ proposed mine

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in Nevada are others that have to negotiate local opposition. Chile’s Constitutional Convention recently approved an expansion of environmental governance that includes reshaping water rules and other environmental protections that could affect lithium producers if the charter is ratified in a September referendum. So, lithium producers don’t know what the rules will be. But lithium producers face an even bigger problem. Part of the reason consumers are prepared to pay a premium for an electric vehicle is that it’s better for the environment. But the lithium supply chain is far from green. The Atacama desert of northern Chile is one of the driest places on Earth, but extracting the mineral from salt flats 10 times the size of New York’s Central Park and processing it requires a lot of water. According to BloombergNEF, it can take about 70,000 litres of water to make one ton of lithium. Mining spodumene is energy intensive and together with shipping the concentrate to China for refining can emit 3.5 times more carbon

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dioxide than lithium extracted from brine, according to Wood Mackenzie. Companies are pursuing new technologies to lower expenses, cut water use and green their operations. Albemarle Corp, the world’s biggest lithium producer, is seeking responsible mining certification for its operations in Chile and said it will reduce the intensity of freshwater use by 25% by 2030 in areas of high water-risk. Many are pursuing direct lithium extraction, a term used to describe ways to chemically capture lithium compounds that would speed up production. Albemarle, which carries out its own research, said DLE so far has shown to be “typically less economic and less sustainable than conventional brine resources.” The company will continue to investigate DLE and other processes to meet sustainability goals. Environmental and supply issues have prompted companies to look for alternatives to the lithium-ion battery, including hydrogen. But none have come close to supplanting lithium in the all-important passenger car market, and most are years away from commercial viability. Therefore, lithium-ion will likely remain the dominant battery technology at least up to 2035. Lithium-ion batteries fall into a sweet spot that balances high energy density and safety. The mineral is the least-dense solid element with the greatest electro-chemical potential and a very low melting point, producing an excellent energy-toweight performance. Ulderico Ulissi, battery research lead at Londonbased Rho Motion Ltd., an energy transition researcher, predicts that solid-state and sodium-ion batteries could eventually challenge lithium-ion packs in some applications in the second half of the decade. “EV qualification, however, is a lengthy process and scaling up manufacturing of new technologies can bring several challenges.” Another potential source of lithium is from recycling old batteries, a practice that could meet 16% of annual demand by 2035. But battery retirements are only set to surge after 2030. Basically, there’s just not enough batteries to be recycled right now, whilst recycling presents its own environmental problems.

There is little real-world evidence to support any sort of sustained pullback in lithium prices due to an oversupply situation. In fact, the anecdotal evidence from major producers is the opposite.

sort of sustained pullback in lithium prices due to an oversupply situation. In fact, the anecdotal evidence from major producers is the opposite. End-users are still scrambling to ensure enough supply, a situation that could well be exacerbated the with reopening of China’s major cities, Shanghai and Beijing. We could well see a resurgence in EV purchases now that Chinese citizens can move about with greater freedom, which will mean pressure on battery supplies and in turn commodity demand. China represents the world’s biggest EV market and purchases had slowed over recent months, due to lockdowns. The reality is that most industry groups are modelling a significant lithium supply deficit of around 20% for the period 2023-2030. Nevertheless, the recent pullback in equity and commodity prices is a healthy thing in any overheated market, as it typically provides the breather the market needs, allowing for price consolidation and the opportunity for industry fundamentals to be properly reassert themselves. Gavin is based in Sydney, Australia and has followed the fortunes of international resource markets for the past 25 years, covering both equities and commodities, as a research analyst. He believes that the most interesting resource opportunities are typically found at the smaller end of the market, which these days is his exclusive area of focus. The resource sector is on an inexorable growth path, driven by an ever-increasing world population and modernization of living standards in emerging economies, as well as a significant shift in how we generate energy. This will provide enormous growth in the demand for commodities of all types. Gavin is the Head of Mining & Metals with research group Independent Investment Research (IIR) and he is the Founding Director and Senior Resource Analyst with MineLife. For more information about MineLife, please visit: www.minelife.com.au

Summary There is little real-world evidence to support any Note: This article is not an attempt to provide investment advice. The content is purely the author’s personal opinions and should not be considered advice of any kind. Investors are advised to conduct their own research or seek the advice of a registered investment professional. Gavin Wendt doesn’t own any stock in any companies mentioned in this article.

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MicroCap Review Magazine 75

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AS IA CORN ER

// By Leslie Richardson

Hong Kong IPO Market Hits Dry Spell Starting in early January with the fifth Covid-19 wave, the Hong Kong financial market has been hit with a steady stream of punches this year.

hree months of strict social distancing restrictions led to a sizable cut back on much of the local business activity causing the overall economy to shrink by four percent in the first quarter. Compounding the pressures of the local economic struggles are heightening geopolitical tensions and increasing interest rates resulting in the Hang Seng Index down around 9% YTD as of June 20th.

Adding to the challenges of Asia’s most popular fundraising venue, just 22 companies listed in the first half of the year, with only one IPO competed in May. Total proceeds raised were HK$17.1 billion, representing a 92 percent plunge in proceeds raised from the first half 2021. JL Mag Rare Earth, a producer of permanent-magnet materials, has been biggest Hong Kong IPO so far in 2022, raising over US$500 million in January. The IPO drought is due to a combination of China’s sharp economic slowdown, new regulatory framework for overseas listings and companies choosing to postponed their listing due to the weaker secondary markets. Insurance group FWD delayed its US$1bn Hong Kong initial public offering stating volatile market conditions as the cause. Highlighting the IPO market uncertainties is the impact of Beijing’s ongoing technology crackdown. Following last year’s tech crackdown and the blow to the Didi Chuxing IPO, China is putting more scrutiny on Chinese companies offshore listing plans as it revises its overseas listing rules. In December 2021, the China Securities Regulatory Commission (CSRC) released new rules for overseas IPOs includ-

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ing Hong Kong, requiring all Chinese companies pursuing overseas IPOs to file with the CSRC. As part of the new draft regulation, companies can still list overseas as variable interest entities if they meet compliance rules, a sign that China is trying to avoid financial decoupling from the US. JD Technology, the fintech, cloud and AI arm of Chinese e-commerce company JD.Com, is one of the first high profile IPOs to be impacted by the new regulations. The company hoped to lodge its IPO filing in Hong Kong by the end of March followed by an IPO later this year. However due to the updated domestic regulatory approval requirement, it has been forced to delay its plans to raise up to US$2 billion as it waits to secure regulatory approval from the CSRC. Full Truck Alliance Co Ltd, China’s ‘Uber for trucks’, plans to raise US$1 billion in a secondary Hong Kong listing this year have also been paused as the company waits for the Chinese cybersecurity regulator to announce findings of a probe into the company. The company raised US$1.68 billion in a US IPO last year. Additionally, companies like Ximalaya and Green Tea Group are taking a wait and see approach to their IPOs. Ximalaya, China’s largest online podcasting platform, scrapped its US IPO plans after China implemented new regulatory rules targeting technology firms. The company filed its IPO application in Hong Kong last September but has re-evaluated its IPO plans while Chinese fusion cuisine restaurant, Green Tea Group, pushed back its plans to raise US$150 million in March amid the increasing poor market conditions.

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Considering the poor IPO performance in the first half of the year, PwC cut its full-year IPO forecast for in Hong Kong to US$23.4 -US$26 billion down from its forecast at the beginning of the year of US$45.5 – US$52 billion. The number of deals PwC expects is now 80, down from 120 with three to four companies raising more than HK$10 billion each in the second half as the market gradually regains momentum.

Homecoming listing are anticipated to remain a theme through 2024 as US regulator have flagged a total of 149 US-listed Chinese companies for failing to meet the audit regulations. These companies will be required to delist from the US market as early as 2024 if they fail to meet the regulations contained in the Holding Foreign Companies Accountable Act (HFCCA). The first delisting of non-compliant foreign stocks is expected to start in late 2023.

Hong Kong’s IPO pipeline for the second half of 2022 includes one of China’s top lithium producers, Tianqi Lithium Corp. The company is looking to raise up to US$1.2 billion in what could be the biggest initial public offering this year. Listed on the Shenzhen Stock Exchange, Tianqi Lithium was ranked third in terms of revenue generated from lithium globally in 2020, according to a report from data analytics firm Wood Mackenzie.

Since new reforms introduced in 2018 to allow companies with multiple classes of voting rights and biotechnology companies without any revenue to list in Hong Kong, the Hong Kong stock exchange has seen significant growth in new economy and biotech listing. It is now the world’s second-largest biotechnology fundraising hub with 93 IPOs that raised a total of HK$258.5 billion. It has also listed 198 new economy companies that have raised a total of HK$853 billion, representing 26 per cent of the exchange’s daily turnover. Being the IPO destination for China’s new economy and biotech companies, the Hong Kong Stock Exchange is considering new listing reforms to allow pre-revenue tech giants start-ups to raise funds.

In June, Baidu backed Chinese electric-vehicle maker, WM Motor, filed for an IPO in Hong Kong as it looks to raise up to US$1 billion, according to Bloomberg. WM Motor plans to deliver affordable EVs on mass scale. Its first model, a sport utility vehicle starting at 160,000 yuan, nearly US$24,000, became a best-seller in its price segment after its launch in 2018. Hangzhou-based Leapmotor applied in March this year to raise up to US$1billion through a Hong Kong IPO. The company targets the mid- to high-end segment with its smart EVs. EV companies have become highly attractive since China is promoting cutting carbon emissions with its plan to achieve carbon neutrality by 2060. Re-routing its original plan for a U.S. listing, Tencentbacked Tuhu, an online automotive service platform in China, filed for an IPO in Hong Kong to raise up to US$400 million. China being home to the world’s largest car market, makes it a fertile ground for development of an aftermarket offering services for the millions of cars on its roads. Joining the wave of homecoming listings, Chinese EV start-up Nio and KE Holding completed its Hong Kong listing by introduction without raising any money this spring. Companies that seek a listing by introduction are able to do so because their existing shares are already widely held and have an open market for their shares after the new listing. Q&A platform akin to Quora, Zhihu, made its homecoming in April, raising US$106 million in a Hong Kong.

The Hong Kong exchange is dominated by mainland companies with 80 percent of total market capitalization represented by the mainland and seven of the top 10 Hang Seng Index constituent stocks are mainland companies. With the sheer size of China’s economy and the preference of Chinese firms to raise capital internationally, Hong Kong’s IPO prospects are expected to bounce back as the city remains an important “venue that bridges China with the rest of the world.” Ms. Leslie Richardson has over 20 years of investment management and equity research experience. She operates a boutique investor relations firm in Hong Kong for Asian companies listed in the U.S. and Hong Kong. She also assists private companies develop investment material and build an investor following in preparation for a public listing. Additionally, she is the Asian Correspondent for Micro-Cap Review, www.microcapreview.com, a financial magazine focused on mirco-cap companies. Previously, she worked for CCG Elite in assisting Asian-based, U.S. listed clients formulate key communication strategies. Ms. Richardson began her investment career at U.S. Trust Company then went on to join Odyssey Advisors as a portfolio manager and Director of Research. Ms. Richardson specialized in high growth sectors such as bio-tech, alternative energy, IT and telecommunications. She earned her M.B.A. from the University of Southern California. Ms. Richardson is based in Hong Kong. www.elite-ir.com.

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MicroCap Review Magazine 79

m a r k et ma k er co rner

// By Eric Flesche

Payment for order flow At Glendale Securities, Inc., we mainly make markets in OTC securities for our customers. We charge our customers a commission for execution and use our market making capabilities to facilitate customer executions.

e are often asked why we don’t offer commission free trading like some of the online retail brokerage firms offer. Wait, how can a broker dealer offer commission free trading? The answer to that question requires a discussion on the practice of payment of order flow, and a clarification on when payment for order flow is paid to brokers. Many large retail brokerage firms including the online ones you are probably familiar with do not make markets in stocks. To fill your order, brokerage firms have a couple of options, each with their own cost/profit structure. They can

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send your order to an exchange or ATS, but those often charge the broker on a net basis for execution. They can execute the order internally as a market maker, but that requires staff, technology, and risk capital that may be too cost prohibitive. Another option is to send customer orders to a wholesale market maker who pays the brokerage firm for its order flow. If you must choose between the three options outlined above, receiving payment for order flow for sending orders to a wholesale market maker seems like it’s the smartest option for the brokerage firm. The brokerage firm eliminates costs, doesn’t

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Not all market makers pay for order flow, and many provide best execution regardless of their payment for order flow arrangements. At Glendale Securities, Inc., we focus on executing our customer’s orders to obtain best execution, regardless of how the order is executed.

need to add technology, increase its staff, or have excess risk capital available to execute orders. The brokerage firm then can pass those savings on to customers in the form of zero commissions. Sounds like everyone wins, doesn’t it? But wait, how does the wholesale market maker pay for order flow, when it must have the technology, staff, and risk capital necessary to execute the orders it receives? Wholesale market makers must be able to profitably trade against client orders (on average) for the practice of payment for order flow to make sense for the wholesale market maker. This profit must be significant enough to continue to make payments to brokers that send them order flow. How does the wholesale market maker continue to make enough profit off these orders? Are wholesale market makers just smarter than everyone else, so smart that they always are profitable on average? It’s possible that the profits may come at the expense of clients in the form of inferior execution. That can’t be legal, can it? One famous brokerage firm was charged $65 million by the SEC because it “provided inferior trade prices that in aggregate deprived customers of $34.1 million even after taking into account the savings from not paying a commission.” So its possible that wholesale market makers are smarter, they just are giving enough inferior execution to keep their average trading profits high enough to be able to afford and profit from payment for order flow arrangements. Another way wholesale market

makers tip the table in their favor is by selecting the types of orders that they will make payments for order flow to brokers that send them orders. Wholesale market makers will typically not pay for orders in OTC stocks, including for OTC foreign securities that are quoted in the US with an “F” as the fifth letter in their ticker that denotes that they are foreign incorporated companies. Online brokers that do take orders in OTC stocks will often charge commission for OTC stocks. Other zero commission brokers will not even take an order in an OTC stock, possibly because they are not receiving payment for order flow. Wholesale market makers compete for business by paying out larger amounts to brokers that send them orders. So, your broker may be choosing to send your order to the wholesale market maker that pays the broker the highest payment for order flow versus to the wholesale market maker that offers the best execution. Not all market makers pay for order flow, and many provide best execution regardless of their payment for order flow arrangements. At Glendale Securities, Inc., we focus on executing our customer’s orders to obtain best execution, regardless of how the order is executed. www.GlendaleSecurities.com

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Fund Manager Q&A with Tavi Costa In this new Q&A series in the MicroCap Review Magazine, we want to highlight fund managers that we’ve come across from our interviews on the Planet MicroCap Podcast, that have recently given Keynotes, Moderated Panels, have had exceptional performance and/or are up-and-coming whose star is on the rise.

ur first Q&A is with Tavi Costa, Member and Portfolio Manager at Crescat Capital. I met Tavi recently at our event, the Planet MicroCap Showcase, in Las Vegas, where he gave a keynote presentation titled, “A Trifecta of Macro Imbalances” (we have that presentation up on the SNN Network YouTube Channel if you’d like to check it out). In mining circles, Tavi has been compared to the likes of the next Rick Rule. He’s in his early 30s with a long and prosperous career ahead of him with a new and refreshing take on how and why he focuses his time investing in Natural Resources. I appreciate Tavi taking the time to answer a few short questions:

1. How would you describe your investing philosophy? We deploy tactical investment themes based on proprietary value-driven equity and macro models. Our goal is industry leading absolute and riskadjusted returns over complete business cycles with low correlation to common benchmarks. We apply our investment process across a mix of asset classes and strategies to assist with each client’s unique needs and objectives.

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Tavi Costa

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2. What is the “Ideal Investment”? Can you describe your criteria? We look for historically undervalued opportunities that are strongly supported by our macro views and quant models. Examples of themes that we are currently invested: •• •• •• •• •• •• ••

Energy Shortage Global Fiat Currency Debasement Mega Cap Growth Ceiling Mispriced Cost of Capital Resource Underinvestment SaaS Rationalization Brazil Liftoff

3. How has your fund performed recently? Our flagship fund, Global Macro, is up about 40% YTD. 4. What has been your strategy to mitigate all the global turmoil and market drawdown? We are long inflationary assets (i.e. commodities) and short historically overvalued financial assets and currencies (CNH & HKD)

5. How are you positioning yourself for the rest of 2022 and beyond? •• Long tangible assets such as: precious and base metals, soft commodities, energy and uranium. •• Long Brazilian assets: Steel producers, cellulose businesses and the overall Brazilian equity market •• Short: technology companies (mostly mega cap), short companies that are likely to be margin squeezed by energy/labor cost or cost of capital. •• Short the Chinese Yuan and the HK dollar vs. the US dollar.

Tavi Costa is a Member and Portfolio Manager at Crescat Capital and has been with the firm since 2013. He is responsible for developing Crescat’s macro models as part of our thematic investment process. His research has been featured in financial publications such as Bloomberg, The Wall Street Journal, Reuters, Yahoo Finance, Real Vision, and others. Tavi is a native of São Paulo, Brazil and is fluent in Portuguese, Spanish, and English. Before joining Crescat, he worked with the underwriting of financial products and in international business at Braservice, a large logistics company in Brazil. Tavi graduated cum laude from Lindenwood University in St. Louis with a B.A. degree in Business Administration with an emphasis in Finance and a minor in Spanish. Tavi played NCAA Division 1 tennis for Liberty University. www.crescat.net

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MicroCap Review Magazine 83

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// By Erik Nelson

DTC Eligibility What is it And Why a Company Needs It

What is DTC eligibility? And what does it mean to “DTC Eligible?” Simply put, the importance of having DTC Eligibility has never been greater.

realize that this can be an obscure issue that has you asking “Why does my company need it?” Very simply put, DTC eligible means that when a company’s shares are DTC Eligible, they are eligible able to be held in a brokerage account in electronic format. To understand why this is so key one must understand how we got to our current system of holding shares in electronic format.

Historically, in the U.S., stocks and bonds traded within the United States traded on one of the national or regional stock exchanges. Those that did not were traded as what was known as “Over the Counter” (“OTC”). The settlement of trades, whereby securities purchased were exchanged for cash payment was literally done physically. At the end of each day’s trading, brokerage firms would pull stock certificates from their vaults, and send runners with the certificates to the various stock transfer agents to have the stock certificates split into the appropriate denominations for delivery to the brokerage firm representing the buyers. The brokerage firm receiving those certificates would then need to have them re-registered in its name. This was a very slow and cumbersome process, which made settling trades very expensive. By the early 1970’s the processing of stock trades in this manner was a crushing task due to the growth in trading volume. The securities industries’ solution to the growing burden of processing stock trades was the creation of the Depository Trust Company (“DTC”) in 1973. The Depository Trust Company is a centralized securities depository which holds securities in electronic and physical format for the benefit of

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brokerage and clearing firms. Stocks and bonds which are eligible for deposit into the DTC system are known as being “DTC Eligible.” When they are held in electronic format by DTC, they are common and referred to as being in “streetname”. DTC then tracks the allocation of the shares to its various participants, and electronically adjusts the allocation of these shares to correspond with trade settlement. The individual brokerage and clearing firms are then responsible for the allocation of the shares to their respective client accounts. It is this system that has allowed trading volume to grow exponentially since its creation. It is important to remember that shares of companies that are not DTC Eligible, still trade the same way they did prior to the creation of DTC. This creates a lot of extra fees. Brokerage firms charge higher commissions due to the difficulty and added time for processing these trades, which are ultimately passed along to the shareholders. These fees include transfer agent fees, and lots of shipping fees. Investors and traders do not like to pay these fees, and as a result trading volume is a lot lower for non-DTC Eligible securities. Moreover, most brokerage firms do not want to execute trades in non-DTC Eligible securities. Therefore, companies whose securities are not DTC Eligible see dramatically lower investor interest, trading volume, and lower valuations. Clearly there is a tremendous benefit for a company’s shares to be DTC Eligible and held in streetname, however is not an automatic process. For eligibility a company’s shares must undergo an

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underwriting process, which includes a very strict review before they can become DTC eligible. Once this review process is completed, a company’s shares are then able to be held on deposit at DTC by brokerage and clearing firms.

While this is just a brief look at what it means for a company’s shares to be DTC Eligible, it is a key level of approval for a company’s shares which corporate executives, investment bankers, and potential investors need to be aware of. Afterall, everyone should have an idea of how they will potentially be able to exit an investment before they invest their money.

The benefits to a company be being DTC eligible are very significant. Investors and shareholders have a much easier time depositing shares, and the cost of trading shares, which are DTC Eligible, is dramatically lower as the settlement of the trades is handled within the DTC system. This leads to greater investor interest and improved company valuations, as well as increased trading volume.

Corporate Bio

These are important considerations that impact a variety of companies in differing situations, including startups, companies which are new to the U.S. markets, or trading within the U.S., as well as foreign corporations whose shares are dually listed on an exchange in their home country, and in the states. Basically, if a company is going to have its shares traded within the US, then they need to be DTC Eligible.

Erik Nelson is the President of Coral Capital Advisors, LLC. www. coralcapital.com, an independent consulting and advisory firm focused on companies and participants in the lower and middle markets. Coral Capital Advisors specializes in DTC Eligibility services, due diligence, and corporate restructurings. Coral Capital Advisors. provides services to Investment Banks, Private Equity Funds, investors, and both privately held and publicly traded companies, as well as various stakeholders in those organizations. This has included international public companies with operations on three (3) continents to smaller privately held domestic companies. Our experience in the areas of corporate advisory, due diligence reviews, and regulatory compliance allows for a cost effective and efficient solution to the issues at hand. Please feel free to visit our web site at: www.coralcapital.com or call our offices via. telephone # (404)-816-9220 to see how we may be of assistance.

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// By John Bonfiglio, PhD, MBA

Financing MicroCap Biotechs Mistakes to Avoid

A friend of mine recently suggested I write about my experiences and mistakes I’ve made while trying to finance micro cap companies I’ve run over the last 25 years. There are many potential pitfalls when raising capital and every company will have its own set of issues. Below are some of the most common. Do your Homework

efore approaching investors or the market there are a few key items you should have in hand:

•• How much do you need to raise? This number should be large enough to get comfortably to the next milestone investors would want to see. •• What are the milestones or inflection points you are going to base your pitch on? •• What type of financing are you willing to accept? PIPE? Convertible debt? Other? •• A well thought out and appropriate pitch deck designed to be modified for different groups. It is extremely important the deck is short, to the point, and spells out exactly the what, why , how and who about the company and the market. Even if the deck is sent ahead of the call or meeting it is imperative that the actual pitch is practiced and doesn’t sound like you are reading off the deck. Trust your Gut We’ve all been approached by groups that say they can get the financing done easily even after you’ve already been turned down by several reputable investment groups. Many of these “bottom feeders” are only interested in getting a retainer fee and

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stringing you along with the hope that someone they introduce you to ends up on their “tail” for a future financing. Also, if proposed deal terms seem too good to be true – they probably are. This goes back to doing your homework. You need to understand what the market is offering for financing a company similar to yours. Dilution or Financing? We’ve all heard from Board members and investors about the perils of doing a financing which could cause substantial dilution. In my opinion, this is a myth and has no real value in the strategy. If the company meets its milestones and the technology proves itself, then dilution won’t matter. The valuation of the company will increase and either the dilution won’t matter or the company can execute a reverse stock split. If the company fails, it also doesn’t matter. Just to be clear, I’m not advocating outrageous financing that would give away the company for a small amount of capital. I am saying I’d rather have 50% of a company worth $100M than have 100% of a company worth $5M because it didn’t have the capital to execute the development plan.

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Also, if you are a private company your valuation expectation may be in for a shock. Even if you raised capital at a higher valuation previously, there is a good chance the valuation could be lower during this raise. This depends on whether you’ve met previously announced milestones, market environment, therapeutic area/market size and most importantly how desperate are your immediate capital needs. (see next section below). In my experience, it is appropriate to negotiate the valuation. However, if there is only one term sheet on the table you may be compelled to take the deal. Raise Capital When It’s Not Immediately Needed (If possible) The absolute worst time to raise capital is when you have little or no capital left in the bank. I’ve been in Board meetings where I presented a term sheet to the Board from an investor and the feedback was “We have money now we should wait until we finish this trial and then raise capital at a better valuation and less dilution”. To me, this is like playing Russian roulette. How many clinical trials have failed to reach their primary endpoint or even worse barely met the endpoint? If this occurs how will you raise capital to do the next trial even though your team has determined what the issues were and know how to fix them for the next trial. Hire the Right Outside Team(s) No man is an island. In this environment it’s nearly impossible to raise capital without a great team assisting you. Assuming your internal team was hand-picked by you and the Board, picking the right external team is paramount. I have used Investment Relations (IR) firms for many years to help get me in front of of the right investors. Not all IR firms are created equal. Again do your homework! Ask the candidate company for references and follow-up with calls. Many of these firms call on the same people repeatedly and it’s difficult to get traction when they are inundated with companies.

the names of the primary bankers in the company. It’s amazing what a simple search can turn up about past issues. Make sure the terms of engagement meet with your needs. I usually want a six month engagement with a six month tail. The tail has to be in writing and agreed to by you and the company. Some forms will try to put companies on the tail that they spoke to on the phone but you have not talked to directly. It is clear there are many other issues that need to be addressed which I’ll save for another time. The important thing to remember is in most cases raising capital requires a good team, hard work and perseverance. I remember being in grad school and thinking I could never be a great salesman because I hate rejection. Then as an active CEO I’ve been rejected by more investors than I could imagine! Keep pushing and keep working! John N. Bonfiglio PhD MBA and has over 30 years’ experience in the biotech/pharmaceutical industry Including over 20 years as a C-level executive in the biotech industry. Dr. Bonfiglio started his career with 11 years at Allergan pharmaceuticals. He spent 3 years at Baxter HealthCare before starting a career in small biotech companies. He rose to the position of CEO at Peregrine Pharmaceuticals where he turned around the financially strapped public company. Dr. Bonfiglio was named COO at Cypress Bioscience while the company was reinventing itself as neuro-pharmaceutical company. He then joined the Immune Response Corporation as CEO and was responsible for raising over $50M and restarting clinicals in the HIV and MS areas. As CEO at Argos Therapeutics a privately held oncology company, he raised $35M through a series C financing. His tenure at Argos produced clinical data which led to an IPO and subsequent financings. Following Argos, he became President and CEO at Oragenics in Tampa, Fl. Here he completed two strategic deals with Intrexon Corporation, raised $29M relisted the company on the NYSE:MKT and refocused the company on new novel and proprietary antibiotics Dr. Bonfiglio was the COO at TapImmune where he was responsible for starting a clinical program, raising capital and relisting the company on Nasdaq. The company is now known as Marker Therapeutics (MRKR -Nasdaq). Dr. Bonfiglio has held independent Board positions at GT BioPharma (GTBP), Microlin and Genprex (GNPX). He recently joined Sequella a private company developing new therapies for Multi Drug Resistant tuberculosis as an executive Board director. To reach Dr. Bonfiglio: bonfiglio.john@gmail.com

Likewise with investment bankers. There are of course very reputable investment banks ranging from the well-known larger firms to the small boutique firms. Some of the smaller firms are spinouts from the larger ones and have great contacts and investors that have invested with them before. A good first move is to use search engines to look into Note: This article is not an attempt to provide investment advice. The content is purely the author’s personal opinions and should not be considered advice of any kind. Investors are advised to conduct their own research or seek the advice of a registered investment professional.

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// By Wesley Ramjeet, CPA

What is the role of a microcap CFO? In today’s business world, it is more important than ever to find a capable chief financial officer (“CFO”). These leaders are responsible for the financial well-being of companies. While there isn’t a one-size-fits-all answer to finding the perfect CFO, there are several qualities that should be looked for in any potential candidate. In this article, we will discuss the qualities needed in a Microcap CFO and how they can help a company succeed.

Microcap company is defined as a public company with less than $300 million in market capitalization. Typically, they are undercapitalized and need capital for growth and expansion. The qualities of a microcap CFO are quite different than a fortune 1000 company as typically a microcap company has fewer resources to fill a complete financing and accounting team. As a result, the Microcap CFO has to wear multiple hats and pitch in to solve financial and operational issues.

these toxic financings so that existing shareholders and management do not get blown up. Integrity and Trust

The CEO lays out the vision and the CFO works on the planning to execute the vision. One of the most important points is how much capital is required to execute the vision and how to get the right capital to fund the vision.

When you are responsible for a company that has a market capitalization of less than $300 million, there are a lot of things that can go wrong. The CFO must be the voice of reason and compliance. The microcap CFO must ensure communication with shareholders, management and other constituencies be truthful and above board. This means disclosing all relevant information, both good and bad promptly through appropriate channels. A CFO must have integrity and ethical values to be successful in this role. They must be able to make sound financial decisions that are in the best interest of the company, even if it means making tough choices. They must also be able to maintain high standards of ethical behavior and set an example for others in the organization.

Capital

Technical expertise

Raising capital is a critical need for most microcap companies. A microcap CFO must be well versed in the different structures and impacts on the microcap company’s future. I have seen too many companies raise capital with toxic convertible features that decimate the company’s stock price and capitalization table. A microcap CFO must be able to navigate

In larger organizations, the CFO has an army of accountants and finance professionals that are responsible for all financial statement preparation, SEC filings, Budgets Technical Accounting Research, Reviewing Contracts, and signing off on payments. The larger company’s CFO has oversight but does not typically get involved in the details. A typical

A microcap CFO must be a great partner with the CEO to plan and execute the vision of the company.

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microcap CFO has to be able to dive into the details and has to deal with new pronouncements, drafting 10Ks and 10Qs, and be very involved with the external auditors and other issues without the resources of an army of accountants and financial professionals. Strategic vision A microcap CFO is a critical member of the executive team and must be able to think strategically. They must be able to see the big picture and help guide the company in the right direction. They need to understand where the company is today, where it wants to go, and how it plans to get there. They also need to be able to manage financial resources efficiently and make sound financial decisions that will benefit the company in the long run. Financial acumen A microcap CFO must have the financial acumen to be successful in the role. Financial acumen includes an understanding of financial statements, cash flow, and budgeting. The Microcap CFO is responsible for ensuring that the company has enough cash to

cover its expenses and that it is making smart investments with its money. Additionally, the CFO must be able to communicate effectively with investors and other members of the executive team about the company’s financial status. To quote Neil Levine, Partner at Friedman LLP, “The CFO of a microcap company should provide qualified financial controls and guidance to help the CEO execute his business plan accordingly. It is very difficult to come back from hasty decisions in the eyes of the investors.” Too often I see good Microcap Companies miss their SEC filing deadlines, take on toxic financing that leads to the demise of the company. A great microcap CFO is worth his/her weight in gold take the time to find a good one. Wesley Ramjeet is the founder and CEO of PPMT Strategic Group, a consulting firm that provides Management and CFO consulting services. Mr. Ramjeet is the Founder and Chairman of MD Logic Health a nutritional supplements company. Mr. Ramjeet is also the Chairman of SNN, Inc a financial media company that covers the micro-cap market. Mr. Ramjeet received his bachelor’s degree in accounting from St. John’s University and is a CPA. Email Wesley@ppmgroup.com www.ppmtgroup.com

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MicroCap Review Magazine 89

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Lake Resources Aligning Operations to Power North America’s EV Revolution

Lake Resources is advancing clean lithium production as the world’s electrification drive picks up speed. With the United States, Europe and other regions putting increasing focus on supply chain security, the ASX-listed company is realigning its operations to North America to support the accelerating electric vehicle (EV) industry.

n June 20, Lake stated its ambitions by announcing plans to establish a North American presence, becoming even closer to its key partners and markets.

“Lake’s aspirational target is to reach capacity of 100,000 tpa [tonnes per annum] by 2030, which will underpin Lake’s ambition to become a leading global producer of sustainable high purity lithium,” said Lake’s Executive Chairman, Stu Crow. “We are now establishing a North American presence to serve our offtake customers, continue to work with our US-based technology partner, Lilac Solutions, and engage capital markets. We are aligning project delivery, extraction technology, and operations.” The Australian company has flagged a six-month transition to its new North American headquarters, with Crow taking the reins as executive chairman to oversee the process. Speaking from New York City, Crow said he was excited by the company’s new phase. “We are interviewing candidates with exceptional experience for the CEO and Managing Director role, and also candidates for the board to reflect growth of the company in U.S. markets,” he said.

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“There is enormous interest in Lake and we have been delighted by the depth of talent available to us, as we take the next step in our journey towards becoming a leading global producer of sustainably produced, battery-grade lithium.” Lake is currently developing four lithium projects in Argentina, led by its flagship Kachi project, with more than 150 people working across its portfolio. Significantly, the company has amassed one of the largest lithium lease holdings in the South American nation, amounting to more than 2,200 square kilometers (1,367 miles), with the majority owned 100 percent. “Argentina is part of the ‘Lithium Triangle,’ home to the world’s lowest cost lithium production, and aims to become the region’s leading lithium producer. We

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have received strong support from government and other local stakeholders and are proud to support its efforts in this key industry of the 21st century,” Crow said.

Australia’s leading companies in the lithium sector,” he said. “However, we have no plans to slow down and are aiming even higher.”

Top 200 company Lake’s growth under Stu’s leadership has been rapid. From a micro-cap company in January 2021, Lake was officially admitted to the ranks of Australia’s top 200 companies in June with a market capitalisation of around A$3 billion (U.S. $2 billion). The announcement by S&P Dow Jones that Lake would join the S&P/ASX200 index on June 20 was a proud moment for Crow and his company. However, this is only the start of the journey, Crow says. “Joining the top 200 index recognises our enormous growth in market value and our status as one of

Lake’s promotion to the benchmark index is expected to see more institutional buying of the company from major investors such as superannuation funds and investment banks. While global stock markets have been rocked in 2022 by rising inflation and interest rates and war in Ukraine, Lake continues to enhance its engagement with international capital markets. On June 17, the company announced it had appointed two leading project finance institutions, Citi and J.P. Morgan, as joint coordinators for its Kachi project. Lake said the appointment followed a tender panel that indicated bank appetite for the project was “in

Stu Crow, Executive Chairman

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“Backed by the strength and status of the export credit agencies of Britain and Canada, Lake has extremely strong financial backing for our flagship project, providing confidence to our investors and project partners.”

excess of five times the required amount, reflecting the strong interest by international banks and support from export credit agencies.” Citi and J.P. Morgan have been tasked with assembling the debt financing package for Kachi, with the support of GKB Ventures and SD Capital Advisory. Importantly, Lake has also gained support from Britain’s official export credit agency, UK Export Finance (UKEF), to fund around 70 percent of Kachi’s requirements, subject to UKEF approval and to standard project finance conditions. Canada’s export credit agency, Export Development of Canada, is expected to participate alongside UKEF, further strengthening the project’s finances and providing access to low-cost lending. “We are pleased to partner with Citi and J.P. Morgan, who support Lake’s commitment to sustainable extraction and minimizing our environmental footprint,” Crow said. “Backed by the strength and status of the export credit agencies of Britain and Canada, Lake has extremely strong financial backing for our flagship project, providing confidence to our investors and project partners.”

In March 2022, Lake announced a non-binding memorandum of understanding (MOU) with Japanese trading house Hanwa Co. Under the agreement, Lake could provide up to 25,000 tpa of lithium carbonate over 10 years, with a minimum of 15,000 tpa LCE, priced at average quarterly benchmark prices. The MOU also allows for Hanwa to provide financial support, such as equity investment, a potential prepayment on offtake, and trade finance facilities to secure a long-term agreement with Lake. “The market for lithium-ion batteries for EV is unstoppably expanding, and we are handling raw materials for those sophisticated products and increasing our involvement in all aspects of the supply chain,” Hanwa’s J. Tomono said. “We have been seeking the right products, at scale, with the right partner, to advance development of the latest technology in batteries and its cathodes.” Lake’s Crow said the MOU and finalization of a binding offtake agreement with Hanwa would “allow Lake to stay an independent supplier into global lithium supply chains and ensure security of supply to the market and potential customers.” “Increasing customer and consumer scrutiny around the environmental credentials of lithium production, and concerns about security of supply has given us the confidence to enter into this partnership with Hanwa,” he added. Less than a month after the Hanwa announcement, Lake followed up with another non-binding MOU, this time with leading global automaker Ford Motor Company. On April 11, Lake announced plans for offtake of around 25,000 tpa from the Kachi project with Ford, supporting Ford’s EV drive and the development of a “clean lithium supply chain.”

Ford, Hanwa MOU’s

“As we’ve shared, Ford is sourcing deeper into the battery supply chain,” said Lisa Drake, Ford’s vice president, EV Industrialization.

Lake’s production targets have received backing from both the United States and Asia, following this year’s signing of two significant agreements.

“This is one of several agreements we’re exploring to help us secure raw materials to support our aggressive EV acceleration,” she said.

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“Both Lake and Ford see this as an opportunity for a potential long-term agreement, with the ability to scale up environmentally responsible production and participate in Lake’s other projects to ensure high-quality lithium products are available to Ford,” Lake said. The Ford tie-up followed the U.S. automaker’s April launch of an electric F-150 Lighting pickup, a move it described as “the Model T moment for the 21st century.”

On April 11, Lake announced plans for offtake of around 25,000 tpa from the Kachi project with Ford, supporting Ford’s EV drive and the development of a “clean lithium supply chain.”

The first mainstream, full-size electric pickup launched on the U.S. market, the new vehicle has a starting price of below US$40,000 and an estimated range of up to 320 miles. Built at Ford’s historic Rouge Complex in Michigan, the vehicle is part of the Ford F-Series, America’s best-selling truck for 45 years straight, second only to the iPhone in revenue among U.S. consumer products. Ford said it had seen “unprecedented” demand for the new F-150 Lightning, with some 200,000 orders already received. It plans to ramp up production to 150,000 vehicles per annum from 2023, following a US$950 million investment in its Rouge Electric Vehicle Center. “America’s real transition to electric vehicles [EVs] starts now,” Ford President and CEO Jim Farley said in an April 26 statement. LMC Automotive projects the U.S. electric pickup truck market will increase from around 25,000 vehicles in 2022 to more than 1 million by the end of the decade. The current five electric pickup models are seen rising to more than 20 by 2030.

needs, supplied by its own iron ore and coking coal mines in Michigan and Kentucky. Now, amid soaring prices and declining supply of key battery metals such as lithium, Ford plans to take control of its supply chains “all the way back to the mines,” Farley said. Industry analysts Benchmark Mineral Intelligence have flagged a continued structural deficit in the lithium market through 2025. And with the EV revolution entering the mainstream, lithium resources such as Lake’s are in strong demand, particularly those capable of meeting the high-quality battery grades and exacting sustainability requirements of European Union and U.S. automakers. www.lakeresources.com.au The company paid consideration to SNN or its affiliates for this article.

Ford aims to deliver more than 2 million EVs annually by 2026, equal to one-third of its global volume, targeting 50 per cent by 2030. The increase to 2 million EVs would make Ford second only to Tesla, although General Motors aims to surpass Tesla in domestic EV sales by 2025. Ford is also following its founding principle of self-sufficiency in reviving vertical integration. During World War One, Ford’s River Rouge complex produced iron and steel for its vehicle manufacturing Note: This article is not an attempt to provide investment advice. The content is purely the author’s personal opinions and should not be considered advice of any kind. Investors are advised to conduct their own research or seek the advice of a registered investment professional.

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THE MICRO-CAP REPORT 2022 HALF YEAR REVIEW Lucosky Brookman is the industry leader in micro-cap IPOs and in uplisting domestic or foreign quoted OTC companies and foreign exchange listed companies to the Nasdaq or NYSE. Each month, Lucosky Brookman publishes The Uplisting Report and The Micro-Cap IPO Report - the most comprehensive resources dedicated to the Uplist, cross-list and micro-cap IPO marketplaces. The reports bring powerful and in-depth market data and analytics to help issuers, management teams, boards of directors, consultants and others involved in the IPO, uplisting and cross-listing processes make better decisions. Placing a particular emphasis on issuers operating in the micro-cap space (issuers with up to $300 million market cap), the following is a synopsis of our Uplisting and Micro-IPO Reports for the First Half of 2022 (H1). To view current monthly and archived Reports, please visit: https://www.lucbro.com/our-firm/uplisting-monthly Please contact us at uplist@lucbro.com if you would like to discuss your company's IPO, uplisting or cross-listing prospects, if you would like to better understand the IPO, uplisting and cross-listing marketplace, or if you would like to receive a comprehensive 7-8 page listing Analysis of your company. Lucosky Brookman LLP www.lucbro.com uplist@lucbro.com 94 MicroCap Review Magazine

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MICRO-CAP 2022

H1 SUMMARY Like the larger capital markets, the micro-cap marketplace continued to be active in the first half of 2022 (H1). Micro-cap uplisted and cross-listed companies raised approximately $215 million in H1, while companies completing micro-cap IPOs raised approximately $810 million. UPLISTING/CROSS-LISTING

A total of 30 micro-cap companies which operate in 11 different sectors made up the 2022 H1 class of uplisted and cross-listed companies. Twelve (12) of the newly exchange traded companies were listed organically, meaning they did not require a simultaneous underwritten public offering in order to consummate the uplisting or cross-listing to a Senior U.S. Exchange. Eighteen (18) of the uplists and crosslists

included

simultaneous

underwritten

public

offerings,

ranging

from

approximately $2,500,000 to $40,000,000. MICRO-CAP IPOs

A total of 38 micro-cap issuers, operating in 8 different sectors completed their IPOs

H1,

with

offerings

ranging

from

approximately

$6,000,000

$108,000,000. Seventeen (17) micro-cap foreign private issuers (FPIs) from 9 different jurisdictions completed their IPOs in the U.S. during H1.

UPLISTS & CROSS-LISTS

MICRO-CAP IPOs

FOREIGN PRIVATE ISSUERS CROSSLISTING IN H1

MICRO-CAP IPOs COMPLETED IN H1

MICRO-CAP IPOs COMPLETED BY FOREIGN PRIVATE ISSUERS IN H1

92%

UPLISTS AND CROSSLISTS ASSISTED BY INVESTMENT BANKERS

ISSUERS LISTED ON A SENIOR U.S. EXCHANGE ORGANICALLY

ISSUERS FROM NINE JURISDICTIONS COMPLETED MICROCAP IPOs IN H1

OF ISSUERS COMPLETING MICROCAP IPOs IN H1 LISTED ON NASDAQ

$12.6M

$810M

$15.6M

AVERAGE OFFERING SIZE FOR UPLISTING AND CROSS-LISTING MICRO-CAP ISSUERS

RAISED IN MICROCAP IPOs DURING H1

MEDIAN OFFERING SIZE FOR MICRO-CAP IPOs IN H1

MICRO-CAP ISSUERS UPLISTING AND CROSS-LISTING IN H1

$215M RAISED BY UPLISTING AND CROSS-LISTING MICRO-CAP ISSUERS IN H1

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MicroCap Review Magazine 95

UPLISTS & CROSS-LISTS

During H1, 30 micro-cap uplisting and cross-listing issuers listed on a Senior U.S. Exchange, an increase of 3 issuers compared to the same period in 2021. Micro-cap uplisting and cross-listing issuers raised, in a total of 18 offerings, a combined $215 million, representing a decrease of $132 million from the combined $347 million raised in a total of 20 offerings during H1 of 2021. The average offering size in H1 was $12.6 million, a decrease of $4.4 million from the $17 million average offering size in H1 2021. A total of 12 issuers listed organically during H1, an increase of 5 issuers when compared to the same period in 2021. Dollars Raised

$125M $100M $75M $50M

$25M

2022

$0M

Jan

Mar

H1 2022

30 18 12

Feb

Apr

May

June

2021

27 20

H1 2021 Uplists & Cross-Lists

8 6 4

Total Listings

Organic Listings

Offerings

Cross-ListingS

2 0

Jan

Feb

Mar

Apr

May

June

MICRO-CAP IPOs

In H1, 38 micro-cap issuers completed their IPOs, a decrease of 12 issuers compared to the same period in 2021. Such issuers raised a total of $810 million, representing a decrease of $729 million from the combined $1.57 billion raised during H1 of 2021. The median capital raise in H1 was $15.6 million, a decrease of $9.4 million from the $25 million median offering size in H1 2021. Seventeen (17) of the offerings in H1 came from foreign private issuers, a decrease of 7 when compared to the same period in 2021. Dollars Raised

$400M

IPOs

$300M

FPIs

$200M

$810M Raised

$100M $0M

Jan

Feb

Mar

H1 2022

Apr

May

June

H1 2022

H1 2021 Micro-Cap IPOs

$25M Median

7.5 5

2021

2.5 0

$15.6M Median

Jan

Feb

Mar

96 MicroCap Review Magazine

Apr

May

June

$1.57B Raised

FPIs IPOs

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Articles inside

Lake Resources: Aligning Operations to Power North America’s EV Revolution

Market Maker Corner: Payment for Order

Battery Metals OvervIew by Gavin Wendt, MineLife

Financing MicroCap Biotechs

What is the Role of a MicroCap CFO?

Asia Corner: Hong Kong IPO Market Hits

Making Seats for Female Board Members

Global Electrification for All Vehicles No Longer a Thing of the Future

Accounting Corner: CFO Ultimate Stress

In Remembrance: Igor Levental

Has the definition of “Value Investing” Changed? by Tobias Carlisle, Acquirers Funds

My Love Affair with Global Investing

How EOS® Can Improve Employee

How Public Relations Can Support MicroCap and SmallCap Companies

Ask Mr. Wallstreet: Should I Buy, Sell or

EVs – Silver to Play a Minor or Major Role?