MicroCap Review Fall 2016 by Planet MicroCap Review Magazine

Celebrating Our 10 Year Anniversary

www.stocknewsnow.com • $5.00

The Official Magazine of the MicroCap Stock Market Since 2006

Fall 2016

Apivio Systems, Inc. Page

TSX-V: APV Rob Bakshi, CEO www.apivio.com

Energy Fuels Inc. Page

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IEG Holdings Corporation Page

OTCQX: IEGH Paul Mathieson, CEO www.investmentevolution.com

NYSE MKT: UUUU / TSX: EFR Stephen Antony, President and CEO www.energyfuels.com

TapImmune Inc. Facebook Page

FEATURED ARTICLES

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Mixx

Skype

Technorati

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30 MicroCap Guru Jim Collins 32 The Cyclical Nature of Investing in

43 Exciting News: All Investors Can Now Get

64 The Time to Buy the Miners, Gold,

50 XTI Aircraft Company - Reg A+

Reddit to Buy and SellFriendFeed MicroCap Stocks 72 When

39 Adjusting to Public Company Life

Offering Circular

57 As a Millennial Investor, Why Should I

82 MicroCaps - First Mover Advantage

Resources Rick Rule

After Ringing the Bell Margaret Rosenfeld

40 Reg A+ “From Converting Reservations Into www.stocknewsnow.com Buy Orders and Exit Strategies” David Weild and Daniel Barfield

Into Select IPO’s Daniel Mulcahy

Have a Diversified MicroCap Portfolio? Robert Kraft

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OTCQB: TPIV Digg Glynn Wilson, Ph.D., Chairman and CEO www.tapimmune.com

and Silver is Now! David Morgan

Sam Namiri

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www.stocknewsnow.com Follow us: @StockNewsNow SNN Inc. 5839 Green Valley Circle Suite 205 Culver City, Ca. 90230 www.StockNewsNow.com PUBLISHER Shelly Kraft SNN Chairman/Founder/CEO skraft@snnwire.com Lynda Lou “Lulu” Kraft SNN President EXECUTIVE EDITOR Robert Kane Kraft SNN Chief Operating Officer rkraft@snnwire.com Wesley Ramjeet SNN Chief Financial Officer info@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 424-227-9018 GRAPHIC PRODUCTION Unitron Media Corp info@unitronmedia.com SNN CONFERENCES info@snnwire.com 424-227-9018

Micro-Cap Review Magazine is published periodically. POSTMASTER send address Changes to Micro-Cap Review Corporate Offices. ©Copyright 2016 by Micro-Cap Review 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. Micro-Cap Review is owned and operated by SNN Inc.

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E D I T O R I A L

hen I look back on my Wall Street career I realize I have been in the microcap stock market for over 35 years. Before I went to Wall Street I cut my teeth starting and managing small businesses in both the industrial sewing machine industry and the garment center. My education, startup company experience and managing a Wall Street microcap underwriter-market maker has given me a macro perspective of the microcap market and has put me in the perfect position to publish the MicroCap Review magazine, which we have now been publishing for 10 years. Many investors like myself, for as long as I can remember, struggled to find information on low-priced emerging growth microcap companies. Unfortunately, the majority of microcaps are not covered by broker dealer research analysts and professional newsletters focus on small cap or higher. MicroCap Review helps fill this void. The microcap market has evolved over the past 10 years of our publishing. Since our humble beginnings, there has been a ground swell of interest in microcap stocks that has grown into a tidal wave of individual and institutional investor interest in microcap companies today of record proportions. And you, our subscribers and readers, who are either high net worth accredited investors, individual investors, self-directed investors, fund managers, family offices, wealth managers, microcap fund managers, service providers, research analysts, newsletter writers, lawyers, CPAs, and the growing cadre of millennial and value investors are searching for the next big winner. The microcap market attracts investors for many reasons, however, their intentions are

about the same: take greater risk to achieve greater rewards. This is our world; we are all part of the microcap investor community! Hooray for us! Many call the MicroCap Review the “Forbes of MicroCaps”, others have called it the microcap due diligence portal; I just call it a labor of love. In this 10th Anniversary issue, I thought about significant events over the last ten years as positive tipping points and catalysts in the MicroCap Stock market. Three stand out: The first is the full integration of OTC Markets, which brought transparency to near 10,000 MicroCap Stocks; the second is Barack Obama signing The Jobs Act, which includes Regulation A+, and the third is the growth of MicroCap Conferences where investors meet and mingle with C level execs, other investors and the street. But number One is definitely the Law… Today Reg A+, AKA Mini IPOs, an outgrowth of the Jobs Act, how it is changing the markets. It reminds me of the early days of the mid 1980s to1990’s, when MicroCap IPOs saw investors start to invest in risky IPOs, many times quite successfully and other times not so good, ultimately throwing money at IPOs in an all-out bull market buying frenzy. The overheated IPO market slowed to a crawl due to market conditions, which lead to the disappearance of traditional market makers and underwriters, as surviving underwriters focused on refinancing products, alternative and secondary offerings. Thanks to the JOBS Act, Reg A+ Mini IPOs is a new beginning for the microcap market and a renaissance for emerging growth small business opportunities available for all investors whether accredited or non-accredited, retail or institutional.

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.

MicroCap Review Magazine 10 Year Anniversary Issue

We are proud to be part of the microcap community doing our part in the capital markets to keep information flowing to our like-minded audience. MicroCap Review is dedicated to providing coverage to this renewed investor interest in microcaps and access to information about the Reg A+ capital formation process. In this issue, we have provided expert editorial and educational articles about Reg A+, an example of a Reg A+ issuer, XTI Aircraft, an ad for a full service brokerage firm and

service providers all participating in the Reg A + capital formation process. This issue also contains 15 exciting microcap company profiles in various business sectors. The four companies on this issue’s front cover are: Apivio Systems,” technology”, IEG Holdings, dba “Mr. Amazing Loans”, a “fintech company”, Energy Fuels,

a “uranium producer” and Tapimmune, an “immune-oncology company”. The remaining profiled companies include: cannabis, gold mining, biotech, pharma, consumer products, medtech, radiation detection equipment manufacturer and a healthcare and technology innovation holding company. Profiled companies are listed on NYSE/ Amex, Nasdaq, OTC Markets, TSX, or the TSX Venture. We are proud to be part of the microcap community doing our part in the capital markets to keep information flowing to our like-minded audience. Thank you all for your loyal support over the last 10 years. n

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MicroCap Review Magazine 10 Year Anniversary Issue

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The Planet MicroCap Showcase brings together the best companies and the top dealmakers in MicroCap finance for three days of company presentations, one-on-one meetings, and networking in the nation’s #1 destination for meetings and entertainment. Meet C level company executives, investors, finance professionals and industry leaders in the MicroCap stock market for an unequaled experience in networking and dealmaking. Presentations by selected pre-IPO and MicroCap company management. Pre-arranged and spontaneous one-on-one meetings, with investors, management and professionals. Daily networking opportunities over breakfast, lunch & cocktails and nightly networking receptions and event-exclusive concierge services to facilitate private meetings and entertainment. Who will attend: Public Companies – Private Companies – Institutional Investors – Private Equity Firms Private Investors – Industry Executives – Family Offices – Wealth Managers – Venture Capitalists

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MicroCap Review Magazine 10 Year Anniversary Issue

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CONTENTS STOCKNEWSNOW.COM FALL 2016

F E AT U R E D A RT I C L E S 30 MicroCap Guru By Jim Collins

46 Regulation A+, Engaging the Crowd – Testing the Waters By Michael Colon

32 The Cyclical Nature of Investing in Resources By Rick Rule

50 XTI Aircraft Company - Reg A+ Offering Circular

39 Adjusting to Public Company Life After Ringing the Bell By Margaret Rosenfeld

57 As a Millennial Investor, Why Should I Have a Diversified MicroCap Portfolio? By Robert Kraft

40 Reg A+ “From Converting Reservations Into Buy Orders and Exit Strategies” By David Weild and Daniel Barfield

58 Coal will be 3rd Most Popular Source of Energy in 2030 By Karl Douglas

42 So, What’s Wrong with Reg A+? By Louis A. Bevilacqua, Esq.

64 The Time to Buy the Miners, Gold, and Silver is Now! By David Morgan

43 Exciting News: All Investors Can Now Get Into Select IPO’s By Daniel Mulcahy 44 Regulation A+ Observations One Year Later By John Lowy

Resources Corner

21 MicroCap Action in the Uranium Space By Nick Hodge

Legal Corner

53 Ask the Legal Experts By Eric Hellige and Francesca Djerejian

Charts

72 When to Buy and Sell MicroCap Stocks By Sam Namiri 82 MicroCaps - First Mover Advantage By Maj Soueidan

Cyber Security Corner

76 Cyber Security By Yoram Golandsky

Cannabis Corner

88 The Coming Election Season Cannabis Stock Trade By Alan Brochstein

Opinion

84 The ABCs of Sustainable Investing By Shelley Goldberg 86 The Zika Virus Epidemic . . . Risks to Americans By Dr. Eugene Seymour 91 The Private Side of Cannabis By Leslie Bocskor

Comic Strip

63 Comparison Chart of Various Securities Offerings Provided by Mintz Levin Cohn Ferris Glovsky and Popeo PC

81 What Am I Buying? By Chris Lahiji

20 WallStreet Chicken - Episode 14 “Wall Street Weekend”

77 New Formations By David Alsup

Proﬁled Companies

35 Eurasian Minerals, Inc. NYSE MKT: EMXX, TSX-V: EMX

Commodities Corner

68 Commodities in Review By Mark Shore

Asia Corner

70 Global Risks Weighing on Hong Kong Stocks By Leslie Richardson

Accounting Corner

74 MicroCaps in SEC Cross Hairs of Non GAAP Measurement Debate By Corey Fischer

www.stocknewsnow.com

8 TapImmune Inc. OTCQB: TPIV

11 Safeguard Scientifics, Inc. NYSE: SFE 12 IEG Holdings Corporation OTCQX: IEGH 16 Apivio Systems, Inc. TSX-V: APV 22 Energy Fuels Inc. NYSE MKT: UUUU / TSX: EFR 26 Pressure BioSciences, Inc. OTCQB: PBIO 29 Reign Sapphire Corporation OTCQB: RGNP

36 Theralase Technologies Inc. TSX-V: TLT, OTC PINK: TLTFF 62 US Nuclear Corp. OTC PINK: UCLE 67 Millrock Resources, Inc. TSX-V: MRO 78 Nano Dimension Ltd. Nasdaq CM: NNDM 90 Endexx Corp. OTC PINK: EDXC 94 Grow Solutions Holdings, Inc. OTCQB: GRSO

MicroCap Review Magazine 10 Year Anniversary Issue

PROFILED COMPANY

tapimmune inc. otCqB: tPiV

apImmune, Inc (OTCQB: TPIV) is an Immuno-oncology company focused on the treatment of breast and ovarian cancer.

Glynn Wilson, Ph.D., Chairman and CEO

The Company’s lead product (TPIV 200) is entering multiple Phase II clinical trials for the treatment of triple negative breast cancer and ovarian cancer. After conventional therapies (surgery, radiation and chemotherapy) patients in these indications are at high risk of cancer recurrence with poor overall prognosis. TPIV 200 stimulates the body’s cellular immune system to recognize and fight cancer cells and in particular targets metastatic disease which is the biggest threat to survival. The Company’s approach is to broadly stimulate T-cells to recognize and remember specific targets (antigens) on tumor cells throughout the body.

and breast cancer completed at the Mayo Clinic, Rochester, MN, both technologies were shown to be safe and well tolerated, and produced robust T-cell immune responses in over 90% of patients treated. TPIV 200, which contains 5 (Class II) peptide antigens, has been formulated and manufactured as a single lyophilized product that in Phase I protocols was administered once a month for six months. It is an “off the shelf ” product that can be administered through a simple injection.

leVeraGinG tranSlational MeDiCine reSearCH at Mayo CliniC

Based on the exciting results from Phase I studies TapImmune plans to conduct multiple Phase II studies on TPIV 200 in triple negative breast and ovarian cancer starting in 2016. Initial studies will test the ability of vaccines in a therapeutic setting to prevent or slow disease recurrence in patients that have completed standard therapies. In triple negative breast cancer a large 280 patient, double-blinded, placebo-controlled study will be started at the Mayo Clinic, Jacksonville. This study will be funded by a $13.3 million grant awarded to the Mayo Clinic by the US Department of Defense (DOD) and will start later in 2016. TapImmune will provide TPIV 200 for these studies and will have access to clinical results. The endpoints of this study will be time to disease progression. A smaller (80 patients) TapImmune spon-

TapImmune has a worldwide exclusive license to commercialize proprietary vaccine technologies discovered in the laboratory of Dr Keith Knutson at the Mayo Clinic. These technologies (called multiple epitope vaccines) are against cancers that over-express the HER2neu (in HER2neu breast cancer and ovarian cancer) or Folate Receptor Alpha (in ovarian, triple-negative breast and non-small cell lung cancer) antigens. Vaccine compositions were derived from studies in cancer patients that showed that the immune system could recognize a number of small peptide antigens. In Phase I studies in patients with ovarian

MicroCap Review Magazine 10 Year Anniversary Issue

CliniCal DeVeloPMent

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sored open-label study (already enrolling) will study the vaccine dose and boost strategy and the endpoints will be safety, immune responses and therapeutic responses. This study has already started at multiple centers. Two studies are planned in ovarian cancer. The first has started at Memorial Sloan Kettering Cancer Center, New York, NY, and will study the combination of TPIV 200 and a PL-1 inhibitor (durvalumab; AstraZeneca) in 40 patients with platinum resistant ovarian cancer. An additional study will also examine the efficacy of TPIV 200 as a maintenance therapy in ovarian cancer patients that are responding to platinum treatment. The Company also plans to complete formulation and manufacturing on TPIV 110 so that they can start trials in HER2neu positive breast cancer at the start of 2017. Thus, TapImmune anticipates a number of clinical milestones including submission of new INDs to the FDA, start of new clinical programs and recruitment and treatment of patients. The clinical pipeline for TPIV 200 is summarized in Table 1.

Sponsor: IND Holder

Robust T-cell responses in over 90% patients treated with TapImmune’s T-cell vaccines. Multiple Phase II studies to study clinical efficacy have been initiated. Patient Population – Market Opportunity It is predicted that Immunotherapy will become the leading treatment for cancer with sales of $41 billion predicted for 2020 (http://www.researchandmarkets.com/ research/qjhgbh/global_and_usa). It is the Company’s view that its cancer vaccines will be use as stand-alone therapies or in combination with other immunotherapy approaches. The current markets have an urgent need for new therapies to prevent cancer recurrence. Triple negative breast cancer represents ~ 15% of breast cancer patients

Collaborators

Status

Indication

Study Design

Mayo Clinic (MC1015)

Tapimmune

Completed

Breast and Ovarian Cancer

Phase I Safety & Immune Response

TapImmune (FRV-002*)

Multiple Sites

Recruiting First patient treated

TNBC

Phase II Dose & Boost Safety & Immune Responses

Sloan Kettering Cancer Center (FRV-003**)

AstraZeneca Tapimmune

Recruiting First patient treated

Platinum Resistant Ovarian

Phase II Combination with durvalumab Time to disease progression

Mayo Clinic

TapImmune

Planned 2016 Start

280

TNBC

Tapimmune (FRV-004)

Multiple Sites

Planned 2016 Start

Platinum Sensitive Cancer

Phase II Time to disease progression Phase II Time to disease progression

* clinicaltrials.gov/ct2/show/NCT02764333?term=TapImmune&rank=2 ** clinicaltrials.gov/ct2/show/NCT02764333?term-ovarian+AND+Jason+Konner&rank-1

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with over 40,000 new patients in the US being diagnosed each year. Standard of care includes surgery, radiation and chemotherapy but after these treatments there is a high probability of cancer recurrence. Approximately 30,000 new patients in the US are diagnosed with ovarian cancer and the 5 year survival rate is ~ 45%. In HER2neu breast cancer (which represents ~ 30% of all breast cancer patients) Herceptin (Roche) is currently standard of care. This monoclonal antibody can effectively treat ~20% of patients that have the HER2neu antigen and has annual sales ~$6 billion. TapImmune’s ability to treat over 85% of the patient population provides large market opportunities. As TPIV 200 and TPIV 110 can be used as stand-alone products or in combination with other therapies it gives the Company significant market flexibility.

ORPHAN DRUG AND FAST TRACK STATUS The FDA has granted TapImmune Orphan Drug Status for TPIV 200 in ovarian cancer which will give the Company tax benefits and a period of market exclusivity when the drug comes to market. The FDA has also designated the investigation of multiple-epitope Folate Receptor Alpha Peptide Vaccine (TPIV 200) with GM-CSF adjuvant for maintenance therapy in subjects with platinum-sensitive advanced ovarian cancer as a Fast Track Development Program. Designation as a Fast Track product for a new drug or biological product means that the FDA will take such actions as are appropriate to expedite the development and review of

MicroCap Review Magazine 10 Year Anniversary Issue

Lead product TPIV 200 is a multi-epitope vaccine against Folate Receptor Alpha over-expressed in triple negative and ovarian cancer.

the application for approval of such product.

NEXT GENERATION VACCINES TapImmune has developed internally a novel DNA vaccine technology called PolyStart with the potential to become the next generation of T-cell stimulating vaccines. This technology facilitates the expression of multiple peptide antigens to produce a stronger immune response. It has the potential to be a stand-alone vaccine platform. Patent claims on the technology were recently issued. The Company’s immediate goal is to complete preclinical work to include PolyStart constructs into current clinical programs and to seek out-licensing and collaborative opportunities for PolyStart in both cancer and non-cancer indications.

EXPERIENCED MANAGEMENT AND DEVELOPMENT TEAM TapImmune has established a top-tier management and development team that can execute the Company’s plans. Chairman & CEO, Dr Glynn Wilson has a broad background in Product & Corporate

Development in large pharmaceutical organizations (Ciba-Geigy; SmithKline Beecham) and start-up organizations (Tacora; TapImmune). He was responsible for in-licensing vaccine technologies from Mayo Clinic and in developing the current product pipeline. The Company’s Strategic Advisor, Dr John Bonfiglio has successfully run several Biotech Companies, including Peregrine, Immune Response Corporation, Argos, and Oragenics, and has broad experience in product development and financing. Dr Robert Florkiewicz, Head of Research, is a molecular cell biologist with experience at Synergen, TSRI, GSK and Seed IP, and is the inventor of the PolyStart technology. Dr Patrick Yeramian, Consultant Medical Director has over 25 years experience in the clinical development of new drugs, biopharmaceuticals and vaccines with corporate experience at Viragen and Searle. This team together with advisors has demonstrated the ability to execute and progress clinical and preclinical programs.

class T-cell vaccines for breast and ovarian cancer. The Company’s business strategy is to fund the completion of Phase II clinical trials where successful results will provide significant value inflection points. At a current market valuation of ~$40 million, in one of the most attractive investment areas, there is the potential for significant growth and the Company represents a compelling investment opportunity. n The company paid consideration to SNN or its affiliates for this article.

BUSINESS & FINANCIAL STRATEGY TapImmune is positioned with the best in

TapImmune is positioned with the best in class T-cell vaccines for breast and ovarian cancer. The Company’s business strategy is to fund the completion of Phase II clinical trials where successful results will provide significant value inflection points. 10

MicroCap Review Magazine 10 Year Anniversary Issue

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nySe: SFe

PROFILED COMPANY

Safeguard Scientifics, inc.

or more than 60 years, Safeguard Scientifics has been synonymous with entrepreneurship and innovation. Safeguard’s charter is to build value in earlyand growth-stage businesses by providing capital as well as strategic, operational and management resources to its “partner companies”, which generally refers to those companies in which Safeguard has an equity interest and in which Safeguard is actively involved, influencing development through board representation and management support. Safeguard strives to create long-term value for its shareholders by helping its partner companies increase their market penetration, grow revenue and improve cash flow. Safeguard focuses principally on companies with initial capital requirements between $5 million and $15 million, and follow-on financing needs of between $5 million and $10 million, with a total anticipated deployment of up to $25 million from Safeguard.

FounDation For GrowtH Safeguard Scientifics was founded in 1953 as the Lancaster Corporation, a holding company with the express purpose of engaging directly or indirectly in the development of high-potential businesses. During that era, there was very little venture capital at work anywhere and the notion of investing in small companies was fairly new. Safeguard was one of the first companies of its kind to deploy capital and acquire controlling stakes in a variety of businesses across a myriad of industries. Safeguard’s distinguished track record includes market leaders such as Novell, QVC, Cambridge Technology Partners, CompuCom, Internet Capital Group, Traffic.com, Clarient, Avid Radiopharmaceuticals, Advanced BioHealing, Portico Systems, ThingWorx, Alverix, Crescendo Bioscience and more! While Safeguard’s sector focus has evolved over time, technology has been, and continues to be, the epicenter of Safeguard’s strategic focus. www.stocknewsnow.com

wHy own SaFeGuarD (nySe:SFe)? • Access to a diversified group of earlyand growth-stage companies • SFE currently trades at significant discount to net asset value • Full value of partner companies not reflected in share price • Exits expected to demonstrate value • Team has deep domain expertise and operating experience • Balance sheet demonstrates financial strength, flexibility and liquidity • Strong alignment of interests with shareholders Today, within select technology-enabled segments such as adtech, fintech, healthtech and medtech, Safeguard identifies companies whose business models are disruptive and/or respond to an imminent and unmet market need. With eyes primed for growth, Safeguard targets companies that have a proprietary capability relative to their market competition, including patented functionality or sustainable customer relationships; that can scale quickly in defined markets that have significant size or potential for rapid growth; and that have the opportunity to generate recurring revenue over time.

BuilDinG Value Safeguard’s team of experienced entrepreneurs, board members, financiers and operators drive opportunities to transform early- and growthstage partner companies into high-traction market leaders. Safeguard’s ability to deploy capital, build value and realize value rests in large part on its deal team, which tirelessly identifies and thoroughly analyzes partner company prospects. Safeguard’s methodical screening process distinguishes opportunities in which Safeguard can add value and drive growth, striving to achieve aggregate cash-on-cash returns of at least two-

times cost over a three-to-five year period. Safeguard plays an active role in developing the strategic direction of its partner companies to address critical success factors required for long-term growth. Safeguard provides valuable support services in the areas of marketing, operations, finance and legal. Its curated team of industry experts and serial entrepreneurs work alongside companies to lend strategic insight and help management teams remain focused on critical objectives. Most importantly, Safeguard leverages its vast network for the benefit of each business through welltimed, well-placed introductions to contacts and companies that may serve as strategic partners, customers and/or potential acquirers. Separately and cumulatively, these layers of value formulate a powerful growth model for Safeguard’s partner companies, ultimately driving value for Safeguard shareholders.

tHe oPPortunity aHeaD Safeguard is continuously looking to identify tomorrow’s success stories. As an active advocate and catalyst for the success of early- and growthstage technology companies, Safeguard deploys capital to accelerate a company’s growth and build long-term value. As a result of Safeguard’s steadfast focus, the company finds itself gaining tremendous momentum from greater consistency in the amount of capital deployed and capital realized. In addition, Safeguard continues to further align its interests with the interests of its shareholders and is incented to create and maximize shareholder value. Overall, Safeguard’s core business is sound and its financial strength, flexibility and liquidity remain the foundation of its evergreen business model. The company is well positioned to continue to deploy capital in an appealing pipeline of high-potential early- and growth-stage companies and believes that its steady execution will continue to drive value for its shareholders. n The company paid consideration to SNN or its affiliates for this article.

MicroCap Review Magazine 10 Year Anniversary Issue

PROFILED COMPANY

ieG Holdings Corporation otCqX: ieGH “Mr. Amazing Loans” – A Consumer Finance Vanguard A Better Model In The Evolving FinTech Marketplace CoMPany BeGinninGS

CEO, Paul Mathieson

IEG Holdings Corporation, which does business under the brand “Mr. Amazing Loans”, is the realization of several long journeys through finance, coupled and leveraged with a decade of financial evolution. Mr. Amazing Loans is the refined outcome of its Founder, CEO, and Chairman Paul Mathieson’s background in finance – which includes over 21 years’ financial industry experience in lending, funds-management, stock market research and investment banking – and a former Mathieson-led, Australian-based business model that lent ~$48 million to over 11,500 customers in the mid-2000’s. Having realized success in using a prior, less-efficient, technology and capital-constrained model Mathieson relocated to the US in 2008 to replicate the base-platform model already established; utilizing cash flow from the runoff of the Australian loan book to fund the current US setup and utilizing the much improved global technology infrastructure to improve the second iteration of the model. On the back of the success of the Australian Mr. Amazing Loans business was born a more evolved, more FinTech leveraged model that has expanded on the foundation of its quasi-predecessor. “I believed I could set up a consumer loan business and do it better than competitors with superior branding, professional management and a much more cost-effective

MicroCap Review Magazine 10 Year Anniversary Issue

and fairer structure that was affordable to consumers,” said Mathieson.

a ProBleM, a Solution, a 50% aPPliCation rate With a customized, fully-integrated frontend website portal, back-end loan processing system, credit checking system, bank statement retrieval system, and multiple lead providers, Mr. Amazing Loans is a web-based property that has a cycle-tested 50%-plus application rate from prospects. The end result of this highly-efficient top to bottom prospect-funneling system is a platform with a low customer acquisition cost and a great customer experience. This matters when realizing that the Mr. Amazing Loans’ targeted consumer finance market tops out at ~$80 billion in the US alone. In Australia, using a predecessor model that was both technology and capital constrained, Mr. Amazing Loans captured a 10% market share. “Our product is significantly cheaper, at 23.9%-29.9% per annum, than the long established ‘payday lending market’ that has been charging over 300% traditionally. In addition, other businesses are based on shortterm, high returns whereas Mr. Amazing Loans possesses a model where we’re helping the consumer and doing what the government intends. We’ve received a lot of support for our model and consumers appreciate the differences. Mr. Amazing Loans’ $5,000 loan www.stocknewsnow.com

product sits right in the range of what the consumer wants and is where we believe the sweet spot is for targeting customers seeking $2,000 to $10,000 loans. Extensive historical static pool analysis leads us to believe that credit losses increase significantly for loans greater than $10,000 and customer lead acquisition costs make sub-$5,000 loans uneconomic. Further, short-term loans of less than 5 years don’t enable enough duration to earn a desirable return taking into account write-offs and customer acquisition costs. We really think Mr. Amazing Loans is a data-based, analytics-driven model that can scale as a result of our positioning and the economics we can achieve within this positioning framework,” Mathieson noted.

A Unique Dynamic Due to the significant regulatory and capital barriers to entry, there are only a handful of direct competitors to Mr. Amazing Loans; including: OneMain Financial, Avant, Lending Club, and Prosper – which are all capitalized at over $1.5 billion. Mr. Amazing Loans’ indirect-competitors are credit card lenders, “payday lenders” with multiple storefronts and legacy physical infrastructure issues, online high-rate lenders, and tribal lender companies operating via tribal exemptions. Mr. Amazing Loans’ competitive advantages over these lenders include a significantly lower overhead driven by its highly-lean online model, its superior branding, its targeted marketing strategy, its affordable weekly repayments, and a strict regulatory compliance. “The advantages Mr. Amazing Loans has over its competitors stem from the speed of online application and funding for the client; without compromising our high-hurdle underwriting standards we can take a loan from application to funding within hours of application completion,” said Mathieson. He added, “Another key advantage is the low weekly repayment cost of our loans only being $37.03 a week (principal and interest repayment) for a $5,000 loan over www.stocknewsnow.com

Available States Planned States

5 years. Even better for the borrower, this is automatically direct debited from the customer’s account. We also hold the third largest number of state lending licenses of any company in the US. Licensing is becoming

increasingly important as more state and federal regulatory scrutiny is bearing down on the industry. The regulatory scrutiny is especially directed at peer-to-peer lenders who don’t hold any licenses. Some of these

The advantages Mr. Amazing Loans has over its competitors stem from the speed of online application and funding for the client; without compromising our high-hurdle underwriting standards we can take a loan from application to funding within hours of application completion. MicroCap Review Magazine 10 Year Anniversary Issue

regulatory issues have been extremely high profile as of late. Finally, for those considering the financials of the space, unlike peerto-peer lenders we actually hold loans on our balance sheet, resulting in superior 29.9% gross revenue margins compared to ~2% gross revenue margins for many peer-topeer lenders. You can imagine, with holding loans on our books, we want to do things the right way when it comes to underwriting and regulation.”

Data-Based, AnalyticsBased, Responsible Growth Carla Cholewinski, COO of IEGH, stated, “Current economic conditions provide the

perfect time for Mr. Amazing Loans to be expanding across the US and rapidly growing our loan book. Demand for our loan product is at an all-time high. It’s rewarding to be able to provide risk-adjusted loans to consumers that are neglected by mainstream lenders such as banks and to be part of such a dynamic, high-growth organization. I also like that we have a model we believe generates a return that’s sustainable; one that we don’t believe is dependent on any material changes to current, status-quo assumptions for long-term sustainability and growth.” IEGH has only recently entered an accelerated growth phase having established and refined its online operational platform, added efficient customer lead sources, and

MicroCap Review Magazine 10 Year Anniversary Issue

most importantly having secured increased capital. IEGH cumulative loan volume, which again is a function of its capital availability, rose 2,168% from $587,000 at January 1, 2014 to $13,314,023 at June 30, 2016. Full year revenue increased 2,815% from $62,949 in 2013 and 247% from $529,225 in 2014 to $1,835,165 in 2015. IEGH, currently doing business in 17 US states, plans to expand into 25 US states – encompassing ~75% of the US market or ~240 million in total population. IEGH also plans to grow new loan volumes by leveraging a marketing strategy focused on and around prequalified, direct mail outs, online lead advertising with Google, Bing, YouTube, adding other online partners, and www.stocknewsnow.com

leveraging newly available, capital-driven growth runway.

Sustainability Isn’t Complicated, Neither Is The Future IEGH has a highly scalable business model with low customer acquisition costs that operates in a data-defined zone of risk optimization. IEGH operates in a financial vertical with strong barriers to entry and where regulatory pressure will require competitors to attempt to obtain licenses or buy a group such as IEGH in order to continue to operate. IEGH is an emerging growth microcap company in the truest sense and although it still needs to further ramp up its volumes in the US, it has a proven business model that

The business of Mr. Amazing Loans isn’t rocket science and that’s by design. Growth is driven by consistent risk-management and execution of our cycle-tested model. Utilizing our leading online loan platform, combined with cost-effective customer lead acquisition, thorough and highly efficient underwriting, and the ability to access appropriate funding, we should be able to continue to grow in a responsible, sustainable way. works, having recognized a problem and provided a solution. As IEGH expands and executes the Mr. Amazing Loans strategy, increasing corporate revenues should elevate growth and shareholder value. “The business of Mr. Amazing Loans isn’t rocket science and that’s by design. Growth is driven by consistent risk-management and execution of our cycle-tested model. Utilizing our leading online loan platform, combined with cost-effective customer lead acquisition, thorough and highly efficient underwriting, and the ability to access appropriate funding, we should be able to continue to grow in a responsible, sustain-

able way,” Mathieson stated. “My 5-year vision is to become the McDonalds of small loans, to operate licensed and to lend online in 25 states within the US – which would expose our services to ~75% of the population. In the mid-term we’d like to be NYSE listed, carry a $1 billion plus loan book, and to continue to provide a great product for our customers and fantastic returns for our investors,” Mathieson concluded. n The company paid consideration to SNN or its affiliates for this article.

IEGH has a highly scalable business model with low customer acquisition costs that operates in a data-defined zone of risk optimization. IEGH operates in a financial vertical with strong barriers to entry and where regulatory pressure will require competitors to attempt to obtain licenses or buy a group such as IEGH in order to continue to operate. www.stocknewsnow.com

MicroCap Review Magazine 10 Year Anniversary Issue

PROFILED COMPANY

apivio Systems, inc. tSX-V: aPV

pivio Systems, Inc. is engaged in the design, development, marketing, and sale of Voice over Internet Protocol (“VoIP”)

communications equipment and software. Apivio began as Moimstone Corporation in South Korea in 2003, which since then has sold more than 5 million enterprise VoIP and Wi-Fi phones to Korea’s largest telecommunications carriers.

Rob Bakshi, CEO

Rob Bakshi, Apivio System’s CEO, is an entrepreneur who recognized the opportunity – and the pain – inherent with enterprise telephones that didn’t improve worker productivity. After selling his last company, Silent Witness Enterprises to Honeywell in 2003, he was involved with several other businesses before being introduced to Moimstone. Rob’s vision for innovation in the enterprise phone market enabled him to capitalize on Moimstone’s growing IP telephony business in Korea. “I recognized that most vendors in the enterprise telephony business were more focused on innovation on the back end, leaving a lot of room for improvement with the phones and other endpoints,” said Rob Bakshi. “My vision is that one day, every enterprise phone will be a smart phone, thereby shifting the value proposition from hardware to software.” After becoming the CEO in 2013, he has focused the Company on several innovations that are redefining the enterprise phone market. In May 2014, Moimstone changed its

MicroCap Review Magazine 10 Year Anniversary Issue

name to Apivio Systems, and management listed the company on the Toronto Venture Exchange under the ticker “APV”. In 2014 Apivio brought aboard David Pais, a seasoned CFO who was involved in the sale of Carmanah Design and Manufacturing Inc. to NYSE-listed Kadant Corp (KAI). Apivio has grown to a $60 million revenue business with over $2 million in adjusted EBITDA in 2015. The Company has now been EBITDA positive for the last eight quarters.

SMart DeSktoP PHoneS During 2014, management invested a portion of Apivio’s cash flow into R&D to create the Monet-series of VoIP, enterprise, desktop smartphones. The phones represent a paradigm shift from “dumb” to “smart” phones in enterprise telephony due to productivity apps and custom interfaces that benefit user workflow, increase revenues, and/or reduce enterprise costs. For example, hotels can generate new revenues by streaming advertisements to guestroom Monets to www.stocknewsnow.com

Figure 1: Rob Bakshi’s vision combines desktop phones and smartphones into the Apivio System’s Monet desktop smartphone.

fill its restaurants or promote local shows and sightseeing tours. Monet apps can also reduce costs; hospitals, for example, can lend Monets to discharged patients to monitor their recoveries via video calls, rather than having patients return to hospitals for expensive visits. Apivio’s vision for enterprise smartphones was shared by NEC Corporation of America, a subsidiary of NEC Corporation, the world’s third largest enterprise telephony provider. NEC America ordered 10,000 Monet-Series phones in 2015. Apivio delivered all 10,000 phones on schedule. Order flow and integration of the Monet series from NEC America continues to progress through 2016: NEC America issued another 2,000 Monet purchase order to Apivio in March 2016, and announced the integration of the Monet with three of the NEC Univerge Private Branch Exchanges (PBXs). The largest of these PBXs can accommodate almost 200,000 users, illustrating the potential size of the market for Monet phones in larger NEC customer installations in the future. NEC Corporation in Japan and Apivio further solidified their relationship in June 2016, announcing a letter of intent to develop the next generation of Monet phones and expanding distribution to NEC’s customers globally.

NEC and Apivio understand the potential of recurring revenue from enterprise applications, and they are part of each company’s respective vision to transition into an app-based recurring revenue model.

FROM HARDWARE TO ENTERPRISE APPLICATIONS While the cell phone industry has experienced tremendous innovation with the advent of apps on Android and iPhones, the enterprise phone market has remained stagnant. With the Monet phone, enterprises

can now access a range of Android based applications. In addition, Apivio intends to develop a number of apps targeted at specific verticals. These enterprise applications are not offered at low price points of most consumer targeted apps. These apps are priced higher based on the utility and benefit to enterprises using them. Many can be sold

Figure 2: Apivio Systems’ Monet Desktop Smartphone

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MicroCap Review Magazine 10 Year Anniversary Issue

Figure 3: NEC envisions security, biometric, and hospitality applications for Apivio’s Monet enterprise, desktop smartphones.

Figure 4: Apivio’s Liberty Wi-Fi phone

on a subscription basis – with payments either monthly, quarterly or annually. And since the costs of developing these apps are expensed when incurred, gross margins are usually very good. NEC and Apivio understand the potential of recurring revenue from enterprise applications, and they are part of each company’s respective vision to transition into an app-based recurring revenue model. To

NEC has more than 3,000 dealers globally and over 700 dealers in North America alone. The dealers are the first line of contact with the customer. NEC trains and educates their dealers so that they have all the right tools to sell the NEC suite of products and services. With desktop smartphone applications, NEC dealers can leverage their existing customer base to sell new Monet phones and productivity tools and apps for recurring revenue streams. NEC communicates to Apivio, ideas and comments from customers who ask for customized apps to serve their specific needs. Apivio choses to build some apps, whereas the rest are built by the Android app development community.

support this vision, in December 2015, NEC America launched its App Store, and for every Apivio app that is sold on a Monet, Apivio receives a percentage of the revenue. Apivio also receives a percentage of the revenue generated by third-party apps. Third party app developers are happy to have their apps distributed in an app store targeted at the enterprise market and are happy to share a part of the revenue with NEC and Apivio.

NEC trains and educates their dealers so that they have all the right tools to sell the NEC suite of products and services. With desktop smartphone applications, NEC dealers can leverage their existing customer base to sell new Monet phones and productivity tools and apps for recurring revenue streams. 18

MicroCap Review Magazine 10 Year Anniversary Issue

THE LIBERTY SERIES Wi-Fi PHONE – ANOTHER GAME CHANGER Beyond Apivio’s Monet hardware and associated applications, another leg of growth will likely come from its Liberty series Wi-Fi phone. Similar to how a cell phone works www.stocknewsnow.com

Figure 5: Apivio’s base business continues to grow each year.

within the cellular coverage area, a Wi-Fi phone can work within any Wi-Fi coverage area. The Liberty™ allows enterprise workers to remain connected as long as they are within the range of any accessible Wi-Fi hotspot, essentially enabling workers to carry their deskphones around their workplace. This enables workers in any distributed workplace, such as warehouses, airports, factories, and even those traveling abroad, to use their deskphones while they are on the move - no more voicemail for hard-to-reach workers since they are always connected with a Wi-Fi enabled Liberty™ phone. Apivio has sold more than 100,000 Liberty™ phones in Korea and Apivio’s management is adapting the phone for North America before bringing it to the U.S. and Canadian markets. “I want Apivio to be the leading innovator in the enterprise phone industry,” said Mr. Bakshi, “I see an industry that has tremendous room for change and improvement. We want to produce the best enterprise smartphones in the market and make them available on a number of platforms. The whole value proposition for enterprise phones will change when enterprise customers experience the benefit of a smartphone on their desk, running applications designed for their environment. Apivio intends to distribute enterprise specific apps to any vendor of www.stocknewsnow.com

The whole premise of our business model is that hardware is an enabler whereas our software based products and solutions will bring more value to our customers and recurring revenue to the Company. Android smart phones through its Apivio app store. The whole premise of our business model is that hardware is an enabler whereas our software based products and solutions will bring more value to our customers and recurring revenue to the Company. I am excited about the growth opportunities and look forward to communicating more about our industry-leading products and solutions in the future.”

to identify and convert business opportunities into products and establish partnerships with large enterprises for sales and marketing. For company information, please visit Apivio’s Website at apivio.com. For regulatory documents and financial filings, please visit www.sedar.com. n The company paid consideration to SNN or its affiliates for this article.

FOR MORE INFORMATION Apivio Systems (TSX-V: APV) is a global VoIP telephony provider with an established and broadening Korean business, an expanding relationship with NEC America to deliver Monet, desktop smartphones and applications to enterprises, and a nascent Wi-Fi smartphone business.. Apivio’s management team has demonstrated the ability MicroCap Review Magazine 10 Year Anniversary Issue

MicroCap Review Magazine 10 Year Anniversary Issue

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RESOURCES CORNER

MicroCap Action in the Uranium Space This article was supposed to be about gold. There are plenty of people talking about gold at this point. Its rise after a protracted bear market was inevitable, and over a third of the world’s debt moving into negative yield territory drove enough capital into the yellow metal to turn the market around. We know it’s going higher.

n NICK HODGE

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So let’s talk about uranium. That other metal that’s supposed to be in a bull market by now. It’s had all the classic markings of a coming bull market for several years now. Fear subsiding after Fukushima. Japanese restarts. Rapid nuclear growth in China, Russia, and India. Sustained low prices that took enough supply offline to correct the balance. Indeed, the price of uranium has been below $50 per pound for nearly four years now, and is below $30 now. At current prices, more than half of primary supply is underwater. These low prices are at a time when the outlook for nuclear energy – and therefore uranium demand – remain robust. The U.S. has nearly 100 operable reactors. China could have that in a decade. There are more than 200 reactors being built, licensed to be built, or in advanced planning worldwide. The International Energy Agency (IEA) has said the world needs to double its current installed nuclear capacity to 930 gigawatts by 2050 to meet the international goal of limiting the global temperature rise to two degrees Celsius by the end of the century. As the world continues to build out its nuclear fleet, a uranium shortfall scenario could emerge fairly quickly, which is why many banks and analyst are calling for much higher uranium prices in the longer term. Prices right now aren’t high enough to spur new production. But over the next decade that will have to change as the world needs to bring 80 million pounds of new

uranium supply online annually. New uranium supply isn’t that easy to come by, so the few publicly-traded producers out there will yield good returns as this scenario plays out over the next few years. The $4 billion Cameco comes to mind. But believe it or not, there is plenty of microcap action in the uranium space as well. In fact, of the four companies currently producing uranium in the U.S., three of them have market capitalizations below $100 million. The fourth is Cameco. And when it comes to exploration, it’s nearly entirely a small and microcap game. Nine out of ten of the world’s best undeveloped uranium assets as ranked this year by the prestigious Mining Journal have market caps below $300 million. Seven of them are below $100 million. These tiny uranium companies can increase by many multiples once the sector gains more wide stream favor. We saw it in 2006 and 2007 after the flooding of the Cigar Lake mine, when microcap uranium explorers ran thousands of percent in months. I believe we are staring directly at another uranium bull market – this one driven by demand. n Founder and President of The Outsider Club, and Investment Director of Early Advantage, Nick Hodge has been in the investment publishing business since graduating Loyola University in 2006. Known for a “call it like you see it” approach to money and policy, his insights have led to numerous appearances on television and in various outlets on the Web, including the Business News Network and Yahoo!’s Daily Ticker.

MicroCap Review Magazine 10 Year Anniversary Issue

PROFILED COMPANY

energy Fuels inc. nySe Mkt: uuuu / tSX: eFr

Leading Producer of U.S. Uranium Positioned for Global Growth in the Nuclear Sector

President and CEO, Stephen Antony

Despite all the talk about wind and solar these days, nuclear energy produces more zero-emission, zero-carbon energy in the United States than all renewable sources combined – and by a wide margin. Because of nuclear energy’s clean air attributes, the sector is growing – significantly – led by China, India, South Korea, Russia, and the U.S. Indeed, many people don’t know that the U.S. currently has the largest fleet of nuclear reactors in the World, we just started a new unit in Tennessee earlier this year, and we have four more units under construction in Georgia and South Carolina. All nuclear reactors – in the U.S. and around the world – are fueled by uranium. Energy Fuels Inc. (NYSE MKT: UUUU & TSX: EFR) is positioning itself to become the largest producer of uranium in the U.S. and a major global supplier. Already in 2016, Energy Fuels expects to be the 2nd largest producer of uranium in the U.S., behind only Cameco. However, uranium is a misunderstood commodity right now, and uranium producers like Energy Fuels are surprisingly seeing little love from investors. Look at the 10-year stock charts of uranium companies like Energy Fuels, Cameco, Paladin, and Rio Tinto subsidiary, Energy Resources of Australia, etc. The sector has been decimated – most names in the space are down well over 90% since 2007. Here is an unbelievable statistic: if you remove Cameco from the equation, today an investor can buy every

MicroCap Review Magazine 10 Year Anniversary Issue

single publicly-traded, pure-play uranium producer in the World – for under a billion dollars. That’s mind boggling considering the global nuclear space is actually growing. According to the World Nuclear Association, today there are 444 operable nuclear reactors in existence, along with 62 new ones under construction, and another 509 on order, planned, and proposed. China has officially announced that it intends to double the size of its nuclear fleet – in the next 5 years – and they expect to have up to 6 times more nuclear capacity installed by 2030. Nations around the World are seeking to address climate change and air pollution, as demonstrated by the recent COP21 Paris Agreements. This is not a declining sector by any means – to the contrary, nuclear is experiencing very strong global growth. And, this growth will be fueled by uranium. Consider this: 1.6 billion people around the World have no electricity at all. 3 billion more people will be born in the World by 2050. Reliable electricity results in cleaner air, cleaner water, better healthcare, better education, and stronger economies. Nuclear energy is on the rise, yet uranium prices are near multi-year lows. The main reasons for the weak performance of uranium prices are largely tied to the 2011 nuclear disaster in Japan and unexpected growth in production from Kazakhstan, today’s leading producer. Despite these developments, there is reason to believe the oversupply of uranium is about www.stocknewsnow.com

to reverse course. Kazakh production has already plateaued, and Japan is returning reactor units to service – albeit slowly. In addition, major uranium mines are depleting, others are reducing production, and the low prices of the past several years have severely curtailed new uranium exploration and mine development. There are only two new major mines coming online now – Cigar Lake and Husab. The World is expected to need several more large mines at some point in the next 10-15 years, and there are none on the horizon, as it typically takes 10+ years – at least – to explore, license, finance, and construct a major new uranium mine. When the market finally turns, existing producers like Energy Fuels are likely to be the main beneficiaries, since demand will outweigh supply – perhaps dramatically so – and that could drive uranium prices much higher. Energy Fuels is uniquely positioned, because it provides the “double-barreled” benefits of lower cost production and the potential to significantly increase production when uranium prices rise. Energy Fuels is an established uranium producer with current sales to major nuclear utilities. They are not an exploration or development play – they have a proven track-record of producwww.stocknewsnow.com

tion and sales. While the company makes sales internationally, it largely focuses on the United States, which is the World’s largest nuclear market. In 2016, the company expects to produce about 1 million lbs. of uranium form its lower-cost sources of production. However, it has the capacity to produce over 11.5 million lbs. annually in a higher price environment. The company also has the largest NI 43-101 uranium resource in the U.S., among producers and near producers. Arguably, no other company can claim these levels of scalability. Energy Fuels has emerged as the dominant uranium producer in the U.S., especially since Cameco has announced that it is reducing U.S. production to focus on largerscale production in Canada and Kazakhstan. Energy Fuels is also the only company in the U.S. – and one of only three companies in the World – with uranium production that utilizes both conventional and in situ recovery (“ISR”) methods. In very general terms, ISR is typically lower cost, while conventional is typically more scalable and better suited to increasing to higher levels of annual production over a longer period of time. Energy Fuels owns and operates two ISR production facilities, the Nichols Ranch

Project in Wyoming and the Alta Mesa Project in Texas. The company has grown significantly over the past several years through acquisitions that are consolidating the U.S. uranium space. Their most recent acquisition added the Alta Mesa Project to the company’s portfolio. This was a highly strategic move by Energy Fuels. Alta Mesa is a fully-licensed and constructed ISR plant and mine that is currently on standby – it ready to go back into production within about 6 months of a “go” decision. It produced almost 5 million lbs. of uranium between 2005 and 2013. Indeed, the company expects Alta Mesa to have the lowest cash costs of any project in its portfolio once it goes back into production. The company also expects to publish a maiden NI 43-101 resource report on Alta Mesa in the summer of 2016, and the project has considerable exploration potential on the nearly 200,000 acres of private land comprising the project. By the way, this is about a quarter the size of Rhode Island! Energy Fuels’ Nichols Ranch Project is an ISR plant and mine currently in production. Nichols Ranch began operations in 2014, and it is expected to produce about 300,000 lbs. of uranium in 2016. The company is currently regulating production in order to maintain the in-ground resources for the higher prices expected in the future. As uranium prices rise, a significant amount of the company’s near-term, lower-cost scalability is expected to come from Nichols Ranch. Energy Fuels is also the only conventional producer of uranium in the U.S. The company owns the only conventional uranium mill in the U.S., the White Mesa Mill. The company expects to produce about 650,000 lbs. of uranium from the White Mesa Mill in 2016. Energy Fuels is also currently in the process of developing a conventional mine in Arizona, called the Canyon mine. Shaftsinking is underway to mine the deposit, and as of this writing, the shaft is at a depth of over 1,000 feet. They are also in the midst of an underground drill program to further

MicroCap Review Magazine 10 Year Anniversary Issue

evaluate the resource. The company has currently identified about 1.6 million pounds of uranium with an average grade of about 1% U3O8 contained in 83,000 tons of inferred resources. However, they hope to significantly expand the resource through underground drilling and upgrade the resource to a higher classification. Finally, the company has a number of other future production sources, including three large conventional projects currently in permitting. The Roca Honda Project in New Mexico is one of the largest and highestgrade resources in the U.S., and the company has a published preliminary economic assessment (PEA) which estimates average annual production of 2.7 million lbs. of uranium for nine years. Roca Honda is also within trucking distance of the White Mesa Mill – which has ample excess capacity – so there is a fully licensed and operating facility available to produce this resource. The Henry Mountains Project in southeast Utah is another large resource within trucking distance of the White Mesa Mill. The company has a NI 43-101 report which shows that Henry Mountains has indicated uranium resources totaling 2.4 million tons with an average grade of 0.48% containing 12.8 million pounds of uranium, along with inferred uranium resources totaling 1.6 million tons with an average grade of 0.47% containing

8.1 million pounds of uranium. The company has a 3rd major conventional project – the Sheep Mountain Project – located in central Wyoming. Energy Fuels published a NI 43-101 preliminary feasibility study (PFS) that estimates average annual production of 1.5 million pounds of uranium over 15 years. As recently as 1980, the U.S. was the World’s largest producer of uranium, and in the coming years, the U.S. could become a major player again. That bodes well for Energy Fuels, since the company has the management and technical team to execute on their growth strategy. Management has decades of experience in all phases of the U.S. uranium mining industry. President and CEO, Steve Antony, has worked in the U.S. uranium mining space since the mid-1980’s, including stints with Mobil Oil’s uranium division, Energy Fuels Nuclear, and Power Resources. Harold Roberts, who runs all of the company’s conventional operations, including the White Mesa Mill and the Canyon Mine, has over 30 years of experience with the company’s assets. Paul Goranson oversees all of Energy Fuels’ ISR production and is a recognized leader in this method of production. The company also recently added Mark Chalmers as Chief Operating Officer. He previously served as Executive General Manager for Paladin

MicroCap Review Magazine 10 Year Anniversary Issue

Energy in Australia, where he was involved in the Langer Heinrich and Kayelekera mines and oversaw sustained, significant increases in production and reduced operating costs. Energy Fuels continues to use today’s quiet uranium market to position itself for the coming price recovery. They are closely monitoring market conditions to determine the best time to increase production. They are continuing to manage their cash, debt, inventory, and production rates. They have a strong balance sheet, including $37.5 million of working capital as March 31, 2016. Later this year, they hope to announce positive drill results at their Canyon Mine, along with updates on production, uranium sales, and utility contracting. Energy Fuels offers current uranium production, lower costs, scalability, and excellent potential leverage to the increasing prices expected in the future. Energy Fuels is listed on the NYSE MKT under the symbol UUUU and on the TSX under the symbol EFR. Further information on the company can be found at www. energyfuels.com. n The company paid consideration to SNN or its affiliates for this article.

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MicroCap Review Magazine 10 Year Anniversary Issue

P R O F I L E D C O M PA N Y

Pressure BioSciences, inc. OTCQB: PBIO

ressure BioSciences, Inc. (OTCQB: PBIO) is a life sciences tools company focused on the development, marketing, and sale of proprietary laboratory instrumentation and associated consumables based on the Company’s game-changing Pressure Cycling Technology (“PCT”).

Richard T. Schumacher Founder/CEO

PCT is a patented, enabling technology platform that uses alternating cycles of hydrostatic pressure between ambient and ultra-high levels (up to 90,000) to safely, conveniently and reproducibly control the actions of molecules (i.e., inactivate, break (lyse), liberate, extract, and/or prepare for downstream analysis) from biological samples, such as cells and tissues from human, animal, plant, and microbial sources. The Company is focused on the development and sale of PCT systems (instruments and consumables) to address the challenging problems inherent in biological sample preparation, a crucial laboratory step performed by thousands of scientists worldwide working in biological life sciences research. Sample preparation is a term that refers to a wide range of activities that precede most forms of scientific analysis. Sample preparation is often complex, time-consuming, and one of the most error-prone (but crucial) steps of scientific research. It is a widely-used laboratory undertaking, the requirements of which drive a large and growing market, estimated currently at approximately $6 billion worldwide. PBI’s PCT systems can be used to exquisitely control the sample preparation process. PCT uses internally developed instrumentation that is capable of cycling pressure between ambient and ultra-high levels, at specific temperatures and time intervals, to rapidly and repeatedly control the interactions of bio-molecules, such as DNA, RNA, proteins, lipids, metabolites,

MicroCap Review Magazine 10 Year Anniversary Issue

and other small molecules. Our product line includes five different models of pressuregenerating instruments and over a dozen different consumables. Our website contains over 100 publications, many from worldrenowned scientists, addressing key advantages of PCT. Through March 31, 2016, PBI has sold or leased over 275 PCT Sample Preparation Systems to approximately 175 leading academic, government, biotech, and pharmaceutical companies. Current customers use the PCT Platform for a wide assortment of important applications, including sample preparation for biomarker discovery, biotherapeutics characterization, vaccine development, soil and plant biology, forensics, histology, and counter-bioterror applications. There are a number of existing methods used by scientists for biological sample preparation, including mortar and pestle grinding, sonication, homogenization, and bead beating. The Company believes that PCT offers significant advantages over these methods, including safety, speed, reproducibility, versatility, and ease- of-use, often with a substantial increase in the quality of the final results. There are a growing number of scientific publications and presentations from independent laboratories that we believe highlight and confirm these clear advantages of PCT over other current methods. Our primary efforts are focused on the development and sale of PCT-based prodwww.stocknewsnow.com

ucts and applications for the preparation of samples used in the discovery of biomarkers, a primary focus of thousands of scientific researchers worldwide. These researchers work in academic, biotechnology, pharmaceutical, and government laboratories. A 2012 market research report by ASDReports has estimated the worldwide market for biomarkers to be approximately $26 billion. The Company derives its revenue from the sale, lease, or rental of our Barocycler instruments, as well as from the recurring purchase of consumables required for the PCT process and from instrument service contracts, replacement instrument parts, and grants. Richard T. Schumacher, Founder, President, and CEO of PBI, said: “We believe that there are approximately 80,000 laboratories worldwide that require the extraction of DNA, RNA, proteins, lipids, and small molecules from biological samples for their research studies. Based on market research, our results to date, and the fact that PCT is a novel, cutting-edge technology currently uncontested in the field of small volume, high pressure preparation of research samples, we believe that a large number of these laboratories will benefit from the advantages www.stocknewsnow.com

of the PCT Sample Preparation System. We believe that we can capture a reasonable share of this existing market over the next 3-5 years, and that by doing so, we will become a highly respected and profitable life sciences instrument and consumables provider.” Mr. Schumacher continued: “In addition to our patented and cutting-edge technology platform, we have both a hard-working, results-driven management team and an experienced and supportive Board of Directors. We believe the combination of these factors will help ensure the success of our company with a concomitant strong return-on-investment for all stakeholders in PBI.”

2016 MAJOR ANNOUNCEMENTS

2320EXT, the next generation PCT instrument expected to be the centerpiece of its co-marketing program with global life sciences leader SCIEX. The Company also announced that six presentations were made on the advantages of the PCT platform at a recent key scientific conference. May 18, PBI announced Q1 2016 financial results, including a 16% increase in total revenue and a 26% increase in products and services revenue. April 7, PBI announced the close of its $5M PIPE at an over-subscribed amount of $6.3M. All five of the Company’s Board of Directors participated in the final tranche of the PIPE. The Company also announced that 100% of its floorless debt had been eliminated, without any lender converting its loans into Company shares. January 28, in a report focused on the exclusive co-marketing agreement between SCIEX and PBI, Emerging Growth LLC indicates the combination of the two company’s technologies could result in superior biological insights and discoveries and in rapid and dramatic revenue growth for PBI. January 12, SCIEX, a global leader in life science analytical technologies, and a whollyowned subsidiary of Danaher Corporation (NYSE: DHR), announced a two-year, exclusive, worldwide co-marketing agreement with PBI to improve protein quantitation in complex samples. n For more information about PBI, please click on the following website link: http://www.pressurebiosciences.com Please visit us on Facebook, LinkedIn, and Twitter

The company paid consideration to SNN or its affiliates for this article.

July 21, PBI announced it has shipped the first five Barocycler 2320EXT Systems, three of which will be used in an important longterm cancer research program by CMRI of Sydney, AU. It was also announced that CMRI had just been named by the White House as a collaborator in President Obama’s “Cancer Moonshot” initiative. July 13 PBI unveiled the Barocycler MicroCap Review Magazine 10 Year Anniversary Issue

MicroCap Review Magazine 10 Year Anniversary Issue

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P R O F I L E D C O M PA N Y

a Sapphire in the rough Miner’s Gate to retail: a Sapphire’s Journey to the new age

otCqB: rGnP

n 2014, entrepreneur Joseph (Yossi) Segelman set out to launch a revolutionary, premium, global, direct-toconsumer Sapphire Jewelry brand, aptly named Reign Sapphires. Today, Reign Sapphire Corporation (OTCQB; RGNP), has emerged as a growing publicly traded company recently launching its stunning inaugural jewelry collection at www.reignsapphires.com. Reign Sapphire Corporation is the world’s first vertically integrated “Miners-Gate to Retail” model featuring Australian Sapphires and Fine Sapphire Jewelry. Reign’s distinction, and marked competitive advantage, derives from its unique approach to gemstone sourcing, quality and supply chain controls, coupled with sophisticated, targeted Brand Identity. Reign Sapphire’s allnatural, conflict free, ethically processed sapphires are mined in Australia from verified sources and jewelry is designed and manufactured in Los Angeles. Reign purchases rough sapphires in bulk directly from commercial miners in Australia and closely controls and manages each step along the supply chain, from sorting, polishing and cutting to design and manufacturing and direct to consumer sales of Reign branded fine jewelry. Reign’s disruptive brand identity is founded upon a modern take on classic designs. The brand offers three distinct collections, Reign Opulence, offering statement pieces at a higher end price point, Reign Signature, a fine jewelry collection, and Reign Classics, an “accessibly priced” line. Taking a nod from old Hollywood, the pieces reflect the decadence from a by-gone era while

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designed with a very modern approach. Jewelry from the Company’s inaugural collection was worn on the Red Carpet at the 2016 Golden Globe Awards, 2016 Screen Actors Guild Awards, 2016 British Academy of Film and Television Awards (BAFTA) and the 88th Academy Awards. Reign’s go-to-market initiatives are as bold as the design approach, aspiring to penetrate the underserved colored gemstones retail jewelry segment, where only 8% of total sales include colored gemstones. Reign has kicked off its consumer marketing by leveraging social and digital media networks with striking digital marketing and advertising campaigns, and influencer/blogger outreach. Reign intends to expand their efforts through establishing exclusive distribution partners, marketing its products in boutique jewelry store windows, and finally by growing its retail presence through its own future Beverly Hills flagship Reign Sapphires Store. Reign’s compelling, highly competitive

business model and stunning appeal have the potential to REIGN down large future profits, if CEO Segelman’s vision comes to full fruition. Learn more about Reign Sapphire Corporation at www.reignsc.com and www. reignsapphires.com n The company paid consideration to SNN or its affiliates for this article.

MicroCap Review Magazine 10 Year Anniversary Issue

F E AT U R E D A RT I C L E

MicroCap Guru W

elcome to the world of the MicroCap Guru. I’m Jim Collins and in conjunction with SNN, the publishers of MicroCap Review, I’m launching a newsletter dedicated to microcap stocks.

A few questions should be answered: What is a microcap stock? A stock with a market capitalization of less than $500 million. Because of their size, these companies tend to be ignored by the research departments of investment banks. Therein lies the opportunity for the savvy, wellinformed investor. Why am I a Guru? Well, guru-ness may be in the eye of the beholder, but I have spent my entire adult life analyzing stocks. For 11 years I worked in equity research for big investment banks (Lehman, DLJ and UBS) based in New York and in London, attaining the CFA designation along the way. I’ve traveled the world researching companies and spent countless hours poring over financial statements of all manner of companies.

n BY JIM COLLINS

Where else can I find your services? The asset management services I provide via my company, Portfolio Guru, LLC, are on an invitation-only basis. I also write for several financial publications. I write 5 columns per month for Forbes and 8 per month for Real Money @ TheStreet.com. I’ve also been featured on Fox Business, BNN and quoted in the Wall Street Journal, New York Times and, of course, Microcap Review. Why subscribe to the MicroCap Guru newsletter? First and foremost, the MicroCap Guru is going to be a research-focused publication. I am not compensated by the companies I will write on, and all ownership positions will be disclosed. How will the MicroCap Guru differ from other small-stock newsletters? There will be no exclamation points!!!!!!!! Seriously, I’m just so sick of having to muck through 347 e-mails per day with idiotic come-ons advertising services that guarantee “8,000 percent returns!” from individual stocks or warn of a “coming catastrophe!” to scare investors into owning commodities that have no intrinsic value. There will be no idiotic conspiracy theories about “secret pipelines” or “government manipulation” in the MicroCap Guru. So, MicroCap Guru won’t be filled with nonsense, but will it contain? Each 8-page monthly issue will have the following: • market overview

MicroCap Review Magazine 10 Year Anniversary Issue

• 2-page company-specific research report • another 2-page company-specific research report • sector spotlight • MicroCap Guru performance update Aren’t the research reports that will be contained in MicroCap Guru typically reserved for large corporate and institutional investors? Yes, and that’s the true value for the MicroCap Guru subscriber: real research on underfollowed stocks. Will there be specific stock recommendations in the MicroCap Guru? Yes, each of the research reports will contain a detailed valuation and 12-month target price for that stock. If that target price is at least 50% of the current stock price, I›ll tell you to buy it. If I›m buying it for myself and my Portfolio Guru, LLC asset management clients, I›ll tell you that, too. Is 50% upside too much to look for in a stock? No. Due to their small size and typical lack of liquidity, microcaps are inherently risky. Thus there must be a higher potential reward to justify their inclusion in your portfolio. Not every recommendation will work, but I promise to keep an accurate record of performance of all highlighted stocks and to publish that data in each monthly issue. How do I subscribe? Subscription info is in the advertisement on the facing page. n

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Delivered to your inbox every month: Stock Picks Each monthly newsletter will contain actionable analysis of undervalued, underfollowed and undiscovered MicroCap companies.

In-Depth Company Specific Research

MicroCap Guru is a monthly email newsletter that delivers actionable insights from a MicroCap expert.

Each month at least two companies will be highlighted via detailed Wall Street quality research notes with earnings estimates, valuations and price targets.

Macro Context The MicroCap Guru will also provide research driven analysis on the overall MicroCap market and attractive subsectors within the MicroCap universe.

Highly Experienced Analysis Jim Collins, the author of the MicroCap Guru, has 25 years of experience with major Wall Street Investment Banks and with his own money management firm, The Portfolio Guru, LLC

Subscribe Now at

MicroCapGuru.com

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Yearly Subscription

$595

MicroCap Review Magazine 10 Year Anniversary Issue

F E AT U R E D A R T I C L E

The Cyclical Nature of Investing in Resources

xcerpt from the Planet MicroCap Podcast, “Episode 21 – The Cyclical Nature of Investing in Resources with Rick Rule, U.S. Sprott Holdings, Inc.”

“The Cyclical Nature of Investing in Resources” – some would argue that you could replace ‘resources’ with any sector. Everything is cyclical. I would argue, sure – that may be theoretically true, but is there any other sector that relies so heavily on understanding whether or not we are in a bear or bull market? As you’ve probably noticed in our interviews with individuals like Rick Rule, we usually ask, “So, where are we at in the mining cycle?” This is a common question he gets quite often because, quite frankly, that is a big indicator as to when to play this market. The following excerpt is from my recent interview with Rick Rule from the Planet MicroCap Podcast that discusses why understanding cycles can help you determine when and how to participate in the natural resources market. B: How many cycles have you been through in your lifetime thus far? R: Well…. let me see, um, I guess this is my fourth major cycle. The first one of course took place in the decade of the 70’s, the makeable market and I’m...You know at a point in time when I experienced that I was at once too inexperienced to understand what was going on, but I’ve been through three cycles since, that I have been completely cognizant of.

n BY RICK RULE

B: What does a cycle mean? What does this mean especially in mining? R: Well Robert, that’s a wonderful question…all of the natural resource industries are extremely capital intensive, which means that they are extremely cyclical. When you look at the cost associated with a commodity, there are many costs that are in addition to the cash costs associated with extracting the resource. The front end cost, including the capital for plant construction are very large factors and construction can take a very very very long time. What that means, is that when the price of a commodity goes up, the supply of the commodity doesn’t go up in commensurate fashion, quickly. So, you get these extraordinary up moves in commodity prices…the producer can’t respond to price signals quickly, they do so overtime. But overtime, just as the thesis associated with the commodities being very well demonstrated in the market, the high price of the commodity begins to constrict demand and increase supply and when that happens, of course the price of the commodity falls. When the price of the commodity falls the industry itself doesn’t cut production as fast as they would in other industries, because the cash cost of production isn’t the same as the total cost of production, which includes the capital. What that means, is that the margins in the industries and the price of the commodity fluctuates very wildly relative to median and to the mean. And what it means further for an investor, is that you have two choices, you have to be a contrarian or you’re going to be a victim. You have to be in these businesses when nobody wants to be in them, and when

MicroCap Review Magazine 10 Year Anniversary Issue

they return to favor, in particular hyper-favor, you need to remember to sell. B: So that actually leads into my next question when it comes to philosophy. When understanding natural resources and when I first got into it and I started learning and listening to you and reading Brent’s Newsletter, it seemed more often than not, that this word contrarian continued to come up, over and over again. So how do you become the best contrarian? R: Experience is what did it to me. In the 1970’s, as a young man, I made an extraordinary amount of money, while all of my peers were losing money in the general market. Like all young men, I think, I confused a bull market with brains. And when the sector turned down, I went from being a very wealthy young man to having a negative net-worth. There’s nothing like experiencing it up-close and personal to turn you into a contrarian. Most of the younger generation, who became involved in natural resources and precious metals, became involved towards the end of the last decade. In other words, they came into a bull market and any of them who have experienced the bear market that was the necessary consequences of the bull market have enough experience now that they are or will be contrarians. Think about what you saw in the small cap natural resource market: you saw the index in the last bull market, go up five or six fold. You saw numerous stocks that went up 2,000 or 3,000%. And then after that you saw the index, the TSX-V resource index, fall by 90% in real terms. That’s a market that fell by half and then for good measure, fell by www.stocknewsnow.com

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MicroCap Review Magazine 10 Year Anniversary Issue

half again, and then for good measure, fell by half again. The experience of being in a market that goes up 10 times, then comes off by 90%, is probably ample illustration of the fact that you either must be a contrarian or you will be a victim. B: When you’re a contrarian you have different ways in which you’re now going to go in and pick certain companies to invest in. Rather than giving an over arching “what are you looking for”, I want to know in this current market, what are you looking for and when do you believe it is the right time to start looking at MicroCaps in the resource sector? R: Well, certainly if you’re under invested in the gold space, the right time is now in gold and precious metals. The truth is we’re through the bear market and into the bull market. Now, we’ve had a pretty substantial up move in the metal and in particular in the stocks. So it wouldn’t surprise me if for the next 3 to 4 months both the metal and the stocks stayed flat, but the truth is remember we are in a market in terms of equities which is off by 90%. So a 50% up move basically recoups less than 10% of what was lost. So if you’re underweight precious metals and precious metals equities, I would suggest that the time to get involved in

that sector of the market is now. If you have a good portfolio position in the precious metals stocks, by contrast you might want to take a little, tiny bit of the table. The truth is you need to get paid all the way through a bull market. In the broader material segment, I think we’ve bottomed. In other words, I think we have seen the worst, but I think we’re going to have a saucer shaped recovery and my expectation is that a really robust bull market in the nonprecious metals resource space will take 18 to 24 months to materialize and my suspicion is that in particular in the oil and gas space that you’re going to see a lot of credit market dislocation in energy. Beginning in the junk bond markets and that part will begin in the third or fourth quarter of this year. So you may see weakness, further weakness, in the sub-billion dollar market-cap space in the oil and gas sector and you’re going to see, not so much weakness with microcap stocks, but certainly you’re going to see massive dislocation in the junk bond markets in the energy space. But you need to remember, that when you are hearing about, reading about or even experiencing absolute carnage in the market and if all of your competitors are afraid, it’s time for you to be brave. So, beginning sort of 9 months from now, through 18 months from now, would be a really good time to position in the industrial materials markets.

MicroCap Review Magazine 10 Year Anniversary Issue

B: And where could our audience go to find more information? R: Well I would love it if your audience would come to the Sprott Global website: www. Sprottglobal.com. Two comments with regards to that; we have an in house blog from Sprott, which catalogues our best ideas and information. I know your audience will get their money’s worthfrom it, because it’s absolutely free. That’s called “Sprott’s Thoughts”, you go to www.SprottGlobal.com for that information. Second thing though is a special offer for your subscribers and listeners, which is I personally will do a portfolio review if they send me an email with their junior resource portfolio, in the text, not as an attachment, with both name and stock symbols. Send that to contact@sprottglobal.com, I will personally review and rank their portfolio, no obligation and send it back to them by return email. n Mr. Rule has dedicated his entire adult life to many aspects of natural resource securities investing. In addition to the knowledge and experience gained in a long and focused career, he has a worldwide network of contacts in the natural resource and finance worlds. As Director, President, and Chief Executive Officer of Sprott US Holdings, Inc., Mr. Rule leads a highly skilled team of earth science and finance professionals who enjoy a worldwide reputation for resource investment management. Mr. Rule is a frequent speaker at industry conferences, and is interviewed for numerous radio, television, print and online media outlets concerning natural resource investment and industry topics. He is frequently quoted and referred by prominent natural resource oriented newsletters and advisories. Mr. Rule and his team have long experience in many resource sectors including agriculture, alternative energy, forestry, oil and gas, mining and water. Mr. Rule is particularly active in private placement markets, having originated and participated in hundreds of debt and equity transactions with private, prepublic and public companies. Sprott US Holdings, Inc. is a holding company made up of three separate and distinct companies: Sprott Global Resource Investments, Ltd., a FINRA Registered Broker/Dealer; Sprott Asset Management USA Inc., an SEC Registered Investment Adviser offering managed accounts; and Resource Capital Investment Corporation, an SEC Registered Investment Adviser managing partnerships. These three companies make up the US Subsidiaries of Sprott Inc. and are active in securities brokerage, segregated account money management and investment partnership management involving both equity and debt instruments, across the entire spectrum of the natural resource industry.

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PROFILED COMPANY

eurasian Minerals, inc. nySe Mkt: eMXX, tSX-V: eMX

urasian Minerals, Inc. got its start when gold exploration geologist Dave Cole gambled security, a steady income and rolled the dice. He left his eighteen years of work and elevated position at one of the world’s largest gold producers, Newmont Mining. The time seemed right and Mr. Cole raised money and interest by pounding on the doors in North America’s natural resource capital, Vancouver BC, along with teaming with metals and energy venture investor and magnate, Rick Rule. Cole quickly assembled a team of seasoned exploration geologists from Turkey, Czech Republic, Scotland and the US; the majority of them wielding Ph.D.’s and long histories of Big Company experience. The early years were spent prospecting for gold and copper in geographic backwaters, but mineral rich countries such as Romania, Serbia and Kyrgyzstan. As the portfolio of promising exploration properties began to expand, industry insiders began to take notice. Once again the timing was right and the Company publically traded its first shares in early December, 2003. Eurasian Minerals quickly developed a track record of success in minerals exploration discovery, minerals royalty generation, and strategic investment. The Company’s global property and royalty portfolio is situated in the Western USA, Sweden, Norway, Australia, New Zealand, Haiti, Slovakia and Peru, as well as legacies from the early days in Serbia, Turkey and Kyrgyzstan. Strategic investments in mineral property companies have also been placed with key players operating in Chile and Far Eastern Russia. Eurasian’s primary focus is on gold and copper. But its diversified approach to business provides a broad spectrum of exposure to multiple opportunities, while mitigating a litany of risks.

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The Company enjoys cash flowing royalties emanating from gold production on Nevada’s world famous Carlin Trend. In addition, EMX has a stream of advance royalty payments from organically grown royalty properties that have yet to reach production. Royalty payments, in addition to funds received from partners for periodic property payments, milestone payments and management fees, help to cover operating expenses and provide capital to quickly exploit emerging business opportunities. At the heart of Eurasian’s business model is Prospect Generation. EMX, as many of the staff call the company, acquires early-stage mineral exploration properties with unrecognized upside, advances the project on a low cost basis, and then seeks partners with the geologic expertise and funding to further advance it to discovery and onto production. This methodology is very similar to the bio-tech model of developing new pharmaceuticals. The Company’s preferred M.O. is to execute agreements where partners can earn a 100% equity interest with work commitments, milestone payments and advance royalty payments, with EMX retaining a

production royalty. Cole is fond of saying: “We sell the risk and keep the reward”. The natural resource sector has suffered a long, difficult downturn, taking many companies to the edge of the mine shaft where some have fallen in. Eurasian has dug in admirably well and appears well poised to take advantage of what now seems to be a new bull market in metals. With a growing royalty portfolio, ongoing cash flow and a host world class partners such as Newmont Mining and Rio Tinto advancing their assets, their future may indeed glisten like gold. Eurasian Minerals Inc. trades in Canada under the symbol EMX and in the USA under EMXX. n The company paid consideration to SNN or its affiliates for this article.

MicroCap Review Magazine 10 Year Anniversary Issue

PROFILED COMPANY

theralase technologies inc. tSX-V: tlt, otC Pink: tltFF

oger Dumoulin-White was a senior executive for Ford Electronics Manufacturing Corporation, a division of Ford Motor Company, running a $30 million a year

business for Ford with 400 employees reporting to him.

Roger Dumoulin-White, President and CEO

Life was good for Roger, or so it seemed, and then a call came, which would change his life forever. In 1993, Roger’s father, a jeweler called him one evening to proclaim that he had been introduced to a new medical technology and wanted to speak to Roger about it. Roger travelled to his father’s jewelry store for a meeting. His father stated that he has met an inventor in Belgium, who had developed a therapeutic laser that was able to heal tissue. Roger the penultimate skeptic, asked to see it. Oddly enough, his father stated that he couldn’t show it to him because it was an invisible laser. Now Roger was really skeptical and thought that his father had gone off the proverbial deep end. Roger persisted and his father produced a rough prototype of a medical laser that produced an invisible laser light. His father proceeded to place it on his own arm to demonstrate and Roger instantly snatched it out of his father’s hand proclaiming, “Dad, if it is a laser, it will burn you. Lasers burn tissue.” His father claimed that it healed tissue and Roger tired from the banter, and clearly not convinced, stated that he had to leave, as he had to work early the next morning. His Dad produced a one page document, translated from Flemish, which

MicroCap Review Magazine 10 Year Anniversary Issue

detailed how fibroblasts (the building blocks of connective tissue, like tendons) had an increased mitosis rate (cell division leading to growth of new tissue) of 100% under the influence of this mystery invisible laser light. Roger took this page and pondered on the drive home, “How on earth could an invisible laser light influence the growth of biological tissue?” After all, we are not plants, we don’t require sunlight to complete photosynthesis. Roger being a technical person at heart decided to research this phenomenon to see if it had any validity. After a year and of due diligence, Roger had discovered that this technology had merit. It was in its infancy in Europe, was unheard of in North America, but had solid scientific data supporting its biological effect on tissue, although not well understood by scientific researchers or medical doctors. Roger flew to Belgium in July 1994, met the inventor, the doctors who were using it and the patients who were being treated and fell in love with the technology. He negotiated the worldwide exclusive rights to the technology and flew back to Toronto where he walked into head office for Ford Electronics and promptly resigned his position, starting Theralase from scratch August 1, 1994. www.stocknewsnow.com

Theralase Technologies Inc. (“Theralase”) (TLT: TSXV, TLTFF, OTC) was born. Roger’s research indicated that this technology had the power to heal tissue with none of the side effects of surgery or pharmaceutical drugs, such as ineffective treatments, long healing times, scar tissue or addictions. His vision was to design, manufacture and distribute a therapeutic laser which met the stringent criteria of Western medicine and delivered safe and effective treatments to patient’s suffering from a wide range of nerve, muscle and joint conditions. Theralase designed 3 successively more effective therapeutic laser platforms, the TLC-500, the TLC-1000 (which completed $2 M in sales in 2015) and now the TLC2000, which uses patented CellSensing® technology to automatically detect injured tissue and adjust the power and time (“dose”) of laser light based on a patient’s physical characteristics (skin color, subcutaneous fat, muscle thickness, etc.) to deliver effective treatments with healing rates in excess of 90%. In 2000, Roger was reading an obscure www.stocknewsnow.com

article in a trade magazine called Laser Focus World where he read a two line article about a female chemistry professor that was starting to develop new drugs called Photo Dynamic Compounds (“PDC”), which had an attraction to cancer cells and when light activated could destroy the cancer cell from the inside out. This caught Roger’s eye and he wrote to the researcher of his interest. She sent her latest research on the subject and Roger couldn’t understand a word about the technology, but after a year of due diligence and research was able to partially understand the complex chemical formulas that comprised

her research. Again, Roger fell in love with the technology, flew to Virginia Tech (“VT”) in Blacksburg, Virginia and negotiated the worldwide exclusive rights to the technology. Roger set to work designing laser systems that could activate these next generation anti-cancer drugs; however, something was missing, where would the technology be used to treat patients? What type of cancer patient would respond best to the technology? Roger then negotiated a working relationship with one of the top 3 research cancer institutes in the world, the elite Princess Margaret Cancer Centre, part of University Health Network (“UHN”) based in Toronto,

Roger’s research indicated that this technology had the power to heal tissue with none of the side effects of surgery or pharmaceutical drugs, such as ineffective treatments, long healing times, scar tissue or addictions. MicroCap Review Magazine 10 Year Anniversary Issue

In 2012, Theralase and VT won the Popular Mechanics Award for one of the best ten technologies in the United States. Canada. The trilogy was now complete, VT would design and manufacture the PDCs, Theralase would manufacture the lasers to effectively activate them and UHN would test the combination on cancer patients to prove their safety and efficacy. In 2012, Theralase and VT won the Popular Mechanics Award for one of the best ten technologies in the United States. There were numerous announcements and media coverage, which caught the attention of another female chemistry professor from Acadia University in Nova Scotia, Canada, who was also designing and developing PDCs. She contacted Roger and Roger now fully versed on the PDC science, reviewed her research and again fell in love with the technology, negotiating the worldwide exclusive rights to this new platform of PDCs. Theralase the penultimate visionary acquired the worldwide exclusive rights to two groundbreaking technologies: therapeutic lasers to heal pain and PDCs to destroy cancer. Roger then set upon hiring the right engi-

neers, sales and marketing professionals, scientific researchers and clinical staff to build the Company, but quickly realized that these high priced heads all cost significant money, so in 2003 Roger negotiated a Reverse Takeover with a public shell and took the Company public raising a small amount of funds at the time. Fast forward to today, multiple rounds of financing and strategic hiring has placed the Company on the cusp of greatness. It received Health Canada and FDA approval of its next generation TLC-2000 therapeutic laser with CellSensing® technology in December 2015 and is strategically rolling this technology out in Canada and the United States. Theralase expects to grow this division into $50 million annually in the next 5 years as it enters mainstream medicine in the United States. Theralase is also commencing a Phase Ib first-in-man clinical trial for Non-Muscle Invasive Bladder Cancer (“NMIBC”) in August 2016 at UHN, pending Health Canada approval of its laser system used to activate the PDC.

It received Health Canada and FDA approval of its next generation TLC-2000 therapeutic laser with CellSensing® technology in December 2015 and is strategically rolling this technology out in Canada and the United States. Theralase expects to grow this division into $50 million annually in the next 5 years as it enters mainstream medicine in the United States. 38

MicroCap Review Magazine 10 Year Anniversary Issue

The US pain market is estimated at $100 billion dollars annually and growing rapidly with the aging population, a large addressable market. The US cancer market for NMIBC is estimated at $4 billion annually and Theralase expects to secure 25% of this market on commercialization of its anti-cancer technology at the end of 2018. So Theralase after 22 years of hard work has finally reached an inflection point and is set to attack 2 multi-billion dollar behemoths in the world; namely, eliminating pain and destroying cancer. To complete these daunting tasks, Theralase has hired a direct sales and marketing force in Canada and the United States to sell its next generation therapeutic laser and has signed agreements to work with one of the top 3 cancer research institutes in the world to prove that its next generation anticancer technology has the ability to safely and effectively destroy cancer. As a bonus, the PDC technology has demonstrated the ability to prevent cancer recurrence through an immune mediated response that vaccinates the patient against further cancer attacks. An elegant one-two punch to a deadly disease, destroying the primary tumour, one, and then preventing its recurrence, two and knockout. Further developments for the Company include commencing research into the destruction of lung cancer and brain cancer with its next generation anti-cancer technology, later this year. n For more information: www.theralase.com The company paid consideration to SNN or its affiliates for this article.

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F E AT U R E D A RT I C L E

Adjusting to Public Company Life After Ringing the Bell

articipating in the opening bell ceremony on your first trading day as a public company may feel like the quintessential Times Square New Year’s Eve celebration for you and your team: lights, cameras, ticker-tape and a clock counting down to that single celebratory moment on the cusp of your future. But back in the office, what will January 2 as a public company look like? Implementing. Along with a ticker symbol comes a full suite of new or revised corporate documents, including updated charters, bylaws and board committee charters. Provide support and training for your Board, which may be experiencing new or changing membership, to ensure that they understand and fulfill their enhanced responsibilities. Prepare management and other key stakeholders for compliance with insider owner-

n BY MARGARET ROSENFELD

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ship and trading regulations and periodically refresh them on your company’s trading policy. Pay close attention to the disclosure controls and procedures that your company adopts and be ready with a communications plan. Actively addressing changes will help ensure a smoother, swifter transition. Monitoring. Newly public companies are not accustomed to continually evaluating whether corporate activities trigger public disclosure. Entering into a significant acquisition agreement may naturally raise a yellow flag, but what about adopting a new form of equity award agreement, entering into a new headquarters lease or soliciting interest in the sale of a facility? Many activities that you may think of as mundane may require a time-sensitive SEC filing. In addition, the listing exchanges will require advanced notice of certain disclosures – so take care to not overlook those requirements. Ensuring that the appropriate personnel are mindful of the disclosure requirements and communicate pertinent developments to the appropriate people can help avoid the consequences of late or missed securities filings or listing exchange communications. Be sure to also keep abreast of new rules as they become effective and understand how they will affect your organization; many rules will apply differently, or not at all, to newly public and/or smaller public companies. Communicating. Even small public companies have investor relations functions (either in-house or out-sourced) dedicated to understanding and communicating with the company’s institutional shareholder base. In addition to creating and maintaining interest in your stock, proactive investor

outreach can help evaluate how such shareholders may be influenced by proxy advisory firm recommendations, anticipate or avoid shareholder proposals or determine the impact such shareholders may have on vote outcomes. Your company will need to carefully control the timing and content of all disseminations of information, from quarterly earnings releases to tweets by senior management, to ensure that only appropriate information reaches the public marketplace. These are just a few areas that will draw increased time and attention from your company’s personnel once public. The process of going public can appear overwhelming. After what sometimes feels like a crash course on permissible marketing, the finalization of offering materials and ringing the bell draped in your company’s logo, the value of being prepared for the transition into the rest of your public life cannot be underestimated. n Partner Margaret Rosenfeld has more than 20 years of experience with public companies and she leads the global Microcap practice at Smith Anderson law firm (SmithLaw.com). Founded in 1912, Smith Anderson is the largest business and litigation law firm headquartered in the world-renowned Research Triangle region of North Carolina. Smith Anderson provides a full range of legal services to a diverse group of regional, national and international companies and is well-versed in assisting small public companies with initial public offerings, ongoing public reporting and corporate governance requirements, structured financings such as PIPEs, registered directs, CMPOs, rights offerings, ATM/equity lines, convertible preferred and convertible debt, and alternative financings under Title II, Title III and Title IV of the JOBS Act. Smith Anderson is proud to have represented Groundfloor Finance as the first company to qualify an offering under Regulation A+. For more information, please contact Margaret Rosenfeld at mrosenfeld@smithlaw.com or 919-8216714.

MicroCap Review Magazine 10 Year Anniversary Issue

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Reg A+ “From Converting Reservations Into Buy Orders and Exit Strategies”

s Reg A+ deals begin the rigors of marketing and taking reservations from potential investors can you explain the process of converting a “reservation” into an actual buy? What is the process and who does it?

A “reservation” is a very soft indication of interest that is received by a Company during a “Testing the waters” marketing campaign of a Reg. A+ deal. It is a nonbinding indication of interest that may take place before anything is filed with the SEC (Securities & Exchange Commission). During “Testing the waters” there is no offering and thus there is no mechanism to accept cash into escrow. Companies that use “Testing the waters” must, if they later decide to pursue a Reg. A+ offering, file with the SEC under Tier II of Reg. A+ because otherwise “Testing the waters” activities are likely to cast them afoul of state regulations (see accompanying Chart from Mintz Levin entitled, “Comparison Chart of Various Securities Offerings”). The use of “Testing the waters” (not to be confused with the version that precedes

n BY DAVID WEILD AND DANIEL BARFIELD WEILD & CO.

the filing of an S-1 or full-blown IPO and is used to poll institutional investors) and “reservations” in Reg. A+ is intended to help the Company gauge the likelihood that a deal can get done BEFORE the Company decides to incur the cost of preparing and filing Form 1-A (the Regulation A+ placement memorandum) with the SEC. The investor may place a non-binding “reservation.” Because there is no obligation on the part of the person making the reservation, some reservations will be inflated in size or simply fabricated by individuals who have no intention of making an investment. Testing the waters in Reg. A+ is generally accomplished through email or social network messaging to the natural affinity group of a given company. For consumer companies, their affinity group is typically made up of customers. For social networking companies, their affinity group will be made up of users. For companies that are posting on a crowdfunding portal, their affinity group will include members of the portal. Companies with larger and more “engaged” affinity groups are likely to see a greater number of “reservations” from a testing the waters exercise. These companies, market conditions aside, should have a higher likelihood of raising more money than companies with smaller and less engaged affinity groups. Why is it that although Reg. A+ is gaining in popularity but the closing of deals is off to a

MicroCap Review Magazine 10 Year Anniversary Issue

slow closing rate? And many deals are not closing at all. Weild & Co. advises companies on putting together management groups for underwritten offerings (e.g., traditional IPOs filed under Form S-1). We are beginning to do this for Reg. A+ issuers (e.g., offerings filed under Form A-1). Recently, we reached out to and spoke to as many active Reg. A+ filers as would speak to us. What we discovered is an emerging marketplace where companies and service providers are learning as they go, and in the process, making every mistake in the book. The market is characterized by naïve but eager participants and a lack of quality advice on deal structure, packaging, distribution and marketing. This combination, we expect, will lead to a very high failure rate for these companies. Common mistakes we see being made include: i. Unmarketable deal structures – Whether it be the use of non-voting shares or deal sizes that are too large for the stage of company or the size of the affinity group, many issuers have expectations that are not grounded. ii. Poorly articulated story – Investors and sales people need to immediately “get” a company’s value proposition, its business and how the company will provide returns to investors. If the story isn’t made obvious and it doesn’t “resonate” the offering won’t stand much of a chance of getting done. iii. Institutional story in a largely retail www.stocknewsnow.com

market – Crowdfunding and Reg. A+ will largely succeed by attracting retail investors. This is because institutional investors require greater liquidity than small offerings can typically provide. While there are some exceptions to this, those institutions tend to be private placement buyers and the terms and conditions that those buyers require are markedly tighter than what is typically experienced in public offerings. iv. Inadequate distribution – Most of the distribution groups that we see backing Reg. A+ offerings are undersized. Having priced over 500 IPOs earlier on in my career, I was frequently asked, “How much of the offering should go institutional and how much should go retail?” I would reply, “That is the wrong question?” You should be asking, “How can we maximize demand to create allocation options and leverage?” Companies need to come to market as if they have to sell 100% of the deal out the direct retail channel, the retail broker channel and the institutional investor channel. They need to bring their “A” distribution game. Most Reg. A+ issuers are mounting a “D” distribution game. At this point, I would be giving out no “As” and may one or two “Bs.” That doesn’t bode well for completion percentages. v. Inadequate marketing budget – It costs money to market stocks and we find that many companies are woefully underestimating the war chest that they will need in order to adequately support the marketing of their offering. Looking ahead into the future, what can investors in Reg A + deals expect as their exit strategies? There are likely to be two types of Reg. A+ transactions: 1) Ones that trade publicly and 2) Ones that don’t trade publicly. In the case of a publicly traded Reg. A+ offering, the investor’s exit path is to sell the stock in the public market. However, be careful, because if the stock is traded in the OTC Market and the original placement was quite small, the stock is apt to be illiquid, unsupported, www.stocknewsnow.com

and the transaction cost may be very high as measured by trading “spread” and impact on the stock price. For larger offerings and offerings that are listed on NASDAQ or NYSE, it may be easier to sell the stock. For Reg. A+ offerings whose shares are restricted from trading, the investor will generally need to wait for the Company to be sold or to do a formal IPO. Thus, for investors that are considering an investment in a company whose shares will not be traded, investors should factor into their investment decision the likelihood of an exchange listing, IPO or sale of the Company. If the Company does not paint a credible picture of a path to liquidity, investors are less apt to buy the stock. Traditional Wall Street investment bankers look to company valuations when determining capital formation looking at before capital infusion and after capital infusion for valuation and deal pricing. How would you compare determining Reg A+ companies’ valuations methods to traditional Wall Street methods? Reg. A+ companies are still companies. Reg. A+ investments are still investments. As such, the valuation methodologies used should be no different than those applied by professional investors, investment bankers and research analysts that are “reasonably schooled in the art.” Treat investors with respect. Provide value. Have a good business model and a qualified management team. Don’t look to the Reg. A+ market as a place where you can get take shortcuts or inflate values because it will end badly for everyone. As is standard for all types of investments, if there is no liquidity (e.g. private placement) or the prospect of limited liquidity, investors will demand a significant discount to the valuations of larger, more established and liquid companies.

Where is it headed? What needs to be done? The Reg. A+ market is a “Bad News | Great News” Story. The Bad News is that many people are experimenting and there will be many mishaps and lots of failure. The Great News is that there are a lot of people experimenting that this will drive learning curves, innovation, lobbying and improvements in outcomes, rules and regulation enabling small business to access capital. We are on the ground floor of a revolution that will, when fully developed, reshape the U.S. economy for the benefit of generations to come. The road to public capital formation had been closed to small companies. Today, it’s open, but there are potholes, roadblocks and detours in the way. Just like any great infrastructure project, there will be companies that will navigate past the potholes, roadblocks and detours while others will never make it to their destination. However, the armies of entrepreneurs that have been unleashed by the JOBS Act in the name of “Access to capital” will, we believe, grind away the potholes and roadblocks while removing the detours. We will look back on this chapter in our history and find that Reg. A+ became a formidable contributor to America’s growth economy. n David Weild is known as the “Father of the JOBS Act.” He is CEO of Weild & Co., the disruptive investment bank creating a network of investment bankers to rekindle small cap, microcap and private company finance. Weild was vice chairman of The NASDAQ Stock Market and head of equity capital markets and investment banking at a major investment bank. He testifies frequently in Congress, at the SEC and has spoken at the G-20, OECD, Budapest Economic Forum, European Federation of Exchanges, Arab Federation of Exchanges and numerous conferences on the JOBS Act and emergent forms of finance including Reg. A+ and Crowdfunding. Weild is a graduate of Wesleyan University and the Stern School of Business. (See www. weildco.com) Daniel Barfield is a banking, legal and legislative analyst at Weild & Co. He is a graduate of the University of Texas at Austin.

You are a well-known and sophisticated person in the small company space, what’s your opinion on the state of Reg A+ at this time? MicroCap Review Magazine 10 Year Anniversary Issue

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So, What’s Wrong with Reg A+?

n June 19, 2015 amendments to Regulation A commonly known as Regulation A+ became effective.

Since the adoption of the rules, there has been much fanfare. The poster child for Regulation A+ is Elio Motors, a designer and manufacturer of a three-wheeled, low-cost, efficient and environmentally friendly vehicle. Elio Motors launched its Regulation A+ campaign last year around the time that Regulation A+ became effective. After unrivaled marketing efforts Elio Motors was able to raise $17 million in February of 2016 at a pre-money valuation of about $325 million. This successful deal has not had many followers, however, Regulation A+ deal activity is on the rise. According to Rod Turner, the CEO of Manhattan Street Capital, SEC qualified Regulation A+ filings accelerated to 2.5 per week during May 2016. Several articles have addressed the benefits of Regulation A+, which include the ability of an issuer to “test the waters” before filing an offering statement with the SEC, the ability to sell securities to both accredited and non-accredited investors and raise up to $50 million, state blue sky preemption, a more streamlined offering statement and SEC review process, lesser ongoing reporting requirements, the ability to sell unrestricted securities and, most importantly, the ability to leverage all different types of deal marketing avenues like social media, direct

n BY LOUIS A. BEVILACQUA, ESQ.

mail, internet, radio and television. So, what is wrong with Reg A+? I have polled the Reg A+ brain trust, including Steve Dresner, the CEO of Dealflow.com, Lou Taubman of Hunter Taubman Fischer LLC, and Rod Turner, the CEO of Manhattan Street Capital. This article discusses some of the challenges that were identified. The biggest challenge for issuers raising capital in a Regulation A+ offering is the cost to conduct the offering. From start to finish a Regulation A+ offering will cost between $250,000 and $500,000 mostly depending on how big the marketing budget is. This range does not include fees payable to an underwriter. Although the cost is much less than a traditional IPO, which can easily exceed $1.5 million in fees, it is still a sizable sum for an emerging company trying to raise capital. The solution, of course, is bridge financing. It seems that issuers are willing to provide generous terms for the bridge money, yet hedge and VC funds are slow to move into the space. Another serious challenge faced by Regulation A+ issuers is the lack of institutional investor acceptance. Given the relative novelty of Regulation A+, it is difficult to attract institutional money. Ideally, the “crowd” would be used to round out institutional investments that have already been secured and piggyback off of institutional level due diligence. It may take some time and several successful offerings before institutions begin regularly investing in Regulation A+ offerings. Lack of liquidity is also at the top of the list of Regulation A+ challenges. Issuers will need to conduct aggressive investor relations campaigns, seek research coverage and provide heightened levels of transparency in order to increase volume following their

MicroCap Review Magazine 10 Year Anniversary Issue

Regulation A+ offering. Other challenges like the requirement for placement agents to submit to a FINRA Rule 5110 compensation review, the lack of preemption for secondary transactions in securities, the inability of public companies to use Regulation A+, and the sometimes disjointed process of depositing Regulation A+ securities in a brokerage account are also worth mentioning. Overall Regulation A+ will provide issuers with greater access to capital and allow for online capital formation. Challenges exist, but they are not insurmountable and will be overcome as the number of successful Regulation A+ offerings increase. n Mr. Bevilacqua is the founding member of Bevilacqua PLLC (www.bevilacquapllc.com), a boutique transactional corporate and securities law firm. He is also co-founder, President and General Counsel of Digital Offering LLC (www.digitaloffering.com), a FINRA registered investment bank. Previously, Mr. Bevilacqua was a partner in the Corporate and Securities Group at Pillsbury Winthrop Shaw Pittman LLP and held that position since October 2008. Mr. Bevilacqua counsels companies of every size ranging from entrepreneurs with just an idea to established companies whose securities trade on the NYSE or NASDAQ. He has broad experience representing issuers in public offerings and private placements of securities, Exchange Act compliance, angel and venture capital financings, and other areas of equity and debt financing. Mr. Bevilacqua also advised his clients on mergers, acquisitions and other business combinations, including “roll up” transactions. Mr. Bevilacqua has several years of experience working with microcap public companies whose securities are quoted on the Over-the-Counter Bulletin Board, and he understands the special needs of these companies. He also represented companies with international operations, including companies based in the People’s Republic of China and Taiwan, Republic of China, Latin America, Europe and Australia. Mr. Bevilacqua graduated Cum Laude from Fordham University and obtained a Juris Doctor from Fordham University School of Law where was a member of the Order of Coif. Mr. Bevilacqua is Chambers ranked in Capital Markets (International Firms) (Experts Based Abroad) and USA Capital Markets: Debt & Equity (Foreign Experts). www.stocknewsnow.com

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Exciting News: All Investors Can Now Get Into Select IPO’s “IPO does not stand only for “initial public offering.” More accurately, it is also shorthand for: It’s Probably Overpriced, Imaginary Profits Only, Insiders’ Private Opportunity, or Idiotic, Preposterous, and Outrageous.” (Jason Zweig, The Intelligent Investor rvsd ed.) There was a time when IPO’s presented themselves as an opportunity to be an early investor in a company that has shown promise. Today when you look at an IPO you have to ask yourself “is this a growth stage investment opportunity or is this a liquidity event for the true early shareholders?” The historical return of IPO’s can vary widely, but according to Renaissance Capital 51% of the companies that had an IPO in 2015 are trading below their issue price. It’s not hard to understand that when you look at the valuations companies are going public at. Hopefully, this trend will begin to change with the advent of the JOBS Act and the revised Reg A+ IPO. Title IV of the Jumpstart Our Business Act (JOBS) provided individual investors with the ability to invest in IPOs of smaller private companies seeking growth capital. Ideally, this was designed to help fast-growing companies gain access to capital, along with providing all investors—not just the wealthy elite—the ability to invest in promising young companies prior to going public.

n BY DANIEL MULCAHY

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Reg A of Title IV of the Jobs Act, is potentially the biggest opportunity for investors to gain exposure to promising growth companies in the last 80 years. You do not need to be an accredited investors to invest in these new Mini IPO’s and you do not need to have a brokerage account at a major brokerage firm. Below is a brief summary of the potential benefits available for investors and issuers alike into what are being called “Reg A securities “. It’s all relative, but Reg A+ allows investors “to be early investors”. Are you an early investor if you buy in at $1BN valuation? These companies are significantly smaller than what’s become the norm for traditional IPO’s and could be better compared to the IPO’s of the 80’s and 90’s; Microsoft raised $61M in their 1986 IPO (inflation adjusted $122M). Reg A+ IPO companies can’t have more than $75M in public float and can only raise $50M. Is it easier to go from $10M to $50M in revenue or from $100M to $500M? Allows private companies to raise new capital in a significantly faster and more cost efficient manner than ever before. Whereas private securities and the new crowdfunding securities are generally not freely transferable, Reg A securities are freely transferable; meaning you can trade them to others or on a public exchange( once they are listed on that exchange). Investors and Companies can benefit from the new ability to cut out the middleman and sell shares directly to investors; bypassing intermediaries such as broker dealers and their fees. Investors will actually get to know about companies considering or pursuing an IPO, possibly well ahead of time. In contrast to traditional IPO’s, wherein companies, their leadership, and financial advisors are forbidden or

otherwise severely limited in the information they can release to the public during the SEC review period, Reg A not only allows companies to use general solicitation to gauge investor interest (“test the waters”) prior incurring the expense of preparing for an IPO, they can also continue to use general solicitation until the shares become effective. Whereas, 100’s of public companies stock languish on the smaller exchanges, limiting both the investors ability to get a fair price and the issuers ability to raise additional capital, Reg A shares have two attributes that may help protect investors and issuers from the previously mentioned pitfalls: First, it is expected that a new genre of exchanges will emerge referred to as “Venture Exchanges”, these exchanges will likely be niche focused in area’s such as healthcare, biotech, manufacturing, or etc… thereby providing investors an alternate and possibly a more targeted means of gaining liquidity. Second, companies and investors may get a viable secondary market sooner as a result of using general solicitation. As mentioned above, the traditional IPO model restricting communications with the public as it relates to stock promotion, 100’s of companies stock languishes on the smaller exchanges because they do not have any exposure to investors; it’s arguable, but if there was sufficient general solicitation in the lead up to the effective date, one could assume the prospect for a viable second market is more likely to develop sooner than under the traditional IPO process. n Mr. Mulcahy is responsible for the evolution and development of Zacks capital raising platforms, www. zacksinvest.com as well as the coordination and execution of due diligence, advertising, and placement efforts. Mr. Mulcahy has more than 20 years of experience in diverse leadership roles in management, sales, private investments, finance and real estate. Mr. Mulcahy n holds Series 7, 24, 66, and 79 securities licenses. dmulcahy@zacksinvest.com.

MicroCap Review Magazine 10 Year Anniversary Issue

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Regulation A+ Observations One Year Later

veryone in the microcap community is talking about Regulation A+ (“Reg A+”): it was the featured topic at the Growth Capital Expo in Las Vegas, held on May 3-5, at which I was on the first panel to discuss this new method of public financing.

n BY JOHN LOWY

Then, at the Marcum Conference in New York on June 1-2, Reg A+ garnered a lot of attention (not as much attention as Newt Gingrich’s keynote address, but a lot). So, what’s all the fuss about Reg A+, which became effective on June 15, 2015, and which allows companies to raise up to $50,000,000 in a public offering that can be made directly to the public? Assuming that it’s a viable way for microcap companies to get financed—and it definitely is—what insights have some of the recent Reg A+ deals given us? As of the date that this article went to press, the only company to successfully complete a Reg A+ capital raise and begin to trade (besides a few community banks) has been Elio Motors, which raised nearly $17,000,000 (gross proceeds) in its Reg A+ offering, which closed in February, 2016, at a price of $12 per share. As of this writing, ELIO is listed on the OTCQX and trading comfortably above its offering price, although with limited trading volume. What were the ingredients in ELIO’s success? According to Jason Paltrowitz, Executive Vice President of Corporate Services for OTC Markets Group, with whom I spoke on June 9, CEO Paul Elio himself was one of the three keys to ELIO’s success. Jason described him as a vision-

MicroCap Review Magazine 10 Year Anniversary Issue

ary, who was passionate about his automobile, and—the second key—invested good money to get a concerted marketing and crowdfunding campaign: remember the Wall Street axiom, “Deals are not bought, they are sold”. The third key ingredient--and in my opinion the key to a successful Reg A+ offering--is the ability to combine selling a company’s stock with selling its product to consumers, hopefully the company’s existing customer base. In ELIO’s case, there were more than 50,000 pre-orders to purchase the automobile when it becomes commercially available. What better way to raise capital than to have those same enthusiasts also buy your company’s stock? Indeed, ELIO now has approximately 6,600 shareholders, so it’s a good assumption that many of them are among the 50,000 pre-order customers. Moreover, ELIO’s public filings show that the company raised nearly $17,000,000 in gross proceeds at a cost of less than $900,000, i.e. about 5.3% of the gross proceeds, which was far less than the traditional costs of doing an S-1 through an investment banking firm. However, as with any attempt to raise capital, there have been unsuccessful offerings or attempted offerings in the Reg A+ arena. As they say in life, you learn more from your www.stocknewsnow.com

failures than from your successes. So, here is a brief review of two offerings which were withdrawn after the offering commenced, without the shares having been sold: RalliBox was a complete startup—no revenues and not even any assets—that wanted to raise $3,000,000 to enable it to start a cooperative network of online retail merchants. Candidly, the Offering Circular was not well-written, and I suspect that there wasn’t much of a marketing/promotion effort put into it. If your idea is to “go it alone,” i.e. post your offering only on your company’s website and hope for the best, you should expect the worst (again, deals are sold, not bought). Sun Dental, another post-qualification deal that was withdrawn after not selling, was nowhere near a startup—more than $9,000,000 in revenues for the first six months of 2015 in its Offering Circular. However, its products are sold only to dentists and dental labs; so, in my opinion, even though Sun Dental is a real company, its stock would appeal only to the .001% of people who actually like going to their dentist! As Jason Paltrowitz pointed out when I spoke with him on June 9, because Reg A+ offerings can be marketed directly to the public without having to go through investment bankers, millennials are an entirely new and different breed: they are evaluating companies less on their balance sheet and more on their like or dislike for the product. Hence, while traditional investment banks, institutions, etc. might think that ELIO’s post-money valuation of nearly $318,000,000 was far too high, the fact that it’s trading at a premium over the offering price shows that, ultimately, the market itself is the best judge of value. So, after approximately one year of Reg A+, and one successful capital raise (not including a few community banks), some failures, and with several more in the works, what is the future of Reg A+? Jason Paltrowitz has publicly stated, “This is going to be transformative. It’s just going to take some time. The reality is that the market for small company www.stocknewsnow.com

However, as with any attempt to raise capital, there have been unsuccessful offerings or attempted offerings in the Reg A+ arena. As they say in life, you learn more from your failures than from your successes. capital raising is broken and this was a way to try to address it and fix it. . . . So our view here at OTC Markets is that this is threeto-five years out. This process, with tweaks, still is probably the best thing to happen in recent memory to help small businesses raise capital, and it does it in a way that allows it to be open and transparent. It’s open, it’s democratic, it’s social and it’s online, it’s all these great things.” Like any financial undertaking, Reg A+ is not for the faint of heart. It takes patience and persistence to successfully raise capital, whether debt or equity, in a private or a public offering, or via S-1 or Reg A+. So, a year after it was promulgated, here are my thoughts about Reg A+: It’s an excellent way for a company to raise up to $50,000,000, especially a company that sells its products to individual consumers. Put together a solid business plan, be sure to have audited financial statements, experienced legal counsel, a good funding portal, and be prepared to spend on marketing— this time, for marketing the stock along with the products your company sells. Many thanks to Jason Paltrowitz, Andy Kyzyk, and the outstanding team at OTC Markets Group for their assistance. n

has led or participated in more than 200 such transactions, creating market value in excess of $5 billion. He has been instrumental in leading the process by which many companies have raised capital or reverse merged, and achieved listings on the NASDAQ or the AMEX, or have been sold to larger companies. In addition to the U.S., John has completed transactions for clients based in Australia, Brazil, Canada, the Caribbean, China, Hong Kong, India, Korea, Philippines, Singapore, South Africa, Turkey, UK, Vietnam and other nations. The sectors in which these clients are engaged range from high tech to low tech, real estate, pharmaceuticals, medical devices, oil and gas, mining, solar power and other renewable energy, entertainment, food, forestry, agriculture, education and retail, among others. John received his B.A. from Tufts University and began practicing law after graduating from the University of Pennsylvania Law School. He is a frequent contributor to MicroCap Review.

John Lowy is the founder (in 1993) and CEO of Olympic Capital Group, Inc. (www.ocgfinance.com), and is the principal of his law firm John B. Lowy PC, both based in New York City. John is a highlyrespected and acknowledged expert in reverse mergers, capital formation, financial consulting and initial public listings of all types. He recently founded and is the CEO of Platform A+, Inc. (www.platformaplus. com), which provides a turnkey advisory service to companies that want to raise capital via Regulation A+. As an attorney, an advisor or as a principal, John MicroCap Review Magazine 10 Year Anniversary Issue

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Regulation A+, Engaging the Crowd – Testing the Waters Y ou could almost hear the cheers when President Obama signed the JOBS Act into law in April, 2012. We were coming out of a historic recession when access to capital had dried up, and the JOBS Act promised to ease regulations and make it easier for companies to raise capital. Crowdfunding, while still in its infancy, was touted as the platform that would deliver the promise of the JOBS Act, and after 29 long months the SEC adopted the rules behind Reg A+. While the JOBS Act started with cheering, Reg A+ has gotten off to a slow start. Since being approved, only one company, Elio Motors, has successfully made it through the entire process. As a result, some have begun to question the viability of Reg A+. There are varying opinions as to why Elio Motors succeeded and others haven’t. In my opinion there are several factors at play, but it starts with companies assuming that everyone will want to invest in their company. Reg A+ Tier II allows companies to promote their offering and gather indications of interest prior to filing with the SEC. This means everything from emails, letters, and even phone calls to prospective investors. The ability to engage “the crowd” is one of the most powerful provisions of Reg A+. Of course that assumes the company has a network large enough to benefit from the provision. In reality most don’t. Rather than taking the time to build a network

n BY MICHAEL COLON

organically, they turn to marketing companies to try and create one. The problem with that plan is that most companies forget that investing is personal. Investment Bankers know this, which is why they spend so much time building relationships. Social and associative marketing, and targeted email campaigns can be effective in making introductions, but that’s merely the first step in establishing a relationship. Early Reg A+ offerings have shown us that if “the crowd” doesn’t truly know your company, they’re not likely to open your email let alone invest. So how do you build a network big enough to benefit from Reg A+? Start by introducing your company to the right prospective investors. Targeting investors with an interest in your sector is a good start. And while investing is personal, sometimes a local connection can be just as powerful. Subscribing to a service that gives you access to a database of local investors and their investment interests is a must. Mail them letters and tell them what you’re doing as a company. Invite them to open houses where they can meet and get to know you. Put out relevant press releases on a regular basis. Virtual roadshows can be especially effective. A steady flow of information demonstrates transparency, which creates engagement, and eventually leads to trust. We should still be cheering for the JOBS Act and Reg A+ and not be surprised by the challenges. After all Reg A+ represents the first meaningful change to a set of regulations that were established decades ago. Elio Motors may have been the first, but it will not be the last. Mr. Colón is Vice President of Corporate Development for Issuer Direct and leads the company’s Regulation A+ practice. Prior to joining Issuer Direct Mr. Colón was the founder and CEO of SEC Compliance

MicroCap Review Magazine 10 Year Anniversary Issue

Services, an XBRL service provider. Issuer Direct acquired SEC Compliance Services in 2012. Mr. Colón received his Masters of Business Administration (MBA), and Bachelors of Arts in Management from St. Mary’s College of California. While Reg A+ represents a significant improvement over Reg D, it’s not for everyone. Successfully accessing “the crowd” requires a network, but it also requires a few things that may seem like common sense: Build/have an amazing management team. Vision is important, but nothing beats past performance. A young team can be augmented with a strong Chairman and Board of Directors. But, only if they truly have control. Boards of advisors are less valuable because they lack fiduciary insight and control. Have a track record, or a unique model/ idea. Once again, nothing beats past performance. Pre-revenue companies that are trendy or derivative (ex: Uber for babysitting) probably won’t be as well received as companies that already have traction in the market. A business plan, or at a minimum a solid executive summary, and 3-years of financial projections. This is important even if you have an established company. The only thing that beats past performance is a plan that shows how you’re going to continue to perform. We should still be cheering for the JOBS Act and Reg A+. The original promise still holds true: Entrepreneurs have access to more capital, and individuals can invest like venture capitals. n Mr. Colón is Vice President of Corporate Development for Issuer Direct and leads the company’s Regulation A+ practice. Prior to joining Issuer Direct Mr. Colón was the founder and CEO of SEC Compliance Services, an XBRL service provider. Issuer Direct acquired SEC Compliance Services in 2012. Mr. Colón received his Masters of Business Administration (MBA), and Bachelors of Arts in Management from St. Mary’s College of California. www.stocknewsnow.com

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MicroCap Review Magazine 10 Year Anniversary Issue

As submitted on June 29, 2016 to the UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 1-A REGULATION A+ OFFERING CIRCULAR Under The Securities Act of 1933* *The actual Form 1-A and Offering Circular may be found at

https://www.sec.gov/Archives/edgar/data/1638850/000164460016000157/xti_oc8.htm which you should read before making any investment

XTI AIRCRAFT COMPANY A Delaware corporation

Up to 20,000,000 Shares of Common Stock Minimum purchase: 350 Shares ($350) We are offering up to 20,000,000 shares of common stock on a “best efforts” basis. Since there is no minimum amount of securities that must be purchased, all investor funds are available to the company upon commencement of this Offering upon one or more closings, which may take place at the company’s discretion, and no investor funds will be returned if an insufficient amount of shares are sold to cover the expenses of this Offering and provide net proceeds to the company. Sale of these shares commenced on July 21, 2016, after the Offering Statement filed with the Commission was qualified. There is currently no trading market for our common stock. The company announced on February 18, 2016, that we intend to establish a secondary over-the-counter market for the shares sold under this Offering. The shares may be purchased on the StartEngine platform: www.startengine.com/startup/xti World-class highly experienced management team Game-changing breakthrough aircraft with large global market Three years of engineering and market analysis completed Discussions with major component suppliers ongoing

• • • •

David E. Brody Founder and Chairman dbrody@xtiaircraft.com (303) 503-5660

• • •

First prototype currently in development Popular Science named the TriFan 600 one of the 100 greatest innovations of 2015 One patent issued, others pending

Andrew Woglom Chief Financial Officer awoglom@xtiaircraft.com

Scott A. Pomeroy Senior Financial Advisor spomeroy@xtiaircraft.com (303) 522-8936

Centennial Airport, 13000 Control Tower Rd., Suite 217, Englewood, Colorado 80112 50

www.xtiaircraft.com

MicroCap Review Magazine 10 Year Anniversary Issue

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XTI Aircraft Company startengine.com/startup/xti

XTIaircraft.com

Combining the speed, range and comfort of a business jet with the ability to take off and land like a helicopter.

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MicroCap Review Magazine 10 Year Anniversary Issue

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Investors Investors@Primaryllc.com 52

Companies Seeking Financing Financing@Primaryllc.com MicroCap Review Magazine 10 Year Anniversary Issue

Portals Partner with Primary Capital Jleo@Primaryllc.com www.stocknewsnow.com

LEGAL CORNER

A S K T H E L E G A L E X P E RT S

Section 16 Best Practices for MicroCap and SmallCap Companies

ection 16 of the Exchange Act of 1934 (the “Exchange Act”) governs the regulatory requirements that must be met by “insiders” of companies that have registered a class of equity securities under Section 12(b) or Section 12(g) of the Exchange Act. For micro cap and small cap companies that may not have in-house counsel or legal departments, ensuring compliance with Section 16 presents an ongoing challenge due to the intricate reporting and compliance obligations imposed by the rules. Developing a comprehensive Section 16 compliance program is a best practice for smaller public companies to ensure that reportable transactions in securities by insiders are properly disclosed and that insiders do not run afoul of the prohibitions on “short-swing profits” set forth in the rules.

to wHoM Do tHe rePortinG requireMentS unDer SeCtion 16 aPPly, anD wHat ForMS are requireD to Be FileD By SuCH PerSonS? n BY ERIC HELLIGE AND

FRANCESCA DJEREJIAN

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A person is deemed an insider for purposes of Section 16 if he or she is a director or

executive officer of a public company or a stockholder of a public company who directly or indirectly beneficially owns more than 10% of the company’s equity securities. The reporting obligations for Section 16 insiders include an initial statement of beneficial ownership on Form 3, disclosure of changes in beneficial ownership of any class of a company’s equity securities on Form 4 and annual statements of beneficial ownership on Form 5.

wHat tyPeS oF tranSaCtionS triGGer SeCtion 16 rePortinG oBliGationS? In practice, in addition to open market or other purchases or sales of stock, many transactions in the ordinary course of business will trigger Section 16 reporting obligations. For example, the appointment of a new director or executive officer will result in a Form 3 filing obligation, receipts of grants of stock options, restricted stock or stock appreciation rights, the cashless exercise of stock options and the vesting of restricted stock units must be disclosed on Form 4.

MicroCap Review Magazine 10 Year Anniversary Issue

What are the consequences of violating the reporting obligations under Section 16?

What steps can companies take to improve their Section 16 compliance protocol?

Consequences of not filing the forms required by Section 16 in a timely manner include a requirement that companies publicly report any delinquent filings by officers and directors (both in their annual proxy statements pursuant to Item 405 as well as on the cover of their annual report on Form 10-K), significant fines and penalties arising from SEC enforcement actions and potential liability under federal securities laws, such as Rule 10b-5. Because Section 16 is a strict liability statute, the SEC has made clear that inadvertence is no defense to filing violations. Therefore, both issuers and their insiders are on the hook for violations of Section 16.

Given the many ambiguities and potential pitfalls that can be encountered in ensuring compliance with Section 16, it is best practice for companies to implement formal policies that identify triggering events and establish robust communications among companies, their insiders and counsel. Steps that companies can take to bolster their compliance program include the following:

What transactions are prohibited by the “ShortSwing Profits” rules? Section 16(b) applies to transactions in company securities by Section 16 insiders and imposes strict liability for realizing “shortswing” profits from certain transactions. It provides that any profit realized by such insiders from the purchase and sale, or sale and purchase, of any equity security (including derivative securities such as options, warrants and certain fixed-price convertible securities) that occurs within a six-month period must be paid to the issuer, irrespective of whether proof of actual abuse of inside information or intent to profit on the basis of such information can be established. The transactions do not have to involve the same shares and may be “matched” if, for example, the insider is deemed to have a pecuniary interest in the shares in question (such as a sale of shares by the insider’s spouse). In addition, ceasing to be an insider does not prevent a transaction from being matched with one made prior to such insider’s departure.

• Making a determination of which executive officers and beneficial owners qualify as insiders under the rules; • Requiring mandatory pre-clearance of transactions by insiders with outside counsel and/or a designated compliance officer; • Providing periodic pre-clearance reminders to insiders; • Giving Section 16 compliance reminders to insiders with information on triggering events; • Preparing a Section 16 filing calendar which includes information on known triggering events for the coming fiscal year (such as annual equity grants and vesting of restricted stock units) and notes the filing deadlines for each such event; • Ensuring that officers, directors and 10% beneficial owners are aware of the triggering events and sending periodic reminders regarding filing obligations; • Requiring reporting persons to execute powers of attorney authorizing the company’s secretary or outside counsel to sign Section 16 forms to ensure timely filing; • Keeping track of other individuals who are responsible for transactions in equity securities by insiders, such as trust administrators and financial advisors; • Delegating responsibility between the company and outside counsel for the preparation of necessary filings with Section 16 insiders; • Making sure that the company’s chief

MicroCap Review Magazine 10 Year Anniversary Issue

financial officer and outside counsel are informed of all option grants before they occur; • Requesting certifications from all insiders in their D&O Questionnaires that they have timely filed all Section 16 forms for the prior fiscal year; and Monitoring all trading activity by insiders to prevent any short-swing trading violations. With the assistance of outside counsel, micro cap and small cap companies can develop a formal, written Section 16 policy that incorporates all of the above-listed best practices. Inevitably, unique interpretive questions will come up in the course of executing such policies because of the particular complexity of Section 16’s requirements. If properly implemented and well-coordinated, however, Section 16 policies can go a long way in providing built-in assurances of compliance and helping to prevent unintended violations of the federal securities laws. n A premier, midsized law firm with headquarters at 7 Times Square and a satellite office in Los Angeles, Pryor Cashman is known for getting the job done right, and doing it with integrity, efficiency and élan. Over 145 attorneys strong, we are dedicated to our clients’ long-term success, advising them on everything from day-to-day issues to the most complex investments, mergers and acquisitions (M&A) and financings. With an experienced partner as their primary point of contact, clients always have someone available to them who is devoted to understanding their businesses, industries and cultures. For more information, please visit www.pryorcashman.com.

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MicroCap Review Magazine 10 Year Anniversary Issue

F E AT U R E D A RT I C L E

As a Millennial Investor, Why Should I Have a Diversified MicroCap Portfolio? Early lessons I’ve learned in MicroCap Investing intro One thing I have heard my entire investing career (albeit, not that long) is that I should diversify my portfolio. Whether that bit of advice is right or wrong, I’m not sure – it’s been right for some and not for others. Based on my experience, and on the experiences of others whom I’ve interviewed on my podcast, I think most, if not all, would also agree, diversification requires analysis.

wHat DoeS DiVerSiFieD PortFolio Mean? Diversification, as defined on Investopedia. com, “is a risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique contends that a portfolio of different kinds of investments, on average, yield higher returns and pose a lower risk than any individual investment found within the portfolio.” In other words, you want to limit your exposure to risk by making sure your spreading your investment money across multiple stocks, and that could include: stocks in different sectors or multiple stocks in the same sector. I go into greater detail on the differences below. We have all heard: “spread your risk”.

n BY ROBERT KRAFT

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DiVerSiFiCation aCroSS MultiPle SeCtorS This form of diversification is the most common – constructing a portfolio with stocks that covers a more than one industry or sector, for example, owning a junior mining or exploration company, a cyber-security company, a biotech company in early clinical trials, a coffee producer and distributor, or an online gaming company to mention a few. The point of this strategy is to diversify risk. Now, what if I told you this strategy wasn’t the most efficient? Think about it – you want to know the companies as best you can; that requires being fairly knowledgeable in multiple sectors. Using the example above, you’d probably want to know about geology, cybersecurity, the science behind the biotech’s molecule and global coffee market, and the gaming sector That seems like a lot, wouldn’t you say? Not insurmountable by any means, especially if you’re interested in all these things, but daunting nonetheless. Disclaimer: These are just ideas I considered in my early years of being an investor from what I surmised for myself. Obviously your likes and dislikes will vary from mine so make your own decisions.

DiVerSiFiCation witHin one SeCtor Within every industry, there are multiple sectors. Using the example from the last section, the junior mining company is part of the “Basic Materials” industry, a cybersecurity company is also a “Technology” company, a biotech company would fall into the “Healthcare” category and the coffee company would be “Consumer Goods” company and so on. I’ve done both strategies, and I personally

have multiple interests, however, I’ve found that a narrow approach works better for me. I’ve made my mistakes in “Healthcare” companies because, quite frankly, I didn’t know enough about the science or the companies I invested in which I probably should have, my learning experience cost me money. I refer to that as a passive investment, and it didn’t turn out so well. However, I walked away with a valuable lesson – narrowing my focus, figure out what I find interesting which translates into being more particular and investigative about my approach to due diligence I’m about to do for any potential investment. This experience has helped me while I’m in my early years of investing and now I feel more confident in my investing decisions. I’m not saying I’ll never invest in another MicroCap healthcare company, but rather I now know how to become an educated investor.

ConCluSion The key overlap when it comes to diversification, and my approach to investing in MicroCaps, is that I focus on what I know and, more importantly, what I’m interested in. When I’m excited about a company and/ or industry, it makes doing that arduous due diligence actually fun (okay, more interesting)! At any one time, I could be invested in multiple industries or just one depending on the market conditions and companies. Diversification is something I’m still learning about, however, what’s been most important for me is keeping a narrow focus that follows my developing investment strategy. n Robert Kraft is SNN Inc. Chief Operating Officer, Editor-in-Chief of StockNewsNow.com, The Official MicroCap News Source, Host of the popular MicroCap podcast, the Planet MicroCap Podcast. He is also the Co-founder and CEO of Sammi Girl Productions with his brother, Frankie.

MicroCap Review Magazine 10 Year Anniversary Issue

F E AT U R E D A R T I C L E

Coal will be 3rd Most Popular Source of Energy in 2030 C

oal will slip behind natural gas in 2030 and maintain the number three position well beyond 2040. Run a quick search on “coal and dead” and you’ll get hundreds of articles projecting the death of coal.

Figure 1:

n BY KARL DOUGLAS

Source: U.S. Energy Information Administration, Annual Energy Outlook 2016 Reference case

The recent spate of coal bankruptcies effecting once considered “invincible” companies such as Peabody Energy, Arch Coal and Alpha Natural Resources, has led many to conclude coal is in fact a dead sector, relegated to the buggy whip graveyard. But the Energy Information Administration (EIA), a division of the Federal Government says otherwise. How often do you get to invest in an industry responsible for supplying 33% of a $15 Trillion-dollar economy’s electricity demand for pennies on the dollar?

MicroCap Review Magazine 10 Year Anniversary Issue

Indeed, the short term outlook is far from obvious as coal’s share of electricity generation will continue to fall. Coal was burned to generate 50% of US electricity production in 2005 and 33% in 2015. It is projected to fall to 21% by 2030 and eventually 18% by 2040. How do you make money in an industry slated to shrink by 27% over the next 14 years? Invest in strong balance sheets! It’s the un-leveraged companies that will emerge as tremendous cash flowing opportunities offering growth fueled by massive www.stocknewsnow.com

industry consolidation. Many of the recent bankruptcies are arguably self-inflicted; the result of significant overleverage, in some cases as much as >10X EBITDA. As Figure 1 demonstrates, the onset of abundant low cost natural gas, a competing fossil fuel, directly offset a significant percentage of the coal burn through “coal-gas switching”. In fact, the industry contracted 34%, with electricity from coal dropping 17 points from 50% of all electricity to 33%. The resulting commodity price drop, margin erosion, over leverage and a decade of anti-coal lobbying and media presence by environmental activist groups, produced a coal industry in a tailspin! So what makes this pariah of an industry potentially tomorrow’s darling of an investment opportunity? Things to consider: We can’t do without it! Even under the most aggressive EPA assumptions, coal will still represent about 10% of US energy consumption by 2040, a quarter century from now. It will still be used to generate 18% of US electricity by 2040, a statistic that must be quite a disappointment to green lobbyists. Scrubber Capex Investment – The power industry has already invested over $500B in environmental remediation equipment such as NOX/SOX scrubbers. They will need the depreciation from these investments to keep electricity prices down. Low Gas Prices Unsustainable – Gas prices are rising steadily as environmental regulation increases and exploration activities become more costly. Rig count has fallen to a three year low and at costs above $2.50 per MMbtu, coal starts to look competitive again. Global demand will continue: India and China will remain the largest consumers of coal through 2040. The EIA forecasts coal consumption to grow at the slowest rate of the competing fuels, at a mere .6% per annum. No alternative for steel production: We haven’t found a steel making alternative to the use of metallurgical coal in the steel making process. www.stocknewsnow.com

Figure 2: World energy consumption by source 1990 - 2040.

Fresh balance sheets – Previously overleveraged companies that emerge from bankruptcy and newly formed companies managing the vestigial assets of the doomed ones will have stronger balance sheets and hopefully debt-phobic management. Renewables benefit from coal – Newer transmission lines built to support renewable power producers would be financially unsustainable without the additional use by base load power producers that generally utilize coal for their base load generation. Technology - Coal can be burned with zero emissions if the right technologies are used. As energy production costs continue to rise from competing sources, clean coal will reemerge as a cheap source of energy,

Source: EIA

potentially tipping the scale back in favor of the black stuff!

Before you open up your online trading account and start buying coal stocks, there are some very important considerations to keep in mind. In terms of coal production forecasts, the numbers vary significantly. CPP or Clean Power Plan is an EPA initiative to reduce CO2 emissions. Ultimately if this plan gets fully implemented, US CO2 emissions will be reduced by 45% relative to 2005 levels by 2040. As the forecast indicates, there can still be a significant delta in demand, particularly starting in 2019, where under the CPPHOGR

Figure 3

MicroCap Review Magazine 10 Year Anniversary Issue

According to the EIA, US utilities burned 740 million short tons in 2015. So three of the four most severe scenarios already call for more production than is currently available. And with the most recent announcement of Alpha Natural Resources, additional production will go offline. With 650M tons of thermal coal supply, well run companies should be able to achieve reasonable cash flow. scenario we see demand fall to 650M tons by 2025. But thereâ&#x20AC;&#x2122;s a silver lining in all these numbers! According to the EIA, US utilities burned 740 million short tons in 2015. So three of the four most severe scenarios already call for more production than is currently available. And with the most recent announcement of Alpha Natural Resources, additional production will go offline. With 650M tons of thermal coal supply, well run companies should be able to achieve reasonable cash flow. The characteristics to look for are quite simple: minimum leverage, low reclamation liability, low production cost. Production cost is usually a function of reserve quality and logistics. Forward sales price is also sig-

nificant. Companies with long term off-take agreements will offer significant ability to ride out short term dips in the market which based on EIA forecasts are expected between now and 2020. In the Microcap segment of the market, Hallador Energy Company (NasdaqCM: HNRG) is worthy of tracking. The company is in the stable Illinois Basin. It has a market cap of roughly $134M. Once again this company has demonstrated fiscal discipline, debt is roughly $250M with EBITDA of $85.38M as of 3/31/2016. Their operating margin is 13.46%, slightly lower than much larger analogs such as Alliance Resources, ARLP. We think HNRG will be interesting if they can make smart acquisitions with low to no

The volatility in the coal sector will continue to test the mettle of coal companies through 2020. Only the companies that have minimal debt will survive. We believe many of the choice assets that will become available through the bankruptcy process will be acquired by private equity sponsored companies. 60

MicroCap Review Magazine 10 Year Anniversary Issue

leverage, and grow their footprint. Foresight Energy LP (NYSE: FELP) is another Microcap with market capitalization of roughly $209M ($1.60 per share as of 7/5/2016). FELP is a significantly larger company. The company reported TTM revenues of $912.02M with EBITDA of $236.64M. Total debt is $1.6B, and operating margins are reported as of 3/31/2016 of 4.5%. We believe the leverage profile of FELP demonstrates the same type of risk profile that has brought down many of the majors. We consider over-leveraged assets (more than 5X EBITDA) an insurmountable risk in this market place. On an EV/EBITDA valuation basis, FELP is significantly overpriced relative to its peers. The volatility in the coal sector will continue to test the mettle of coal companies through 2020. Only the companies that have minimal debt will survive. We believe many of the choice assets that will become available through the bankruptcy process will be acquired by private equity sponsored companies. Those same PE companies will seek to exit into the IPO market and a sector of hopefully deleveraged assets will join the publicly traded coal sector. n Note: This article is not an attempt to provide investment advice. The content is purely the authorâ&#x20AC;&#x2122;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. The author does not own shares or any equity or debt interest in any companies mentioned in this article before or at its publishing. About the author: Karl B. Douglas is a management consultant at PPMT Strategic Group, Inc., OTC PINK: PPMT an advisory firm servicing microcap issuers. In addition to activities as a generalist, Mr. Douglas has been investing in and advising companies in the coal sector since 2006. He is an investor in and adviser to several investment groups currently actively investing in the coal industry.

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CELEBRATING 46 YEARS OF EXCEPTIONAL SERVICE

RESOURCES

EXPERIENCE

RESULTS

CONTACT: MICHAEL PORTER - (212) 564-4700 INFO@PLRINVEST.COM

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SEVEN PENN PLAZA, SUITE 810 MicroCap Review Magazine 10 Year Anniversary Issue NEW YORK, NY 10001 USA

P R O F I L E D C O M PA N Y

uS nuclear Corp. announces aerial radiation Detection otC Pink: uCle US Nuclear Corp is proud to announce the Aerial Radiation Detection instruments of the DroneRAD system. In this time of multiple threats to our security: dirty bombs; cyber crime; shooters in public places; homemade bombs; misinformation; etc. we feel extremely vulnerable; perhaps more vulnerable than ever before. With the advent of Drone technology now available for commercial applications, technology previously only held by the military, the opportunity has come to unite Drone Technology with aerial sensors. Drone mounted aerial sensors are typically: thermal, radar, camera, surveillance, and sensors to monitor the UAV (Unmanned Aerial Vehicle) systems. Now there is the DroneRAD. Radiation detection instruments mounted on a Drone for aerial radiation detection, surveillance, and locating. Technical Associates, a division of US Nuclear Corp, provides sensors for both airborne radiation and for the search and location of radioactive materials: Alpha, Beta, Gamma, Neutron. Gas filter sample collection for chlorine, biological particulates, and aerosols such as anthrax and nerve gas is also available via the DroneRAD. Partnering with FlyCam UAV the DroneRAD detector system is mounted on FlyCam UAV’s Cypher 6 drone for Aerial Radiation Detection, the first of its kind. Utilizing a six motor drone copter provides

aBout uS nuClear CorP.

security, a ten pound payload, and longer flight times. Applications for this technology are diverse such as airborne radiation detection in terms of a plume, search detector for dirty bombs or questionable packages, field surveys for depleted uranium. The benefits of Aerial Radiation Detection are many including: saving man hours compared to handheld detection of large areas; protection of the operator by remote detection of smuggled source; remote surveillance of buildings and vehicles; mapping airborne plume emissions from stacks or other sources; mapping background radiation of large areas; monitoring facility perimeters which promotes maintaining regulatory compliance; avoiding exposure during a questionable event. US Nuclear Corp provides the DroneRAD Detector System: sensors and software and readout technology; FlyCam UAV’s Cypher 6 drone with controllers and hard shell case for ease of transporting the full system; and flight and radiation measurement instruction. Nuclear radiation sensor instrumentation suitable for Drone application is new to the market place. The DroneRAD system has a widely diverse application and includes conducting Gamma and/or Neutron radiation surveys of the ground, buildings, and vehicles, Uranium surveys of landfills and K-40; background radiation surveys for construction and development, and airborne hazards. The DroneRAD system mounted on FlyCam UAV’s Cypher 6 drone provides a versatile, durable, and easy to use system and has an approximate launch time of five minutes with wireless download of data.

MicroCap Review Magazine 10 Year Anniversary Issue

US Nuclear Corp is a fully-reporting, publicly traded company on the Over-the-Counter Bulletin Board, traded under the ticker symbol UCLE. The Company’s operations are principally engaged through its subsidiaries, operating two leading nuclear radiation detection companies, Overhoff Technology Corp. and Optron Scientific Company Inc. dba Technical Associates. US Nuclear Corp designs, manufactures and markets branded, full line radiation detection and specialized advanced Tritium technology both domestically and internationally for the nuclear energy industry and other nuclear industries such as hospitals and radiopharmacies. In addition to the cutting edge instruments of the DroneRAD Aerial Radiation Detection system, US Nuclear Corp has developed specific detection instrumentation for emerging technological processes such as Thorium and Molten Salt (MSR) reactor technologies, and real-time continuous water monitoring for nuclear effluent, wastewater, and drinking water. With over three hundred instruments in the US Nuclear Corp catalog and a reputation for meeting customer’s needs with custom designed and tailored instruments satisfied customers include United States Government Agencies, the U.S. Military, Homeland Security, National Laboratories, Universities, Hospitals, and nuclear reactor facilities in the United States, China, Canada, South Korea, Argentina, Russia and others. n For Further Information Contact: Robert Goldstein rgoldsteinta@gmail.com 818-883-7043 www.usnulearcorp.com www.tech-associates.com

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Regulation A+ Tier 1

None.

May rely in good faith on a determination by an intermediary that an investor has not exceeded the per-investor investment limit. Intermediaries may rely on an investor’s representation that it has not exceeded limits.

Resales prohibited for one year, with limited exceptions (including resales to accredited investors and family members). Yes. Each offering must be conducted through a single intermediary that is a registered broker or a registered funding portal.

“Reasonable steps” must be taken to verify that each purchaser is an accredited investor. May not rely on self-certiﬁcation alone.

Unlimited number of Accredited Investors and no more than 35 NonAccredited Investors, if each such investor is sophisticated

Reasonable belief must be held that each purchaser is (1) an accredited investor or (2) a non-accredited investor that, alone or together with its purchaser representative, is sophisticated. Purchaser selfcertiﬁcations are generally used.

Yes, securities sold under Regulation D Yes, securities sold under Regulation D are restricted securities. are restricted securities.

General Solicitation Permitted

Investor Restrictions

Obligation to verify investor status

MicroCap Review Magazine 10 Year Anniversary Issue

Disclosure Requirement to Investors?

Integration Concerns

Combinations Permitted

Blue Sky Requirements Preempted?

Regulation A+ Tier 2

Form C must be filed with SEC. Includes two years of financial statements (must be reviewed by an accountant for offerings raising over $100,000 (or firsttime offerings over $500,000) and audited for non-first-time offerings over $500,000). Similar to disclosure in a Securities Act registration statement. Form C is not subject to SEC review.

Initial Public Offering

Registered Public Offerings Conﬁdentially Submitted Initial Public Offering (Emerging Growth Companies)

None.

Must inform investors of the investment cap None after the registration statement is for nonaccredited investors, and may rely ﬁled publicly. Before the registration on an investor’s representation that it is in statement is ﬁled publicly, TTW sessions compliance with cap. must be held only with QIBs/IAIs.

None.

None after the registration statement has been ﬁled.

None.

Yes

Yes.

Yes, annual report on Form 10-K and other periodic reporting is required.

None.

Yes

Yes.

Yes, annual report on Form 10-K and other periodic reporting is required.

Form 1-A must be filed with the SEC, including an offering circular and two years Yes, all information required in the Form Yes, all information required in the Form S-1 is of audited financial statements. Similar to S-1 is required to be disclosed. Includes required to be disclosed. Includes description Similar to disclosure in a Securities Act description of business, risk factors, of business, risk factors, audited financial disclosure in a Securities Act registration registration statement. Form 1-A is audited financial statements, MD&A, statements, MD&A, description of offered statement. Form 1-A is subject to review subject to review and comment by the and comment by the SEC. First-time issuers description of offered securities, etc. securities, etc. SEC and by state securities regulators. are eligible for non-public review by the SEC. First-time issuers are eligible for nonpublic review by the SEC.

Form 1-A must be ﬁled with SEC, including an offering circular and two years of ﬁnancial statements, which need not be audited.

None.

Per-investor investment cap for nonaccredited investors (unless the securities are listed on a national exchange). The cap is equal to 10% of the greater of: annual income or net worth (for natural persons), or annual revenue or net assets (for nonnatural persons).

Annual report on Form C-AR, including Annual reports on Form 1-K (with audited financial statements satisfying the None, unless/until the issuer exceeds financial statements), semi-annual reports None, unless/until the issuer exceeds None, unless/until the issuer exceeds requirements applicable to its most recent the threshold for becoming a on Form 1-SA (with unaudited financial the threshold for becoming a reporting the threshold for becoming a reporting offering statement. Form C-AR requires reporting company under Exchange statements) and current reports on Form 1company under Exchange Act rules. company under Exchange Act rules. information similar to the offering Act rules. U. statement on Form C. No. Issuers must comply with state blue sky registration and qualification Yes. Yes. Yes. Yes. requirements where offers and sales are to be made. Yes Yes Yes Yes Yes Yes, if multiple offerings occur within Yes, if multiple offerings occur within six months, must ensure that each six months, must ensure that each Limited to $20 million per 12-month Limited to $1 million per 12-month period. Limited to $50 million per 12-month period. component satisfies the applicable component satisfies the applicable period. exemption. exemption.

No, but subject to anti-fraud limitations.

Yes, but only if sales are made to any non-accredited investors. Disclosure requirements are similar to those for a Securities Act registration statement. In addition, a Form D must be ﬁled with the SEC.

Annual Reporting Requirements

None.

Intermediary Requirement

Limitation on Resales?

For investors with annual income and net worth both above $100,000, the limit is 10% of the lesser of (i) annual income and (ii) net worth, in each case with a $100,000 cap on sales to any individual.

None.

Unlimited number of Accredited Investors.

n/a

Testing the Waters

For investors with annual income or net worth below $100,000, the limit is the greater of (i) $2,000 and (ii) 5% of the lesser of annual income and net worth.

Any amount

Maximum Raise

Yes

No Limit.

Any company, including publicly traded and private issuers.

Regulation Crowdfunding

'33 Act, Section 3(b)(2)

(1) Must be US or Canadian issuer (1) Must be US or Canadian issuer (2) Must Must qualify as an Emerging Growth (1) Must be US issuer (2) Must not be a public company, an not be a public company, an investment Company (EGC). Generally, issuers that (2) Must not be a reporting company; an investment company, a "blank check" company, a "blank check" company, a have not completed a US IPO before Any company, including publicly traded investment company; a shell company; or company, a delinquent filer under Reg. Any company. delinquent filer under Reg. A+, a company December 8, 2011 and have less than and private issuers. an issuer that has failed to make any A+, a company with a revoked Exchange with a revoked Exchange Act registration, $1 Billion in annual gross revenue can required Form C filing Act registration, or a "bad actor" (see or a "bad actor" (see below). qualify as EGCs. below). No Limit. No Limit. No Limit. No Limit. Must qualify as EGC No Limit No (although as a practical matter could No (although as a practical matter could Yes Yes Yes Yes present challenges) present challenges) Form D Form C Form 1-A Form 1-A S-1 S-1 $20M/12 Months. Issuer raising less $50M/12 Months. Issuer raising less than Any amount $1M/12 Months Any amount Any amount than $20M may choose between Tier 1 $20M may choose between Tier 1 and Tier and Tier 2. 2. Yes. Only to Qualified Institutional Buyers (QIBs)/Institutional Accredited Not Recommended Due to Range of n/a No Yes Not unless issuer is an EGC Investors (IAIs) and only after the State Laws registration statement has been submitted confidentially. Issuers may only issue “tombstone” ads Yes. Issuers also permitted to engage in with specific limited information. No limits Yes. Issuers also permitted to engage in test-the-waters communications before Yes, only after the registration Yes, only after the registration statement has on communications with potential test-the-waters communications before and Yes and after the offering statement has statement has been filed publicly. been filed publicly. investors through the intermediary’s after the offering statement has been filed. been filed. platform. Per-investor limits in any 12-month period:

Regulation D Rule 506(c)

Exempt Transactions / Private Offerings '33 Act, Section 4(a)(6)

Form D

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Issuer Size Thresholds Rule 506(d) ("Bad Actor") Disqualiﬁcation SEC Filing Requirement

Eligible Issuers

Regulation D Rule 506(b)

'33 Act, Section 4(a)(2)

Comparison Chart of Various Securities Offerings *This chart is a high-level summary only; one should consult the relevant statutes, regulations, and SEC guidance when engaging in any of the following transactions.

Comparison Chart of Various Security Offerings Chart Provided by Mintz Levin Cohn Ferris Glovsky and Popeo PC

F E AT U R E D A RT I C L E

The Time to Buy the Miners, Gold, and Silver is Now! O

n January 19, 2016 the final intraday washout of resource sector mining companies on the TSX and U.S. exchanges took place. Yes, important bottoming action preceded this in December 2015. In fact, as the silver chart below shows (mirror-imagery by gold), a two-month classic triple-bottom action formed during the December-January period. Watching dozens of mining stocks print new lows for the move, then reverse on heavy volume to close near their highs of the day was quite a sight. Nothing offers greater confirmation of a solid bottom than a heavy volume reversal after two or three

n BY DAVID MORGAN

tests of support. The third and final major secular up leg of the bull market in gold, silver and the miners is underway. History tells us this leg will be the biggest. The Morgan Report’s extensive multiple-year research on the subject led us to conclude the following: The rush into gold is primarily by nation states, but the rush into silver is basically (by) ‘the people,’ - it’s not just ‘the people’ of the U.S.’ - it’s ‘the people’ of the world. There

Silver - Gold’s mirror image triple bottom.

MicroCap Review Magazine 10 Year Anniversary Issue

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will be a rush into gold, and then into silver, like you have never seen before. This will be a global phenomenon. It wasn’t the case in 1979, but this time it will be. You (will) either have it or you won’t. What’s fascinating, and a bit surprising, is how many analysts have been hesitant to accept the validity of this year’s massive rally off the 4 1/2 year cyclical bear market lows, which knocked 45% and 70% respectively off the 2011 gold and silver highs...along with 90% + from the value of most TSX-Vlisted mining stocks. This year we’ve been informed of several “topping formations”, “bearish COT statistics” and “bearish dome formations” - all of which were somehow penetrated on the upside by Mr. Market who apparently does not read newsletters! Yes, we will have violent corrections on the way to the public mania blow-off we see down the line, whether it takes us two, three, five years...or more to get there. In the process, the odds favor market action that sees short, violent, relatively shallow retracements, compared to the drawn-out declines of the last several years. Our recommendation? If you have not done so, pick up some physical gold and silver bullion - rounds, bullion coins, American Eagles, Krugerrands, or Canadian Maple Leafs (avoid numismatics!) from a trusted source. Then consider establishing a core position in a number of “junior” gold and silver producers, a couple of streamers, and some top tier stocks, for stability and safety, as we outline in our Asset Allocation tables. It’s possible that the usual summer softness in the sector may play out as expected. If so, count yourself lucky, so that you can “top off ” your positions ahead of this fall’s strength. After due diligence, establish positions with several tranches (portions), buying into weakness. Consider placing Limit/GTC orders into downside price gaps or along 50/200 day moving averages. If a big rally takes place, consider selling some of your trading portion while holding tight to core positions - and know the difference! www.stocknewsnow.com

Global Physical Silver Demand, 2015

Are your investment dollars working hard enough for you? There are a number of market letters you can subscribe to in exchange for your hard earned money. You can find them from $49 to several thousand dollars per year. But we feel - and the surge in new subscriptions we’ve been getting lately supports our belief - that The Morgan Report offers greater value

for your dollars than any other letter out there. On or before the first Monday of each month, David Morgan and the team at The Morgan Report send our subscribers the highest quality analyses of the resource sector and the metals. We bring you new and updated company names - but only when we feel they offer the best fit for consideration in helping

First Majestic Silver (NYSE: AG) MicroCap Review Magazine 10 Year Anniversary Issue

If you have not done so, pick up some physical gold and silver bullion - rounds, bullion coins, American Eagles, Krugerrands, or Canadian Maple Leafs (avoid numismatics!) from a trusted source. expand your wealth and knowledge base. From what we can tell, looking at some of the other market letters, a number of writers, who perhaps placed too much value on technical analysis when the fundamentals and market action kept saying something else...look to have caused those who took their advice to miss as much as 30 - 60% of this year’s explosive rally up from the January lows to the June intermediate highs. Below is a chart of First Majestic Silver (which TMR Staff members hold in their

own portfolios) - the strongest primary silver producer stock in this year’s rally. The Morgan Report consistently followed AG, and it has been in our Asset Allocation Tables for quite awhile (since 2008). Subscribers understood its business model, so they could choose to buy it below US$3 a share in January...and watch it rise over 400% higher. n The Morgan Report Staff individually answers every question subscribers send our way. Of course we are prohibited from offering personal investment advice, but our subscribers almost universally have

told us that our response to them went well beyond what they had expected, in terms of increasing their knowledge base, and helping them being able to plan and act upon the information they have collected. A Special Offer for Stock News Now/MicroCap Review Readers. YOU, as an SNN reader can become an exclusive website member to one of the most prestigious report services available - The Morgan Report - at a 25% DISCOUNT. Instead of the normal price for a one year subscription, you pay just $375! We want to help you build and preserve your wealth. Use this link, or call 480-325-0230 access code SNN. Offer expires July 31, 2016.TheMorganReport.com David Morgan, The Silver Guru, is Editor of The Morgan Report: Money, Metals and Mining. He presents frequently at conferences in North America, Europe and Asia, and is a regular on financial talk shows across the U.S. and Canada. You can learn about his service at themorganreport.com and follow his perspectives http://www.youtube.com/user/ silverguru David H. Smith is Senior Analyst for The Morgan Report and a Contributor to moneymetals.com. He investigates on-site, and writes about precious metals mines and exploration projects in Argentina, Chile, Mexico, Bolivia, China, Canada, and the U.S.

PondelWilkinson

Investor Relations  Strategic Public Relations

Helping quality public companies and long-term investors connect the dots since 1968.

www.pondel.com Contact: Evan Pondel 310-279-5980 epondel@pondel.com

MicroCap Review Magazine 10 Year Anniversary Issue

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P R O F I L E D C O M PA N Y

Millrock resources, inc. Buying low in the Downturn TSX-V: MRO

or many explorers, the past few years of the bear market were a devastating time. But for Greg Beischer, his partner Phil St. George, and the Millrock Resources team, it was quite the opposite. The former Inco Ltd. geologist, CEO Greg Beischer, has experienced much of what the cyclical mining business has to offer. After nearly 3 decades in mineral exploration, he had learned as tough as the bear markets are, they present the perfect opportunity for a generative exploration company, following the project generator model. “It took some guts and a lot of patience, but the downturn presented opportunities to acquire projects that would have been impossible to get at any other time” said Beischer, “so we’ve spent the last three years focused on just that – acquiring high quality assets at a very low price.” While many in the industry were hunkered down, Millrock went on the offensive, acquiring 27 projects in just over 3 years. When prompted about the number, Beischer remarked “we all know that investing success is simple. Buy things when they are low. Sell them when they are high. Whether we are talking stocks or mineral properties, they just didn’t get much cheaper than at the bottom of that bear market in 2015, so we took the cash we had and carefully deployed it.” Recent acquisitions for the project generator include a large group of claims in B.C.’s Golden Triangle, neighboring Pretivm Resources and its Brucejack gold project – a deal that took ten separate agreements with prospectors and vendors. Beischer knows www.stocknewsnow.com

that consolidating this ground would have been almost impossible to complete under any other market condition than those that prevailed in late 2015. The plan in the Golden Triangle mirrors the successful strategy Millrock has employed on its other projects. As a project generator, Millrock diligently seeks partners to minimize costs to shareholders, while increasing their odds of taking part in a major discovery by advancing multiple projects simultaneously. “Rather than raising large sums of money and betting it all on a single high-risk drill program” Beischer said, “Millrock increased its chances of discovery by advancing multiple projects at once, using funding from multiple partners to pay for exploration.” For the company, it provides a sustainable way to fund operations and gives multiple opportunities to discover an ore body. For investors, it means exposure to the upside of multiple exploration projects while minimizing the risk of any single project failing, or dilution from multiple financings to fund exploration. And as the market begins to heat up, it looks like this strategy is beginning to pay off. In northern Mexico, Millrock has partnered with Centerra Gold on two projects. Centerra is funding work on the Los Chinos and Los Cuarentas gold projects. Drilling is anticipated to start in September. Up in Alaska, Millrock has partnered with Australia’s Newcrest Mining, one of the world’s largest gold mining companies. The partners are exploring on a large claim block

situated adjacent to the Sumitomo-owned Pogo gold mine. And now Millrock is prepping ground in the Golden Triangle (British Columbia) for the right partner. Having yielded spectacular deposits like Pretivm’s Brucejack and Seabridge’s KSM, this premier exploration jurisdiction is really heating up. Beischer seems quite optimistic about the likelihood of finding partners to fund exploration on these projects. “Through the downturn we positioned ourselves well. Now, as the markets begin to heat up, we’re seeing partners come back to fund exploration and drilling. Each hole we drill presents the opportunity to make a new mineral deposit discovery that could send our share price soaring and reward our shareholders. We will be doing a lot of drilling in the coming years.” www.millrockresources.com n The company paid consideration to SNN or its affiliates for this article.

MicroCap Review Magazine 10 Year Anniversary Issue

COMMODITIES CORNER

Commodities in Review A

nalyzing Russell 2000 Options-Based Benchmark Indexes Designed to Provide Enhanced Yields and Risk-Adjusted Returns (Excerpt)

In 2006 the Chicago Board of Options Exchange (CBOE) introduced the CBOE Russell 2000 BuyWrite Index (BXR) optionsbased benchmark based on the Russell 2000® Index (RUT) options. November 2015, the CBOE added five more options-based benchmarks based on the Russell 2000 Index. This article is an excerpt from a 32-page research paper published in February 2016. The Russell 2000 Index generally is regarded as the premier benchmark index for U.S. small-capitalization stocks. In 2015 more than $460 billion in assets was benchmarked to the Russell 2000 Index. All indexes in this paper (except for the RVX) are total return indexes. Data from Jan 2001 – Dec 2015. Total return indexes with reinvested dividends (but taxes and transaction costs are not included).

The six options-based strategies write options on the Russell 2000® (RUT) Index, are as follows: 1) BXR – CBOE Russell 2000 BuyWrite Index; 2) CLLR - CBOE Russell 2000 ZeroCost Put Spread Collar Index; 3) BXRC CBOE Russell 2000 Conditional BuyWrite Index; 4) BXRD - CBOE Russell 2000 30-Delta BuyWrite Index; 5) PUTR - CBOE Russell

2000 PutWrite Index; 6) WPTR - CBOE Russell 2000 One-Week PutWrite Index. The following items highlight key results of the study (all analyses were done through the end of 2015) • Growth of Options Volume: The average daily contract volume of the Russell 2000® Index options traded at the CBOE grew more than 2000%

Exhibit 18: Volatility Risk Premium Since 2004

Sources: Bloomberg, CBOE Past performance is not predictive of future returns.

Exhibit 19: Gross Premiums Received for Index Option Writing

n BY MARK SHORE Sources: Bloomberg, CBOE Past performance is not predictive of future returns.

MicroCap Review Magazine 10 Year Anniversary Issue

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Exhibit 19b: Yearly Premiums Received from WPTR & PUTR

to the longer dated options and tend to be more responsive to the immediate market volatility To read the full paper go to www.cboe. com/benchmarks n

Sources: Bloomberg, CBOE Past performance is not predictive of future returns.

•

from 2004 to 2015. Risk-adjusted Returns: Since 2001 the PUTR had higher returns, lower volatility and a higher Sharpe Ratio than both the Russell 2000 Index and Citigroup 30-Year Treasury Bond Index. Options Premium Income: In 2015 the aggregate gross premium (as a percentage of the underlying) was 41.4% for WPTR, 22.2% for PUTR, 19.5% BXR, and 9.2% for BXRD. Lower Volatility: Since 2001 the PUTR, BXR, CLLR & BXRD indexes had a lower annualized standard deviation than the Russell 2000 Index. The reduction ranged from 14% to 28% lower. The options-based indexes also had lower betas (ranging from 0.59 to 0.82) than the Russell 2000 Index. Less Maximum Drawdown: Since 2001 the maximum drawdowns for the PUTR, BXR, CLLR & BXRD indexes averaged 21% less than the Russell 2000 Index. Faster Average Recovery (in months): Since 2001 the PUTR Index average recovery time was 21% faster from the drawdown troughs than the Russell 2000 Index. Richly Priced Index Options: Since 2004 the implied volatility for the Russell 2000 has averaged about 2.88 volatility points higher than its realized volatility, and the rich pricing for index options may have facilitated higher returns for option-selling

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indexes such as PUTR and BXRD (when compared with CLLR). • Tail Risk: During the five years when the Russell 2000 return was negative, the PUTR and CLLR indexes had higher returns than the Russell 2000 Index. Since 2004 the estimated average difference between RVX Index implied volatility vs. Russell 2000 realized volatility of daily close-to-close was 2.88 volatility points. This means the expected volatility over the next 30 days usually has been higher than the realized volatility. This may cause options to frequently be richly priced and may offer ongoing opportunities to reward sellers of option premiums. The maximum & minimum difference is 17 and -40.89 volatility points respectively. Discounting the major events 2008 thru 2011, the risk premium tends to be higher than the long term average. Regarding Exhibit 19, with many at-themoney (A-T-M) option writing strategies, investors can receive more gross premiums (but also forgo stock upside in times of bull markets) when compared to certain out-of-the-money (O-T-M) option writing strategies. SM

Regarding Exhibit 19b, The Weeklys options offer potential for greater premium received on an annualized basis due to rolling four times a month vs. a monthly option rolling only once a month. The premium for Weeklys options average about 2X more in gross income vs. monthly options. The greater premium may also be due to Weeklys options having a short time decay opposed

Mark Shore (info@shorecapmgmt.com) has more than 25 years of experience in alternative investments, publishes research / consults on the capital markets and conducts educational workshops at Shore Capital Research LLC. www.shorecapmgmt. com Mr. Shore is also an Adjunct Professor at DePaul University’s Kellstadt Graduate School of Business and a frequent speaker at alternative investment events. He is a contributing writer for the Eurex Exchange, CBOE, MicroCap Review, Swiss Derivatives Review and Seeking Alpha. Prior to Shore Capital Research LLC, Mr. Shore was Head of Risk for Octane Research Inc ($1.1 billion AUM) where he was responsible for quantitative risk management analysis and due diligence of Fund of Funds. He chaired the Risk Management Committee and was a voting member of the Investment Committee. Prior to Octane, he was the Chief Operating Officer of VK Capital Inc, a wholly owned Commodity Trading Advisor unit ($300 million AUM) of Morgan Stanley. Mr. Shore provided research and risk management expertise on portfolio construction, product development and business strategy. Mr. Shore received his MBA from the University of Chicago. Options involve risk and are not suitable for all investors. Prior to buying or selling an option, a person must receive a copy of Characteristics and Risks of Standardized Options. Copies are available from your broker, by calling 1-888-OPTIONS, or from The Options Clearing Corporation at www.theocc. com. The information in this paper is provided for general education and information purposes only. No statement within this paper should be construed as a recommendation to buy or sell a security or to provide investment advice. The BXR, BXRC, BXRD, CLLR, PUTR, and WPTR indices (the “Indexes”) are designed to represent proposed hypothetical options-based strategies. The actual performance of investment vehicles such as mutual funds or managed accounts can have significant differences from the performance of the Indexes. Investors attempting to replicate the Indexes should discuss with their advisors possible timing and liquidity issues. Like many passive benchmarks, the Indexes do not take into account significant factors such as transaction costs and taxes. Transaction costs and taxes for strategies such as the Indexes could be significantly higher than transaction costs for a passive strategy of buying-and-holding stocks. Investors should consult their tax advisor as to how taxes affect the outcome of contemplated options transactions. By Mark Shore Adjunct Professor, DePaul University; Chief Research Officer, Shore Capital Research LLC www.shorecapmgmt.com

MicroCap Review Magazine 10 Year Anniversary Issue

ASIA CORNER

Global Risks Weighing on Hong Kong Stocks Investors Await Shenzhen-Hong Kong Connect

ong Kong stock market kicked off the year in negative territory amid increased concerns of global risk, but by mid-February sentiment

began to turn as China’s economy appeared to show signs of stabilizing. Yet, by April investors began to question whether China’s better-than-expected manufacturing data in March would prove to be sustainable as confidence once again began to fall. The bullish momentum quickly dissipated with the market giving up seven percent of its 16 percent gain from the February 12th bottom to its peak on April 21. Additionally, concerns about Hong Kong’s exposure to global risks beyond China such as a potential hike in the U.S. interest rate, Britain’s referendum on leaving the European Union as well as outflow of capital from the emerging markets is also putting pressure on the market. Underlying confidence in market is expected to remain fragile until investors find a catalyst for a turn around. Despite the market’s struggles in the first

quarter, Hong Kong maintained its number one ranking globally for IPOs in terms of the amount of funds raised, according to Deloitte China. The exchange completed 19 new share launches to raise about HK$28 billion (US$3.61 billion). Mainland Chinese companies remained the major sources of IPOs in Hong Kong, accounting for 92.4 percent of the funds raised in the city, with the rest coming from local companies. While the total number of floats in the quarter was

down from 25 IPOs over the same quarter last year, proceeds were up from HK$19 billion. For the full year, Deloitte China expects Hong Kong to have 115 to 125 IPOs, raising approximately HK$260 billion. In March the China Securities Regulatory Commission (CRSC) reassured investors that it is still moving towards deepening capital markets reform, although the CRSC stated it will be a lengthy process and will be launched only when market conditions

n LESLIE RICHARDSON

MicroCap Review Magazine 10 Year Anniversary Issue

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and the legal environment “are appropriate”. Thus, even though the CRSC already approved the A-share IPO system to be change from the current approval-based IPO system to a registration-based one last November, with China continuing to delay the transition, Hong Kong will remain the top choice for Chinese companies to go public. Subsequently, Hong Kong is expected to maintain its place as one of the world’s largest IPO market for 2016. With the overall market sentiment cautious, the majority of IPOs this year have been predominately small and medium sized. One of the best performing new listing this this year is local property developer Wang On Properties (HK:1243) which spun off from Wang On Group (HK:1222 ) in an IPO on April 13th and is up 392 percent from its debut. The company has successfully established its residential property brand “The Met” in Hong Kong and is developing boutique residential as well as commercial projects in the SARs. Mid-tier banks China Zheshang Bank Co Ltd. (HK:2016) and Bank of Tianjin (HK:1578) are among the largest IPO’s globally in the first quarter, raising US$1.7 billion and US$950 million, respectively. Of the fourteen newly listed Hong Kong GEM companies this year, Ching Lee Holdings(HKG:8318) has been the top performer. Ching Lee Holdings, a civil engineering company providing substructure building works and superstructure building works, is up 132 percent since it started trading on March 30. Upcoming IPO, BOC Aviation Ltd., is receiving overwhelming investor interest as it raises $1.1 billion with a June 1st target date to begin trading. The Singapore-based company is Asia’s biggest aircraft-leasing company by asset value. Asian leasing companies have been rapidly expanding fleets as the region is projected to overtake the U.S. as the world’s largest market for aircraft. BOC Aviation currently has agreements with 62 operators in 30 countries and last January it placed an order for 30 Airbus A320 aircraft to expand its fleet and meet customer www.stocknewsnow.com

demand. It has also committed to acquiring more than 240 more aircraft in the coming years to be serviced by its Singapore, Dublin, London, Seattle and Tianjin offices. The company posted a record net income of US$343 million (S$470 million) in 2015 for an 11 per cent increase over the previous year, as revenue rose 10 per cent to US$1.09 billion. As of May 24th, the public offering was over-subscribed by 37 times. Shenzhen-Hong Kong Stock Connect Following the launch of the ShanghaiHong Kong Connect in November, 2014, the Shenzhen-Hong Kong Stock Connect is expected to be launched later this year. As one more step in China opening its capital markets, the link will enhance the connectivity of the mainland and Hong Kong stock markets and allow offshore investors access to many of China’s technology and high-growth companies. The new connect scheme is highly anticipated among Hong Kong and international investors as many see Shenzhen as China’s economic future. Often referred to as China’s Silicon Valley, Shenzhen is home to some of China’s most successful tech companies, such as smartphone makers Huawei, ZTE, BYD, social media group, Tencent, and the world’s No. 1 supplier of civilian drones, DJI Technology Co. Once the stock connect is launched, offshore investors will have new opportunities to diversify Chinese equity holdings away from financial and manufacturing firms listed on the Shanghai exchange to information technology, consumer discretionary and healthcare companies listed in Shenzhen. In less than 30 years Shenzhen has grown from a fishing village to a digital hub and home to almost 1,800 companies. Most of the stocks listed on the Shenzhen Stock Exchange have a market capitalization less than 2 billion dollars, but faster earnings growth than their large-cap peers listed in Shanghai. Even though Shenzhen free float market capitalization is smaller than that in Shanghai, trading has been much more active as domestic investors prefer small-cap stocks. Companies listed on the Shenzhen

index are projected to grow sales by 37 percent in 2016. This year China is expected to be in the top three markets in technology IPO, according to PwC. Already the Shenzhen Exchange has started off year with three technology companies successfully raising funds during the first quarter. Chengdu Eoptolink Technology Inc (SHE:300502) raised US$64 million and is up 178 percent since its March 3rd debut. The company is one of the market leaders in optical transceiver and communication industries. Tongyu Communication Inc (SHE:002792) is up 124 percent since its March 28th IPO while Changsha Jingjia Micro Co Ltd (SHE:300474) is up 524 percent since its March 29th debut. Anticipated IPOs on the Shenzhen Exchange include the world’s biggest gene researcher, BGI, which filed in December to list two of its units, BGI Dx and BGI Tech, on the Shenzhen ChiNext exchange. The IPO is targeted to be completed by the end of 2016 and is expected to offer a 20 percent stake (US$600 million) of the merged entity, placing a $3 billion valuation on the combined subsidiaries. BGI Tech provides contract sequencing to life science companies while BGI Dx offers clinical screening tests, especially non-invasive prenatal tests in China. *Performance is based from IPO date to May 26 close n 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.

MicroCap Review Magazine 10 Year Anniversary Issue

F E AT U R E D A R T I C L E

When to Buy and Sell MicroCap Stocks I

nvesting in microcap companies is very different compared to larger and more liquid stocks. Timing as to when to buy a stock is more difficult in microcaps as one large buyer or seller can quickly move the stock price. The key is to have a strong and repeatable investment process in place that includes when to buy and sell. My investment life cycle has the following 5 phases: Finding quality companies, performing extensive due diligence, paying the right price, monitoring results, and strict sell discipline. Finding quality companies is key to microcap investing because no one wants to invest in a business model that doesn’t work. Some of the key attributes that I look for are recurring revenue either contractually or by nature of the product, high barriers to entry, low competition and pricing power. This is in addition to strong management teams and businesses that are not highly levered. After finding a company that fits the bill as a quality business, I follow-up with intense research into the organization. I read all of the company’s and its competitors filings,

n BY SAM NAMIRI

industry publications and scour the internet for more information. I initially talk to management, competitors, customers and suppliers on the phone. Eventually I will attend industry trade shows and conferences as well as visit the company. The main reason for the visit is to make sure that the company has the systems and culture in place to run the organization well that allows both the employees and management of the company to effectively perform their jobs and monitor the business. Many microcap companies do not have effective processes and culture in place which is a risk not typically found in large cap companies. Throughout this process I am building my position over time as research is done and the investment still looks positive. While doing research I am also building a financial model. The key to the model is to make sure that the financial results work out so that the stock can at least double within 2 years. If I don’t think that it can meet or surpass that hurdle, I’m not interested. I generally use cash flow or earnings multiples and look at comparable company valuations that are either publicly traded or have been acquired. If I think that a company’s stock is worth $5 per share in 2 years, I don’t really worry if I pay $1 or $1.50 per share, although cheaper is always better! I continue to monitor the results of the business and industry as time goes on and

MicroCap Review Magazine 10 Year Anniversary Issue

update my model and valuation. At any point if price targets are met, fundamentals break down, or performance milestones are not reached, it is time to sell the stock. Depending on the liquidity of the stock and/ or how quickly things have turned determines the price that I am willing to sell the stock at. It is important to never place market orders for stock and to always have a limit price set when buying and selling microcaps. You risk buying or selling the stock at irrational prices due to lack of volume. On the other hand, you can occasionally take advantage of these irrational buyers and sellers as well in the microcap universe which is nearly impossible to do with large caps. In general, as a value investor in microcaps I look for quality companies that at reasonable market driven valuations can at least double within 24 months and once it does or if I do not think that it can, I sell. n Sam Namiri is Vice President at Grand Slam Asset Management, a registered investment adviser specializing in small and micro-cap value investing. Prior to Grand Slam, Mr. Namiri was the Founder and President of International Strategic Investment Group, Inc., a jewelry company involved in television, media, manufacturing, distribution and e-commerce. He led the company in producing a reverse-auction show selling jewelry which aired on DirectTV and also started a plant to manufacture semi-precious gemstone jewelry in Pakistan. Mr. Namiri has a BS in Industrial Engineering and Operations Research from the University of California, Berkeley and an MBA from Columbia Business School.

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MicroCap Review Magazine 10 Year Anniversary Issue

ACC O UN T I N G COR N ER

MicroCaps in SEC Cross Hairs of Non GAAP Measurement Debate

icrocap companies are once again in the cross hairs of the Securities & Exchange Commission (SEC), as that regulatory body prepares to clamp down on public company use of non-GAAP (Generally Accepted Accounting Principles) metrics in financial reporting. As the SEC moves to rein in use of nonGAAP metrics by public companies, it may prove to be another example of how financial accounting standards, as well as SEC rules, are written for the big companies, but cause oversized implications for microcap companies. Non-GAAP financial measures are customized methodologies used by management to reflect earnings. These measures give companies the flexibility to present the results that best reflect their performance. Non-GAAP measures adjust a company’s historical or future performance, financial position or cash flows by excluding or including amounts from the GAAP measure of net income (or loss). Many large cap companies use non-GAAP measures in an effort to smooth earnings to eliminate such items as restructuring charges, stock compensation costs, impairments and other non-cash or non-recurring charges. Some companies have gone so far as adjusting and accelerating revenue recognition. Approximately two-thirds of companies that make up the Dow Jones Industrial Average utilized non-GAAP metrics in reporting earnings per share, according to a

n BY COREY FISCHER, CPA

recent study, and the SEC is wondering if the trend has gone too far. The SEC is seeking to ensure that non-GAAP use is not misleading and that it does not undermine disclosure effectiveness and investors’ ability to assess financial results. It fears that companies may be touting the non-GAAP measures in their press releases to make financial performance appear more favorable than it would be under current accounting guidelines. Of the listed companies on the DJIA index that reported non-GAAP earnings per share in 2015, the adjusted metric was on average 30% above earnings reported under GAAP, according to data from FactSet. It was even more pronounced for companies in the S&P 500, where fourth quarter pro forma earnings were 59% higher than under GAAP. While the analyst or sophisticated investor is presumably better equipped to discern the difference between GAAP and non-GAAP, the SEC is concerned that these higher numbers may be most misleading to the less sophisticated investor, who may not be able to distinguish between the adjusted numbers and GAAP results, especially when reported on websites or other venues not covered by SEC rules. But, any proposed regulations aimed at curtailing large cap companies may be overkill for microcap companies that live in a very different financial and capital raising environment. For microcap companies, non-GAAP reporting may actually provide a clearer picture of a company’s financial situation than GAAP because it allows management of these growth companies to tell their story beyond the basic numbers; providing a broader overview of the company and its future prospects. Many microcap companies, for example, are burdened with significant non-cash charges that, for practical purposes, are of little use to the readers of their financial statements. Most often, these non-cash

MicroCap Review Magazine 10 Year Anniversary Issue

charges result from financing transactions or issuance of a company’s equity instruments that are common among microcaps, who frequently go to market for additional capital. The accounting for these rules is overly complicated and creates huge swings in earnings that have nothing to do with the company’s operating performance. Furthermore, these accounting rules can create large non-cash liabilities such as derivatives that often overwhelm cash, payables and the other liabilities on a balance sheet. In these instances the ability to use non-GAAP measurements is the only way to explain the true picture to investors and other financial report readers. The increased popularity of companies using non-GAAP measures has certainly caught the attention of the SEC. Though there may be an appropriate regulatory path that reels in the more outlandish reporting techniques utilized by Big Board companies, we hope that the SEC appreciates that microcap companies live, and struggle, in a very different world. The same regulation that might necessitate an adjustment in practice for a large cap company, can have serious punitive impact for its microcap brethren and their investors. For now, non-GAAP earnings are permissible if done correctly. Microcap companies always should strive for transparency, for consistency in how measures are calculated, provide appropriate disclosure, and a thoughtful discussion of why non-GAAP use is valuable in their particular reporting process. n Corey Fischer, CPA, is Firm Managing Partner of Weinberg & Company, a multi-office, PCAOB and CPAB-Registered firm specializing in the audit, assurance and tax needs of micro and small cap companies. He has more than 25 years of experience, having worked with the Big 4 accounting firms, and as an SEC reporting officer for a number of NASDAQ-listed companies. He is based in Los Angeles and is an expert in financial reporting, SEC compliance, raising debt and equity, mergers and acquisitions and structuring accounting operations. E-mail: coreyf@weinbergla. com or 310-601-2200. www.stocknewsnow.com

For the past 15 years, Tuesday’s Children has been committed to serving all those directly impacted by the events of September 11, 2001. We’ve made a promise to never forget. We are still here. Forged in the aftermath of Tuesday, September 11, 2001, Tuesday’s Children serves those impacted by terrorism and traumatic loss, including: families of 9/11 victims, responders; military service members and wounded veterans; international youth and global victims of terrorism. Tuesday’s Children’s programs strengthen resilience and build common bonds. Help find an internship for a child who lost a parent to terrorism, make a charitable donation, become a mentor to a child, fundraise, or simply call us and tell us how you’d like to get involved. We need your help to keep the promise.

www.stocknewsnow.com MicroCap Review Magazine 10 Year Anniversary Issue For more information, please call 212-332-2980 or visit our website at www.tuesdayschildren.org.

CYBER SECURITY CORNER

Cyber Security C

orporations of all sizes are investing in protecting their digital assets from both internal and external threats. Despite these efforts, the volume and complexity of cyber-attacks is increasing. Many of the more sophisticated attacks evade detection for weeks even months. While there are undoubtedly a growing number of defensive technologies, there is a shortage of skilled personnel for the consulting, deployment and maintenance. In the last couple of years’ cyber security has escalated to the top of the agenda for most boards. The questions remain, “How secure are we?” and “How do we know?” These should be repeated to the Chief Information Security Officer (CISO) on a quarterly basis as they deliver their “state of security” address. The “2015 PwC US State of Cybercrime Survey” asked whether organizations have the expertise to address cyber-risks associated with implementation of new technologies and only 26 percent said they have the capability to do so with their current staff. The good news for the consulting industry is that the rest rely on a combination of internal and external expertise to address cyberrisks of new solutions. According to a global nonprofit association ISACA (Information

n BY YORAM GOLANDSKY,

CEO OF CYBERISK

Systems Audit and Control Association), 83 percent of enterprises currently lack the right skills and human resources to protect their IT assets, leading many to turn to professional services to fill the gap. Given these market statistic, the long-term market potential for CybeRisk remains quite vast. When dealing with shortage of talents, tight budget and lack of expertise few pointed questions the CISO/CIO should be asked: 1. Should we be investing in this work and how much? 2. Can someone else do it more effectively at a better value? 3. Is there work we can outsource to create capacity to focus on something more critical? By holding advisory services firm accountable to answering those questions, and by creating mechanisms for using outsourced service delivery partners, companies can optimize and leverage its security spend and operations. Outsourcing this work often proves to be the best choice both economically and technologically and choosing the right cyber security services partner is important. It’s wise to find a partner with deep expertise in your vertical with broad experience to fill in whatever gaps exist in your security capabilities and know-how. Finjan Holdings, Inc. is a cybersecurity technology company with a rich 20 year history in behavior-based threat detection. The company has had success operating as both a hardware and software business and today licenses its innovative patented technology worldwide. Finjan is always exploring

MicroCap Review Magazine 10 Year Anniversary Issue

new avenues to drive growth and, as such, recently launched its cybersecurity consulting business, CybeRisk Security SolutionsTM (“CybeRisk”), to offer risk advisory services to customers from the server to the board room. Finjan Holdings Offers Cyber Risk and Security Advisory Services Through its Subsidiary, CybeRisk. Finjan Holdings Ticker: FNJN NasdaqCM. To learn more about CybeRisk and the company’s expertise please visit www.cyberisk.biz. n Yoram was named CEO of CybeRisk in 2015. In this role, he is responsible for overall strategic vision and initiating a strong customer base. Prior to CybeRisk he was General Manager of Cisco’s Cyber Security Center of Excellence where he also led the Red Team and War Gaming global practice. Prior to Cisco, Mr. Golandsky was the founder and CEO of Security Art Ltd. providing worldwide cybersecurity and information risk management services. In this role he oversaw R&D and built upon his operational and business management skills. Yoram has also held senior roles at EMC where he was Head of Information Security for RSA consumer division and PricewaterhouseCoopers where he served as Chief Information Security Manager. Mr. Golandsky began his career in the Israeli defense forces and until recently continued his service as a reserve Major. Yoram has been named to the National Law Journal’s inaugural list of Trailblazers in Cybersecurity and Data Protection. The list honors 50 trailblazers who have made an impact in the fight against criminal cyber activity by adding layers of security to protect data as the world becomes increasingly digital. The honorees were featured in the December 14th issue of the legal journal.

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July, 2016 adds & subtracts of FINRA Member Firms compiled by DAVID ALSUP

Financial Industry Broker Dealer Data Aggregator

June: 15 New formations & 19 Withdrawals Also see the RIA formations chart.

(New Formations:Three-year average is 10.2↓ per mo. BDW three year average is 20.5↓Closures per mo)

15 New Firms were admitted • •

19 Firms Withdrew

1 Firm admitted are Equities oriented 11 firms admitted are Private Placement firms 1 firms admitted is Crowdfunding 2 firms admitted are classified as Mutual Fund

• 9 were equities firms.

• 8 were Private Placement firms • 2 were Mutual Fund firms • 3 firms kept their RIA

Monthly New Formations chart showing the number & types of firms admitted

20 15 10 5

Pvt

Mut F,

Other

Equities

0 12

Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec Jan Feb Mar Apr May June

RIA Net New Formations Monthly 160 140 120 100 80 60 40 20 0 -20 11649 -40

RIA Formations Monthly

11702

11820

11947

12013

11957

11988

12025

12092

Feb Mar Apr May June July Aug Sep Oct Nov Dec Jan Feb Mar Apr May June

As of J une 30, 2016, there are 4001 FINRA Member firm CRD Numbers. (Note: There are some bankrupt firms still carried in CRD, such as Lehman Bros, & Stanford.) Subtract another 28 or so firms that have filed BDW, not yet posted. ===========================================================================

The above data has been sourced from regulatory agencies publications' and statistics, along with some independent third parties. While it is believed to be reliable there can be no guarantee of the accuracy of the data. The numbers have been cross-checked for accuracy, and they should be within plus/minus two percent. For example, there may be as many as 28 firms NOT included in these statistics and NOT reported that filed for a BDW prior to May, 2016. David Alsup 949468-0111 david@fishbowlstrategies.com www.stocknewsnow.com

MicroCap Review Magazine 10 Year Anniversary Issue

PROFILED COMPANY

nano Dimension ltd. transforming the world of 3D Printed electronics The manufacturing world is poised for a big change and Nano Dimension is printing the path – literally. Nano Dimension’s proven success printing PCBs – the circuits that make electronics work – coupled with its nanotechnology-based conductive and dielectric inks – uniquely positions the company to usher in a bold new era for 3D printing, bringing a range of products to market faster. Nano Dimension’s disruptive technology shortens the printed circuit board (PCB) prototyping process from weeks to hours and allows companies to prototype proprietary designs in-house at reduced costs rather than relying on third-party manufacturers. Significant product development and r&d cost reductions plus an increased competitive edge are just some of benefits that have attracted more than 2,000 entities to Nano Dimension.

tHe neeD For SPeeD: tHe DraGonFly 2020 3D Printer DragonFly 2020 brings together an extremely precise inkjet deposition 3D printer, advanced nanoparticle inks, and sophisticated software to enable ultra-rapid prototyping of complex, high-performance multilayer PCB prototypes. Allows designers and engineers to significantly reduce the time and complexity of developing electronics-enabled devices.

SoPHiStiCateD nano-ink teCHnoloGy The DragonFly 2020 printer uses proprietary nano ink technology produced at the company’s two fully-equipped ink laboratories, one of which produces highly conductive silver nano-particle inks and the other insulating dielectric inks. The company’s one-part, nano-epoxy

Amit Dror, CEO and Co-Founder of Nano Dimension

nasdaq CM: nnDM ers purchase a printer then additional nano inks over time.

reDeFininG tHe 3D Market anD Future GrowtH

insulating dielectric inks are well-suited to meet the needs of advanced electronics manufacturers who require both rigid and flexible circuits.

StronG ManaGeMent eXPerienCe More than 40 employees and the management team consists of four co-founders (CEO, CTO, COO, and CBO) whose strengths include years of 3D printer production, print technology, consumer goods and business development.

SaleS anD ContinuouS reVenue MoDel Nano Dimension’s strategic objective is to develop and commercialize the DragonFly 2020 printer for multi-layer PCBs and related ink products. Nano Dimension intends to establish long-term, recurring sales with a razor and razor blade model where custom-

MicroCap Review Magazine 10 Year Anniversary Issue

Nano Dimension plans to market the products and services worldwide to manufacturers and companies that develop sophisticated products with electronic components, including consumer electronics, IoT, telecom, semiconductor, defense, aerospace, automotive, medical/biotech and transportation industries. • Approval to the NASDAQ market in March 2016 was a major milestone for the company, and for the development of advanced 3D printed electronics in the market. • Signed agreement with Flextronics International Ltd. And FATHOM, industryleading advanced manufacturers and distributors • PCB market is forecast to reach $93 billion market size by 2017 [BPA Consulting Lucintel and EDAcafe] • The global PCB manufacturing market is expected to increase its market size from approx. $62.3 billion to $74.3 billion in 2018, growing at a compound annual growth rate (CAGR) of 3.6%. [Research and Markets] The significant growth projections for the 3D printer market serves as an indicator that there are significant market drivers facilitating growth. Nano Dimension helps enable prototypes in all shapes and sizes and is already having a disruptive influence beyond consumer electronics. In collaboration with Accellta, Ltd., Nano Dimension successfully lab-tested a proof of concept 3D Bio Printer for stem cells. n www.nano-di.com @nanodimensiontech on Facebook Nano Dimension on Twitter: @3Dpcb on LinkedIn: The company paid consideration to SNN or its affiliates for this article.

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MicroCap Review Magazine 10 Year Anniversary Issue

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OPINION

What Am I Buying? What’s LOV Got to Do With (Spark Networks)

he Beatles so eloquently said “All you need is love.” Well, the Beatles were right, but it may have been an oversimplification. All I need is good health, some money, and for my damn investments to go up. My selection today is Spark Networks (LOV), and it is not without controversy.

Essentially, I believe the sum of the parts are worth much more than its current market cap of $40 million. The company owns multiple web-sites in the “dating” space, most notably JDate.com and Christianmingle.com Spark has no debt, and around $4 million in cash. It has not been profitable for the past year, and it is being streamlined. Long story, short. The people on the management side have a history of successes. The Executive Chairman, Michael McConnell was brought in to Collectors Universe (CLCT) back in 2009, and took the role as CEO. Collectors was never very profitable, until he became the CEO. CLCT quadrupled during his tenure. Another thing that is interesting is that you have deep value investors involved, most

notably John Lewis from Osmium. John has had one of the best track records for overall returns this decade, and I know he is busy on the board trying to unlock value. My belief is simple. If they cannot streamline the operations fast enough, I think that the company will be acquired for considerable more than what the stock is trading. JDate.com alone is not only sticky, it is globally known and respected. Even I browsed the site in search of a beautiful Jewish woman, and did not leave disappointed. Until reality set in and I realized that I am already married and have a child. Let’s see what happens. For full disclosure, I do not own any shares at the moment. n

n CHRIS LAHIJI www.stocknewsnow.com

MicroCap Review Magazine 10 Year Anniversary Issue

F E AT U R E D A R T I C L E

MicroCaps - First Mover Advantage

y dad had a big influence on my choice to make a living by investing in stocks. As a teenager, I remember spending week nights with my Dad watching the Nightly Business Report on PBS, building my love affair with the stock market. I became attracted to the idea of looking for management teams to invest in, sitting back making money by letting them do what they do best. My introduction to microcaps began when my Dad would occasionally emerge from his “stock cave” in the basement telling me about a great company he found that I never heard of that would end up quickly doubling. When I finished reading “One Up On Wall Street” by Peter Lynch, given to me by my Dad, I knew I wanted to invest for a living one day. I eventually learned that my Dad gained a competitive advantage, whether he knew it or not, by investing in Microcap stocks because it gave him a “first mover advantage” (FMA).

FirSt MoVer aDVantaGe You don’t have to be a genius to gain an FMA. You simply have to be aware of following three things: • Know what pieces of information move prices like earnings, contracts and changes in risk profiles • Know where to find information in places that most retail investors are probably not looking such as SEC filings, conference call transcripts & fee based research avenues. • Learn how to interview management teams Your goal is find an information arbitrage: An arbitrage exists when a disconnect between stock prices and available public information on a company is noticeable, and

n BY MAJ SOUEIDAN

monetarily worth pursuing. Sometimes, the mispricing of micro-caps can be substantial.

reSearCH, reSearCH, reSearCH! The microcap universe is a great place to exploit information inefficiencies. You are in a playground where over 50% of stocks are microcaps. That means you are avoiding competition from institutional investors who are performing their research in larger capitalized stocks. Your primary opponents are individual investors who may not have the time, resources or expertise to give you a run for your money. Simply stated, you will be handsomely rewarded for hard research by getting into stocks before the crowd finds them. Sorry, but if you thought great research ends at reading press releases and watching the talking heads on CNBC then you are probably going to be a fool, rather than a great investor. Peter Lynch is quoted as saying: “I work about 70 hours a week, and my average competitor works probably 50 hours.” “So if I’m working 40% more a week than my competitor, I figure I ought to be able to beat him by 10%.”

quiCk tiPS to SeCure your FMa The “FMA” reveals itself in the nooks and crannies of the microcap and even small cap space. When you invest, try to approach the research process in the microcap space like an institutional investor would. Sources of information- Many investors will just rely on press releases to perform their research. Looking in other not so obvious places will give you a leg up. Live conference calls and related transcripts offer an endless source of information that management omits from press releases. Also, don’t be stingy. Spend a little money on fee based sources that retail investors normally won’t shell out the cash for. This is one of the best moves I ever made to give me access to loads of great info and make my research process

MicroCap Review Magazine 10 Year Anniversary Issue

more efficient. (Reuters and Valueline) Reliability of information- Places like Yahoo Finance and many stock screeners often don’t possess the most reliable information on microcaps. Furthermore, microcaps do not disclose non-GAAP financial data as much as larger caps do. Taking the time to do your own math to determine the true earning power of a company will be your advantage. Interview Process- Many retail investors are simply afraid to call management teams. But it’s one of the most important steps in the research process. Being prepared and following a planned protocol is key for me. The more I know about a company the better I am received by management. Go through SEC filings to understand the business. I typically ask questions I know the answers to, to see if management knows their own business. Majed (Maj) Soueidan received his dual major degrees in 1992 in Finance and Risk Management from Temple University and has been an investor since 1989. He co-founded GeoInvesting in 2007 to bring institutional quality long-biased investment research to the average investor and help broaden the awareness of the opportunities that exist in the inefficient micro-cap and small-cap equity universe and U.S Listed China stocks, all the while combining the tenets of growth plus value. Maj works with and manages the “GeoTeam” on a daily basis to increase its investment opportunity pipeline and heighten GeoInvesting’s awareness in the financial markets to intensify its market influence. Maj stresses the concept of “information arbitrage” in an era where info overload has actually made it more difficult for investors to locate profitable information. n Majed (Maj) Soueidan received his dual major degrees in 1992 in Finance and Risk Management from Temple University and has been an investor since 1989. He co-founded GeoInvesting in 2007 to bring institutional quality long-biased investment research to the average investor and help broaden the awareness of the opportunities that exist in the inefficient micro-cap and small-cap equity universe and U.S Listed China stocks, all the while combining the tenets of growth plus value. Maj works with and manages the “GeoTeam” on a daily basis to increase its investment opportunity pipeline and heighten GeoInvesting’s awareness in the financial markets to intensify its market influence. Maj stresses the concept of “information arbitrage” in an era where info overload has actually made it more difficult for investors to locate profitable information. www.stocknewsnow.com

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MicroCap Review Magazine 10 Year Anniversary Issue

OPINION

The ABCs of Sustainable Investing

he “do good” investing space offers a myriad of acronyms. A common one is SRI (Socially Responsible Investing) or all encompassing ones such as ESG (Environmental, Social & Governance) or EHS (Environmental Health and Safety). No matter how it’s defined, the opportunities to profit from an investment while also doing good (referred to as a double- or sometimes triple-bottom line initiatives) are increasing exponentially, namely because investors want product and institutional investors are delivering.

tHe eVolution oF Do-GooD inVeStinG Well over a decade ago, investment managers seeking double bottom lines, structured their portfolios to eliminate the ‘bad-boys’, namely tobacco companies, gun manufacturers and gaming industry names. As concerns in the environment grew resulting from climate change and rising CO2 emissions, portfolio managers sold positions in fossil fuel producers. Thus, E&Ps, coal and even nuclear power companies joined the ranks in the ‘cleansing process’ pressured by university and college students calling for their endowments to pull out of these investments. Today, the focus has changed course, in part because energy prices are recovering, gun sales are booming while tobacco pro-

n BY SHELLEY GOLDBERG

ducers eagerly market other popular consumer products. Now, practically every corporation and even small business has either a CSO (Chief Sustainability Officer) or CRO (Chief Responsibility Officer) to address best practices in everything from the environment, to the health and well being of its employees, and its effects on the communities in which its business operates. Firstly, businesses are taking responsibility as their customer base is asking them to do, while social media has affectively spread the word about business practices globally. Secondly, investors are seeking out sustainable companies, and encouraging portfolio managers in the SRI space to perform robust due diligence in order to ensure that these businesses are worthy of being in their portfolios.

wHere to Start A simple approach with no- to low-fees is an ETF or index. The Dow Jones Sustainability Indexes have a geographic focus either covering the world, or narrowing the focus to Emerging Markets or even a specific country, like Chile. These long only equity portfolios screen names based on a host of requirements involving corporate practices, operation and actions. Or, an investor can focus on an issue, such as the S&P 1200 Fossil Fuel Free Carbon Efficient Select Indexes, designed to measure the performance of a subset of companies with relatively low carbon emissions. In the fixed income space there are the Barclays Fix Income Green Bond Fund indices.

MicroCap Review Magazine 10 Year Anniversary Issue

For more actively managed accounts that typically carry a fee, there may be greater investment turnover, and the application of hedges or overlays. For the more hands on investor, private equity and venture capital provide opportunities to invest in businesses whose sole focus is sustainability - recyclers, clean-tech, or disruptive businesses that aim to change the way current manufacturing, industry, and retailers are operating while resolving a problem or concern. Finally there is a small but growing number of investment advisors who can steer the investor in the right direction. n Shelley Goldberg is an investment advisor, consultant and board member to businesses focusing on environmental sustainability with an emphasis on double-bottom line initiatives. Previously she served in the capital markets on both the sell- and buy-side with a sector expertise in global resources and commodities. She has been a macroeconomic strategist, trader, and investment advisor for multi-asset, topdown portfolio managers. She managed her own energy fund, G3 Capital Partners, LLC, and ran the largest fund-of funds devoted to natural resources with Union Bancaire Priveé, a Swiss private bank. She has also served as a trading and investments strategist for Brevan Howard Asset Management LLP, a multi-billion- dollar hedge fund manager, and for Roubini Global Economics. Shelley is a frequent writer, speaker, and panelist at industry conferences, and is regularly featured as an expert commentator on television and online segments. For information: info@invest-with-focus.com

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MicroCap Review Magazine 10 Year Anniversary Issue

OPINION

The Zika Virus Epidemic . . . Risks to Americans

he Zika virus was first discovered in 1947 in rhesus monkeys in Uganda. The virus quickly jumped to humans, with the first cases in people recorded in 1952 in Uganda

and Tanzania.

Outbreaks were reported in Yap in 2007; French Polynesia in 2013; and Brazil, Colombia, and Cape Verde in 2015. In addition, cases have been reported in the Continental United States. It is now estimated that the vast majority of Puerto Ricans will become infected within the next 2 years. This is thought to occur because of large mosquito populations, crowed urban conditions associated with lack of window screens and air conditioning.

n BY DR. EUGENE SEYMOUR

In the Americas, Brazil has been hardest hit with over 1 million cases reported thus far. As of July 1st, 2016 there have been approximately 600 cases in the continental US, mostly from people who returned from Zika zones in Central and South America. The CDC is currently following over 300 pregnant women who were infected by the virus in their first trimester of pregnancy. The virus is spread by two species of mosquitos, Aedes egypti in urban areas and Aedes albopictus in the southern states along the Gulf Coast. It is thought that the US population will largely be spared from the mosquito-borne aspect of this disease. However, approximately 40M Americans travel each year to zones where Zika has been found. The more disconcerting aspect of transmission is through sexual intercourse, either vaginal or oral. The CDC recommends that men use condoms for 8 weeks after visiting a country where both the Zika virus and mosquitos are found in abundance. The problem with this advice is that the virus is known to persist in the semen for months, even possibly years. In addition, most people are unaware that they have been infected so they may inadvertently pass the virus along to their spouse. This could be a serious problem since up to 15% of women infected with the virus during their 1st trimester will give birth to a child with microcephaly. This condition develops when brain cells are destroyed early in the pregnancy. There are a

MicroCap Review Magazine 10 Year Anniversary Issue

number of other neurologic and ophthalmologic conditions found in these newborns. This is reminiscent of the neurologic and ophthalmologic abnormalities that we found in the children of women who had been infected with the Rubella virus (German measles) during their first trimester. It is estimated that each of these Zika damaged children could cost society up to $10M during the course of their lifetimes. In addition to the damaged children, Zika infection has also been associated with the Guillain-Barre Syndrome (GBS), a situation in which a personâ&#x20AC;&#x2122;s own immune system attacks and damages their peripheral nervous system, sometimes causing life-threatening or permanent muscle weakness or paralysis. So with all of this grim news, what are the risks to Americans? Unless you have traveled to a Zika zone or have had unprotected sex with someone who has, the risks range from minimal to nonexistent. That being said, itâ&#x20AC;&#x2122;s important to eliminate any free-standing water where mosquitos could breed and to use mosquito repellent when outside in areas where mosquito populations are high. The Centers for Disease Control website (cdc. gov) is an excellent source of current information. n Dr. Seymour is the CEO of NanoViricides, Inc, a biotech company currently developing treatments for various infectious diseases caused by viruses such as herpes, shingles, influenza etc.

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CANNABIS CORNER

The Coming Election Season Cannabis Stock Trade S

ummers are usually tough on OTC stocks, and, by extension, the cannabis sector, as almost all of the stocks trade on the OTC, which sees volumes typically fall during the vacation season. 2016 is likely to be different for cannabis stocks, though, as the election season should be a major draw for speculative traders. We saw minor rallies in 2015, when Ohio voted on legalization (failed), and in 2014, when Alaska, Oregon and Washington, D.C. voted on

legalization (all passed) while Florida voted on medical cannabis legalization (failed). In both years, the sector experienced positive returns in October, suggesting that traders set up in advance of the elections. Cannabis stocks have finally emerged from a severe downturn. After a collapse of 97% from the peak in March 2014 to the trough in February 2016 as measured by the 420 Investor Cannabis Stock Index, prices have shown signs of life over the past few

n ALAN BROCHSTEIN

MicroCap Review Magazine 10 Year Anniversary Issue

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month. Through May, the index is roughly unchanged in 2016 at 38.09, which is down 3.0%. For some perspective, here is how the market has performed in 2016, with a very solid 63% move from the lows in February to the peak in April: This election season looks to be the biggest one ever in terms of the populations of the states involved. While not all of these are definitive, there are likely to be ballot initiatives for full legalization in California, which has more than twice the residents of legal states Alaska, Colorado, Oregon and Washington combined, as well as Arizona, Maine, Massachusetts, and Nevada. Each of these states already has a medical program in place. Florida will again be voting on medical cannabis. It’s a presidential election, so there is likely to be significant media attention on these state votes. Additionally, the legalization movement, which has so far been limited to the West, could take hold in the East, where states are more populous and close together, suggesting a potential tipping point for the legalization movement. Already more states have medical cannabis programs than those that have none. If one accepts the premise that traders will focus on the cannabis sector, it’s important to nail down the timing. At 420 Investor, I have long been suggesting that the trade will start much earlier than November, perhaps in early September. I have noticed a trend over the past three years that I have been following the cannabis sector that suggests an interim trough in the market may actually occur in mid-August, when the companies on regular calendar year-ends report their Q2 financials. These reports are typically met with negative responses, as traders/ investors see the lack of fundamental progress. The important point is that the time to sell not buy will be in November. Yes, sell the news, even if it is good. So, now having established that there will likely be an event-driven trade in the cannabis sector and that one should likely position well in advance, the obvious challenge is to figure out what to buy. There is no cannawww.stocknewsnow.com

Make no mistake about cannabis stocks: They are extremely speculative. The legal cannabis industry is performing well, but the stocks, for the most part, don’t really reflect the underlying industry. The market seems to be finally figuring this out, so the liquidity is starting to improve in some of the higher quality names that have struggled to resonate with traders. bis sector fund or ETF, so one will have to pick stocks. Typically these election trades work best in the more liquid names, which have tended to be the same old names with the cute tickers like “ERBB”, “HEMP” or “MJNA”, but, fortunately, are a lot broader these days. In fact, some of the companies that I think stand out against the sector in terms of their potential have achieved greater liquidity than in 2015. I expect that traders will look for a pattern of good trading volume but also stock prices that aren’t at their lows but are far from their highs. So, the inflows are likely to be somewhat broad, but there are some companies with higher than average quality that I will be focused on, as I expect that they will participate in the trade. One name in particular that I find interesting is Terra Tech (OTC:TRTC), which has great positioning for the elections as it operates in California and Nevada, both of which are likely to not only be on the ballot but to also get approved by the voters. TRTC certainly has liquidity, but the stock is already up substantially in 2016, though it has pulled back from the April highs. This stock is likely to be very volatile and is one to watch in the Summer for potential entry. Make no mistake about cannabis stocks: They are extremely speculative. The legal cannabis industry is performing well, but the stocks, for the most part, don’t really reflect the underlying industry. The market seems

to be finally figuring this out, so the liquidity is starting to improve in some of the higher quality names that have struggled to resonate with traders. The big trade I envision in the Fall is likely to benefit some of the same old scoundrels that have been trading for years but making no progress but also some of the names with relatively higher quality. Editor’s Note: Alan Brochstein, CFA, began his career as a bond trader in NYC in 1986 with Kidder, Peabody and worked with CS First Boston and Criterion investments until transitioning to equities as a analyst/portfolio manager in 2000. In 2007, he began AB Analytical Services, where he provided research and consulting to several investment advisors while also becoming one of the most popular contributors at Seeking Alpha. In 2013, Alan launched 420 Investor, an online community focused on publicly-traded companies in the cannabis sector, and, more recently, he began New Cannabis Ventures, a news & information platform that highlights the most promising companies and influential investors in the cannabis industry. n www.420investor.com Alan has no investments in any of the stocks mentioned in this article.

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wenty five years of investment banking in the biotech industry teaches you more about survival and failure than any other sector in the investment world. Rarely does a technology, product or molecule, emerge, that can change an industry and enhance the quality of life of its intended customer”, stated Todd Davis, CEO of Endexx. According to the company founder, Endexx has discovered its “Higgs-Boson”, its “God-Particle”, its element that directly benefits their customers and can systematically change lives for the better. CBD-rich hemp oil and its extracts, is the next big “Oil Boom”. Endexx has developed formulations, technology and distribution platforms to support

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a single focused mission: provide the highest quality and proper dosing of Cannabidiol (CBD) and Phyto-nutrient extracts from the whole hemp plant and bring them to market. Endexx nutraceuticals are helping individuals with chronic and debilitating medical conditions live more productive lives through pain management and inflammation reduction with all natural products. Endexx has positioned itself to be a leading provider of retail consumer products, medical and therapeutic products for doctor/patient care, and pet products for pain, inflammation and anxiety management, and cosmetics (skin and hair care), and additives and formulations for products of all kinds that will benefit from the addition of CBD. As a go to market strategy, Endexx has concentrated on two key sectors: the Platinum group (50+), and people of all ages that maintain active lifestyles. Pain and discomfort from physical activity, trauma and life experiences can decrease mobility and the ability to naturally recover from stress. Doctors interested in providing better solutions for pain and inflammation management for their patients have been a critical component in understanding the needs and desires of our target audience. By conducting voluntary case studies utilizing CBD (cannabidiol: a naturally occurring molecule), Endexx has been able to gather clinical information that supports the fact that pain is being reduced in patients with neuropathy, migraines, arthritis, bursitis, sciatica, back pain, plantar fasciitis, and general joint and muscle pain. These conditions effect and affect everyone at some time in their lives and chronically for a high percentage of the general population. According to statistics

MicroCap Review Magazine 10 Year Anniversary Issue

taken from the American Academy of Pain Medicine, “pain affects more Americans than diabetes, heart disease and cancer combined. Pain is a significant public health problem that costs society at least $560$635 billion annually (an amount equal to about $2,000.00 for everyone living in the U.S.).” Data from the 2012 National Health Interview Survey (NHIS) found that an estimated 25.3 million U.S. adults experience chronic pain. Endexx’s CBD based formulations are directly benefiting this population. Since November 2015, the Company has added over 70 retail stores and numerous Health Practitioneers and pharmacies nationwide that are providing CBD Unlimited products over the counter to their customers. “The consensus is universal, the product works. More importantly, it is natural, safe and without side effects” added Davis. In the current year, Endexx is expanding its sales force and has engaged a food distribution network with the goal of introducing multiple high-end national chains that are currently evaluating the company’s products. As the education of the national market awareness of the benefits of CBD has begun, Endexx is preparing a national rollout and will be an early mover in the market. Mr. Davis added, “multi-billion dollar industries don’t grow on trees. However, the phyto-nutrients produced from this, all-natural plant, can potentially change the world we live in and Endexx is on the leading edge of this change. n For more information: www.endexx.com Ticker: EDXC www.cbdunlimited.com The company paid consideration to SNN or its affiliates for this article.

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OPINION

The Private Side of Cannabis Weigh your public vs. private opportunities

n BY LESLIE BOCSKOR,

ELECTRUM PARTNERS

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By 2020, adult use and medical marijuana sales are projected to grow to over $22 billion, according to ArcView Market Research and New Frontier, a research firm focused on legal cannabis. Historical data and research such as the RAND Corporation’s estimates of the total market value of cannabis is in the $30 billion to $40 billion range. I also believe people are underestimating the sheer volume of new products and services emerging in the industry. Like many others, I had concerns when the industry had a less than auspicious beginning, especially in regards to publicly traded businesses. When the “green rush” first started, many of the companies that initially reported extraordinary stock price gains turned out to be bad investments, with inflated valuations created by bad actors looking to cash in on the hype surrounding legalized marijuana. Two examples are Advanced Cannabis Solutions and CEN Biotech; two companies that presented in January 2014 at an Investor Conference in Las Vegas. Both were being traded on the OTC markets. After their presentations I was asked to share my opinion on both to the investor membership. Neither company had a substantive existing business, both had management issues regarding experience in running public companies, and both had valuations that were completely inflated beyond any reasonable number. Coincidentally, they both ended up running into trouble eventually with Advanced Cannabis Solutions having its trading halted by the SEC and CEN biotech running into numerous problems with various regulatory agencies in Canada. As the SEC moved the bad actors out and forced new players to be completely buttoned up, the next phase of cannabis invest-

ing looks drastically different. The foundation for a vibrant ecosystem of legal cannabis companies and ancillary business growth is being created right now, and the opportunity is immense.

PuBliC VS PriVate: wHiCH inVeStMent PatH Do you take? In order to participate it is critical to understand the magnitude of change that is occurring. We are witnessing the birth of a vibrant, lucrative industry with a massive built in audience. It goes without saying that the opportunities for those willing to traverse uncharted waters is significant. But with new opportunity, questions begin to arise. What is your strategy? Are you building a diversified portfolio of businesses in the sector spread across medical, adult use, life science, nutraceutical, hemp, ancillary, and veterinary? Can you hold the stock for years? Or are your investment objectives short term? Liquidity is obviously a plus for investing in public cannabis companies. Other benefits to investing in OTC stocks include access to public information allowing for in-depth research on each investment opportunity.

inVeStinG in PriVate CoMPanieS If you’re considering investing in private cannabis companies, there are significant benefits as well. For starters, the volume of deals and opportunities is much larger than the number of OTC companies currently listed. Additionally, private cannabis companies often have lower valuations which may allow the shrewd investor to build a larger

MicroCap Review Magazine 10 Year Anniversary Issue

self. Who refers to the team. Do they have any previous exits? Have they succeeded before? I would rather bet on an “A” team with a “D” project than a “B” team with an “A” project because a great team can adapt effectively and win no matter the circumstance. What is the basic value proposition and how big can it be? Why asks the question, will they win versus the competition? Where refers to the market position overall, not just the geographical location. When has to do with market timing and urgency, and finally, How refers to strategy. Asking these basic questions can be extremely useful during your analysis. Going deeper down the rabbit hole, there are also a myriad of wHat are SoMe oF tHe legislative and jurisdictional factors to coniMPortant StePS PeoPle sider that come into play. Keep in mind, due MiSS or SkiP wHen inVeStinG diligence is critically important and planning in leGal CannaBiS? is essential. With no analysts for coverage or fund Who, What, Why, Where, When and How? managers for guidance, how does a pruLITERATURE PROJECT NO PAGE(S) SIZE INK(S) on These are some questions to askNOyourdent cannabis investor stay informed Continental Stockbasic & Trust equity position with equivalent capital. Just as a portion of publicly traded companies, many private companies will emerge into long term success stories with excellent cash flow and invaluable intellectual property. However, private companies carry considerably more risk due to the lack of liquidity. As a minority shareholder in a private company you will often have little to no rights, and as such, getting any capital out until the entrepreneur decides to take the company in the direction of providing an exit for its shareholders either through; 1) distributions, 2) getting the company acquired, or 3) utilizing the public markets for an exit.

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Leslie Bocskor is Managing Partner at Electrum Partners. Named most valued investor member of the ArcView Investor Group in 2015, and CEO of the year by The Weed Blog, the most highly-trafficked industry trade publication and one of the top 100 most influential people in the industry by The Cannabis Business Executive (CBE). Electrum Partners is an advisory services firm specializing in medical and adult use cannabis and ancillary businesses. Visit www.electrumpartners.com

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P R O F I L E D C O M PA N Y

Grow Solutions Holdings, inc. otCqB: GrSo “When a Proven Business Model Meets the Cannabis Industry”

hatever opinions you may have on Cannabis, the one conclusion that every investor and broker can agree on is that the Cannabis Industry is the fastest growing industry in the country ($4 Billion Today). Forbes, CNBC and MSNBC have estimated the Cannabis Industry will grow 10 fold by 2020 ($40+ Billion). Grow Solutions Holdings, Inc. is a financial holding company rooted in the cannabis industry. The company’s management applied their collective expertise and experience to apply their own strategies and principles to the unsophisticated cannabis industry. In fifteen months Grow Solutions has become a publicly traded company, and shown steady revenue growth. The Company does NOT grow cannabis or sell cannabis avoiding any violations of Federal and State Laws. The holding company is made up of three key divisions described below:

Grow teCH This division provides cannabis growers with nutrients, supplies, equipment, lights etc. The Company has 3 retail stores in Colorado and one online store (give website) and has a growth strategy to expand through acquisition with retail stores located in Oregon and Florida. The Company plans

to introduce a new Greenhouse Division in the fourth quarter of 2016. The Greenhouse division will profit from sales without capital expense. Greenhouses are typically large expenditures (in excess of $300,000), and GRSO’s commissionable income will potentially be substantial.

Future teCH This division creates and manufactures products and brands for the consumption, processing and storage of regulated herbal products including cannabis. The first three brands to come from Future Tech Products are Opti Flavor™ Technologies (vaporizers and quartz accessories), RozTek™ (Rosin presses) and Terpene Preservation Labs™ (silicone storage solutions). These brands and products are cutting edge technologies for smoke shops, tobacco shops and dispensaries. The Company plans to add an online wholesale distribution platform linking manufacturers to retailers, B2B, streamlining the ordering and fulfillment processes.

com is a partnership with Recruiter.com and is an employment platform for the regulated cannabis industry. JobGrow.com provides a platform for certified cannabis industry employees and employers to connect qualified applicants with jobs. Through this partnership with Recruiter.com, the Company has a competitive advantage bringing higher level professionals to the cannabis industry. The company has maintained its business principle since inception - create integrate new and existing products and build revenue in the cannabis industry, the fastest growing industry in the country. The Grow Solutions business model is to grow its revenues both organically and through acquisition. Grow Solutions Holding, Inc. is a fully reporting company: OTCQB: GRSO. www.growsolutionsinc.com n The company paid consideration to SNN or its affiliates for this article.

DiGital teCH This division includes our digital properties – Sprout.news and JobGrow.com. Sprout. news is a news and social media site reporting on the confluence of cannabis and politics, sports, health and culture. JobGrow.

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MicroCap Review Magazine 10 Year Anniversary Issue