Micro-Cap Review Magazine Spring/Summer 2012
The #1 magazine in the Micro-Cap space is pleased to bring to you the Spring/Summer edition of the Micro-Cap Review. This issue features public and private Micro-Cap companies and provides information about the recently passed Jobs Act, Precious Metals, Oil & Gas, Life Science/Healthcare, Technology, and more. Feel free to download, embed and share your favorite articles. If you would like a print version of the magazine, please send your info here: http://stocknewsnow.com/?page_id=2385.
$5.00 quarTer 2 � 2012 microcapreview.com ter Retweet mbleUpon Digg (16) Shoreline Energy pe Capital Markets Visibility (18) Clean Wind Energy Tower (40) The Jobs Act by David Weild (42) Technorati DecisionPoint Systems (47) LinkedIn @StockNewsNow Extremebidder.com (52) The Perfect Storm for Micro-Cap Stocks (56) CommerceTel Mobivity (60) Internal Fixation Systems (77) ERF Wireless (82) Tube StockNewsNow Exploration, Development and Production of Petroleum and Natural Gas CALGARY Suite 400, 209 - 8th Ave SW Calgary, AB T2P 1B8 Phone: (403) 767-9066 TORONTO Suite 103, 145 King Street W Toronto, ON M5H 1J8 email@example.com www.shorelineenergy.ca Ticker Symbol: SEQ.TO E D I T o R I A L www.snnincorporated.com www.stocknewsnow.com Follow us: @StockNewsNow SNN Incorporated Micro-Cap Review 4766 Admiralty Way #13004 Marina del Rey, CA 90295 www.snnincorporated.com PUBLISHER Sheldon Kraft, SNN Founder, CEO, Chairman firstname.lastname@example.org Wesley Ramjeet, SNN CFO email@example.com EXECUTIVE EDITOR Lynda Lou Kane Kraft, SNN President ASIAN PACIFIC CORRESPONDENT Leslie Richardson WRITERS Lance Jon Kimmel Lynne Bolduc, Esq. Holmes H. Stoner Jr. Leslie Richardson Sheldon "Shelly" Kraft Dr. Gordon Chiu Erik S. Nelson Peter Baxter Micchael S. "Mickey" Fulp David Weild David Alsup Mark Shore Michael A. Berry Ph.D. Tom Opsahl Lynda Lou Kane Kraft Brett Goetschius U.S.-CHINA SNN REPRESENTATIVE TO CHINA AND PACIFIC RIM Holmes H. Stoner Jr. SNN COMPLIANCE AND DUE DILIGENCE ADMINISTRATION Jack Leslie CHAIRMAN OF SNN ADVISORY BOARD George R. Jensen Jr. ADVERTISING Sheldon Kraft firstname.lastname@example.org 818-730-6000 COMMUNICATIONS AND SOCIAL NETWORKING Robert Kraft @stocknewsnow RKraft@snnwire.com EXECUTIVE VP OF MARKETING Shane Hackett SNN CORPORATE COMMUNICATIONS Trudy M. Self CIRCULATION Info@snnwire.com GRAPHIC PRODUCTION Tony Vibhakar Tony@unitronmedia.com PRINTER Vintage Filings, a division of PR Newswire 866-683-5252 VIDEO EDITOR-PRODUCTION ASSISTANT Sammi K. Kraft MARKETING CONSULTANT Rolv Heggenhougen Micro-Cap Review Magazine is published Quarterly, Spring, Summer, Fall, Winter POSTMASTER send address Changes to Micro-Cap Review Corporate Offices. �Copyright 2009 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 Micro-Cap 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. et's face it for micro-cap companies it all comes down to getting funded. It is no secret a micro-cap company cannot exist or grow without Do Re Mi as they say. Both public and private companies are in the same boat. Until the revenue stream from sales begin to cover expenses and provide excess capital for growth, microcap companies need to rely on capital sourcing to develop the company into a profitable business. Over the last several years raising money has been a struggle for most microcap companies and during this time many companies have either stagnated, lost their value or have fallen off investors minds and screens. IPOs were making a comeback until the Facebook debacle. Success stories have been fewer and harder to find. There is a direct correlation between unfunded microcap companies and the huge high unemployment numbers in the United States. "Street" veterans see the depletion and unwillingness of venture capital money to venture their capital into startups has led to a defeatist attitude within the micro-cap funding world. The costs of raising money by brokers dealers has risen, micro-cap funding is smaller in numbers and slower in happening, company valuations have fallen, regulation has risen, public listings from IPOs have steadily been reduced and FINRA member broker dealer numbers are shrinking while cash is sitting on the sidelines. We knew there had to be a light at the end of the tunnel as small business has been in need of financial stimulation for years and L even the mid to large cap companies have been cutting costs by reducing work forces to survive as banks continue to sit on capital which they refuse to lend. Ladies and gentlemen, just when you think the U.S. micro-cap stock market is going to hell in a hand basket, both Congress and President Obama come through big! President Obama signed the Jobs Bill in law and is now the Jobs Act! The Jobs Act had bi-partisan political approval and could save small business, public and private, in this country, unanimously, we sure hope so. I cannot say enough positive things about this event and history will remember this great achievement of President Obama and I am ready to call this the "Obama Financial Act of 2012". Within this issue of the Micro-Cap Review we bring to you, our readers, new information on the Jobs Act, Crowd Funding, global micro-cap markets, FOREX, and micro-cap market commentary. The new influence and changes within the micro-cap markets are monumental and in fact some believe are the most significant since the 1933 & 1934 Acts. As always SNN Incorporated management thanks you for your support to our websites www.stocknewsnow.com and www. snnwire.com, www.microcapreview.com and our newly launched corporate website www.snnincorporated.com and please support our advertisers, visit their websites and contact any micro-cap CEO directly with your questions or for more information. n This Publication is not to be construed, under any circumstances, by implication or otherwise, as an offer to sell or a solicitation to buy or trade in any commodities or securities herein named. Micro-Cap Review Magazine and its employees are not, nor do they claim to be registered investment advisors or broker/dealers. This magazine contains forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934 relating to companies' future operating results that are subject to certain risks that could cause results to differ materially from those projected. Readers are cautioned not to place undue reliance on these forward-looking statements. This publication undertakes no obligation to update these forward-looking statements. Micro-Cap Review Magazine, its owners, employees, their families and associates may have investments in companies featured within this publication and may elect to sell these investments or purchase additional investments in these companies at any time. However, the policy of our editorial staff is to avoid any pre-publication trading of featured stocks or sales until the release date of the magazine. In order to be in full compliance with the Securities Act of 1933, Section 17(b), where the publisher has received payment for advertisement/advertorial of a security, the amount and type of consideration will be fully disclosed. All information about the Company contained within an advertisement/advertorial has been furnished by the respective Company and the publisher has not made any independent verifications of such information and makes no implied or express warranties on the information provided. Readers should perform their own due diligence before investing in any securities mentioned. Investing in securities is speculative and carries a high degree of risk. All MicroCap Review Disclaimers apply http://www.microcapreview.com/disclaimer.php before investing view www.sec.gov/investors www.stocknewsnow.com�www.snnwire.com�www.microcapreview.com Micro-Cap Review Magazine 3 ACCESS. INSIGHT. OPPORTUNITY. 1 Photos: Jack Hartzman HOST SPONSORS PLATINUM GOLD SILVER BRONZE PROUD MEDIA PARTNER Medical Care CONTENTS WWW.MICROCAPREVIEW.COM QUARTER 2 2012 F E AT URED ARTICLES 7 11 12 16 18 Raising Capital Under the JOBS Act By Lance Jon Kimmel The Private Offering Super Highway By Lynne Bolduc, Esq. Hidden Opportunities in Hong Kong Micro Caps By Leslie Richardson Shoreline Energy Corp. Capital Markets Visibility Program Drives Investors Engagement for Small-Cap and OTC Companies By Sheldon "Shelly" Kraft Five Basic Items to Consider Before Becoming an Entrepreneur . . . By Dr. Gordon Chiu Crowd Funding and the JOBS Act By Erik S. Nelson Using the OTC QX and Reg 12G to Get Traction with US Retail Investors By Peter Baxter Graphite: The Newest "Next Big Thing" By Michael S. (Mickey) Fulp Silver: The Next 12 Months By David Morgan 42 54 56 The JOBS Act By David Weild "The Best of Both Worlds" Matmown, Inc. The Perfect Storm for Micro-Cap Stocks May Already Be Here! By Sheldon "Shelly" Kraft Sifting Through the Crowdfunding Noise New BD Formations & BD Withdrawal Summary By David Alsup Currencies in Your Future Portfolio? By Mark Shore Are Markets Discounting the Great Debt Deflation? By Michael A. Berry PH.D. JOBS: The On-Ramp to Capital Formation By Tom Opsahl It's ALL About the Show and it Sizzles . . . By Lynda Lou Kane Kraft Don't Buy Business Equipment LEASE IT Emerging Growth Capital Rebounds from 2011 Lows By Brett Goetschius 58 62 64 69 24 28 31 74 80 89 90 34 38 29 Financial Puzzle SNN StockWord Puzzle 25 40 47 52 60 68 77 82 86 Profiled Companies Pacific Rim Chamber of Commerce and American International Business Council Report Clean Wind Energy Tower, Inc. DecisionPoint Systems Extremebidder.com CommerceTel Mobivity DM Roth Internal Fixation Systems ERF Wireless Inc. 46 Legal, Tax & Accounting Financial Books Opinion Caveat Emptor or Buyer Beware Written by Sheldon "Shelly" Kraft The Compliance Corner By Russell C. Weigel, III 51 94 Ombudsman By Jack Leslie 93 Comic Strip WallStreet Chicken - Episode 6 Classifieds Micro-Cap Review Magazine www.stocknewsnow.com�www.snnwire.com�www.microcapreview.com 5 No Boring Lawyers OSWALD & YAP Award Winning Business Lawyers Specializing in Micro-Cap Companies for Over 25 Years Contact Lynne Bolduc 16148 Sand Canyon Avenue Irvine, CA 92618 Telephone: (949) 788-8900 Fax: (949) 788-8980 E-mail: LPB@Oswald-Yap.com 6 Micro-Cap Review Magazine www.Oswald-Yap.com www.stocknewsnow.com � www.snnwire.com � www.microcapreview.com F E AT U R E D A R T I C L E Raising Capital Under the JOBS Act The Good, the Bad and the Ugly M uch has already been written � and the SEC has yet even to propose regulations � on the impact the JOBS Act will have on growth companies for years to come. Some of the changes are long overdue, some may not be all they are heralded to be and some may be of far less utility than first assumed. Let's start with the good news. The much-needed relaxation of the prohibition against general solicitation and advertising in private offerings with all accredited investor purchasers is nothing short of revolutionary. It is one of the biggest and most helpful changes since the advent of Regulation D itself over 30 years ago. The SEC has long taken the position that accredited investors do not need specified disclosure, as long as they receive complete and accurate disclosure just like any investor must always receive, because they can fend for themselves. That being the case, what is the harm if companies reach out to such investors more broadly than through the arbitrary � and often abused � notion of a "pre-existing relationship". Congress now says there is no harm and, once the SEC n BY Lance Jon Kimmel proposes and adopts appropriate rules, this artifice will finally fall away. While it is too soon to tell what the SEC rules here will look like, although the SEC has only been given 90 days from enactment to adopt new rules. One can imagine on-line and in-person road shows to pre-screened accredited investors who are neither previously known to the company nor introduced through the auspices of the company's placement agent � if they can find one. In fact, if the company has the wherewithal to put together some introductory road shows and the ramp-up advertising to fill a room, they might be able to do offerings without even the services of a placement agent. That might not be all bad news to FINRA member firms, because the overall risk, regulatory burden and cost to them of doing business is sufficiently high these days that FINRA member firms often won't even consider raises of less than $5 million. Now, a company may be able to undertake the offering itself, with the right advisors of course. Remember: the ability to solicit and advertise addresses only the issue of how a company raising capital learns of these potential high net worth and/or high income investors. It does not take the place of needing a proper business plan, PPM or whatever disclosure materials are going to still be needed to make sure that all material information is conveyed to the investors under the antifraud provisions of the securities laws. The bad news belongs to the cool new kid on the block, crowdfunding. Crowdfunding is probably one of the most controversial features of the JOBS Act. For one thing, the entire concept is very new and is the great unknown of how this aspect of social media translates as a practical matter into a financing mechanism, irrespective of the technical rules. There are too few data points to know if this is even a viable way to raise money, and yet we are marching headlong into the Social Financing 2.0 of affinity raises, which themselves have had a very uncertain success rate. For another thing, crowdfunding is going to take place on the opposite end of the spectrum from those using general solicitation and advertising � that is, among the least sophisticated potential investors. Relaxing decades of rules certainly sends a deregulatory message, and very small pre-revenue start-ups may especially feel that crowdfunding will give them a fighting chance at getting some financing going, if even angels pass on their deals or they just don't have traditional friends and family investors. But is this the right message for a part of the public that is perhaps less sophisticated (therefore, more vulnerable) in assessing risky ventures; perhaps has fewer assets that can be staked and lost on an illiquid security if the venture does not turn out well; and perhaps has a lower income level to make back a lost investment. In uncertain times, could this be a lottery of hoping to pick the next Microsoft or Facebook? It's bad enough to run with the pack in high school, but do we want to provide an environment where some could run with the pack simply because an eager investment novice sees that Micro-Cap Review Magazine www.stocknewsnow.com � www.snnwire.com � www.microcapreview.com 7 someone in social media says that an investment is "hot" or a "sure thing" or that it has been "liked" to death? There are also going to be some significant practical limitations on the utility of crowdfunding, some of which are in the JOBS Act and some of which will await new SEC regulations, which are due to be adopted within 270 days following enactment of the JOBS Act. For one thing, the capital raise may not be as inexpensive as one might think. The limit that can be raised through crowdfunding is $1 million in a 12-month period. If the company is raising more than $100,000, it will need to provide tax returns; if it is raising more than $500,000, it will need to provide audited financial statements. Offering materials will still needed, as the concept of "full and fair disclosure" remains inviolate, whether it is through general solicitation to unknown accredited investors or flash-mailing your 1,000 BFFs. The offering must take place through a broker or a crowdfunding web site, which itself will have to be registered with the SEC. There are significant limits on the amount or percentage of income or net worth that an investor can invest in such an offering if their annual income or net worth is under $100,000, which likely means searching for many very small investors in a small deal. There are mandatory annual reporting obligations to investors, which such reports to be filed with the SEC. Relative to the amount that is likely to be raised, the transactional costs of a crowdfunding raise may be quite high. So the ugly in all of this would have to be Regulation A. If ever there was a set of SEC rules that didn't get respect, it would have to be much maligned Reg A. It predates Reg D, but never was easy to use. Reg D, especially for accredited investor (Rule 506) offerings, was much more user-friendly, especially once NSMIA treated 506 securities as "covered" securities and therefore outside the reach of state-level blue sky laws and administrators. Meanwhile, pure Reg A offerings still had to go through state clearance. There was also the dollar limit. Who really needed Reg A and its $5 million limit when Rule 506 gave an unlimited dollar amount that could be raised? But Reg A offered something that Reg D never has and still cannot offer � a path to being public. Reg A securities are tradable, not that as a practical matter they historically have been due to limited volume and a narrow shareholder base. But that is why Reg A offerings are reviewed by the SEC � because you get a trading security out of the deal. However, with the dollar limitation and state blue sky burden, Reg A was of little practical use, because who would go public with not more than a $5 million raise? Reverse mergers and simultaneously raises seemed to put the nail in the coffin for Reg A long ago, if Rule 506 hadn't already done that. The JOBS Act may � and I emphasize may � change this. For one thing, the Reg A limit has been raised to a very respectable $50 million in a 12-month period. Most emerging growth companies would be thrilled to raise $50 million in an IPO. At a $50 million level, it is certainly possible to attract investment bankers on a "best efforts" basis. A Reg A offering does not have the perceived negatives of a reverse merger, in part because a Reg A offering goes through SEC review (unlike the typical reverse merger and super 8-K), but does so in a process that is substantially more streamlined than an S-1. However, unless the security is going to trade on a national securities exchange or is sold to a qualified purchaser, the blue sky burden is still present in a Reg A offering. But it's present in one form or another for other public financings for OTCBB companies, so that concern could be a wash. Similarly, issuers will have to provide audited financial statements annually after the raise and may be required by SEC rules to file other periodic reports, but that is also no different from what smaller reporting companies do right now. Will Reg A find acceptance among the investment banking community as an alternative way to go public? Informal polling shows that the jury is still very much out. And they may stay out for a while, because there is no time limit provided in the JOBS Act for the SEC to adopt implementing rules. With the heavy SEC calendar of rulemaking they are already facing (in some cases, they are still doing Dodd-Frank rulemaking), it could be a while before we see the rules that might give new life to Reg A. But imagine a world one day where an emerging growth company raises its startup money through crowdfunding, advances to broadly advertised private offerings to accredited investors and finally raises $50 million in a Reg A public offering. Now the hard work comes to see if we can get there. Lance Jon Kimmel is the founding and managing partner of SEC Law Firm, which represents growth companies around the globe and the regulated professionals who serve them. Mr. Kimmel's practice focuses on public and private securities offerings, SEC reporting, corporate governance, mergers and acquisitions, representation of companies before the SEC and stock exchanges, and SRO compliance for investment bankers and other service providers. He handles capital raising at every level, from seed capital to initial public offerings, from reverse mergers to PIPEs, from equity credit lines to bank credit facilities. Mr. Kimmel is actively involved in alternative public offering strategies, including reverse mergers for domestic and Chinese companies in the United States, and working with private and public companies going public or dual listing internationally on the AIM in the U.K., the TSX in Canada and the Frankfurt Stock Exchange. His clients reflect the spectrum of 21st century business, from manufacturing to medical devices, from biotechnology to green technology, from financial services to the entertainment industry, from real estate to consumer goods. As one of the most frequently quoted securities attorneys in America, Mr. Kimmel has contributed his insights to NPR Marketplace, Dow Jones, Sky Radio, the Los Angeles Times and Bloomberg Forum, among other mainstream and financial broadcast and print media around the world. Mr. Kimmel has written numerous articles and speaks often on current legal issues in the corporate finance and corporate governance arenas in the U.S., the U.K. and China. He co-chairs the Growth Capital Conference in Los Angeles, serves on the Securities Regulation Committee of the American Bar Association, served as a national coordinator of the SEC's Small Business Forum and has given testimony to the SEC's Advisory Committee on Smaller Public Companies on reform proposals to ease the burdens of the Sarbanes-Oxley Act for smaller reporting companies. n SEC Law Firm 11693 San Vicente Boulevard, Suite 357 Los Angeles, California 90049 Tel: (310) 557-3059 Fax: (310) 388-1320 www.seclawfirm.com email: email@example.com 8 Micro-Cap Review Magazine www.stocknewsnow.com�www.snnwire.com�www.microcapreview.com Ticker Symbol: HASC 15928 Midway Road, Addison, TX 75001 214 302 0930 | HascoMed.com Mobility Solutions to Meet the Needs of Today's Seniors, Veterans and Disabled. Hasco Medical is a publicly-traded mobility consolidator designed to meet the unique transportation needs of seniors, veterans and disabled persons. Since 1986, Hasco Medical subsidiary companies have been leaders in the mobility industry and have dramatically improved the quality of living for our customers. Business Lines Wheelchair Accessible Vehicle Sales Accessible Vehicle Conversions Accessible Vehicle and Taxi Rental Services Vehicle Service and Maintenance Scooters and Home Mobility Products Best in Class Service 24/7 17 Convenient Locations Hasco Medical is the proud provider of accessible taxis to medallion holders in New York City and Philadelphia. Learn more about our innovative family of companies at HascoMed.com. Proud distributor of We proudly serve our country's veterans. Subsidiary Companies Certified Medical Systems II F E AT U R E D A R T I C L E The Private Offering Super Highway T he most commonly used exemption from registration with the United States Securities and Exchange Commission (SEC) for an offering of securities is Rule 506 of Regulation D of the Securities Act of 1933 ("Rule 506"). Rule 506 allows a company to raise an unlimited amount of money from an unlimited number of accredited and up to 35 non-accredited investors. A disclosure document, usually known as a Private Placement Memorandum (PPM), must be used disclosing all of the material information about the company and the offering. Historically, a company was not allowed to conduct a general solicitation or advertise a private offering, rather, the company principals and any broker/dealers making the offering could only approach individuals with whom they had a pre-existing, substantive relationship. On April 5, 2012, the Jumpstart Our Business Startups Act (JOBS Act) was passed which, among other things, will allow private offerings to be advertised. This is a radical change in the law which will open wide new channels for companies to raise money. Even better, another piece of the JOBS Act increased the threshold for the requirement for companies to register under the Securities Exchange Act of 1934 and file periodic reports with the SEC (i.e., a reporting company) from 500 shareholders to 2,000 shareholders (as long as the company doesn't have 500 shareholders who are not accredited investors). $200,000 in each of the two most recent years with the reasonable expectation of the same in the current year or joint income with a spouse in excess of $300,000 in each of the two most recent years with the reasonable expectation of the same in the current year. Rule 506 offerings will continue to enjoy the luxury of no SEC review, no state securities regulator scrutiny, and the ability to make the offering in all 50 states and only to have file notice filings with the SEC and the states of residence of each investor 15 calendar days after a sale is made. Note that the new advertising allowances will not apply to private offerings exempt pursuant to Rule 504 (up to $1,000,000 every 12 months) or Rule 505 (up to $5,000,000). The final rules are required to be enacted by Independence Day (isn't that ironic), but the SEC could ask for an extension of time to enact the final rules. Companies and their professional service providers, such as law firms, public relations agencies, etc., should start planning and preparing their advertising now to capitalize on these new allowances to increase their financing sources. The publisher of Micro Cap Review magazine will also be publishing Private Placement Review magazine, both in print and on-line, devoted exclusively to advertising private offerings. n During her 20-year legal career, Lynne Bolduc has structured and implemented over $1 billion in financings. A Partner with Oswald & Yap, Lynne practices corporate and securities law. She represents both private and public companies, as well as investment bankers and broker/dealers. Lynne's experience includes entity selection and formation matters for businesses just getting started; contract negotiations, review, and drafting; mergers and acquisitions; private offerings; public offerings; and public company reporting with the Securities and Exchange Commission. She is a member of the Board of Directors of the National Investment Banking Association and frequently serves as an expert witness in corporate and securities cases. Lynne is a Contributing Editor to Private Placement Review magazine. n BY LYnnE BoLDUC, ESQ. The company must also have more than $10 million in assets, in addition to the 2,000 shareholders, before it is required to become a reporting company. So a private company will now be able to advertise one or more private offerings, raising an unlimited amount of money, from up to 2,000 accredited investors before having to worry about the expense and time burdens of becoming a reporting company. While we do not yet know what the final rules for advertising a private offering will be exactly, it is a virtual certainty that you will be able to advertise your private offering using the following mediums: � Traditional print media (newspapers, magazines, etc.); � Internet (company website, digital print media websites, etc.); and � Social media (Facebook, Linkedin, etc.). A company is only permitted to advertise its private offering if the company is offering its securities exclusively to qualified institutional buyers and accredited investors. A qualified institutional buyer is a financial institution that owns and invests at least $100 million in securities of other companies. In general, accredited investors are individuals with: An individual net worth or joint net worth with their spouse in excess of $1 million (excluding primary residence); or An individual income of more than www.stocknewsnow.com�www.snnwire.com�www.microcapreview.com Micro-Cap Review Magazine 11 F E AT U R E D A R T I C L E Hidden Opportunities in Hong Kong Micro Caps T Due to Hong Kong's high level of autonomy from a political perspective and close economic tie with China, investors can find some attractive risk/return profiles for undiscovered micro cap investment opportunities on the exchange. The Hong Kong Exchange (HKEx) has over 1400 companies of which slightly more than 200 companies have a market cap greater than US$2 billion. In other words, approximately 85% of the listed companies have a market cap less than $2 billion. At the end of March 2012, mainland Chinese companies accounted for 58% of the HKEx market capitalization. In comparing large cap hanks to its cultural ties to China and its western approach to capitalism, many investors are looking to the Hong Kong Exchange for tactical additions to their portfolios in order to profit from the economic boom in China and Southeast Asia while lowering their geopolitical risk. and micro cap Hong Kong stocks, large cap stocks tend to generate revenue regionally or globally, whereas micro caps are more likely to depend on local consumption and have a stronger relationship to the Hong Kong / Southeast Asian economy. As a result of the trend of increased listings in Hong Kong over the past several years, micros cap companies have greatly benefited from investors' appetite for exposure to China compared to 10 years ago. However, micro cap companies tend to be extremely cyclical in that they perform very well during bull markets but quickly fall out of favor during bear markets. Additional risks associated with investing n BY LESLIE RIChARDSon 12 Micro-Cap Review Magazine www.stocknewsnow.com�www.snnwire.com�www.microcapreview.com SNN Microcap salutes the recent StockNewsNow StockNewsNow BioMaryland LIFE Prize winners Sara Sukumar, Ph.D. Johns Hopkins University Co-Director, Breast Cancer Program, Sidney Kimmel Comprehensive Cancer Ctr. James Gammie, M.D. Professor of Surgery Head, Division of Cardiac Surgery Cynthia Salorio, Ph.D. University of Maryland Developing a mitral valve repair device providing a minimally invasive alternative to open heart surgery. Johns Hopkins University Asst Prof, Dept of Phys Med & Rehab; Pediatric Neuropsych, Kennedy Krieger Inst. James Galen, Ph.D. Associate Professor University of Maryland Medical Center University of Maryland Developing a vaccine against the deadly gastrointestinal disease caused by the Clostridium difficile bacteria. Developing biomarkers to better predict disease progression and response to therapy for patients with breast cancer. Developing a noninvasive device to aid patients with hemiplegia (marked by severe motor deficits on one side of the body). Leading Innovative Faculty Entrepreneurs ..turning RESEARCH into REALITY www.biomaryland.org in Hong Kong micro caps can include low liquidity, limited trading as well as higher trading costs and hidden fees. Moreover, almost every listed Hong Kong company is controlled by a major shareholder, many with family interests. The Hong Kong Exchange was the world's largest bourse by market value up until March 2012 when the CME Group took the number one spot emphasizing the competitiveness of the global markets. In response to the increasing global competitiveness, the exchange has launched a three year strategic upgrade plan. Recently, the HKEx launched its new $380 million technology program, Orion, as a move to boost trading speeds and expand its derivative business and, the exchange has implemented the second phase of its trading hours changes for securities and derivatives with the goal of increasing liquidity. Later this year it aims to complete the construction of a new, $1.5 billion data center that will accelerate Hong Kong's trading. The full upgraded system is scheduled to be rolled out in 2013. The main benchmark for Hong Kong equities is the Hang Seng Index (HSI) while micro caps performance is often measured against the Hang Seng Composite Small Cap Index (HSSI). Year-to-date* the HSI and HSSI are up 14.4% and 10.9%, respectively. Another popular micro cap index is the MSCI Hong Kong Small Cap Index which is up 16.3% year-to-date. The index is a free float-adjusted market cap weighted index designed to measure the performance of small cap equity securities in the bottom 15% of equity market capitalization in Hong Kong. Even though the HSSI tends to underperform the HSI, there are numerous opportunities to find quality micro cap companies that are under represented on the exchange and off the radar of most investors. Mr. Edwin Chen, UBS Small and Mid Cap equity analyst, stated that even though fundamentals may have reached bottom for small and mid cap companies, he remains cautious on their outlook as the recovery in equity performance is expected to take a bit longer. However, Mr. Chen believes that U.S. export focused small caps may turnaround ahead of their domestic focused peers based on the strengthening U.S. economy. Furthermore, at the end of March UBS held their first Small and Mid Cap Corporate Day. Takeaways included continue high revenue growth through 2012 for a few niche companies that are not dependant on macro trends including Sunny Optical (HKG:2382), a manufacturer and distributor of optical and optical related products and Stelux (HKG:0084) an operator in mass-market watch retail market in Hong Kong. Sunny Optical and Stelux are up 33.9% and 18.3% year-to-date, respectively. Additionally, small cap exporters Man Wah (HKG:1999) and Samson (HKG:0531) have experienced strong new order flows as a result of the improving U.S. economy and are at full capacity until May � July 2012. Samson is up 15.6% year-to-date while Man Wah is down 10.7% year-to-date. More recently, Mr. Chen met with the management team from CPMC (HKG:0906), Sitoy (HKG:1023) and Tangong (HKG:0826) and reported that all companies have optimist growth numbers for 2012. CPMC is up 54.3%, Sitoy is up 18.2% and Tangong is up 48.1% year-to-date. A few other strong performers for the year include Soundwill Holdings (HKG: 0878), an investment company with holdings in five segments of the property market in Hong Kong, which is up 41.6% year-to-date. SITC International (HKG:1308) provides marine transportation and warehouse services in Asia and is up 19.0% year-to-date. The company's niche focus on Asia is expected to enable the company to record above industry earnings in 2012 as the intra-Asia market is expected to have the strongest growth of all regions. Mr. Brendon Park, fund manager at investment company Goldswell Asset Management, has been investing in micro and small cap companies listed on the Hong Kong exchange since October 1991. Mr. Parks believes there are many opportunities to find hidden gems among small and micro cap companies listed in Hong Kong. Since inception in October 1, 2004 through April 19th 2012, the Goldswell's Hong Kong Small Cap Value Fund is up 82% after management fees compared to HSI and HSSI which are up 60% and 21%, respectively. The HSSI Total Return Index which including dividends is up 53% over the same period. He attributes the performance of his fund to a heavier weight on industries and stocks that are expected to outperform the market. There are several ETF that track HKEx small caps such as the IQ Small Cap Hong Kong ETF (NYSEARCA: HKK) which seeks to replicate the IQ Hong Kong Small Cap Index, a benchmark that includes about 100 small cap stocks. Year-to-date HKK is down 35.6%. The ETF doesn't include huge financial institutions or oil companies, but rather smaller companies that may offer up more of a "pure play" on the Hong Kong economy. In January, 2012, iShares MSCI Hong Kong Small Cap Index Fund (NYSE:EWHS) was launched. The fund corresponds to the price and yield performance, before fees and expenses, of the MSCI Hong Kong Small Cap Index and is up 15.4% year-to-date. *Note � year-to-date is from January 1, 2012- May 4, 2012 n 14 Micro-Cap Review Magazine www.stocknewsnow.com � www.snnwire.com � www.microcapreview.com F E AT U R E D A R T I C L E Shoreline Energy Corp. The Junior Oil & Gas Company that pays dividends S horeline Energy Corp. Ticker: SEQ on the Toronto Stock Exchange is a junior oil and natural gas exploration and production company located in Calgary, Alberta Canada with its core land and production in the Peace River Arch ("PRA") in North West Alberta. Of the several hundred junior oil and gas companies in Canada, at least half of which are publicly traded, Shoreline is currently one of the only junior oil and gas company on the TSX paying a sustainable quarterly dividend. Shoreline's game plan is to acquire oil and gas assets in a perceived weak commodity price environment and weak economic environment when sellers are focused on their balance sheet and not their operations and assets. Three of the five acquisitions Shoreline completed in the PRA, were assets purchased from major producers. In these transactions, Shoreline acquired a working interest in 17 production facilities and is now operator of several of these facilities. For Shoreline to have a working interest in or to be the operator of a processing facility is a huge benefit and one that can be most valuable in times of weak commodity prices when every penny counts. The benefits to Shoreline from operating its own processing facilities are reduced operating and transportation costs which have a measurable difference to the bottom line. As a result of these five strategic acquisitions, Shoreline owns a majority interest and is the operator of each of its drilling locations and operations. The 3 key components of why Shoreline is a smart buyer 1. Buy assets with existing positive net cash flow PLUS growth through development opportunities that allow for a balanced 50/50 oil to natural gas mix with long reserve life index. 2. Acquire as much of the needed facilities and infrastructure from the vendor and their partners. 3. Only buy assets and reserves that the team knows, understands and has experience drilling and operating. Given the low natural gas price environment that has persisted since mid 2008, Shoreline has purchased natural gas producing properties at low price metrics (on average less than $30,000 per flowing barrel or equivalent) and uses that production cash flow to pay a dividend and to drill light sweet crude oil wells. On May 1, 2011, the day of Shoreline's IPO, the Company was produc- ing 750 BOED with just 12% of that being oil, today they are producing approximately 1750 BOED, 25% of that being oil. The company is targeting a 2012 rate of 2180 BOED at 40% oil production mix. Drilling Shallow drilling of light sweet crude, 1800meter deep vertical oil wells beside deeper 3800meter resource type natural gas wells. Shoreline is drilling into known producing oil pools. When enough vertical wells have been brought on stream to prove up and delineate the reservoir, horizontal wells are drilled to increase the production volumes and rates. On average, a conventional horizontal well will cost twice that of a vertical well, but will produce 4 times as much oil at 4 times the current production rate. A simple economic formula, 2Xcost, 4Xproduction. Today Shoreline's current base production and longer than average reserve life index plus 16 Micro-Cap Review Magazine www.stocknewsnow.com � www.snnwire.com � www.microcapreview.com fact, a sizeable