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Quarter 1 • 2013

oreline EnergyExploration, Corp. Development and Production

of Petroleum and Natural Gas GELES CALIFORNIA, DECEMBER 5TH, 2012. n Ticker: SEQ.TO



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Cover Story: Shoreline Energy (6) mbleUpon Digg StockNewsNow Radio Gary McKenzie (8)

e Energy Corp.



A Rational, Practical and Logical Approach to General Solicitation (9) Organic Alliance (14) Technorati Ask Mr. WallStreet (15)



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Raptor Ranch (16) Marksmen Energy (70) TheraKine Limited (25) AL International (72) AccuHealth (28) Investing in Micro-Caps by Chris Lahiji (30) Kesselrun Resources (58) Graphite One Resources (66) Targeted Market Awareness by Robert “Bobby” Kraft (68)

Micro-Cap Insurance Corner (86) Matmown (92)

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E D I T O R I A L Follow us: @StockNewsNow SNN Incorporated and the Micro-Cap Review 4766 Admiralty Way #13004 Marina del Rey, CA 90295 PUBLISHER Sheldon “Shelly” Kraft, SNN Founder, Chairman, CEO Wesley Ramjeet, SNN CFO EXECUTIVE EDITOR Lynda Lou Kane Kraft, SNN President ASIAN PACIFIC CORRESPONDENT Leslie Richardson SNN Compliance and due diligence administration Jack Leslie chairman of snn advisory board George R. Jensen Jr. ADVERTISING Sheldon Kraft 818-730-6000 SNN VP OF COMMUNICATIONS AND SOCIAL NETWORKING Robert “Bobby” Kraft @stocknewsnow Executive VP of Marketing Shane Hackett STOCKNEWSNOW RADIO Gary McKenzie SNN VP OF SALES Peter Orthos SNN CORPORATE COMMUNICATIONS Trudy M. Self CIRCULATION GRAPHIC PRODUCTION Tony Vibhakar VIDEO EDITOR-PRODUCTION ASSISTANT Sammi K. Kraft

Micro-Cap Review Magazine is published Quarterly, Spring, Summer, Fall, Winter POSTMASTER send address Changes to Micro-Cap Review Corporate Offices. ©Copyright 2013 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.


s I sat down to write this editorial for our year-end issue of the Micro-Cap Review, I realized and reflected that I have personally been through some tough years, as many of you have, but 2012 for me and my family on a personal level, was the worst of the worst. Markets go up and down and some even go sideways, but at the end of the day, win or lose, it’s still only money. Money is replaceable. On October 9, our precious 20 year old daughter, Sammi Kane Kraft, tragically passed away as a passenger in a horrific fatal car crash in Los Angeles, California. She walked out our door and never came home. We got that dreaded call from the California Highway Patrol. Sammi’s organs were donated which give hope and extended the lives of many others. To all of our readers, subscribers, friends, and colleagues, The Kraft Family would like to extend a warm thank you for all of your best wishes and compassionate sympathies expressed to our family. Your loving words of kindness and your caring provided us with comfort and continue to help us in our grieving period. We created a website, produced by the Kraft family as we plan to keep her music alive. One reason, I brought up my personal life is that our personal lives relate to our business careers. As “Micro-Cappers” and financial media, we attend conferences and meet many Biotech, Medtech and Life Sciences companies devoted to developing new drugs, devices, treatments and techniques, which bring so much hope to others. The research, amazing discoveries, and clinical trials that these companies provide embody the true essence of the emerging growth micro-cap market and set an example of meaningful capital raising for the benefit of humankind. We desperately need these companies to exist, discover breakthroughs, create new molecules and treatments and continue to be funded. Our mission at SNN Inc. is to bring as many of these emerging growth companies to your

attention as possible. Sammi would have wanted us to get on with our lives and our business so here we are. To the Kraft family, getting back to business meant, among other things, putting together this issue, the year-end/first quarter issue of the Micro-Cap Review magazine. SNN Incorporated will continue to provide public and private micro-cap and emerging growth company CEOs with a platform for their voice, and media to tell our audience their unique story and to increase market awareness and investor visibility. Shortly after Sammi’s passing, Hurricane Sandy hit and smashed the east coast taking out many of our friends and families’ homes and businesses, impacting their lives forever. This past year had so many tragedies on so many levels for so many of our friends and associates that we apologize for not including them all but we are thinking of you. Microcap companies, across a wide spectrum of sectors, dependent on reaching or exceeding revenue projections and still others hoping to complete a funding in the fourth quarter of the year we hope 2013 brings prosperity. As 2013 begins, President Barak Obama is in the White House for another four years. Thank you, Mr. President, for signing the Jump Start for Jobs Act into Law during your first administration. I believe this law will have a positive effect on micro-cap companies for years to come. To our friends out there in the global junior resource sector we support you and we are here for you! Let me thank you, our readers, for your continuing support on behalf of the SNN family and the many emerging growth microcap companies depending on your support.

Sheldon “Shelly” Kraft Publisher n In Loving Memory of Our Precious Daughter and Sister Sammi Kane Kraft

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 before investing view • •

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9 A Rational, Practical and Logical Approach to General Solicitation By Nancy Cass, Esq., Mitchell D. Goldsmith, Esq., Camilla Merrick, Esq. 19 Biotech: Outlook 2013 By Seth and Stan Yakatan 22 A New Price Paradigm for Platinum and Palladium By Michael S. (Mickey) Fulp 30 What to Look for When Investing in Micro-Cap Companies By Chris Lahiji 32 A Different Way to Invest By Leonard Rosen 34 Restructuring a Micro-Cap Company By Erik Nelson 38 The Year (2013) of Social Media Integration & Empowering of the Users By Dr. Gordon Chiu 40 Attention Wall Street Shoppers By Fred Johnson 42 Why IR? By Keith Lippert 45 Silver Past and Silver Future By David Morgan 52 Bright Outlook for Southeast Asian Countries in 2013 By Leslie Richardson

16 Grand Canyon Raptor Ranch

Financial Books

56 One on One with David Drake on the Jump Start for Jobs Act 62 Growth Equity Investors Dominate 2012 PIPE Market By Brett Goetschius 64 Introduction of the Commodity Markets By Mark Shore 68 Targeted Market Awareness & Pinpoint Investor Visibility By Robert “Bobby” Kraft 74 New BD Formations & BD Withdrawal Summary By David Alsup 77 Trouble is Opportunity By Jonathan Hornik, Esq. 80 What I Learned About Graphite By Greg Bowes 82 The Evolving Direct Public Offering Market Shows Promise for Early Stage Companies By Thomas Carter 86 Micro-Cap Insurance Corner By Eugene B. Podokshik 88 “Closure” By Rabbi Stephen Robbins

Profiled Companies

6 Shoreline Energy

31 Caveat Emptor or Buyer Beware Written by Sheldon “Shelly” Kraft

25 TheraKine Limited

54 OrphanBiotec

Legal, Tax & Accounting

60 The Compliance Corner By Russell C. Weigel, III

Financial Puzzle

Comic Strip

61 SNN StockWord Puzzle 79 WallStreet Chicken - Episode 7


94 Ombudsman By Jack Leslie • •

28 AccuHealth Technologies 58 Kesselrun Resources Ltd. 66 Graphite One Resources 70 Marksmen Energy 72 AL International, Inc. 92 Matmown, Inc. 76


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Superior Execution & Growth W hen we last looked in on Shoreline Energy Corp., TSX:SEQ (“Shoreline”) in the summer of 2012, the company was producing 1,550 barrels or equivalent per day (“Boe/d”), having doubled production since their IPO in May 2011. This has catapulted quarterly revenues and funds from operations up 181% and 170% through the first nine months of 2012, respectively, allowing the Company to reward shareholders with $0.56 per share in cash dividends in 2012, representing an effective yield of between 10% and 14%. Shoreline was thrilled with the results of their first quarter oil drilling program and was busy planning the remainder of their 2012 capital expenditure program. Having experienced a pullback in commodity prices and challenging capital markets in the second quarter, Trevor Folk, CEO and the executive team at Shoreline decided to take decisive and immediate action. Mr. Folk set several aggressive goals and strategic priorities for he and his team to plan and execute immediately: • Accelerate the Company’s light oil drilling program in the Peace River Arch of northwest Alberta by drilling an additional 6 wells in 2012, and • Execute a strategic and accretive acquisition that would increase oil production and revenues thereby improving dividend sustainability. • Implement strategic gas hedges to protect cash flow and dividend payments.

time to redeploy the Company’s capital into projects and assets that would further enhance Shoreline’s long-term cash flows. By doing so while maintaining a disciplined framework around returns on invested capital, Mr. Folk set out to differentiate Shoreline from many of its peers.

US Expansion Beginning in July, Shoreline took advantage of rising commodity prices and began to hedge production for the remainder of 2012 and 2013 at prices above the internal budget requirements. Coupled with Shoreline’s ability to maintain a low cost of production, the Company has generated record revenue each month since June on the company’s base production of 1,550 Boe/d. In August, Shoreline raised $17.0 million in the form of an unsecured convertible debenture with 100% of proceeds to be used for drilling development type oil wells in the Peace River Arch. On the first of September,

Shoreline began drilling the first of a six oil well drilling program in the Peace River Arch, and completed the drilling program in late December 2012, achieving an overall success rate of 86%. Shoreline added a total of approximately 800 Boe/d to its account through this investment and will begin to receive income in the next month as pipeline crews complete their tasks in the field. Shoreline achieved a significant step forward in accelerating its long-term growth on November 20th, 2012 when it announced its entry into the prolific Denver-Julesberg Basin (“DJ Basin”) by acquiring a nonoperating working and royalty interest in the Wattenberg Colorado Project for approximately $12.5 million. The Wattenberg Project is currently an area of a large scale, low risk horizontal development well program, using multi-stage frac technology, led by Anadarko Petroleum Corp. and Noble Energy Inc., with participation of a number of other senior oil and gas producers. The acquisition gave Shoreline a variety of royalty interests

Put Simply “Growth by Drilling and Acquisition” Mr. Folk firmly believed that now was right


Micro-Cap Review Magazine • •

oil pools. While expanding production and cash flows from its existing wells in the Peace River Arch and the working and royalty interests in the Wattenberg Project remain its top priorities, Management continues to evaluate other bolt-on acquisition opportunities that could further diversify Shoreline’s asset base and increase its long term growth.

Outlook for 2013

ranging up to 1.45% on over 150 land tracts spanning over 22,000 gross acres, with an estimated 400 - 700 potential drilling locations on the acquired acreage. The vast majority of the wells in the Wattenberg Project are producing light sweet crude oil. Netbacks from Shoreline’s royalty position is forecast to average between $75.00 and $80.00 per Boe for 2013 based on current forward strip commodity pricing, which would translate into an IRR of over 35% for Shoreline. In addition to moving the Company closer to its goal of a balanced portfolio of 50% liquids and 50% natural gas, the acquisition could potentially increase Shoreline’s cash flow by USD $500,000 per month by December 2013. To further increase it’s footprint in this world class project, on December 21 Shoreline announced the purchase of a nonoperated working interest in the DJ Basin. This working interest property is operated by Anadarko and Noble Energy, the most active and experienced drillers on this play. With between 100 and 150 potential drilling locations on the working interest lands, the future looks bright for Shoreline. In February 2013, Shoreline closed it’s third and fourth acquisitions in the DJ Basin, where the Company acquired a pre pooled non-operated working interest of an average of 14% over 4,500 gross acres. The new acquisitions currently generate $400,000 to $500,000 per month in net income and are being actively developed with horizontal Niobrara and Codell wells.

As of data available in November 2012, the initial 21 wells were on production on Shoreline’s royalty lands, with an additional 24 wells drilling or planned. When one considers the 8 new horizontal wells already on production on the Company’s working interest lands, as well as a 6 to 8 year drilling inventory on its’ entire land base the company now owns, the potential cash flow growth from these assets could be as much as ten fold.

Strategy is Forming This management team continues to make opportunistic, prudent decisions when deploying its precious cash resource among many drilling and acquisition opportunities. Both the Canadian and U.S. assets fit the Company’s historical and future mandate of drilling horizontal wells between producing vertical wells, thereby exploiting know • •

Management is currently finalizing its 2013 capital expenditure program, which will be based on recent success of its Peace River Arch drilling program, and harvesting the highly profitable potential in Wattenberg . The Company is confident that a combination of rising production, firm commodity prices and its ability to operate as a low cost producer, will sufficiently fund its drilling programs and still pay a recurring cash dividend. To further increase the capital flexibility the Company announced in mid February a private placement of common shares in Canada, with the assistance of Macquarie Private Wealth. The Company has been presented with several proposals to increase it’s presence in the United States, and is currently evaluating all options, which may include a U.S. national exchange listing..Investors looking for an undervalued stock with a unique blend of growth and income should give Shoreline Energy a look. n

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A Rational, Practical and Logical Approach to General Solicitation A Dramatic Shift from Exempt Private Offering to Exempt Public Offering


or years the markets and regulators have debated the pros and cons of the prohibition of public advertising for the sale of securities in private offerings. The debate is not over, but the decision has been made that general solicitation for certain 506 private placement offerings will be a reality. While much remains the same, rules issued by the Securities and Exchange Commission (SEC) will place additional requirements and compliance demands on companies that plan to publicly promote their private placements. Management, board members and

investors seeking a practical and rational approach to comply with the new framework for public advertising may find this article of benefit to their companies. The Jumpstart Our Business Startup Act (the JOBS Act) requires the most sweeping change to the Private Placement Offering Exemption since the adoption of Rule 506 promulgated under Regulation D. Under the current version of Rule 506, public comment about an ongoing 506 offering could jeopardize an issuer’s ability to rely on the safe harbor in Rule 506. The new, proposed

n BY Nancy Cass, Esq. Mitchell D. Goldsmith, Esq. Camilla Merrick, Esq. • •

Micro-Cap Review Magazine


version of Rule 506(c) does away with this limitation altogether. Under proposed Rule 506(c), a company will be free to make public comment and advertise, as long as the company sells its securities to accredited investors only and takes reasonable steps to verify that purchasers are accredited, making it easier to reach potential investors. As the Ohio Division of Securities notes, the JOBS Act creates “a new and unprecedented exempt form of public offering….” The JOBS Act directed the SEC to amend Rule 506 by July 4, 2012 to permit general solicitation and advertisements in certain Rule 506 offerings. The SEC has taken longer than anticipated to finalize and adopt the proposed Rule 506(c), and companies cannot generally solicit and advertise their private offerings yet. The choice of Mary Jo White as chairman of the SEC may further delay the adoption of the proposed Rule 506(c). While timing is difficult to predict, Ms. White has a reputation for making tough decisions and getting things done. Now is the time to educate your Board and consider how it can take advantage of the proposed Rule 506(c) and if it should be part of your company’s capital raising strategy for 2013.


Know the (Proposed) Rule 506(c) On April 5, 2012, the JOBS Act was signed into law, and provides that once effective, under the proposed new Rule 506(c), general solicitation and general advertising is permissible so long as all purchasers are “accredited investors” and the company takes “reasonable steps to verify that purchasers … are accredited investors, using such methods as determined by the Commission.” The Commission has preserved the existing Rule 506 in proposed Rule 506(b) for companies who will not engage in general solicitation, and thus are not required to verify purchasers’ accredited investor status. Importantly, under proposed Rule 506(c), companies taking advantage of the general solicitation option will be required to prove that the exemption applies and that they have the documentation to establish compliance. Accordingly, companies working with their bankers and legal counsel must be cautious and mindful of the requirements of Regulation D and prepare and retain documentation establishing the availability and compliance of the Rule 506(c) exemption.

Micro-Cap Review Magazine

Reasonable Steps to Verify Investor’s Accredited Status – What Does This Mean? Proposed Rule 506(c) requires companies “to take reasonable steps to verify that purchasers of the securities are accredited investors.” The company is not required to have actual knowledge that a purchaser is an accredited investor; rather, the company, after taking reasonable steps to verify accredited investor status, must have a reasonable belief that the purchaser is accredited. Most likely companies will no longer be able to rely on investors’ self-certification alone to satisfy their obligation to verify accredited investor status under Rule 506(c). Rather, the determination of whether the steps taken are “reasonable” will require an “objective determination based on the particular facts and circumstances of each transaction.” The Commission has provided some guidance on the factors that bear upon whether the company has taken reasonable steps to verify accredited investor status, including the nature of the documentation reviewed by the company. For example, federal tax returns are inherently more reliable than other types of documentation and therefore the company may rely upon W-2 forms, verifiable net worth statements and similar documentation. The difficulty is that individual investors may not want to provide the private and personal information necessary to establish accredited investor status, and the company will be tempted nonetheless to accept the investment because of its overall belief they are accredited, even if objective proof is lacking. If it is a fund that maintains accredited status by virtue of all investors in the fund being accredited a self-certification from the fund may not suffice. The specifics are yet to be outlined and a careful reading of the rules by legal counsel and bankers will be ongoing as these concepts evolve. This is a good time to gather your team of legal, banking and management to get every- • •

one on board with the specific screening method established. Deal with the details on the front end of an offering, to be efficient and avoid providing investors with conflicting information. Erring on the side of obtaining greater amounts of information will provide greater likelihood that the Company has obtained appropriate accreditation verification. Going back to investors to get additional documents signed after an investment has been received is challenging, time consuming and undermines the confidence of your investors and their advisors. A company without a logical and effective method in place to verify investor accreditation might be required to offer rescission rights to its accepted investors. The nature of the offering also may be relevant to determine the reasonableness of the steps. A company that solicits investors over the Internet or in a general publication is expected to be required to take greater care to verify accredited investor status than a company that either is soliciting from a group of investors with whom it had a preexisting relationship or that solicits from a third-party such as a broker-dealer with a documented know your customer prescreened high net worth investors’ database. Though companies need beware that not all databases are updated nor compiled with the information required for compliance. The amount of the investment also may be relevant to establishing reasonable belief. If the potential purchaser is able to fund an investment approaching $1 million without financing, that could support the reasonableness of the company’s steps. A company that is receiving its accredited investors from broker-dealers will have an easier time demonstrating reasonable belief and compliance. The Commission has noted that companies may continue to rely on third-parties, such as broker-dealers, to verify accredited investor status. This makes sense in light of the fact that broker-dealers are subject to liability under the securities laws, have obligations under “know-yourcustomer” and anti-money laundering rules


and regulations, and are subject to inspections and examinations by the Commission and other regulators. Thus, companies using a FINRA Banker reduce their work and risk. Groups, such as Investor Relations or IR consultants will typically not have the level of information about investors as required by FINRA for customers, therefore it is recommended your securities attorney and FINRA banker be part of any decision to work with consultants that utilize these databases. Compliance is essential, not only for the current capital raise, but also as it relates to institutional investment, IPO’s and M&A transactions, since a critical due diligence linchpin for each of those transactions will be the company’s ability to establish that it complied with Rule 506(c) in its prior financings.

“Tell the truth” – Disclosure – What Doesn’t Change Companies should be aware that while they do not have to register the securities when offering and selling in compliance with Rule 506(c), they are still subject to all antifraud and other federal and state securities laws. While an issuer’s solicitations or advertisements may contain forward-looking statements, they may not contain any misrepresentations of material fact. Further, companies must furnish any material information that may be necessary to make any information required under Regulation D not misleading. In order to limit potential liability, companies should consider full and fair disclosure of all material terms and risks and give a “balanced presentation of risks and rewards.” Proper legends are essential and no advertising should be placed without review by securities attorney and your FINRA registered banker. Remember an error here is not a letter to a couple of investors; it can potentially affect an entire pool of investors and is difficult to correct. Ask yourself: is this the truth, the whole truth, and is it said in a way people can understand

Micro-Cap Review Magazine

it? A company is still selling securities and must not leave disclosure to its marketing department. Further, to the extent the offering is made through a broker-dealer rather than by the company directly, the advertisements and solicitations will also be subject to FINRA’s content standard in NASD Rule 2210. Due care must continue to be given to making all necessary state and federal securities filings to perfect the private offering or exempt public offering exemption.

Crowdfunding Distinguished The JOBS Act introduces the highly publicized crowdfunding exemption. Unlike the proposed Rule 506(c) permitting general solicitation, the Commission has yet to propose a rule implementing the crowdfunding exemption, however, it has indicated that one will be issued in 2013. Therefore, a final Rule 506(c) will likely be adopted prior to a crowdfunding rule. Crowdfunding is a separate and distinct exemption from the Rule 506(c) exemption. The crowdfunding exemption exempts companies from registration when the companies offer and sell up to $1 million in securities during a 12-month period, provided that individual investments do not exceed certain thresholds and the company satisfies other conditions, such as using a broker-dealer or qualified intermediary registered with the Commission. The company also must provide the Commission, the intermediary, and investors with certain information on an annual basis. Importantly, under the crowdfunding exemption, companies can sell securities to both accredited and non-accredited investors. The crowdfunding exemption also expands the integration period from six to twelve months. Under Rule 502(a), the Commission may treat sales of securities within a six-month period as part of the same offering. However, the crowdfunding exemption provides that crowdfunding offerings may be integrated with all other • •

securities offerings occurring in the previous twelve months. This is significant because if a company sells securities to accredited investors under a 506(c) offering and then later to non-accredited investors under a separate crowdfunding offering, the Commission may treat those two offerings as part of the same offering, potentially resulting in the company losing both exemptions.

How Do I Make this Work for Me – Practical Steps Now that you are bleary eyed with regulation, how do you navigate this opportunity efficiently and establish a rational plan for success. Do not go at this alone. While it is vital that the companies wanting to do an ‘exempt public offering’ under proposed Rule 506(c) wait until the final rule is adopted, this is a great time to tee your company up. Align yourself with a team of professionals who truly understand the rules. Any professionally who takes a laid back or kick the can approach to compliance with the rules will not be a good team member. Investment bankers who work in other areas such as mezzanine debt or IPO’s might jump on the new rule, but critical to the process is to work with licensed professionals acutely aware of the rules. IR groups in the microcap space will try to make inroads. Contacts in your company’s industry sector are not the key factor in successful general solicitation of a private offering. It is implicit in this opportunity to reach out to an investor pool beyond your banker’s rolodex.

Disclosures, risk factors and securities law compliance are part of the process. Not only is proposed Rule 506(c) not adopted yet, but other rules or interpretations may emerge, which could provide pitfalls for the unwary. Furthermore either an IPO or registration of the Company under the Securities Act of 1934, could be adversely impacted if a prior private offering was not reviewed by very experienced securities counsel. Similarly, once a company is publicly registered, should it seek to avail itself of a Regulation D exemption in a subsequent securities offering (including a PIPE offering – a “private investment in public equity”), it will need to continue to comply with the applicable disclosure and accredited investor requirements. Therefore, a quality securities specialist, rather than a transactional attorney without up-to-date working knowledge of the rules is a critical member of your team. Not every banker and attorney will be in favor of their clients using the new rule. As stated above the debate carries on. It will take team work of your professionals to efficiently and cost effectively manage issues that will arise. Media outlets with an existing publication or portal that has a following of investors will be in high demand as they provide exposure to the right group of readers. Media groups that expand with a related publication to support companies advertising under Regulation D will be a specialty to look for. The opportunity for misuse and abuse by opening up securities sales to public media has a strong likelihood of placing • •

heightened scrutiny on unregistered offerings, and a company needs to work smart and get the right guidance to be vigilant but practical in its compliance efforts. At the same time, public advertising will provide companies with unprecedented access to new capital sources, which in today’s environment should not be passed over. Nancy Cass is an experienced investment banker and corporate attorney. She is a co-founder of MerchantCass Advisors, a banking firm headquartered in Atlanta. She holds Series her 7, 79, 24 and 63 securities licenses and executes securities transactions with StillPoint Capital, Member Firm FINRA/ SPIC. Ms. Cass is licensed to practice law in Illinois, Florida and Colorado. Mitch Goldsmith is a shareholder with the law firm of Shefsky & Froelich Ltd. of Chicago Illinois. Mr. Goldsmith advises numerous issuers domestically and abroad in a broad array of industries with respect to their offerings and general corporate activities. Camilla Merrick is an associate with Shefsky & Froelich Ltd. and counsels domestic and foreign clients on securities offerings, securities regulation and general corporate matters. Nancy Cass, Esq. MerchantCass Advisors Telephone: 561-889-5210 E-Mail: Mitchell D. Goldsmith, Esq., Shareholder Shefsky & Froelich Ltd. 111 East Wacker Drive ‑ Suite 2800 Chicago, IL 60601 Telephone: 312-836-4006 Mobile: 312-320-4657 E-Mail: Camilla Rykke Merrick, Esq., Associate Shefsky & Froelich Ltd. Telephone: 312-836-4041 E-Mail: n

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o subscribe A company could have the greatest management, money in the bank, disruptive technology, a deep portfolio of IP, huge resources, sizable orders, a potential cure for a disease, huge potential with high expectations but if investors don’t know about it, they won’t care, and they won’t buy it or invest in the company. In fact awareness & visibility needs to be in place before the rubber meets the road and should begin early in the process of funding. Achieving funding is the most important job naturally but then the company needs to get its story out there into the market. The Jobs Act and its adjustments to rules & regulations change general solicitation methods and give private & public companies more freedom to advertise and solicit investor interest. Many consider this Act the most crucial securities law change since the 1933 & 1934 Acts. President Obama said the Jobs Act will “remove barriers for small businesses and will lead to job creation. New businesses account for almost every new job created in America,” the President spoke during the signing ceremony in the Rose Garden of the White House and added, “That’s why I pushed for this bill. The JOBS Act (Jumpstart Our Business Startups Act) removes restrictions for small business and startups to receive broader access to capital and investors. It’s for business owners who want to take their company to the next level; it’s a potential game-changer for startups. The above paragraph was included because our President used terms we are all familiar with like “startups” and “small business” and “access to capital” and “remove barriers”. SNN is dedicated to provide access to our institutional and investor database and subscribers through our products and services. The Jobs Act provides access for investors to small private and public companies, which I coin as the new “Entrance Strategy”. SNN Market Awareness and Investor Visibility begin with the entrance strategy and provide investors an ultimate “Exit Strategy”. SNN is the next step financial publishing, media, content, database and infotainment company providing reach and frequency to the exact target market for funding and market awareness. Subscribe to Ask Mr. WallStreet at place AMWS in the subject



Grand Canyon Raptor Ranch


s the name suggests Raptor Ranch is a birds of prey center that specializes in breeding native raptors (hawks, falcons, eagles and owls), but more importantly it will be an eco-tourism facility that displays native raptors in high speed, energetic out door flight demonstrations and allows visitors to become part of the raptors world. The customer base is a captive audience of 5 million Grand Canyon tourists. An independent feasibility study for this project has been conducted by Martori and Company. After extensive research the report states that they view Raptor Ranch as having “potential for excellent success”. The business model was also featured on the Fox Business News program “Your Questions – Your Money”. The Venture Capital experts on the program gave Raptor Ranch an enthusiastic thumbs up. The location along the Grand Canyon Corridor is a key component for success. This location sees far more passes of National Park tourists than any other location in the country. To date, most commercial uses along the Grand Canyon Corridor have attempted to serve the traveling public; however prior to this, none had sought to build and operate an interactive eco-tourism facility that can be enjoyed by all visitors young and old and that blends into the natural setting and enhances the area’s unique attributes. Coconino County is a steward of the Grand Canyon Corridor, and any commercial development along this corridor is subject to the approval of the county. County Planning and Zoning voted unanimously in favor of this project because they recognize this will add to rather than detract from the Grand Canyon visitor


experience. With the approval of this unique facility in this premium location it is unlikely that they would ever see a need for another. This creates a very high barrier for future competition. The $15.00 Raptor Ranch entry fee will include a self-guided tour of the falconry and natural history museum /art gallery, interpretive displays, raptor breeding facilities, incubation room, nursery, live raptor displays, and the rehabilitation centers video monitoring station. Additionally, visitors will have the opportunity to experience the highlight of Raptor Ranch: the amazing outdoor flying demonstrations, that will reveal how raptors actually act and hunt in the wild. These fast paced exciting flight demonstrations reveal raptors’ hunting techniques as they vigorously pursue mechanically simulated quarries. Such action packed performances can be seen nowhere else and are sure to be remembered for a lifetime. In addition to the self-guided tours, there are numerous visitor participatory activities available for additional fees, such

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as wildlife photography shoots, bird watching excursions, hawk walks, raptor handling, and falconry courses. The number of visitors to the south rim of the Grand Canyon National Park (GCNP) is exceptionally high; however, the time spent at the GCNP is remarkably low. While the views from the South Rim are amazing, the region offers little else in the way of activities for visitors to spend their time and money, creating a pent up demand. The combination of a low cost, proven attraction, placed within a funnel of entertainment seeking tourist traffic that will find our product highly appealing. Currently there is no direct competition. The success of Raptor Ranch’s will ultimately lead Raptor Ranch to become the #1 privately owned tourist attraction in the Grand Canyon area. The Grand Canyon Raptor Ranch is currently seeking private funding, in order to build the premier natural tourist attraction in the Grand Canyon area. n • •

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Biotech: Outlook 2013 T

he field of modern biotechnology is generally thought of as having been born in the early 1970’s with Berg’s experiments in gene splicing or when Boyer and Cohen transferred genetic material into a bacterium, such that the imported material would be reproduced. As we embark into our fortieth year of this industry, opportunities for the advancement of science and innovation abound. This article shall examine the changing business climate in which commercial efforts for biotechnology and its derivate products exist, and how that market is changing for the companies seeking commercial outcomes. The only sources of cash for a biotechnology company are investors, partners or grants. Since most biotechnology companies do not yet generate revenues, investment and partnering deals and the tracking of deals, both in terms of the volume of deals done and the aggregate amount of dollars, has become a barometer for the bell-being of the

Seth Yakatan & Stan Yakatan of Katan Associates • •

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industry. With economic pressures on pricing and reimbursement for drugs, the high failure rate of new therapies in the clinic, the limited number of new drug approvals each year, increasing consolidation among major pharmaceutical and biotechnology companies, downsizing as a result of such consolidation, and public equity markets which allow for few if any new issuers, the blueprint for how to build a successful company in the industry is becoming increasingly more difficult to pinpoint. One thing which is clear is that partnerships are still the main source of capital for biotech companies. Partnership transaction data for 2012 is still being accumulated, however it looks like 2012 is on track to meet or exceed 2011 deal levels. While aggregate partnership dollars for biotech in 2011 and 2012 are below levels of 2005, partnerships still account for in excess of 40% of the capital available to biotechnology companies. In 2012, biotechnology companies which are listed in the US public equity markets are enjoying one of the better years in recent memory. Through October 2012 the NASDAQ Index was up 12.4%, while Large Cap Biotech Index and the Small Cap Life Sciences Index were each up 32.0% and 19.4%, respectively, each well ahead of the NASDAQ. These numbers are driven by the significant performance seen in several subsectors, including the stocks in the areas of ophthalmology, inflammation, and hematology. The private markets are still tough. While


aggregate global VC dollars invested in 2012 are projected to be above 2011, US investment by VC’s into therapeutic companies still trails 2009 levels as more dollars are being pumped into potentially lower risk health care markets such as devices and diagnostics. VC investment in therapeutics during 2012 is largely cluster-based. For example, over the past four quarters close to a billion dollars in new venture cash has flowed into Cambridge, MA based companies through 122 deals. That’s a jump of 5% in funds and 27% in deals. This year has also seen an increase in the Corporate VC activity initiated by, and done in conjunction with, major pharmaceutical companies. Bruce Booth, Burrill & Company and Windhover have done extensive analysis on this subject. The analysis includes 2907 therapeutics companies that raised venture capital dollars between 2000 and 2010 across 5100 rounds of financing. Corporate VCs were investors in about 10% of companies, and this pool of 286 companies had what appears to be a markedly higher hit rate a ~60% higher rate of licensing deals, M&As and IPOs. A recent report published by NVCA/PWC in their MoneyTree earlier this year suggested that 18% of all biotech deals had Corporate VC involvement in 2010 and 2011. Merger and Acquisition activity for biotech is still robust, exits for biotech companies are still occurring and are still occurring at the early stage. The 2012 merger activity has been strong as more deals have been completed for smaller amounts, with Gilead’s

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$11 billion Pharmasset buyout leading the way, followed by Bristol-Myers’ $5.3 billion buyout of Amylin, Glaxo’s $3 billion deal for Human Genome Sciences, and BristolMyer’s $2.5 billion purchase of Inhibitex. Add it all up and Credit Suisse found a $25 billion deal tally through September 2012 compared to $10 billion at the same point last year in 2011. Deal values appear consistent in terms of time to exits, amount of capital invested, stage of development, multiples and specific sectors remaining attractive in terms of buy-side needs. Typically most deals are still being done for companies with assets that are pre Phase-II, and have an average time to exit of approximately4.5 years. Multiples are steady at approximately4.5x with premiums being paid for technologies and deals at the early stage. Oncology companies lead the way in terms of the sheer numbers of companies which achieve an exit, with the highest multiples still in the area of metabolic disease. Transactions continue to be the life blood of the biotechnology industry and the key for the survival of companies and investors. Expect that 2013 will be no different.

Seth Yakatan, Co-Founder, Partner, Katan Associates, Inc. Seth Yakatan brings more 20 years of experience as a corporate finance professional, actively supporting small cap and major companies in achieving corporate, financing and asset monetization objectives • •

through the successful structuring and management of more than several billion in completed strategic transactions and investment. Over the past eleven years as a co-founder of Katan Associates (KAI), Seth has successfully structured and managed strategic alliances and deals, with unique expertise and insight into the US and Global Life Science sector, including numerous buy-and sell-side M&A transactions. Completed Life Science transactions at KAI include: Twelve buy and sell-side M&A engagements, generating aggregate transaction value in excess of $345 million. Numerous early-stage pharmaceutical partnering assignments with aggregate value generated for clients of more than $875 million. Facilitation of several royalty monetization transactions, with aggregate realized value in excess of $125 million. Prior to founding Katan Associates in 2001, Seth worked in merchant banking at the Union Bank of California, N.A., in the Specialized Lending Media and Telecommunications Group. During his six years he completed the placement of subordinated debt and private equity investments, totally in excessive $3 billion, on behalf of the bank. Seth began his career as a venture capital analyst with the Ventana Growth Funds and Sureste Venture Management, where he gained significant experience in creating successful venture-backed life science companies. Seth is a recognized as an expert in the valu-

ation of life sciences companies, stemming from industry experience and academia. He has authored several publications and lectured and guest lectured at corporate workshop and universities on valuation theory, real-world practice and case studies and as a consultant several state and provincial governments worldwide on commercialization and capital access initiatives for. He has also served as a speaker and faculty member at multiple industry conferences including the Annual BIO International Convention Executive Workshop Series. Seth serves as an Advisor to Boston Communications, a communications consulting firm that supports business leaders in addressing their greatest communications challenges, and to The Brookwood Group, a specialized real estate and restaurant consulting firm. Seth holds an MBA in Finance from the University of California, Irvine and a BA in History and Public Affairs from the University of Denver. Seth enjoys being a Dad to his two children, participating in triathlons and long-distance cycling.

Stan Yakatan, Chairman, Katan Associates After 40 years as a successful CEO, entrepreneur, and operational manager, Stan Yakatan has dedicated the last 15 years of his career to sharing his experiences with management teams interested in building technology based companies. His experience as an execu- • •

tive is far reaching as he has served in an Executive capacity with: New England Nuclear EI Dupont ICN Pharma New Brunswick Scientific Biosearch Katan Associates These experiences have provided him with management skills and a corporate finance acumen that he enjoys sharing with others. He has founded or co-founded in excess of 15 companies in the United States, Canada, Israel, France and Germany and in many cases served as the initial CEO, and Chairman of these companies. He currently sits on the board of directors of several public and private companies and has advised several of the world’s leading venture capital firms including TVM (Germany), Ventana (USA), MSP (USA) and Biocapital (Canada). During the decade of the 1990’s Biocapital was the most successful health care venture capital fund in Canada. Stan currently served in a business development capacity for the XL TechGroup. XL Tech Group systematically discovers unmet business needs, then creates, selects, and develops new technology businesses, and scales them to liquidity. Stan assisted XL TechGroup in the development of its business model, and advised on the overall capitalization strategy for XL Tech Group. In October 2004, XL TechGroup undertook an Initial Public Offering in . Stan has also served as s Senior Advisor in Life Sciences to numerous State, Provincial and Federal government agencies These roles have been largely in a effort to assist in the development of government incentives and initiatives to foster and develop regional Life Science clusters. These efforts include work in Canada from 1993 to 1999, Israel from 1999 to 2001, and Victoria, Australia from 2002 to 2008. Stan has completed and advised on numerous acquisitions and corporate finance transactions raising in excess of $1.0 billion dollars in the public and private capital financing markets. He is a frequent speaker at financial and biotechnology conferences throughout the world speaking on topics including, “Capital Raising for the Technology-Based Start-Up” and “The Need to be Global in the Quest for Capital and Partners”. Rick Biondi, Editor of Lab Business Magazine stated,” Mr. Yakatan is a venture capital raising Guru and it is part of his genetic make up.” Stan has been the Chairman of several public companies. Stan founded and served as the Executive Director and Chairman of Biocomm, in Melbourne, Australia, the first of its kind regional business development agency and early-stage capital pool. Stan currently is Chairman of the Board of Mercury Therapeutics, Inc. which is developing new drugs AMP kinase based drugs for the treatment diabetes and cancer and sits on the Board of Directors for Phenomenome Discoveries, Inc., a novel biomarker company. Recently Stan was appointed to the Teaching Faculty at Skolkovo School of Management in Moscow. Stan currently serves as CEO of TheraKine, Ltd.,a privately held company with a novel drug delivery technology for biologics and small molecules that address drug delivery challenges in multiple therapeutic areas n

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A New Price Paradigm for Platinum and Palladium P

latinum (Pt) and palladium (Pd) are the two most commonly used of the six platinum-group metals (aka platinoids), which also include rhodium, ruthenium, iridium, and osmium.

n Michael S. (Mickey) Fulp


As a group, these metals are rare in the Earth’s crust, silvery-white, malleable, and dense. They are highly resistant to wear, oxidation, and corrosion, have stable hightemperature and electrical characteristics, and exhibit catalytic properties. The two metals are produced from primary mines and as byproducts from nickel and copper refining. They occur in unusual and specific geological environments in relatively few places on Earth. The largest deposits currently exploited are the Bushveld of South Africa, Norilsk in Russian Siberia, Great Dyke of Zimbabwe, Sudbury, Ontario, and Stillwater, Montana. According to USGS estimates, 2012 platinum mine production was 179 tonnes and palladium was 200 tonnes, down 8% and 7% from respective 2011 levels. Recycling constituted about 29% of total supply. However compared to 2012 gold production of about 2800 tonnes, these are small markets supplied by a few big mines and companies. South Africa dominated production at 74% with Russia at 13%. Remaining supplies came mostly from Zimbabwe, Canada, and the United States. Palladium mine production came from South Africa at 41% and

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Russia at 40%, followed by Canada, the United States, and Zimbabwe. As with many commodities, the United States is largely dependent on foreign supplies: 91% of our platinum and 54% of palladium consumption are imported. We consume nearly half of the world’s platinum and 30% of its palladium supplies. Because of their rarity and physical properties, platinum and palladium are considered precious metals and used in jewelry and investment coinage. However because demand is dominated by industrial applications, they are actually hybrid metals. Industrial use is overwhelmingly for chemical catalysts and dominated by exhaust systems for automobiles and trucks. In 2011, platinum use stood at 38% for auto-catalysts, 31% for jewelry, and nearly 6% for ETF investments. Other important demand came from the glass, chemical, electronics, petroleum, and medical industries. Palladium use was dominated by autocatalysts at 71%. The electronics industry consumed 16% and dental, chemicals, jewelry, and minor uses constituted the remainder. There was a significant net outflow from ETF investments in 2011. • •

Because much of the world’s supplies come from geopolitically unstable, corrupt, and/or unfriendly countries and are dominated by a few major mines, districts, and companies, platinum and palladium are subject to supply and demand imbalances and price volatility: Since the price of gold was floated on world markets in August 1971, the platinum to gold price ratio (Pt : Au) has been greater than one (>1.0) about 85% of the time. Average monthly price ratios since 1970 are charted below: Ratio reversals (<1.0) occurred at various time periods lasting from over two years to a one month spike in December 1992 when the historic low was set at 0.78. The most recent reversal was from November 2011 thru mid-January of this year. Since 1970 the price ratio of platinum and palladium has varied generally between 2.0 and 5.0, largely reflecting palladium’s inherent price volatility compared to platinum: Palladium price was fixed at the nominal price of gold ($35-36/oz) until mid-1972. From January 2000 to mid-2001, historic lows less than one (<1.0) occurred when rumors spread that Russia would cease stockpile sales to the West. Hoarding by American auto companies caused the price to briefly soar over $1000/oz. But then Russia’s balance of payments suffered, palladium was dumped on the market, and the price went parabolic. By July 2003, the metal reached a monthly average low of $162/oz. Ratio disruptions on the high side (>5.0) occurred in 1983-1984 and when auto industry demand collapsed during the global economic crisis in early 2009. My interest perks whenever an anomalous Pt : Au ratio (< 1.0) occurs over a significant time span. This indicates that platinum is oversold and presents a buying opportunity. Such was the case beginning in November 2011; only recently has the ratio gone back over 1.0. Several factors have caused platinum and palladium prices to rise substantially since

Data Courtesy of • •

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Contact: Twitter: @mercenarygeo

Data Courtesy of

early August: • In 2012, South African and Zimbabwean miners engaged in widespread, violent strikes resulting in severe supply disruptions and constrained market supplies. • An estimated 60% of South African mines currently operate at a loss or at breakeven. • Economic conditions in the United States and China continue to improve and that has stimulated automotive sales and increased demand for platinoids. • Increasing environmental regulation of the auto industry in emerging market countries has resulted in higher demand, especially for palladium. • Although information from Russia operations is closely guarded and always opaque, it has been widely reported that historic palladium stockpiles are depleted and exports will cease this year. • Analyst consensus for significant 2013 supply deficits in both metals has led speculators to accumulate net long positions. In my opinion, there is a new price paradigm developing for platinum and palladium. The supply-side case is particularly compelling with the economic viability of most primary platinum-palladium mines not economic given current price regimes. Unless prices rise substantially, South African supply disruption will evolve into


long-term destruction. The bullish case is strengthened if Russian palladium exports are indeed ending. To my knowledge, there are no new major mines that can replace these looming reductions in platinoid supply. For a myriad of reasons, I maintain an ebullient view of platinum and palladium supply and demand fundamentals and predict that prices will remain robust for the short- to mid-term.

Disclaimer: I am not a certified financial analyst, broker, or professional qualified to offer investment advice. Nothing in a report, commentary, this website, interview, and other content constitutes or can be construed as investment advice or an offer or solicitation to buy or sell stock. Information is obtained from research of public documents and content available on the company’s website, regulatory filings, various stock exchange websites, and stock information services, through discussions with company representatives, agents, other professionals and investors, and field visits. While the information is believed to be accurate and reliable, it is not guaranteed or implied to be so. The information may not be complete or correct; it is provided in good faith but without any legal responsibility or obligation to provide future updates. I accept no responsibility, or assume any liability, whatsoever, for any direct, indirect or consequential loss arising from the use of the information. The information contained in a report, commentary, this website, interview, and other content is subject to change without notice, may become outdated, and will not be updated. A report, commentary, this website, interview, and other content reflect my personal opinions and views and nothing more. All content of this website is subject to international copyright protection and no part or portion of this website, report, commentary, interview, and other content may be altered, reproduced, copied, emailed, faxed, or distributed in any form without the express written consent of Michael S. (Mickey) Fulp, Mercenary, LLC. n

Michael S. (Mickey Fulp Acknowledgement: Michelle Lopez is the editor of The Mercenary Geologist Michael S. “Mickey” Fulp is a Certified Professional Geologist with a B.Sc. Earth Sciences with honor from the University of Tulsa, and M.Sc. Geology from the University of New Mexico. Mickey has 35 years experience as an exploration geologist and analyst searching for economic deposits of base and precious metals, industrial minerals, uranium, coal, oil and gas, and water in North and South America, Europe, and Asia. Mickey worked for junior explorers, major mining companies, private companies, and investors as a consulting economic geologist for over 20 years, specializing in geological mapping, property evaluation, and business development. In addition to Mickey’s professional credentials and experience, he is high-altitude proficient, and is bilingual in English and Spanish. From 2003 to 2006, he made four outcrop ore discoveries in Peru, Nevada, Chile, and British Columbia. Mickey is well-known and highly respected throughout the mining and exploration community due to his ongoing work as an analyst, writer, and speaker.

Micro-Cap Review Magazine • •


TheraKine Limited: Tunable “Toolbox” for Drug Delivery


heraKine Limited (“TKL”) is a privately held Irish drug delivery company with research facilities in Berlin, Germany. Founded in June, 2006, the Company has developed a variety of novel drug delivery technologies for biologics and small molecules that resolve many challenges and are applicable in many disease therapies. The Company has multiple patents approved, pending, and in preparation. The global market for biologic drugs is worth over $60 billion a year. The limitation on this is that biologic drugs have to be injected or infused repeatedly. Depending on the drug, daily or weekly injections are the norm; this limits the potential indications, has safety complication, and is very inconvenient for the patient while being expensive for the health care system. In addition, the biologic pharmaceuticals industry is facing soaring R&D costs, an impending onslaught of patent expirations (over half of the patents expire by 2017), and increasing demands for improved medications. Novel drug delivery technologies are strategically compelling as a product lineextension or life-extension strategy for many global pharmaceutical and biotechnology companies. The utilization of such novel drug delivery technologies also has a highly favorable risk-reward profile. Meanwhile, their competitors see drug delivery as a compelling competitive advantage that moves them from “bio-similar” to “bio-better” status. These companies are recognizing that drug delivery technologies are a powerful strategic marketing tool to differentiate products and extend product life cycles, thereby overcoming many marketplace challenges. They are pursuing stronger alliances with drug

delivery companies, including acquisitions, to enable them to develop superior drugs and remain competitive. The market for advanced drug delivery systems is expected to mushroom from $42.8 billion in 2010 to $75.3 billion in 2015. TheraKine has developed sustained release delivery technology platforms for the local delivery of biologic drugs and small molecules. The lack of injectable long-term delivery systems has been considered to be one of the unmet medical needs preventing progress in biologic therapy. TKL’s tunable sustained release technology now enables linear release of drug products with durations from weeks to many months. To date the company has been funded with almost $2.5MM of private investment and grants. Currently, the technology platform is the subject of on-going commercial collaborations with major biotechnology companies and federal government agencies. For example, anti-VEGF biologics are used to treat wet Age-Related Macular Degeneration (AMD), and these require monthly injection into the Human Eye. We have demonstrated that we can change that interval to three or six months, which is substantial relief for the patients and the treating physician. Anti-TNFa, used for various rheumatological diseases, could, when formulated, replace months of routine injections with a single therapy according to Dr. Andeas Reiff. There are many advantages to local sustained release in therapies for common diseases. Obviously it is better to give one injection every six months than one every week, sparing patients and physicians the other 23 injections needed in that same time. Many patients currently on biologic drug thera- • •

pies are receiving long term therapy; think of rheumatoid arthritis, Crohn’s, AMD, and similar conditions where the patient will be treated for life. In these patients, reducing the injection frequency is a tremendous benefit to quality of care, compliance, and cost. There are also potential advantages in terms of safety and efficacy: a sustained release injection would allow very stable levels of the drug to be maintained, instead of the up and down dosing that occurs with repeated routine injections. For pharmaceutical companies facing end of patent life with a high-value drug, reformulation for sustained release provides new life and new patent protection, preserving the value of established franchises. TKL’s tunable Toolbox technology has been developed to enable sustained release of such proteins and macro-molecular drugs through local injectable resorbable depot formulations. The technology can be applied in therapeutic areas such as ophthalmology, oncology, neurology, neuro-oncology and rheumatology. Expansion into cosmeceuticals, dermatology, and veterinary application are all being investigated. All formulations use existing approved ingredients that are generally regarded as safe (GRAS). This will minimize regulatory overheads, safety concerns, and costs of development and trials. Demonstrated feasibility with commercially available biologics is available for review, along with small molecules, peptides, and generics. In contrast to conventional chemistry or nanotechnology methods, TKL’s matrix formulation approach is based on physical chemistry, primarily physics in the nanoscale achieved by macroscopic processing. Biologic drugs are large molecules (pepMicro-Cap Review Magazine


can reference those results without having to perform those studies themselves.

In Summary

An assortment of release kinetics possible using the Toolbox – 4 to 7 months

tides) and have molecular properties that are uniquely suitable to TKL’s approach. Where previous methods tried for sustained release have depended on the creation of chemical bonds or nano-scale containers, TKL exploits the physics of the peptide molecules directly to create sustained release matrixes. Key to the medical utility of TKL’s technology toolbox is that the active drug is not modified in any way, and remains chemically and structurally unchanged. This has significant advantages by being compatible with current pharmaceutical formulation methods, reduces development time, and may dramatically reduce the regulatory burden when used with already approved biologic drugs. The graph above shows TKL’s ability to tune release kinetics using the Toolbox technologies, in this case for four to seven months of duration. By exploiting the nanophysics of the biologic drugs, TKL can achieve most desired therapeutic dosing requirements. Shorter durations are also possible. We are currently delivering the matrix as a suspension for injection with needles as small as 27 gauge, but paste and semi-solid forms are also possible, as well as topical formulations. Used in conjunction with existing interventional methods (guided injection or catheters), local delivery to every organ in the body is feasible, even inside the blood-


brain barrier. Because we can use a large variety of ingredients to create matrixes that can be hydrophilic or hydrophobic, and vary the processing conditions to adjust the release kinetics from days to many months, we refer to this as a Toolbox Technology – a comprehensive platform solution that enables almost any desired therapeutic profile for biologic drugs. Routine assessment of release kinetics is performed using conventional laboratory methods. Various Toolbox formulations have been independently tested at the Charité University in Berlin, the University of Cork, the University of Potsdam, the Vardinoyiannion Eye Institute of Crete (VEIC), and the United States Air Force (USAF). Parner pharmaceutical firms have also performed their own tests, and the company will be entering pivotal trials shortly. Since TKL’s Toolbox uses GRAS materials, commercial partners can seek the lowest-risk submission pathway whenever they have an already approved drug. This path is defined in 505(b)(2) of the Food, Drug, and Cosmetic Act, and requires only that the new functionality be supported by an additional trial establishing safety and at-least equivalent efficacy. To support this, TKL will be conducting key studies that will be submitted to the FDA so that commercial partners

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• TKL has a Toolbox of technologies that enable sustained local release of biologic drugs, peptides, and other difficult to formulate drugs. • These technologies may also be useful with many classic small-molecule drugs. • Only GRAS materials are used to formulate the injectable matrix. The properties of the matrix – dose, release kinetics, tissue compatibility, and more – are all tuneable. • The resulting drug delivery matrix stabilizes biologic drugs so that they are still active even after many months. Test systems have exceeded one year of linear release kinetics. • Release durations from a few days to over six months have been demonstrated – and both linear and non-linear kinetics can be tuned into the matrix using the TKL Toolbox. • The regulatory path for the resulting therapeutic has been reduced as much as possible, in compliance with FDA and EU regulations. • No chemistry is involved. The formulation exploits the properties of the biologic drugs to achieve long release without any changes to the drug. • The Toolbox has been shown effective with a variety of biologic and conventional drugs, with data available for review. • Feasibility testing with new drug candidates can be done quickly. In conclusion, the novel and tuneable, site specific drug delivery technology developed by Therakine offers an excellent investment opportunity for a pre IPO company in the biotech space. For more information: www. n • •

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AccuHealth Technologies: Empowering Person Centered Health and Wellness


ou could feel the palpable excitement in Atlanta during the 2013 Southeastern Medical Device Association conference on February 19-20, 2013. Cardiologist, Founder and CEO of AccuHealth Technologies, Dr Elizabeth Ofili, describes the mobile technology innovation which uses persuasive self motivation to empower people with chronic health conditions to tackle the intractable problem of non adherence to treatment and behavior change. According to Dr Ofili, who has practiced cardiology for over twenty years “ I share the deep frustration that my patients experience, because they are not able to overcome the challenges of multiple co-occurring chronic health conditions like heart disease, diabetes, high blood pressure and high cholesterol. Many patients fall short in their attempts to sustain the increasingly complex regimen of medications and behavior change that these conditions demand” Dr Ofili’s experience underscores the enormous challenge of managing chronic health conditions. Over 184 million Americans are affected by one or more of the following chronic diseases: heart disease, cancer, mental disorders, chronic lung disease, chronic kidney disease, hypertension, diabetes, arthritis and stroke. Each year, chronic diseases cost the nation a staggering $264 billion, due to health complications and lost


productivity. Since patients with chronic diseases spend the majority of their time outside the healthcare system, mobile technologies should sustain cost effective person centered prevention and intervention. AccuHealth Technologies Inc. has assembled an impressive team of talented software engineers, physicians and communications specialists, to design e-Healthystrides© for the ultimate consumer experience. According to Bethany Saint Clair, Chief Technology Officer at AccuHealth Technologies, “ I have been developing health technology software for over fifteen years. This IP protected innovation shows Dr Ofili’s vision and commitment to commercialize personalized technologies that improve health and wellness.” e-Healthystrides© allows consumers to connect with multiple devices such as blood pressure monitors, glucometers and pedometers. Color coded decision support tools, enable consumers to manage their health. An important feature is a graphic trend of multiple health indicators which facilitate communication with health coaches and physicians. Dr Priscilla Pemu, Chief Medical Officer at AccuHealth Technologies has successfully tested the application in over 300 patients, in community settings as well as in primary care practice settings. A significant improvement in health outcomes was found as a result of this clinical study. “Patients worked with health coaches to sustain clinical ben-

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efits, behavior change and medication adherence. We have been particularly impressed with the superior clinical outcomes of community based participants, compared with their counterparts in primary care practices. e-Healthsystrides© has enabled a disruptive innovation by showing the power of social networks; consumers are motivated to monitor and manage their health outside the doctor’s office” Greg Ofili leads the design team for e-Healthystrides’ mobile solution: “our focus remains on the consumer experience; we have mirrored the data rich component of the web application, and have integrated additional features on cell phones and tablet mobile platforms . For example, physical activity automatically connects to Google maps and calorie calculators as new decision support tools on the mobile platform” The technologies developed by AccuHealth will drive innovations of person centered chronic illness care. The Affordable Care Act is accelerating incentives for a value based health care delivery model. Technologies like e-Healthystrides© will emerge as market leaders by aligning incentives that motivate consumers to sustain healthy behaviors and medication adherence. AccuHealth Technologies Inc. has the team, business model, competitive advantage and expertise to drive innovation in personalized e-Health applications. For more information, please visit n • •

eHealthyStrides©: Color  coded  feedback  decision  support


What to Look for When Investing in Micro-Cap Companies


have always wondered why Vegas does not excite me when it comes to gambling. That’s because I “gamble” every day in the stock market. I know “gamble” is a bad word when it comes to investments, but let›s face it. Most micro-cap companies fail.  You lose all your money. We can get in to all the reasons why most small public companies do not accomplish their goals or “execute” on their strategies, but that is for a later time. What I will discuss are things that we look for in companies before making investments in them.

People Management is the most important part of the equation. Hands down. The guys at the top of the totem pole set the tone for everyone else. A wise man once said that he would take an “A” team with a “C” product any day over an “A” product and a “C” team.  You have to ultimately invest in people that you think can get the job done without using excuses, hyperbole, and disregard for the shareholders best interest. The micro-cap world is littered with undervalued companies with inept management teams that do nothing but “milk” their company year-in and year-out.  Whether its exorbitant salaries, cheap stock option bonuses, or hiring members of the family to positions of power, it stinks and you probably won›t make any money. The qualities I›m looking for in a person are “drive”, contacts, previous background, solid boards, and an intense focus on what needs to be done to get the company (and its share price) to the next level. Why the hell do you think we host a couple of events every year? It›s for guys (including ourselves) to meet with the management teams.  Share Structure

n By Chris Lahiji


The less shares, the better. Common stock should be more valuable than gold. We try to stay away from companies who have big share counts, huge warrants,

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options, preferred convertible notes, and debts, anything that is a mechanism of dilution. Over the past ten years of investing, our share counts in positions of size have been getting smaller and smaller and smaller. Insiders Buying The greatest “investor relations” one can do is to buy their own stock. Even more points if the CFO buys (because he is running the books), and super points if several members of management and the Board buy shares. As an investor, you can fully devote yourself to learning about the intricacies about a specific company for years and still not have the same insight some of these insiders do. Actions speak louder than words. When wallets open, pay attention. Cash Flow Breakeven / Profitability  The chances of survival greatly increase when a company gets to breakeven or makes money.  Those that don›t, continually need to raise, dilute, and hope for the best. A lot of this is common sense, patience, and some luck. The trick is to be in the game, work hard, and hope that your name ultimately gets discovered. n • •


A Different Way to Invest


ith 2013 upon us, many investors take a second look at their portfolios. Some scratch their heads wondering what happened to their money and others think they can do better. Needless to say, investing in the capital markets, equity markets or hard assets such as gold or silver have their potential for upside and certainly come with some challenges. Gone are the days of buying a mutual fund and holding it for years with the hopes of retiring with your nest egg. The markets are dynamic and move fast, and only the savvy investor survives.

n By Leonard Rosen, CEO

Pitbull Conference Inc .


So what are the interesting and unique investments for the next generation? Hard money lending for real estate is an option that many investors have found to be attractive. This is not your traditional real estate investing as you may have come to know, but its a niche way of investing with a conservative return with much less exposure than the equity markets. Its a simple concept that most people can wrap their heads around. Here’s how it works.... Because of tightening credit markets and difficult underwriting guidelines, most banks are reluctant to deploy capital in the real estate market. This is due in part to the 2007 real estate implosion and reckless lending practices by several large mortgage underwriters. These factors coupled with a recession in the U.S economy, forced real estate valuations to recede significantly in many major markets. Here’s the rub.... You are probably thinking, why would I want to invest in a market that was hit by recession and properties values have decreased? The answer is simple, where there are challenges in a market, there are opportunities. Because banks are not lending on commercial property or non owner occupied houses as they were in the past, a private investor has the opportunity to lend to the borrower at the new valuations and receive a reasonable dividend yield. How it works.... Lets assume a borrower comes to you with a small commercial building that needs financing. The borrower has already approached the bank and the bank

Micro-Cap Review Magazine

declined him for various reasons. The property is conservatively valued at $500,000, the property is free and clear of all encumbrances and the borrower needs $250,000. This particular scenario has a 50% loan to value. You are lending on the property at half its value. Both you and the borrower have a vested interest in the property, but you have only lent on 50% of its current value. The borrower pays a interest rate of between 10 to 13%, secured by a first deed of trust. In order for you to lose money, the property would have to lose 50% of its value and the borrower would also have to stop paying. This type of investment is called a hard money investment, because you have control of the hard asset. Unlike the equity markets, you have much more control of your investment. Obviously, this type of strategy for investing is not for everyone, but once you understand the concept, its a fairly easy business model to understand. There are also real estate funds that can be invested in that do all the work for you, but use a methodology that is consistent with the model we have discussed. For more information on hard money lending, our website is an excellent resource Leonard Rosen is nationally known as the expert in hard money lending and provides national conferences for the industry. Always consult with your financial advisor before you invest. This article is not a solicitation or offer to sell securities. n • •


Restructuring a Micro-Cap Company M

any sharp investors have learned the benefits of reading through a company’s annual and quarterly reports, as well as other public filings. It is not uncommon to come across a company with what seams to be very promising products or technology that is trading at a deep discount to what its perceived valuation should be. For sharp investors, selecting the right company to invest in can be very rewarding. However it is very important to know what type of company you are looking at. Is this a growth company, where new products and services could lead to a significant increase in sales and profitability? Or is it a turnaround/restructuring situation? It is important to know the difference between the two types as they require a different form of analysis. In this article we will take a look at evaluating a micro-cap company as a turnaround or restructuring situation as a

potential investment. Our focus is going to be on those micro-cap companies that are generating revenue. Micro-cap companies are generally defined as those with market capitalizations less than $300 million in value. Most microcap companies have either a limited amount of revenue or no revenue at all, and many are essentially start ups where the value of the company really lies in the products and services being developed. Many of these companies have very small management teams that usually own a significant portion of the company’s common stock; and as a result wholesale management changes as typically seen in large companies are not an option for micro-cap companies going

n Erik Nelson


Micro-Cap Review Magazine • •

through turnarounds or restructurings. The majority of companies that are in need of a turnaround or restructuring find themselves in a distressed situation; primarily due to either cash flow issues or the market for its products and services has evolved and the company has not managed to keep up with the changes in the market. Therefore when evaluating a potential turnaround or restructuring situation, it is important to ask three (3) primary questions regarding a company’s ability to restructure and turn itself around: Can the company reduce its expenses and deploy capital where it is needed? Can the company increase its sales and cash flow? Can the company obtain additional financing on terms favorable to existing shareholders? If yes can be answered to these three (3) questions, then a company has the potential for a successful turnaround or restructuring. If of the answer is no to any of these questions, then it is best to move on and look at something else. For those companies that have revenue and are in need of a corporate turnaround, the most important thing is to reduce the company’s expenses and get the company cash flow positive as quickly as possible in order to stop the drain on the company’s financial reserves. This is very important as it will buy the management of the company time to deal with the other problems facing the company. The quest to get a company cash flow positive can involve several different tasks from restructuring debt, cutting expenses, and increasing sales; with the solution usually involving some combination of all three. For many companies involved in a turnaround or restructuring situation, restructuring the company’s debt is a key part of the part of the process. I have worked on several debt restructuring projects, and they have all involved having serious discussions with the holders of the debt about the future of the company. The success or failure of these discussions will depend a lot on the relationship the company has with its debt holders and if they see greater value in the company

Reducing the overall expenses of the company and eliminating unnecessary expense items is a key component of any turnaround and restructuring. continuing in operation. If the debt holders can be convinced there is value to the company as an ongoing entity and they have a good relationship with the management of the company, then there is a good chance that they will agree to some form a debt restructuring. Usually these debt restructurings involve converting the debt to equity, or some portion of the debt to equity and a reduction in the interest rate, resulting in a reduction in the interest payments on the remaining debt. However, if the debt holders believe they have a better chance of recovering their investment by either seizing collateral or by liquidating the company, it may be nearly impossible to get a deal done to restructure the debt. Reducing the overall expenses of the company and eliminating unnecessary expense items is a key component of any turnaround and restructuring. Sometimes this will involve a reduction in the staff or number of employees, other times it will involve eliminating unnecessary items that the company can really do without. The key component of the process is to successfully determine what is an essential item and what a company can live without. Often overlooked or ignored in a turnaround is how can a company increase the sales of its existing products or develop new revenue streams. This is a three pronged approach. It is very obvious that the high profit margin products and services need to be expanded or given additional resources so sales can be increased. The lower margin or unprofitable products and services need to have a full review with the goal of determining how sales and profit margins can be increased. If these goals cannot be accomplished then a company needs to seriously look at either selling these product lines or • •

discontinuing them. The next thing a company needs to do is to determine how and where it can add new products and services to create new revenue streams. This can be one of the hardest parts of the entire restructuring, determining where new opportunities are and how to take advantage of them, but it is ultimately key to the long term survival of the business. For most of these companies they got into trouble because their product mix was not where it needed to be, and reconfiguring their product mix is key to their future. It is also important to understand if the company will need to obtain additional financing in order to complete its turnaround and restructuring. The potential financial sources for a company going through a restructuring is primarily limited to strategic investors, shareholders, and investment companies that specialize in investing in turnarounds and restructurings. A strategic investor is usually thought of as a business partner to the company who sees significant value in the company’s product and services and decides to make an investment in order to secure access to those products and services. Since strategic investors usually seek to maintain good relations with the company and its management, which typically owns a significant portion of the common stock in a company, the strategic investors will usually invest in a manner that avoids massive potential dilution to existing common stock shareholders. A good example of this is many years ago when Apple, Inc. ‘AAPL’ was in not doing well financially, and Microsoft Corp. ‘MSFT’ invested in Apple through a special class of preferred stock. Investment firms that specialize in investing in distressed companies often do so with an eye towards potentially taking over the Micro-Cap Review Magazine


companies they invest in. They are generally going to structure their investments in a manner that places a lot of restrictions on the management of the company, and its common stock holders. They will almost always structure their investments in a manner that allows them to take over the company if things do not work out as planned; and when this happens the common stock holders are usually wiped out. Obviously, if a company you are looking at is in the process of obtaining financing from one of these types of investment firms you will want to remove them from consideration as a potential investment. It is usually a good sign when a company has deep pocketed shareholders who are willing to step up to the plate and increase their investment in the company. When done properly, these shareholders will work to assist the companyâ&#x20AC;&#x2122;s management in gaining the resources needed to complete

the turnaround, as well as structure their investment so that existing common stock shareholders will be able to participate in the upside potential of the company as well. As a potential investor in a micro-cap company that is in need of a turnaround or restructuring there is an opportunity for very outsized gains to be realized. However it requires a substantial amount of work in determining if a company has the ability to effectively execute a turnaround or restructuring. When doing your homework on these companies, do not be afraid to pick up the telephone and call the management at the company to see what they have to say. Be a little skeptical when talking to them and do not take everything they say at face value. However with some hard work you should quickly be able to figure out who is being straight forward and honest with you and who is not. Only invest in those companies where you believe what the management

is saying, and you believe the company can answer yes to the three questions at the beginning of this article.

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

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Micro-Cap Review Magazine â&#x20AC;˘ â&#x20AC;˘

MICRO-CAP salutes the

award recipients

Adlyfe, Inc. Rockville, MD Developer of unique technology that allows the “mapping” of protein surfaces received $200,000 to advance the development of a proprietary minimally invasive ocular imaging test for the early detection of Alzheimer’s.

Bamvet Laboratories, Inc. Baltimore, MD

Cardiosolv, LLC Baltimore, MD

Developer of the first FDA authorized pain medication for laboratory rats and mice received $200,000 to build out marketing infrastructure, and manufacture first commercial batch of product.

Developer of system providing patient-specific cardiac modeling to the bedside received $200,000 to undertake prospective human validation study predicting non-invasively the optimal ablation targets for ventricular tachycardia patients.

CrispTek, LLC Columbia, MD

Remedium Technologies College Park, MD

Developer of patented blend of rice flours and gluten free, allergen free, low-oil absorption products received $99,300 to develop three new certified gluten free/allergen free/kosher baking mixes including testing, packaging and initial store placement.

Developer of proprietary lifesaving technology to stop traumatic bleeding rapidly received $199,100 to validate a novel sprayable foam hemostat, HemogripTM, in a study of on non-compressible bleeds in large animals.

Baltimore 401 east Pratt Street 7th Floor Baltimore, mD 21202 410-767-0505 roCKVille 9700 Great Seneca Highway rockville, mD 20850 301-762-9214


The Year (2013) of Social Media Integration & Empowering of the Users


any look back on 2012 as the year of social media companies becoming main stream. It was greeted with euphoria that turned negative once they were measured according to Wall Street earning standards. Many analysts thought that the top was already reached. As 2012 progressed, the situation stabilized and if you look at thing with a deeper note, you will find that much has been happening on the integration side in a very bullish way. Stock valuations aside, publicly traded companies such as Facebook (Nasdaq GS) and LinkedIn (NYSE: LNKD) have just begun to touch the surface of social media. In 2013, this is the year that integration and inspiration take lead roles by allowing users to do more with their existing social media accounts. 2013 is the year of social media integration and empowerment. Companies that create applications that drive integration from desktop to mobile computing to social media will do well. Consumers will love these application that empower them

n By Dr. gordon chiu


by inspiring, simplifying and make their lives easier. One area that is being “eaten up” by users is the topics around food. Food sharing isn’t just over the physical food but instead over the virtual experience and the nostalgic effects that this brings. It is the art and science of eating virtual displays of food coupled with your real time experience after the viewing. This is a very big area of development. Recently, within many universities, this has become a subject of great interest between student, faculty and companies in the departments of mathematics, computer science and psychology. The interest goes beyond the application but to look into what makes that application enjoyable and even details such as whether the photos or descriptions (long or short) play a bigger role in causing unknown users to “add” or “friend” you. The food example is one of many that spawned multiple replicas in travel, shopping, restaurants, news and information. The contents around each of these topics and how they are shared is a noteworthy study. 2013 will create new disciplines which hybridize disciplines within psychol-

Micro-Cap Review Magazine

ogy, mathematics and computer science. Additionally, 2013 will create a great number of advanced jobs in this rapidly developing sector which will drive the economies of the United States and other developed countries embracing this social media integration space. Here are four examples of existing and future products/properties to pay attention to when it comes to combining inspiration with food in the world of social media. Foodgawker “Feed Your Eyes” – This is an active product. It is where users submit their most awe inspiring perfect plate setting, perfect moment, perfect lighting photos of their collections of foods. Pinterest – This is an active product. Users are able to “pin” appetizing-looking meals such as breakfasts, lunches, desserts during your daily browsing experience. Then, when you are hungry or looking for an idea, you can inspire your mind on what to have on that next meal which could be hours away or plan for a night out the following week with your family, date, friends. Some users even use it to inspire the creation of meals and what to make tomorrow night. Zuse – This is a future product that empowers the user to be able to browse, see, • •

view and interact with more than one website in real time. This product will be released on the Apple iPad while allowing the user to functionalize and create their personal real time multi-dimensional browser. It will be interesting to see how users will use this new empowerment to look at information, news, food, restaurants, shopping to achieve greater inspiration and idea generation. This multi-browser has many unique features allow seamless integration with social media populars like Facebook, Twitter, etc. Foodily – This is an active product. It can be linked with your Facebook application that allows you to “search, discover” and become inspired by sharing, recommending and saving recipes that are created so that you can further recommend these to your friends. Foodily has over 500,000 recipes by what’s on user refrigerators, diet types or

ingredients from top websites, popular blogs, cookbooks and famous culinary artist.

About the Author Dr. Gordon Chiu is an execution-driven businessman with more than 15 years of combined domestic and international experience in biomedical, chemical, cosmetic, medical, and technology industries. He has been invited to serve on the board of public and private companies and to provide vital advice to the board while increasing overall shareholder value. His solid background and broad experience has allowed him to accomplish and advise in areas of Alzheimer research, breast cancer research, dermatology, drug addictions research, green technology, and antimicrobial research. He started his career as a research scientist at Pfizer Inc. and Merck & Co., Inc. and has healthcare and marketing experience with strong links to Wall Street and Asia. His educational background began with a B.S. degree in chemistry from Rensselaer Polytechnic Institute, graduating summa cum laude. He graduated with an M.S. degree in chemistry from Seton Hall University with high honors. Additionally, Dr. Chiu was accepted as an M.D./Ph.D. candidate under the National Institutes of Health’s Medical Scientist

Training Program for four years at the Mount Sinai School of Medicine where he also researched, developed, consulted, and advised Dr. Huachen Wei in the department of dermatology in skin cancer research. Seeing the opportunity to impact foreign policies in healthcare, he transferred his credentials to the fully accredited University of Bridgeport School of Naturopathic Medicine to receive his doctorate in naturopathic medicine. With this unique background, he has investigated the validity of foreign treatments and their success level for public health. He has also been chosen to serve as an advisory role in the identification of low cost solutions (i.e. non-invasive diagnostic equipment) for emerging countries that cannot afford to maintain armies of physicians across numerous subspecialties. His years of experience and continuous involvement have created deep relationships within the scientific, business, and medical communities. Dr. Chiu has developed and owns methodologies called directed combinatorial algorithmic libraries (D.C.A.L.) that are used in various commercial applications, composition development and research. Disclosure: Dr. Chiu is a co-founder of Zuse since 2011 and is an independent adviser to SNN. n


    

 • •

Micro-Cap Review Magazine



Attention Wall Street Shoppers E

xecutives and Boards often consider a number of investment banks in making their selection of the ideal advisor or underwriter. These Bake-offs, Dog and Pony Shows, Beauty pageants in the Street Vernacular are the arenas of competition for the swashbuckling gladiators of Wall Street to impress the CEO, CFO and Directors and win the lucrative banking assignment. Bankers seeking to differentiate themselves ironically fall prey to convention; dark suits, bright ties, over-starched shirts and pitch books filled with deals, league tables, and analyst rankings, etc. A lot about them, little about you, and less still as to the fit. So how can a management team see through this veneer and discern who will do the best job for the Company? Typical criteria used by management include the banks experience (“tombstones” in banker parlance), sector knowledge, the

bank’s market segment (bulge bracket, midmarket, boutique orientation). If the assignment involves a public company raising equity, an important metric is research coverage. Management teams are keen to prove to their boards and their shareholders that their strategy is worthy of interest and support from the sell-side. Woe is the CEO or CFO who routinely admits to their board that they are not followed by the analyst community. How public companies ACTUALLY

choose their investment banking partners is often very different than how they SHOULD make a selection. Companies may gravitate toward a “brand name” or bulge bracket firm (what board would criticize management wanting to partner with an 800-lb gorilla on Wall Street?). The firm’s size may be beneficial if they use their large balance sheet to invest directly in your company or lend to you. However, size can instead mean slow committees with the chance to be turned down or put at the back of the offer-

n By Fred Johnson


Micro-Cap Review Magazine • •

ing queue. Bigger firms also carry conflicts of interest, distractions and have greater concerns as to their own liability. Those factors may impede their ability to take on transactions and may limit what process or audience they can bring to bear. Are you Important? Instead, ask yourself if your deal is important to the investment bank’s platform. Will the senior bankers give your transaction ample attention, care, time and thought? Ways to get a feel for this might be whether the firm’s CEO makes himself available to management to emphasize the importance of the client to the firm. Experience. What about the all important experience factor? Experience is great, unless it isn’t. What if deal experience means the bank feels compelled to reward its repeat investors with deal terms that benefit them instead of you, the issuing client? Experience can also lead to a thoughtless “auto pilot” process that is mechanized and not tailored. Are you a notch in the league table or a valued long-term client? Keep in mind, the firm may have a deep reservoir of relevant deal experience, but your banker may have had a limited role, if any in many of the deals. Ask the banker pitching you the deal what role he or she might have in marketing and structuring the deal. If the process is turned over to anonymous Equity Capital Markets personnel, you might be getting an overly rosy or optimistic view of the firm’s commitment or ability to deliver. Many bankers are great at selling what someone else in their firm actually has to deliver which leads to overpromising and poor results. Support Beyond the Deal. Firms that offer support in ways that don’t pay corporate finance fees (non-deal investor introductions and road shows, conference sponsorship) show genuine interest and demonstrate longer-term perspective, support and conviction in the business strategy. These banks are seeking affiliation rather than an immediate pay day (ok, fees at some point are still the end goal). Non-deal investor introductions and conference sponsorship are excellent previews of the banks distribu-

tion network and work ethic and banker personalities (for those possessing such). Regional vs. National firms. While bulge bracket or nationally-known investment banks may be better known with more resources and heft, a regional bank may be uniquely able to offer different investor exposure. Most banks know plenty of pockets of capital in New York and California for reasons similar to those offered by infamous bank robber Willie Sutton when asked why he robbed banks (“that’s where the money is”). As such companies tend to get plenty of exposure there sooner or later. An investment bank located in the Midwest or Southeast may offer better and incremental exposure to fund managers located in their region. Portfolio managers in cities like St. Louis, Milwaukee and Minneapolis and Atlanta are too often overlooked or skipped for New York and San Francisco. Diligence. Another proxy for a bank’s quality is diligence. Banks that perform little or no due diligence should serve as a major warning. Risks here include a) the deal is going to hedge funds/flippers, b) the banker is essentially a sub-contractor unlikely to remain at the bank too long and therefore indifferent to his employer’s underwriting liability and c) your bankers and sales team be poorly positioned to handle questions and objections from the investors. Commitment. You might also prefer to know the firm’s commitment to you and the sector. Banks that chase fads (Spacs, Reverse Mergers, Chinese companies listing in the US with no presence here) may view you and your sector as such and offer fleeting support. Your banker and research analyst (perhaps even the firm) may be here today and gone tomorrow. Aftermarket support could suffer and key people such as your research analyst could leave or drop coverage. Back to research. How much influence and integrity does the research department of the firm have? The fact that a report is written does not mean it is read, or valued by the institutional investor universe. If a tree falls in the forest……Is the research department • •

known to be a shill for banking or could it stand on its own due to the value of its analysts and stock picks? Cult of Personality. As with any service business, personalities are important. Would you put these bankers in front of your board to walk through process, pricing, etc? Would you be proud to have the particular bankers represent you in the market? Will the senior bankers be accessible to you and your board before, during and after the deal and on short notice? The take away here is that size and stature are not everything. A bigger bank by definition has more capital and more resources and more recognition. Is that capital and are those resources available to your company and in your deal or are they reserved for bigger or more important clients? Smaller investment bank may be more flexible, more agile and more attentive. There is likely greater accountability by the bankers pitching you to select them if they are also the people that will execute the deal. Remember too that many assignments have multiple banks involved. Smaller banks may be better complements to a team if they are not viewed as competing in the same segment of the market routinely with the other bank(s) involved. Investment bankers, even today, command big fees from their clients. Make sure you are getting the best Bang….err um Bank… for your buck. Fred Johnson joined Barrington Research in 2012 as Managing Director in the Investment Banking group. Previously, he was with William Blair & Company from 2009 to 2012 as Managing Director and Head of Confidential Equity Offerings (including PIPEs and Registered Directs). Prior to joining William Blair, he spent 10 years with A.G. Edwards in the Investment Banking department (and one year with its successor, Wachovia) as a Managing Director in the Equity Private Placement group. Mr. Johnson has over 15 years of experience structuring private equity transactions for small-cap public companies (PIPEs), as well as closely held private companies, across many industries. Prior to A.G. Edwards, his experience included merger and acquisition advisory with Arthur Andersen’s Corporate Finance group, and commercial credit analysis with Dun & Bradstreet. Mr. Johnson holds an MBA in Finance from New York University, where he was a Stern Scholar, and dual BA degrees in Economics and Philosophy from the University of Wisconsin-Madison. n

Micro-Cap Review Magazine



Why IR? T

he answer is simple: An effective investor relations program can maximize your company’s valuation as currency for capital markets activities and establish an educated base of investors and analysts for support during difficult times. The challenge is developing and executing an IR program that is accountable both for process and results. This is particularly relevant for a micro-cap company, which most likely lacks visibility, has a limited operating history, and competes in a crowded marketplace with nearly 10,000 OTC companies for the attention of a small universe of risktolerant investors. In my experience it is not enough for management to execute on its business plan and hold out hope that an audience will

discover the stock. There is no doubt that a company’s performance is essential to the IR program’s success. However, I can name many instances in which a company reported outstanding financial results or announced a major breakthrough, only to be largely ignored by the Street. I’ve also seen many companies opt for a haphazard, “IR-lite” approach in which they engage in any number of IR activities without a fully developed plan, overarching strategy or consistent approach. As such,

n By Keith Lippert


Micro-Cap Review Magazine • •



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they miss opportunities to build long-term relationships with investors and maximize the impact of positive developments. One of the best ways to think about IR is to liken a stock to a product that represents the investment opportunity in a company. Like any product, the stock needs to be marketed, and marketing in a complex, regulated environment such as Wall Street benefits from a plan developed and led by an experienced team. A well-conceived IR program is tailored to support each company’s specific business needs and objectives, and is focused on results-oriented actions to accomplish those objectives. Every interaction with the Street is an opportunity to present the firm’s investment thesis, which encompasses the key reasons investors should buy and hold a stock. Developing this investment rationale requires in-depth knowledge about the company’s strategy, competitive advantages and the market environment, as well as a keen understanding of how the Street processes information and makes decisions. Management also needs to provide an ongoing narrative that enables investors to gauge its progress. By presenting meaningful metrics and milestones – both financial and operational – the IR program establishes the framework by which to evaluate the company’s performance. Importantly, when milestones are reached, credibility is created. The highlights of the investment thesis should be intertwined through all investor communications. Thus, consistent messages, milestones and reasons to invest can be reinforced each time the company speaks to the Street, whether in an investor call, press release, company presentation, conference call, corporate fact sheet, stockholder letter or IR website. To have a significant impact, these messages need to be marketed to a targeted audience, including high-net-worth individuals, retail investors, micro-cap institutional investors, sell-side analysts and investment bankers. Knowing who these audiences are and how to reach them is critical to the pro-


gram’s success. Management and its IR representatives should develop a reputation as being investor-friendly by being accessible and forthcoming within the confines of securities laws and in light of business competition. However, accessibility is not enough. Many IR programs miss the opportunity for ongoing dialog with investors, which can provide feedback into market sentiment. Management can leverage these valuable insights to uncover and correct misperceptions about the company, or affirm strategy and positioning. How does management implement a timely, well-conceived program and keep focused on its long-term IR goals? One way is to develop a formal quarterly recap of activities, and develop the IR strategy and plan for the coming period. Even if the timing of some activities shifts and the strategy remains unchanged, a planned program enables you to leverage what you know now and to capitalize on additional opportunities as they present themselves. How do you choose IR representation? Experience is important, including work in your sector with companies at a similar point of development and with comparable market capitalizations. Look for a proven track record in establishing messaging that resonates with micro-cap investors and strong ties with the micro-cap investment community. Ask about results in creating awareness, gaining sell-side analyst coverage, generating invitations to present at investment conferences, building or changing a shareholder base and providing assistance in raising capital. Experience also is essential in providing value-added strategic counsel in any IR situation that may present itself. This encompasses a wide-range of topics, such as exchange up-listing, management changes, shareholder activism, capital market activities, M&A transactions and crisis management. So how do you evaluate your IR program? There are too many variables such as com-

Micro-Cap Review Magazine

pany performance and macroeconomic conditions for stock price to be an appropriate measuring stick. The following checklist can be more useful in assessing the program’s effectiveness: Was a customized investor relations program efficiently implemented? Was management’s time used well? Did the program successfully expand your investment audience? Has your company’s perception on Wall Street improved? Was the strategic counsel valuable and actionable? Were the collateral materials high quality? Were opportunities created and challenges managed? In summary, effective IR works to build awareness of your company as an investment opportunity. It enhances and preserves management’s credibility. Importantly, it supports the achievement and maintenance of maximum valuation, enhancing shareholder value and providing greater accessibility to capital markets.

Keith L. Lippert Founding Partner, LHA Since founding LHA (formerly Lippert/Heilshorn & Associates) in 1984, Keith Lippert has built a reputation as a respected advisor to emerging-growth companies. Along with his partner, John Heilshorn, he has established LHA as a pioneer and a premier provider of financial communications services, and has provided strategic counsel to more than 1,000 public and private companies. Keith plays a leadership role in working with account teams to enhance the market’s understanding of LHA’s clients by integrating all of the investor outreach tools available. He is able to leverage his extensive relationships with institutional investors, securities analysts, retail stockbrokers and investment bankers as well as his capital markets knowledge on behalf of LHA’s clients. n • •


Silver Past and Silver Future “

I am very bullish for both the near–term outlook for silver as well as for its prospects over the next few years. The silver price will be increasingly driven by monetary demand.” –James Turk, founder of GoldMoney The above quote echoes exactly my sentiments about silver as this missive is written in late 2012. First, it is important to review silver’s performance so far in 2012 and what is expected from the indispensible metal going into 2013 and beyond.

Silver posted an annual average price near $30.00 in 2012, down from the average price of $35.12 in 2011. However, it is important to remember that the average price in 2009 was $14.67, so we are up more than double what the price was three years earlier. If this

n by David Morgan Founder: • •

Micro-Cap Review Magazine


Silver also enjoys a wide range of important uses in industry. Industrial applications accounted for over half of world fabrication demand in 2011 and 2012.

trend continues then one might project silver to be above $60 three years hence. Silver investing is truly worldwide at this point and the trend continues to grow. Coin sales by government-produced coins continue to be in high demand, with some hitting record sales. In fact in a few instances, coin demand has outpaced the ability of the mints to produce! Again, this is a trend that will continue, in my strong opinion, as people globally increase their purchases of precious metals due to certainty of government’s inability to address the debt problems facing us all. The amount of silver in the exchangetraded funds is near record off takes, which means more commercial bars are now held for investment purposes than as inventory for industrial consumption. This offers further testament to investors’ enthusiasm for silver as an investment rather than a base metal or consumption metal only. Physical silver bar investment grew by a massive 67 percent in 2011 to 95.7 million troy ounces. The growth in 2012 cannot be determined yet, as we still have one month to go as this is being written. While global coins and medals fabrication rose by almost 19 percent to an all-time high of 118.2 Moz., Western Europe and the United States, which bested 2010’s record performance in terms of American Silver Eagle Bullion Coin sales, led this category to its record high. Elsewhere, strong demand in China accounted for a near 60 percent rise in its bullion coin output last year. Quoting the Silver Institute from September 2012, “Investors are continuing to be bullish on silver in 2012, increasing their holdings of the precious metal that are at near record levels.” Investors have so far pur-


chased more than 32 million ounces of the white metal through silver-backed exchangetraded products this year. Exchange-traded fund holdings now total more than 608 million ounces with a value of $20.5 billion through mid September. The silver price has risen more than 20 percent since the beginning of this year. Significantly, from January 2009 through September 15, 2012, the silver price has increased an astounding 211 percent. It seems important to take a longer-term look at the price movement as new investors usually are focused on too narrow a time span. From this point on, investors would be best served to focus on a three- to five-year timeframe. Silver also enjoys a wide range of important uses in industry. Industrial applications accounted for over half of world fabrication demand in 2011 and 2012. Unlike gold fabrication, which is heavily reliant on jewelry, silver can call on a more diverse range of applications. Furthermore, in the short term, many of these uses are relatively price inelastic, helping to create strong price support. Morgan Stanley has a 2013 average price of $2175 per ounce for gold. This is very close to my estimate, and knowing silver has outperformed gold during this bull market, expects the ratio to drop from the current 53 to 1 (gold to silver) ratio to something around 40 to 1. This implies a price for silver of about $55 per ounce! However, knowing how markets move and especially markets that are as highly geared and emotional as silver once the nominal high of $50 is taken out to the upside, expect silver to establish a “new” high, ranging $60 to $75 in 2013. Why? In commodities especially, there is noth-

Micro-Cap Review Magazine

ing more bullish than a new all-time high. Once silver overcomes decades-long resistance at the $50 level, many momentum players will jump on the silver bandwagon for a short and profitable run. It is important to recall that when silver approached this level in April of 2011 the Commodity Mercantile Exchange (CME) increased margin requirements for silver four times before the market quieted down and sold off sharply. In fairness, my view was that the silver market had become overheated on a temporary basis and if anyone was buying silver at or above the $35 level they should be very cautious. 2013 will be the year that the next leg up in this once-in-a-lifetime bull market will establish itself. As difficult as it may be for investors/speculators to believe, the best is yet to come. Markets move in erratic ways every time they approach their final tops. The precious metals are no exception and in fact have a propensity to have huge moves during the manic/panic buying that lies ahead. It has been stated that 90 percent of the move comes in the last 10 percent of the time. Looking back to the final year of the previous silver bull market, silver started January 1979 in the $6.00 range and a year later topped out at $50. Will history repeat? No one can say, which means we need to be open to all possibilities. We may see a run in silver that makes the 1979 move look tame because there is less silver now than then, it is a global market now, the Internet encourages easy information and purchases, plus the three bullish factors below will continue to bolster precious metals investing.

Bullish Factors Increased Uncertainty Volatility is a function of uncertainty. Because the world is becoming unstable as a result of inability of sovereign nations to keep their promises to the people, we are witnessing demonstrations in the Middle East, Europe, and elsewhere. This is a major • •

trend that will continue and many investors and even average people will seek protection. Gold is considered a “safe haven” and certainly we agree to some extent, yet going back well over a decade when asked to write the “Ten Rules of Silver Investing,” this was Rule #1! Rule #1 – When all else fails, there is silver. No one likes to be a prophet of doom, but the simple truth is that silver is the world’s money of last resort. Should a severe economic collapse occur, leaving paper assets worthless, silver will be primary currency for purchase of goods and services. (Gold will be a store of major wealth, but will be priced too high for day-to-day use.) Thus, every investor should own some physical silver and store a portion of it where it’s accessible in an emergency. After submitting this to the publisher, he called me to express the fact that he had been thinking gold, but in a true crisis, silver would be the metal in use. Money Debasement We need look no further than a recent press release from Thomson Reuters: A Rebound In Investment Demand Stemming From Continuing Loose Monetary Policies Expected To Drive Silver Prices Towards And Possibly Over $50 during 2013. We are in agreement with the GFMS report and yet think silver could do even better depending upon how policy decisions unfold in 2013. It is no secret to thinking people everywhere that the total destruction of a financial system that can be trusted is taking place. Although many want to delude themselves into pretending the obvious cannot really be taking place, those with power and conviction are moving to safe alternatives with zero counterparty risk. This means physical gold and silver, the top of all commodities, because they are MONEY! Silver Trading Platform in Asia The Chinese Gold & Silver Exchange Society, or CGSE, a leading physical gold market-

No one likes to be a prophet of doom, but the simple truth is that silver is the world’s money of last resort. Should a severe economic collapse occur, leaving paper assets worthless, silver will be primary currency for purchase of goods and services place in Asia, plans to launch a silver trading platform in Hong Kong in the first quarter of 2013. The new Silver Contract will be denominated in Hong Kong dollars, and the contract size will be at least 10 kilograms. The minimum delivery unit will be 30 kilograms. An airport-based precious metals vault at the Hong Kong International Airport will be the accredited depository that would facilitate the physical delivery of silver. The CGSE said that it would consider launching yuan-denominated silver trading later under this new platform. This of course would open up the China market even further and puts even more pressure on the silver market.

Initially this new exchange expects around 2 million to 3 million ounces per day in the first six months. It is our thinking that this is only the beginning and increased silver awareness in Asia will bolster demand in a significant way. David Morgan is a widely recognized analyst in the precious metals industry and consults for hedge funds, high net worth investors, mining companies, depositories, and bullion dealers. He is the publisher of The Morgan Report (www.TheMorganReport. com) on money, metals, and mining. Additionally he provides a precious metals savings program through Mr. Morgan is also the author of Get the Skinny on Silver Investing and a featured speaker at investment conferences in North America, Europe, and Asia. n


add a shine to your portfolio • •

Micro-Cap Review Magazine


A SNN INcorporAted ANd MIcro-cAp revIew MAgAzINe Survey

on behalf of you, our subscribers and readers, additional information about companies in this issue will be forwarded to you by checking the box and submitting your request. Information will be forwarded to you by mail or email. q 144 Opinions q About Graphite, Greg Bowes - NGC.V q AL International - JCOF q A Rational, Practical and Logical Approach to General Solicitation q Ask Mr. Wallstreet Newsletter q Attention Wall St. Shoppers, Fred Johnson q Bank of Internet - BOFI q Bio Maryland q Bright Outlook for Asia, Leslie Richardson q Cambridge House International Conferences q Caveat Emptor or Buyer Beware Book q Closure, Rabbi Stephen Robbins q Compliance Corner, Russell C. Weigel lll Esq. q Conmodities Corner, Mark Shore q Direct Public Offerings, Thomas Carter q Editorial q Eservco - ENSV q Graphite One Resources - GPH.V, GPHOF q Growth Equity, Brett Goetobius q Insurance Corner, Eugene B. Podokshik q Investing in Micro-Caps, Chris Lahiji q Investor Consultants q ISEEE, Don Calvin q Katan Associates, Seth & Stan Yakatan q Kesselrun Resources - KES.V q MaloneBailey LLP q Marksman Energy - MAH.V q Matmown, Inc. - MTMW q Metals & Minerals Investment Conferences q Micro-Cap Restructuring, Erik Nelson

q Micro-Cap Review Magazine q Miller Energy Resources - MILL q MZ Group q New BD Formations & BD Withdrawl Summary, David Alsup q New Engine Media q No Boring Lawyers - Oswald & Yap, q Ombudsman, Jack Leslie q One on One, with David Drake q Organic Alliance - ORGC q Orphanbiotec, Dr. Frank Grossman q Pitbull Conference, Leonard Rosen q Platinum & Paladium, Mickey Fulp q Primabiomed - PBMD q Profit Planners Management, Inc. - PPMT q Raptor Ranch q Russell C. Weigel, III, Lawyer q SEMDAConference q Shoreline Energy Corp. - SEQ.TO q Silver Past and Silver Future, David Morgan q SNN Distribution q Social Media Migration, Dr. Gordon Chiu q Soltoro Ltd. - SOL.V q Stellar Pharmaceuticals - KLH.V, SLXCF q StockNewsNow Radio, Gary McKenzie q Targeted Market Awareness, Robert “Bobby” Kraft q Therakine Tunable Toolbox q Trouble is Opportunity, Jonathan Hornik, Esq. q WallStreet Chicken Cartoon q Why IR?, Keith Lippert q World Wide Stock Transfer q

please take the time to answer some simple survey questions so that we may provide the most comprehensive information, stories of interest, investment ideas, and industry analysis in future issues of Micro-cap review. we thank you in advance for your participation. 1. would you invest in a private company? 2. would you donate money to a company on a crowd funding website? q Only knowing it was going public q Yes q Yes, under new Jump Start for Jobs Act q No q No, I only invest in public companies q Yes, less than $1,000 q Yes, I am an accredited investor q Yes, less than $100 3. do you understand the Jump Start for Jobs Act? q Yes 4. will you invest more money in micro-cap companies q Never heard of it in 2013 than you did in 2012? q Send me information q Yes q I am skeptical q No 5. what is you biggest worry about the micro-cap q Will just hold what I have now stock market? q Looking for good ideas q Lack of Liquidity to sell shares q Hard to find a broker who/buy/sell them for me q Over-regulation by regulators q A Reverse stock split of shares

6. what sector of the market seems most attractive to you for investment in the coming year? q Technology q Biotech & Life Sciences q Manufacturing q Media q Mining & Exploration q Software q Other_______________________________ 8. which stock market(s) do you buy stocks? q Brazil q United States q China q Canada q United Kingdom q Australia q India 12. I would like to read more information about? q Micro-Cap companies q Real Estate q Market commentary q Hard money lending q Private placement investing q Commodities 13. when you read Micro-cap review, do you read the print or web version? q Print q Web

7. How did your portfolio do in 2012? q Winner q Loser q Broke even q No comment 9. How many financial conferences will you attend in 2013? q 1-10 q Under 3 q None q More than 10 11. what was your favorite article(s) in this issue? please list. _________________________________________________ _________________________________________________ _________________________________________________ _________________________________________________ 13. which company in this issue would you invest in? _________________________________________________ _________________________________________________ _________________________________________________ _________________________________________________

check off areas of interest: q Currencies q Graphite q Oil & Gas q Aerospace q Defense q Green Technology q Oil & Gas Exploration q Accounting q Diamond Mining q Healthcare q Organics q Alternative Energy q Digital News q India q Pharmaceuticals q Ask Mr. WallStreet q Digital Platforms q Industrial Goods q Publishing Newsletter q Direct Marketing q Industrial Metals & Minerals q Rare Earth Elements q Auto q Diversified Investments q Information Technology q Real Estate q Banking q Drilling q Insurance q Resource Exploration q Basic Minerals q Education q Junior Gold Developer q Retail q Beverages q Electronics q Junior Gold Producer q Security q Biotech q Electronic Medical Records q Legal q Silver q Bullion q Energy q Life Sciences q Social Media q Business Services q Energy Products q Manufacturing q Social Network q Chemicals q Entertainment q Transport q China q Marketing q Finance q Travel q Clean Energy q Media q Financial Trade Shows q Uranium q Communication q Medical Devices q Food q Construction q Veterinary Products q Medical Diagnostics and Services q Franchisor q Medical Fund q Consulting q Medical Practice Factoring q Web Software q Consumer Products q Gaming q Metal Exploration q Wellness q Consumer Services q Gold q Gold Producer q Oil Drilling & Equipment q Wireless Communications q Crowd Funding All participants in surveys receive a Free lifetime subscription to Micro-cap review Magazine.

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What is the International Stock Exchange Executives Emeriti?


he International Stock Exchange Executives Emeriti, Inc.  (ISEEE) is a collegial not-for-profit educational corporation of  former and current securi-

ties exchange officials and other global market experts and professionals.  The ISEEE meets to discuss and analyze issues affecting the global community of securities exchanges, the state of SMEs (Small and Medium Sized Enterprises), make recommendations and address the issues and provide proposed actions to be taken. The ISEEE currently has more than forty  Members and Special Guests participating in the Discussion Sessions which include former and current exchange officials and  

market experts. ISEEE lists as member’s former global stock exchange Chairpersons, CEOs and other experts from Austria, Australia, Brazil, Canada, Egypt, France, Germany, Hong Kong, Hungary, Italy, Israel, Kazakhstan, Luxembourg, Malaysia, Netherl ands, New Zealand, Peru, Russia, Slovenia, S weden, Switzerland, Turkey, United Kingdom and the United States.   Since  the  first  ISEEE Meeting in Orlando, 

n By Don Calvin


Micro-Cap Review Magazine • •

Florida in March  2008 , the  ISEEE  has  issued  an  “Orlando   Declaration”   following the meeting   which has  been distributed to  the press,  regulatory  authorities, legislators and other interested groups. The  “Orlando  Declaration  2012”   includes   a  Summary of  Eleven  Actions for  Balanced   Global  Reform   and is  available  on the  ISEEE website:  www.capitalmarketexperts. com. At  the ISEEE meeting in Orlando in 2010, a Small Business Financing  Crisis  Task Force was created to formulate and recommend practical  and  positive  steps   to  improve  access  of  small and medium  sized  enterprises (SMEs)  to  equity financing. The Task Force has  made  recommendations and a draft report to the ISEEE  Members which was presented at their meeting in Madeira, in September  2012,  and  a  final  report is soon to be  issued. The Report titled: “Opening the World’s Equity Markets to  Small and Medium Sized Companies” will point out changes needed as SMEs produce a greater portion of gross domestic product and more jobs than the large-cap “Blue Chip” companies. The Report proposes a recommended general “carve out” of a regulatory   framework tailored more for SMEs than is currently available. The purpose of which is to allow them to raise needed  equity capital in a more practical and cost effective way  while maintaining the basic needs of investor protection and regulatory oversight.   At the ISEEE meeting held in Madeira two other Discussion Sessions were held in addition to the Discussion of the proposed Report. Discussion Sessions focused on related topics; “Regulatory and Related Market Developments” and a “Capital Formation Roundtable”, Luncheon and Dinner Session included presentations on: “Competitive Developments at  European Exchanges”;  “Outlook and Opportunities -The  Case for Asia-Pacific”  ;  “Investment  Opportunities in Madeira”; 

The  “Orlando  Declaration  2012”  includes   a  Summary of   Eleven  Actions for  Balanced   Global  Reform   and is  available  on the  ISEEE website:

“Developments in the Exchange Traded  Funds(ETFs) Market  Worldwide” and “The Global Economies and MarketsFinding  Order in Chaos”  The  text of all these presentations are available on the ISEEE web site. www.capitalmarketexperts. com. At the upcoming ISEEE Meeting to be held in Orlando, Florida in April, 2013, among the topics to be discussed are the “Changes and Challenges to the Trad itional Exchanges Worldwide - and new Opportunities” including such issues as   “Crowdfunding”, as an example for small and medium alternative issuer financing and how it can be utilized by exchanges to build up the small cap issuer markets. Other topics for the panel are projected to be: 1. regional exchange market linkups 2. Benefits and problems and 3. Benefits and problems of public ownership of exchanges. An additional panel will discuss: “The Regulatory Landscape- Recent Regulatory Actions and Proposals Affecting the Exchanges and the Capital Markets, and the new Issues Raised.” This includes such issues as the regulation of hedge funds, dark pools and high frequency trading and possible regulatory proposals. Other panels are expected to review “Issues Facing EuropeanExchanges” su ch as: the “Legal Entity Identifier” issue and a concluding session will be a “Capital Formation Roundtable – Factors Influencing Capital Formation around the Global Markets.” Each panel will consist of former exchange officials and other public and private markets seasoned experts • •

Presentations of the ISEEE Meetings will be made available at the full discretion of the ISEEE and found on the ISEEE website The   next meeting, after Orlando in April, is planned to be held in Monaco in September and possibly in Istanbul in   2014.Participation is by invitation only, and discussion sessions are open only to ISEEE Members and Special Guests, all of whom are expected to participate and make a presentation or presentations at the various sessions. 

About Don Calvin: Donald Calvin is the Chairman and Founder of  the International Stock Exchange Executives  Emeriti, Inc  (ISEEE) and  the  Chairman of International  Business  Enterprises, Inc and as such has been the  Adviser  to more  than twenty securities exchange Chairmen worldwide. He also was the Chairman of the National Stock Exchange for six years during which time it was the second largest US exchange. Previously was the Executive Vice President of the New York Stock Exchange and served with eight NYSE Chairmen, prior to which he was the Syndicate Manager for a Chicago based investment firm. Previously he was the Illinois Securities Commissioner and is a graduate of the University of Illinois Law School. n

Micro-Cap Review Magazine



Bright Outlook for Southeast Asian Countries in 2013


espite continued uncertainties and anemic growth facing many global economies, Southeast Asian economies are poised to experience strong growth in 2013. An increase in investment and domestic consumption is projected to fuel the region’s growth for the coming years as the region is showing resiliency from the global turmoil. The Organization for Economic Cooperation and Development projects Indonesia’s growth will average 6.4 percent, the Philippines will expand about 5.5 percent a year and Malaysia and Thailand will see gains of around 5.1 percent from 2013 to 2017. Companies in Southeast Asia are benefiting from strong domestic demand as the region’s middle class continues to expand, as well as an increase in foreign investment and public spending by governments offsetting weakness from the export markets. As economic growth remains robust for the region, two countries in particular have stock exchanges are performing exceptionally well this year. The Philippines (PSE Index) and Thailand Exchanges (SET), are up 26.6% and 24.5% from the beginning of the year through November 21, 2012, respectively, are the best performing equities markets in the region. In the Philippines, the acceleration of government infrastructure spending has contributed to the strong growth performance

n By leslie richardson


while Thailand’s financials and consumer related stocks are performing extremely well driven by domestic growth from urbanization and increased domestic consumption. Even after a strong performance this year, there are many good companies that are still considered an excellent value. First Philippines Holding Corp (FPH:PH), an energy play which is up 70.8% year-todate and offers a dividend yield of 2.2%. The company is committed to maintain its growth momentum as it enhances its power assets over the next three year. LT Group Inc. (LTG:PH) is up 191.3% YTD. LT Group was previously named Tanduay Holdings Inc, and focused on the beverage industry; however the company’s CEO, Lucio Tan, Philippines second riches man, is in the process of consolidating all his business in one listing. The companies to be consolidated are LT Group Asia Brewery Inc., Fortune Tobacco Corp., Eton Properties Philippines, Philippine Airlines Inc., Air Philippines Corp. (PAL), Philippine National Bank (PNB), and Allied Banking Corp. Ayala Corp (AC:PM) which is up 66.3% YTD is one of the largest and oldest conglomerates in the country with operations in banking, telecoms, property development, utilities, electronics and automobile sales. Recently, the Ayala-controlled Bank of the Philippine Islands (BPI) and Lucio Tan’s Philippine National Bank (PNB) entered negotiations for a possible merger that would create the country’s biggest lender. In Thailand, beverage firm Oishi Group Pcl (OISHI:TB) is up 130.0% YTD. Oishi sells Japanese-style food at several restaurants and bakeries including Osihi Grand, Osihi Japanese Buffet, Shabushi, Oishi Ramen and Nikuya as well as manufacturers and distributes green tea. Siam City Cement (SCCC:TB) is up 81.47% YTD, the company is projected to benefit from the forecasted double digit growth in Thailand’s cement industry driven

Micro-Cap Review Magazine

by infrastructure spending and private investment. Siam Makro (MAKRO:TB) a discount food and consumer products store chain ) is up 109.1% YTD as the company plans to expand throughout the Indochinese market, starting with Vietnam in 2013. While the Jakarta Stock Exchange Composite Index is up only 13.0% YTD, there are some excellent opportunities for growth to be found. PT Ace Hardware Indonesia (ACES:IJ) is up 91.8% YTD as the company has been rapidly expanding adding 18 stores in 7 cities for a total of 71 outlets in 23 cities and also has 14 toy stores under the name Toy Kingdom. Additional, two pharmaceutical companies that are expanding access to healthcare in Indonesia are Kimia Farma Persero Tbk PT (KAEF:IJ) a pharmaceutical producer and distributor is up 153.3% YTD and Kalbe Farma Tbk PT (KLBF:IJ) which is up 49.3% YTD. If investing in individual stocks is not appealing, investors can add some exposure to their portfolios by investing in Southeast Asian funds. A few funds that have performed well this year include W&W Global Strategies Fund - South East Asian Equity Fund and PineBridge Southeast Asia Small Cap Equity Fund which have one year performance of 14.53% and 20.78%, respectively. Two Asian small cap funds that have also performed well this year are Aberdeen AsiaPacific Smaller Coms InSvc and Fullerton Lux Funds Asian Small Cap Equities which have one year performance of 23.12% and 34.27%, respectively. Small caps are doing particularly well as they tend to be more exposed to domestic consumption with less exposure to changing global demand. However, smaller cap Asian funds also tend to be less researched and exhibit a greater likelihood of price inefficiencies. *YTD=November 21, 2012 n • •



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OrphanBiotec-A Talented Bridgebuilder for Rare Diseases


espite modern medicine, Rare Diseases have been forgotten diseases for decades. Over 250 million people worldwide and more than 15 million children and their families in the US are affected. Their suffering makes joint action a requirement. How can society help and modern companies position themselves by being committed to those affected? A review of the last year activities of the Swiss Foundation Orphanbiotec provides some answers. The Zurich based international focused, Foundation Orphanbiotec, has developed innovative solutions and alternatives for treating Rare Diseases. Specific and unique to the winner of the Swiss Social Entrepreneurship Award 2011 is the business model, targeting the needs of people and integration into its patient empowerment program Little Orphan Elfe. This program started in 2012 under the patronat of the Ministery of Health and support of the Children‘s Zoo of the Swiss National Circus KNIE. This unique program offers therefore a direct exchange of people affected and will be integrating its own innovative patient coaching in the near future. For this purpose it maintains direct contact with those affected, patient organizations, researchers, doctors, government agencies and partners. In addition to the Foundation‘s Online Forum for the first primary exchange, it promoted information and motivation to thousends affected. The complete patient empowerment program not only benefits children and their families, and people suf-


fering from rare conditions, but also all CSRSupporters of the Foundation. They turn into much more than just being our sponsors, the founder Dr. Frank Grossmann says. „Creating Shared Value“ is providing all partners the opportunity to take responsibility for social priorities, while strengthening their own performance. Our partners from various fields are committed through their social engagement at the forefront. Short-term market interests are no longer in the foreground. Affordable and sustainable innovation, knowledge sharing and long-term partnerships based on trust and value creation for company and society is where it‘s at. Therefore, it is important to find alternative ways to encourage innovation and to keep in mind the socioeconomic costs for a healthy society and for modern and healthy enterprises. During the last year‘s activities it has become a requirement of our time, that general society is committed to the challenges that the state alone is not able to solve. This is especially true in the area of health care. Orphanbiotec is the 2012 charity of choice for diverse partners, ministries of health, sports clubs and society working together for health promotion and for our international health campaign „BLACK NOSE“. This global campaign is supporting those affected, giving them a face and a voice. Everyone; whether directly affected or not can make a mark with a Black Nose in support for Rare Diseases and prove that those affected are not alone. Companies can tailor their success for social issues at the same time. Foundation

Micro-Cap Review Magazine

Orphanbiotec provides an excellent reputation and convincing Corporate Social Responsibility. A future partnership with the Foundation will give all patrons the ability to enhance their own economic potential and strategic corporate communication. Those affected by a rare disease today will have a voice and will not forget your support. More infos: Foundation Orphanbiotec Dr. Frank Grossmann / Founder, CEO Einsiedlerstrasse 31A 8820 Waedenswil Switzerland SNN Inc. is a supporter of Foundation Orphanbiotec and applauds the work of its Founder and CEO, Dr. Frank Grossman. n • •

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Micro-Cap Review Magazine



One on One with David Drake on the Jump Start for Jobs Act 1. When will the SEC give guidance regarding the Jump Start for Jobs Act? Why the long delay? SEC will come up with a proposal by no later than February 2013 with the new SEC Chairwoman Walters in place.  The initial delay (deadline just passed Jan .1 2013)

was prompted by former Chairwoman Mary Schapiro and her consequent resignation Dec. 14, 2012. The new interim Chairwoman Walters will pick up the process in by February and the article we wrote Obama’s 10 Steps with SEC & FINRA to Legalize US Equity crowdfunding 2. How did the change from stocks trading in fractions to decimals affect the SME’s? Is it probable that  a return to fractions will occur anytime soon? The 1998 Regulation ATS allowed for decimal trading via computers.  At the same time along with Glass-Steagall Act repeal 1999 we saw a decimation of new IPOs.  SEC was happy to see boiler rooms disappearing.  My friend former Vice Chair of Nasdaq David Weild is a staunch lobbyist for fractions to return.  I don’t see it as a part of upcoming topics but it is such a simple solution that make sense.  Let the issuers pick the fraction.


received aggressive lobbyist letters that were leaked from SEC - these letters and ensuing emails from last August got the chairwoman worried about her anti-consumer legacy and consequently delayed it. By resigning Dec. 14, it comes to SEC Chair Elisse Walters to bring a proposal by no later than February for the Commissioners to vote on it.  When this is voted and passed, then the law will stipulate how advertising can be done.   My prediction is that companies reading this should be turning to you now to put into place an advertising strategy with Micro-Cap and lock into rates now as these rates are going to rise quickly.  Our investment The Soho Loft as the leading financial innovation media company focuses on online advertising and advertising through the 200+ annual conferences we handle globally.  We see this as a strong media compliment to Micro-Cap Review especially since we focus on international funds, law firms and investors.

3. How can a company use Micro-Cap Review magazine for market awareness or general solicitation without recourse?

4. Can a private or public company place an ad to raise money legally in SNN products such as our Ask Mr. WallStreet Newsletter, SNNLive Videos, or StockNewsNow Radio?

First of all, Title 2 of the JOBS Act that introduces the removal of the solicitation ban has yet to pass. It was mandated by Congress and President Obama to be implemented as a law by July 4, 2012.  Mary Schapiro

Private companies under the law cannot advertise offerings while public companies can advertise no different as in the past. The law has to pass first which we expect to occur by end of Q1 2013.

Micro-Cap Review Magazine • •

5. Explain what an issuer can and cannot advertise to raise money from investors?

8. If a company funds itself via crowd funding what are the investors exit strategies?

I’m not a lawyer so I would refrain from answering this question. All issuers should always have legal advise on what they advertise.  

Investors can go public or sell the firm. We would advise companies and investors to make sure there are drag along clauses.  Thus, when the owner wants to sell, the potential of 1000s of investors are dragged along to sell.  Investors can also insist on annual private offerings and access to the books - maybe even insist on that share holders annually will partake in a road show where each owner and employee have the right to sell 10% of their holdings.  :This creates a liquidity event and expected resetting of the company value every year.  This latter is of course more applicable for larger firms.  For smaller investors, the exit would be to sell the shares back to the owners of the company, have an outside investor or VC fund buy the shares when an investment large enough comes along or alternatively investors can have the investment being a convertible note - debt option that gives an investor an exit. 

6. Is there differing requirements soliciting to accredited investors or non-accredited investors? Certainly, the general solicitation under this exemption Reg D, 506 c only applies to accredited investors. That’s for investors earning $200k per year the last 2 years ($300k for married couples) or have $1 million net worth excluding your main home 7. Why would an issuer raise money crowd funding if they require the same approximate  financial reporting expense as going public? They wouldn’t most likely.  The argument with crowd funding for equity (delayed even longer - to Jan. 2014 according to us) is that is would be inexpensive.  However, if it ends up costing $10,000-$20,000 then cost is prohibitive.  Also, Crowd funding for stock / equity has a $1 million  per 12 month period limit.  It would fit a small business growing to open up a second store or bakery. However, to raise capital over $1 million would require other exemption or to go public.  Cost is always the concern with going public.  Crowd funding for equity will be a useless law just like Regulation A+ currently is.  Reg A+ was part of the JOBS Act ad also acts like a crowd funding raise but you need merit based state approval and the states are nuts.  They scramble law students to review reg A applications - it is a joke.  They don’t know what they are doing and as such Reg A is maybe used only 5-7 per year nationwide.  There must be an expediency and economics of scale / low cost.  

9. What is the aftermarket for private crowd funded companies? Currently SecondMarket and SharesPost will be the market place for crowd funded companies as crowd funding for equity becomes legalized end of 2013. 10. Does crowd funding fit most companies and what are the deciding factors? Not at all a fit for all companies.  It is a financial tool among many investment tools we have available - several from the JOBS Act.  Our media firm is the leader in information on these SEC exemptions but also other non-traditional funding.  Too many firms turn to lawyers and accountants for advise.  Their advise will be exclusively within their knowledge and no law firm knows it all just like now accountant knows all of the tax code.  We however know all the experts that have conducted successful • •

transactions in all the financial innovation deals available for SMEs. For instance, we have partners and experts that for the last 30 years write Regulation D for a fixed flat fee under $10,000 including legal, PPM and filing.  This firm even ghost writes for the large law firms that usually add a zero to the final bill.   This information takes years to develop and we have found some of the leading minds of the world thanks to the 200 entrepreneur and financial conferences we handle globally but also because our media company have interviewed 100s of speakers and leading minds in all continents.  We find this information between lobbying Congress on the JOBS Act, having former SEC Chair Cox speak at our conference last fall or attending the Transatlantic Economic Council in Rome as a US Commerce delegate July 2012.  This media access gives us information globally and this is the knowledge behind our eco system.  Our new year resolution 2013 is to inspire entrepreneurs and SMEs globally via removal of red tape and ease to capital formation and capital creation.   10A. What will be your focus in 2013? The Soho Loft as the leading financial innovation media company and fortunately complementing all your existing services.  We are managing 200+ financial conferences globally and increasing our writing.  We recently started writing for Forbes and Thomson Reuters as a weekly contributor. David Drake is the founder and Chairman of LDJ Capital, a Private Equity firm in New York City, and of its subsidiary The Soho Loft Capital Creation Event Series (“TSL”), a global events and media company covering education and creation of financial innovation programs for the Private Company Marketplace. n

Micro-Cap Review Magazine



Kesselrun Resources LTD. Pursuing Ontario’s Next Large Tonnage Granite Hosted Gold Deposit


esselrun Resources Ltd. (KES.V) is a newly formed, well capitalized Thunder Bay, Ontario-based mineral exploration company focused on growth through property acquisitions and discoveries. Kesselrun’s management team, led by professional geoscientist CEO Michael Thompson possesses strong geological and exploration experience with particular expertise in Northwestern Ontario. Kesselrun Resources technical team is backed by Fladgate Exploration Consulting Corporation, the largest, full-service mineral exploration consulting firm in Northwestern Ontario. Fladgate has unparalleled resources and extensive geological experience in the area. Significant gold projects in the region worked by the Fladgate team in past years include both the Hammond Reef and Rainy River deposits. Kesselrun Resources’ flagship Bluffpoint Project consists of 103 mining claims covering 22,512 hectares (55,628 acres) in Northwest Ontario’s Wabigoon Subprovince, host to several recent large tonnage gold discoveries such as Osisko’s (TSX: OSK) Hammond Reef Project and Rainy River’s (TSX: RR) Rainy River Project. Accessible year round by a network of well-maintained logging roads, Bluffpoint offers low cost exploration in an emerging prolific gold district. Kesselrun has recently launched an inau-


gural drilling program at Bluffpoint with the aim of further defining the grade and

Micro-Cap Review Magazine

magnitude of gold along the property’s main zone. While the company only debuted • •

on the TSX Venture Exchange in late July of 2012, they have achieved an impressive number of milestones despite the difficult market for junior resource companies over this period.

Kesselrun Resources – Key Facts and Figures • Kesselrun announced its Qualifying Transaction and TSX Venture listing on July 24, 2012. • Kesselrun has a clean structure with only 22.8 million shares issued & outstanding. • Kesselrun completing two equity financings in Nov. 2012 for gross proceeds of C$3.23 million with KES directors investing $.26 million. • The Bluffpoint project, staked in late 2010, is located in one of the leading, most stable mining jurisdictions globally. • Previous work by Homestake Canada Ltd. (now Barrick Gold Corporation) in the early 1990s recognized the potential for the Bluffpoint Project to host a large tonnage granite hosted gold deposit. Primarily due to the lack of road access to the project and the low price of gold at that time, the Bluffpoint was not drilled.

• On Oct. 18, 2012, Kesselrun reported results from an extensive trenching program at Bluffpoint which confirms the presence of broad, disseminated gold mineralization extending along strike on surface 500-700 meters in length, 100-150 meters in width and open in all directions. • On Oct. 29, 2012, Kesselrun reported grab sample assay results from an area approximately 2300 meters north along strike from the northern extent of the Island (Homestake) Zone included 101.80 g/t Gold and 66.82 g/t Gold and extended the known mineralization on surface to approximately 3000 meters. • On Nov. 22, 2012, Kesselrun commenced an initial diamond drilling program on Bluffpoint along the historic Homestake zone designed to test targets identified during the 2012 surface exploration program; initial results from the first 9 holes were encouraging and showed widespread alteration and gold mineralization - confirmation of the “big system” • Drilling at Bluffpoint is ongoing, based on a new 3D model with continuous, fresh rock sampling that KES can correlate to alteration and gold mineralization. • •

Kesselrun Resources CEO, Michael Thompson, is clearly no stranger to gold exploration and mining in Northwest Ontario. He worked with Placer Dome at the Musselwhite mine and then ran their regional generative office before Placer was acquired by Barrick and Goldcorp. The same can be said for the technical team that is now supporting his endeavours at Kesselrun. “Our team brings a wealth of experience to the Bluffpoint project,” states Mr. Thompson. “One thing we all agree on is that a big mineralizing event has happened here. Strong alteration can be found through the whole property, and we can see from our trenching work, there was a lot of gold in that event.” Michael Thompson, P. Geo., President & CEO of Kesselrun, is the Qualified Person responsible for the Bluffpoint project as defined by National Instrument 43-101 and has approved the technical information in this article. n

Micro-Cap Review Magazine



Annual Report Planning –or– Avoiding SEC March Madness


chievement of a timely filed annual report became more difficult and riskier in 2013 due to the SEC’s XBRL protocol implementation (the coding of financial statements). Greater filing difficulty is anticipated due to the additional time (perhaps double time) required to format financial statements according to the SEC’s XBRL protocol, while at the same time the SEC eliminated the grace period previously available for filing a delinquent XBRL report. This double threat, a potential March 2013 EDGAR filing bottleneck for which the SEC promises no relief, I have named, “SEC March Madness.” However, the risk of delinquent filing can be minimized if management takes appropriate steps at an early stage of the planning of its annual report. This Compliance Corner identifies certain planning matters that, if addressed early in the assembly of the annual reports’ components, may facilitate the reporting company’s avoidance of SEC March Madness. This list is not exhaustive, and all companies should seek competent legal and accounting advice as to their individual circumstances.

Tax Planning 1. Need a tax opinion? Consult your auditor whether it will require a tax opinion on any new matters that may have income tax impact before it will issue its audit opinion. Engage a tax expert well in advance of the year-end audit.

Audit Planning 2. Have a pre-audit planning meeting with the auditor. Arrive at decisions on timing and what the auditor will need to see in the way of supporting documentation. If the audit firm has changed during the fiscal year, make sure that the new auditor has access to all needed prior audit work files. If the audit engagement partner has changed, meet with the new engagement partner to insure proper continuity and expectations. Inform the auditor of the names of firms providing tax opinions or asset impairment appraisals. 3. Have inventory? Start the planning of the physical year-end inventory count and coordinate the timing and procedures with the audit firm. 4. Review the auditor’s prior year comment letter issued to management and determine if all items addressed in the letter have been remedied. Prepare appropriate documentation to support reasons why any items have not been corrected. 5. Is an independent appraisal needed? Examine the transactions that have added intangible assets to the financial statements. Determine if they are to be written off or whether an independent appraisal will be obtained. Have that appraisal done prior to the commencement of audit fieldwork. 6. Determine if any unusual or infrequent transactions exist requiring special disclosure or special handling on the face of the financial statements. Review the latest releases of the FASB and be sure to include any changes in the footnotes of the financial statements.

MD&A Planning

n By Russell C. Weigel, III


7. Identify and collect documentary support for the MD&A discussion of known trends

Micro-Cap Review Magazine

pertaining to liquidity, capital resources, and results of operations. Disclosure of information that can affect revenues can and should include knowledge of product failures and limitations, where applicable.

Scheduling of Audit, Form 10-K Preparation, and Edgarization 8. Consult your EDGAR filing service as to its anticipated workload for the 10-K season. Calendar the date that it believes is its cutoff for your filing to be filed timely. Mid-March 2013 could be the latest time that some filing services are able to accept Form 10-K filing commitments in light of the additional time required for revisions to drafts and for completion of XBRL tagging. 9. Make sure that the audit can be completed and the Form 10-K drafted and reviewed by the auditors within the time required. Pick a target date for completion and request calendar commitments from the company’s legal counsel and auditors to ensure timely Form 10-K filing. Getting an early jump on all of these items, plus any other items recommended by the reporting company’s experienced legal, accounting, and auditing team, is recommended to ensure the timely filing of the company’s Form 10-K. File the Form 10-K as soon after year end as possible. The law firm of Russell C. Weigel, III, P.A. practices securities law nationwide and specializes in taking companies public, helping public companies prepare SEC filings and stay compliant with federal and state securities laws, preparing transaction and disclosure documents for private capital raises, and defending issuers and other securities industry participants from SEC and FINRA enforcement actions and from customer arbitrations. Russell C. Weigel, III, was a branch chief and special counsel at the U.S. Securities and Exchange Commission and served during the years 1990-2001. n • •

StockWord Puzzle



41 - Leslie Richardson is the _______correspondent for SNN 42 - New writer in this issue Fred 43 - Thomas Carter is an expert in helping companies arrange 2 - APO this type of financing 4 - StockNewsNow Radio hosted by 7 - General solictation non-_________ protects private companies 44 - Mary Jo White is next chairperson of this commission 45 - publisher 8 - If the OTC has market makers, Exchanges have? 49 - DPO 11 - Coffee and Nutritional Products company 53 - Exxon-Mobil overtakes this company for highest market cap 12 - Orphanbiotec health campaign symbol 15 - Micro-cap company defined maximum revenue dollar value 54 - Most important part of a public company is __________? 18 - First Fidelity Insurance provides this insurance for micro-caps 55 - Shoreline growth is from drilling and __________ 56 - Exchange Traded Funds 23 - International Stock Exchange Executives Emerti 58 - Closure Article written by 24 - indicate your market interests in Micro-Cap Review 60 - Name stock exchange which sold for $8.2 Billion in the last 25 - Symbol for Organic Alliance quarter of 2012 27 - Gordon Chiu wrote on ________? 61 - according to Merriam-Webster a defiition of commodities 29 - Silver is highly recommended by this contributing author 62 - Moblie 30 - Brett Goetschius 63 - to manage risk 32 - Foundation Orphanbiotec fights 65 - Favorite financial conference of 2012? 35 - What does the W in BDW stand for? 66 - Ask Mr.Wallstreet thememe 37 - there are 20 of these in the US Senate 68 - David Morgan nickname 38 - Not an IPO, Not an APO this is more direct 69 - gold story 40 - Marksman 70 - Jack Leslie specialty


30 - Jump Start for Jobs Act signed into law by 31 - Birds of Prey 33 - Stan & Seth Yakatan expertise 1 - PIPE 34 - Jonathan Hornik is the Mayor of this place in New 3 - The ISEEE Orlando _________ Report on SMEs Jersey 5 - This issue WallStreet Chicken theme 36 - RDO 6 - CMPO 39 - financial advice to broker dealers 8 - SEMDA 44 - cover story about oil 9 - Mark Shore Column 46 - January 24, 1848 10 - Ombudsman 47 - SNN targeted market awareness article writer 12 - According to Lahiji, the less shares the ________. 48 - Erick Nelsonâ&#x20AC;&#x2122;s article focused on? 13 - Key to Pubco market awareness 14 - $300 Million is a ___________market capitalization 49 - Leading Crowd Funding Activist 50 - Name of Leonard Rosenâ&#x20AC;&#x2122;s Conference dollar amount 51 - 2012 Hurricane hits Wall Street 16 - Gregory Bowes article is about this topic 17 - Chris Lahiji compares the stock market to________? 52 - the world expert on crowd funding 57 - financial mountain edge at yearend 19 - ROI 59 - general solicitation no... 20 - CME 64 - Sarbanes 21 - SNN database targeted to 67 - Small and medium sized companies acronym 22 - Retired SEC head 26 - The two most heard words at yearend 28 - This Index rose over 16% in 20121

Answers in the classifieds


Growth Equity Investors Dominate 2012 PIPE Market F

undamental investment-oriented growth equity investors increasingly replaced trading-oriented funds as leaders in the equity private placement market in 2012, marking a changing of the guard in an area of the capital markets critical to the development of emerging growth companies. For the first time since the dawn of the their now four year-long retreat. Another The average deal size rose 38% to $39.83 milPIPE (private investment in public equi- top banker in growth equity private place- lion, sharply reversing a four-year trend in ty) market in the mid-1990s, a long-only ments, Cowen & Co., led dealmaking in the falling deal size. mutual fund manager led the market in healthcare sector, closing 28 deals that totaled The increasing deal size in 2012 reflects total deals and total investment among active $1.5 billion in capital raised. a surge in convertible debt and convertible investors, usurping the fast-money hedge Among law firms serving the PIPE preferred stock by large cap issuers seeking to funds that had long dominated the market. market,  Cooley, with its deep experience literally capitalize on ultra-low interest and Fidelity Management & Research invested representing venture and private equity- dividend rates. A dozen large cap companies $190.7 million in 45 growth equity private backed companies, dislodged long-reign- raised $400 million or more in convertible placements in 2012, making the mutual fund ing  Sichenzia, Ross, Friedman Ference as debt or equity private placements, including behemoth the leading active investor in the top issuer counsel. four which raised more than $1 billion in market in both number of deals and total Overall, PIPE deal-making was down over convertible offerings: Sony, Sprint Nextel, investment, according to PIPE market moni- 2011 while total capital raised was up, reflect- ASML Holdings, and Credit Suisse Group. tor PlacementTracker. But Fidelity was not ing a trend toward bigger, higher quality deals Selecting out these mega-deals brings the alone among fundamental-oriented investors with larger market cap companies, especially average size of unregistered PIPEs in 2012 making their way up the PIPE ranking lists in the area of registered private placements, down to $19.3 million, and the total capital last year. Of the top 25 investors in the mar- which have been a rich source of capital for raised in non-mega offerings to $11.7 billion. ket, at least 10 are generally regarded as long- small cap emerging growth companies over The role of registered offerings in the only, fundamental-focused mutual and ven- the past two years. Almost $32.75 billion of make-up of the equity private placement ture capital fund managers, including insur- capital was raised in 822 equity private place- market continued to grow in the fourth year ance and annuity giant TIAA, Wellington ments in 2012, compared to $26.6 billion in since their emergence in the liquidity crisis Management, Columbia Management, T. 924 deals in 2011, a 23% increase in total of 2008. Registered direct offerings (RDOs) Rowe Price, and Orbimed Advisors. investment amid an 11% fall in deals closed. and confidentially-marketed public offerings The evolution of the PIPE market away Top  Ranked  Investors  in  PIPE  Deals  2012 from the arbitrage and structured investGRAPHIC   Rank#1 Investment  Advisor Deals Amount  Invested ment funds that long dominated the market 1  Fidelity  Management  &  Research  Corpora>on 45 $190,685,292 was reflected in last year’s investment bank2  Heights  Capital  Management,  Inc. 33 $140,566,841 3   M illennium   M anagement,   L LC 33 N/A ing and legal counsel leaders as well. Roth 4  Hudson  Bay  Capital  Management  L.P. 29 $115,356,242 Capital led the agent rankings as long-dom5  UBS  O'Connor  LLC 26 $14,318,746 inant  Rodman & Renshaw imploded, its 6  Teachers  Insurance  and  Annuity  Associa>on 26 N/A 7  D.E.  Shaw  &  Co.,  L.P. 25 N/A hedge fund investment clients continuing

n By Brett Goetschius


8 9 10

Baker  Brothers  Advisors,  LLC  Deerfield  Management  Iroquois  Capital  L.P.

24 24 23

$139,095,699 $49,786,201 $12,144,508

Source: PlacementTracker   Source: PlacementTracker

Micro-Cap Review Magazine

GRAPHIC #2 • •

Average PIPE  Deal  Size  

Source: PlacementTracker  

Average PIPE  Deal  Size  


GRAPHIC #2 $45   $40   $35   $30   $25   $20   $15   $10   $5   $0   2009  




Source: PPlacementTracker lacementTracker   Source: (CMPOs) made up a significant segment of the equity private placement market with $6.33 billion or 19% of the total capital raised, a 21% increase over 2011. But it was the buoyant market for at-theGRAPHIC  #3 market (ATM) offerings that really made (Use   SVG  file  if  needed). 2012 the year of the registered equity offering, with 122 offerings announced, an increase of 42% over 2011, raising $3.27 billion of over $20 billion in best-efforts commitments made during the year. Of those 65 issuers that reported capital raised through ATMs by the end of the year, the average proceeds topped $50 million per offering. As the ATM market grew, it expanded from its typical mid-cap issuer base to include many more small cap issuers. ATM issuance

by emerging growth companies with market caps of less than $1 billion increased 43% to 69 deals in 2012. The 2012 PIPE market was buffeted by headwinds both figurative and literal. The end of the fourth quarter, traditionally the strongest issuance period of the year, was restrained first by Hurricane Sandy, which depressed deal making in the New YorkNew Jersey region for several weeks as Wall Street slogged through a crippled New York City, and then by political intransigence in Washington over a resolution to the “fiscal cliff ” crisis that threatened to throw the country’s economy back into recession just as signs of resurgence began to appear. As we entered 2013, Sandy’s floodwaters

Annual Deals

(All PIPEs and Reg S Deals)



Deals Amount






























2013 (Est.)

had receded and the physical recovery of the New York tri-state region was underway. But little had been resolved in the fiscal cliff stand-off. A short 11th-hour reprieve had averted immediate economic catastrophe but much more difficult political decisions were simply put off a few weeks or months. The ongoing uncertainty over how and when they might be resolved cast a pall over the capital markets that is likely to depress capital formation by emerging growth companies at least until the second quarter. However, presuming a compromise is reached between the deficit hawks and the spending doves in Washington that neither guts the federal budget nor explodes the national debt, the underpinnings of an economic revival are in place to accelerate corporate growth in the second quarter that should allow high-growth companies to tap the equity private placement market for lowcost, high return-on-investment capital. If that scenario unfolds, 2013 could be a robust year for PIPE and growth equity capital raising in particular, as the market’s shift towards fundamental investment over liquidity arbitrage continues to align private placement investors with shareholder equity growth. Brett Goetschius is the editor of Growth Capital Investor, the journal of emerging growth company finance. He has covered the emerging growth capital market since 1999 and is the former editor and publisher of The PIPEs Report, The Reverse Merger Report, and The Registered Offerings Report. This article is excerpted from the January 21 issue of Growth Capital Investor. Interested in the full report with complete data on activity in the emerging growth capital market? Download a complimentary copy at http://www. n Or scan this with your cell phone’s QR reader:


Source: PlacementTracker • •

Micro-Cap Review Magazine



Introduction of the Commodity Markets A

s the introductory Commodity Corner column I found this to be a good opportunity to introduce commodities and futures. One could argue commodities have been around since the beginning of civilization. People have produced, paid or bartered for commodities to use for either production or to consume. Some of the uses of commodities include food, energy, construction, manufacturing, and clothing. According to the Merriam-Webster dictionary, commodities are defined as: 1) an economic good. 2) A product of mining or agriculture. 3) An article of commerce especially when delivered for shipment. 4)

A mass produced un-specialized product. 1 In today’s global markets both large and small firms will trade and hedge commodities as part of their daily business as either a producer or end-user of the commodity. For example a chocolate candy producing firm will need to purchase cocoa, sugar and of course energy to fuel their factories. If they do business in foreign countries they may need to buy and sell foreign currencies for hedging or delivery purposes. (See “Currencies in Your Future Portfolio?” of the

n By Mark Shore


Micro-Cap Review Magazine • •

Spring/Summer 2012 issue). To manage their price risk, a commodity producer, such as a farmer may sell a futures contract to lock-in their selling price. An end-user, such as a coffee chain may buy a futures contract to lock-in their purchasing price. Keep in mind commodity markets tend to be mean-reverting markets as they spike or decline from an average price and then revert back towards that average price overtime. This is often due to shocks in the system such as increased demand, reduction of supply, weather concerns, disruption of distribution channels or possibly political or regional events. If a commodity becomes too expensive, the market participants’ behavioral mechanism will appear as they seek less expensive substitutes. This is known in economics as the substitution effect and one of the differences to note between commodity and equity trading. Commodities are traded in two common locations: either the spot/cash market usually reserved for industry or sometimes known as “commercials” such as producers, distributors and end-users as the actual physical commodity is traded. Or the products trade on an exchange such as one of the futures exchanges found around the world. The futures exchanges are often utilized by both commercials and speculators. An exchange offers commercials the opportunity for immediate offset of their commodity risk by speculators offering liquidity to take on the risk. If a commercial has a loss from hedging, it often means they profited in the underlying cash market, because they are holding the opposite direction in the cash market. One can think of the loss on the hedge as a premium on an insurance policy. The Merriam-Webster dictionary defines a commodity exchange as an organized market where future delivery contracts for a specified grade of a commodity (such as grains, cotton, sugar, coffee, or wool) are bought and sold.2 Many historians point to the Dojima Rice Exchange in late 17th century Japan as the first commodity futures (forward) exchange. The exchange operated

for over 230 years ending just before World War II. 3 Commodity exchanges often seek commodity products to list on their exchange that tend to have price volatility and/ or seasonality. Why list a product that has little or no volatility? This would imply no or little risk. Futures are founded on the basic concepts of price discovery from supply, demand and the movement of pricing. A listed contract offers standardization of grade, size and delivery point as a method of risk management for both the producers of the commodity as well as the end-user of the commodity. As the exchange’s clearinghouse takes the opposite side of each trade, it reduces the potential for default risk of the commodity contract. In America, many commodity exchanges appeared around the country in the 1800s. However, one can point to the Chicago Board of Trade (CBOT) in 1848 as the beginning of commodity exchanges in America as a method for commodity producers and end-users to hedge their commodity risk. It is also considered to be the oldest existing commodity exchange in the world. Prior to the CBOT there was a lot of price volatility in agricultural markets. Farmers would bring harvested crops to the Chicago markets. If they couldn’t sell the crops they were stuck with it and some farmers were known to dump the unsold crops into Lake Michigan. It was this price volatility that prompted the need to hedge agricultural markets and the introduction of the CBOT. In 1898 the Chicago Butter and Egg board was founded and renamed the Chicago Mercantile Exchange in 1919.4 Some of the commodity markets include: Energy markets: Natural Gas, WTI (West Texas Intermediate) Crude Oil, Brent Oil •Grains: Corn, Wheat, oats and the soybean complex of soybeans, soybean oil and soybean meal •Softs: Coffee, Cocoa, Sugar, Orange Juice (as noted in the movie “Trading Places” they traded: Frozen Concentrated Orange Juice •Livestock: Live Cattle, Feeder cattle •Metals: Gold, Silver and copper. By

the early 1970s, futures exchanges began trading financial futures as they were perceived as commoditized products beginning with currency futures and later bond futures and stock index futures. Moving forward since the recent financial crisis, commodities have taken on a new importance as a non-correlated asset class for an investor’s portfolio. As many emerging nations gain wealth, the demand for many commodities continues to gain importance on the world economic stage. (Endnotes) 1 Shore, M. (2011) DePaul University 798 Managed Futures Lecture notes 2 Shore, M. (2011) DePaul University 798 Managed Futures Lecture Notes 3 West, M.,“Private Ordering at the World’s First Futures Exchange”, Michigan Law Review, Vol. 98, No. 8, Symposium: Empirical Research in Commercial Transactions (Aug., 2000), pp. 2574-2615 Published by The Michigan Law Review Association 4 Shore, M. (2011) “Why Are Congressional Agricultural Committees Given Oversight of the MF Global Hearings?” Copyright ©2012 Mark Shore. Contact the author for permission for republication at info@ Mark Shore has more than 20 years of experience in the futures markets and managed futures, publishes research, consults on alternative investments and conducts educational workshops. Mark Shore is also an Adjunct Professor at DePaul University’s Kellstadt Graduate School of Business in Chicago where he teaches a managed futures / global macro course. Mark is a contributing writer to Reuters HedgeWorld and the CBOE Futures Exchange. Past performance is not necessarily indicative of future results. There is risk of loss when investing in futures and options.  Always review a complete CTA disclosure document before investing in any Managed Futures program.  Managed futures can be a volatile and risky investment; only use appropriate risk capital; this investment is not for everyone.  The opinions expressed are solely those of the author and are only for educational purposes. Please talk to your financial advisor before making any investment decisions. n


Graphite One Resources: Number One Graphite Resource in North America and perhaps the world


icro-Cap Review Magazine recently met Graphite One Resources at a regional resource conference in of all places, sunny Palm Springs, California. Graphite One Resource, from Nome, Alaska, is indeed a very interesting emerging growth story. Looking for gold and finding graphite may turn out to be one of those stories that legends are made from. As the story goes, Mr. Anthony Huston, President of Graphite One, was in Alaska investigating a gold prospect, when a local geologist happened to mention that he had done a study of Graphite Creek while working for the U.S. government, and had gotten to know the Tweet family that held the mining rights. Mr. Huston recalls the geologist saying: “There’s this amazing property that I believe could be world class.” Mr. Huston and Mr. Charles Chebry, Chairman and CEO of Graphite One, made the connection and were instantly impressed. “The Tweets are great partners” says Huston. The founder of the clan, Mr. Nicholas Tweet, of Norwegian heritage, came to Nome from Minnesota, must have liked the weather, in 1899 at the age of 23, when the gold-rush settlement consisted only of tents, a saloon built of driftwood and a lone log cabin. Mr. Tweet prospered, successfully exploiting the

rich deposits of gold that were then strewn along the beaches of Cape Nome. Joined a year later by his wife, Evinda, and their two sons, the family went on to found N.B. Tweet and Sons, a company still in business today and which has operated placer gold mines on the Seward Peninsula for over 110 years. As they all got to know each other while visiting, the deal was settled the old-fashioned way, with a friendly handshake in Nome, Alaska. The parties to the deal were a group of Canadian entrepreneurs and the descendants of one of Alaska’s foremost pioneer families. Now, around two years later, the groundwork has been laid for what has the potential to become the world’s largest, richest graphite mine. Calgary-based Graphite One Resources released an NI43-101 compliant resource estimate that is reverberating through the mining industry. The full Technical Report describing the resource was filed on SEDAR January 18, 2013 and can also be found on the Company’s website: It’s still dawning on people that the potential production at Graphite Creek on the Seward Peninsula could dwarf the combined output of the rest of the world’s leading graphite producers. “Based on the size of the resource, flake content and potential, we believe this to be the largest reported flake graphite deposit in the world. We will look to take an aggressive approach in 2013 to advance the project towards production in the near future,” says Mr. Anthony Huston, President of Graphite One.   Gold has always been the Tweet family’s major preoccupation. But in 1914, the outbreak of World War I triggered a surge in demand for graphite. The existence of high-grade graphite deposits in the Kigluaik Mountains 65 km north of Nome had been known since 1900,

and Mr. Nick Tweet had staked claims there. During the war years, the claims produced some 500 tons of graphite, which was hauled three kilometers down to a barge in the bay by one of the first gasoline-powered tractors seen in the territory. That same HoltTM tractor is now on display in Taylor, Alaska. Writing in 1919, geologist G.L. Harrington described the Kigluaik deposits as “very high grade (up to 98 percent carbon), and comparable to high quality flake graphite deposits produced elsewhere; even the poorest material is regarded as good ore as compared to many commercial locations.” When the war ended, the market for graphite shrank and the Tweet family claims went largely un-worked for decades. The claims were still in good standing when Mr. Huston and Mr. Chebry approached the family in 2011. “We spent over six months getting to know them,” says Mr. Huston. “It was not unusual to have 16 members of the family in the room, all wanting to understand the future partnership.” “It’s extremely important to recognize that we did close to 12 months of due diligence before we even closed the deal,” added Mr. Huston. “The deal as concluded gives Graphite One a 100 percent interest in the claims on payments to the Tweet family trust totaling $425,000 by March 2014. The agreement also allows for a five percent production royalty that can be reduced to three percent on payment of $2 million for each one per cent cut,” according to Mr. Charles Chebry, Graphite One chairman, CEO and director Part of the due diligence Mr. Huston mentions included a 2011 report stating that the Kigluaik graphite deposits were in an “excellent configuration for open-pit mining” and represented “an excellent exploration opportunity.”


Micro-Cap Review Magazine • •

Mr. Dean Besserer, Vice President of Exploration at Graphite One, recalls: “We used some geologists with local knowledge to do a 10-day program. We did some mapping that showed a strike length extending along 5 kilometers and the schists were about 100 meters thick. We had a good feeling, based on the grades we were seeing and we became increasingly excited.” Subsequent events have more than justified the early optimism and indications, Mr. Chebry added: “The deal with the Tweets also required Graphite One to spend $1.525 million on exploration over a three-year period. To date, the company has spent more than $4.5 million, partly to fund an aerial survey in which a helicopter picked up electromagnetic evidence strongly suggesting that the strike length in fact extends for 18 kilometers, more than three times as long as previously mapped.” The NI 43-101 report states: “an important conclusion of the SkyTEM survey is the likelihood that high-grade graphite mineralization at the Graphite Creek Property extends continually for a distance of at least 18 km.” An 18-hole diamond drilling program, totaling 4,248 meters, was begun in June 2012 and the NI 43-101 results included an impressive “inferred” resource of 165.5 million tonnes at 4.61 percent graphite with a “potential” resource of between 235 and 492 million tonnes of 4.2 percent to 7.9 percent graphite. The resource also includes 25.44 million tonnes of 9.69 percent graphite and 7.8 million tonnes of 13.5 percent graphite which is all at surface according to Mr. Besserer. As good as these results are Mr. Besserer notes that the potential for 492 million tonnes relates to only a small part of the entire 6,799-hectare Graphite Creek property — less than 30

percent. “The deposit is scalable to meet any future demand. With our inferred resource and our potential, we are already far larger than anybody else and could easily exceed 1 billion tonnes.” Mr. Besserer lists other positive aspects of the Property, including the size and grade of the coarse flake graphite and the relative ease with which it can be extracted. “Undoubtedly, we will have the best strip ratio of anybody,” says Mr. Besserer. “Our high grade deposit is exposed along the face of the mountain, unlike most deposits. With us, it’s day one.” Even putting a “conservative” estimate of US$1,200 a tonne on the price of graphite, Graphite One could earn some US$60 million producing only 50,000 tonnes a year. Prices for graphite are constantly fluctuating. They crashed to as low as US$600 in the 90s as Chinese producers flooded the market. Prices recovered and in 2005, premium product was selling at close to US$3,000, but the global recession has seen those levels cut by half. Nevertheless, industry watchers note that current supplies are tight and that very few new graphite mines have come on line. They say the supply problem could become more acute as economies recover and new, high growth applications for graphite, such as lithium ion batteries, fuel demand and consumption. • •

Ceasars Report, a popular online site covering junior mining companies, noted last year that Graphite One is “standing out in the crowd” as “the only successful graphite explorer in the USA.” Mr. Ken Chernin, Equity Research Analyst with Jennings Capital Inc., in Toronto, said of Graphite One’s Alaska prospect: “We found it very interesting the first time we spoke with Anthony (Huston) prior to the NI 43-101. It’s obviously very sizeable and the logistics appear very workable. And, of course, there’s the fact that it’s situated in the United States in a mining-friendly jurisdiction.” Mr. Huston, whose background is in technology, says he “foresees a multitude of new uses for graphite as new technologies emerge in the booming economies of Brazil, India and China, as well as in developed economies such as the U.S. and Japan. This is a unique opportunity for Graphite One and all stakeholders which merit a fast-track to production,” says Mr. Huston. The company fast-track to-do list is an 8,000-meter drilling program, metallurgy, engineering and permitting. Decisions yet to be reached include how to get the ore from the mine to its customers. Graphite Creek can currently be reached only on foot or by helicopter, even though it’s only a stone’s throw from open water and two roads. “People say, ‘Well, how are you going to get the graphite out of there?’” says Huston. If in the early 1900s they figured out how to get graphite on to a barge and ship it to Seattle and San Francisco, I think that we will figure something out.” One thing is certain: Once the graphite gets to the deep-sea port in Nome, it will be conveniently close to prime customers in the U.S. and along the Asia-Pacific seaboard. In conclusion, being in the right place at the right time can sometimes lead to a treasure trove of great riches. n

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Targeted Market Awareness & Pinpoint Investor Visibility O ne of my trusted colleagues recently texted me the following comment: “SNN has so much distribution we are going to burst”. I read his text and realized how right and spot on he was! It was as if we had reached distribution critical mass. After years of development, hard work and the best creative team on the planet the SNN market awareness program is ready for sale to a market ripe and ready for affordable modern methods of new investor acquisition.  Now any company, public & private, can pick and choose digital distribution based on budget, targeted type of investor, geographic region, accredited investors, Institutional investors, non-accredited investors and professionals.  A company can send SNN products such as SNNlive videos, StockNewsNow radio sound bites mp3, or press releases, announcements, product news to a database of more than 40 Million. In comparison: using SNN is like fishing the web with a net rather than with a worm or lure. When you fish with a net, chances are a great deal better for a good catch, even a whale catch could be possible. For example send an SNNLive interview link to 5,000 RIA or 10,000 accredited investors opted-in as investors interested in micro-cap companies.  You can track opens, reads & video views and confirm that your message is actually in front of your target audience. The SNNlive video interview is complimentary at finan-

cial conferences we attend and you only pay to access and distribute to the SNN database. SNN products are all designed to be user friendly and efficient. Why not try video or a radio sound bite or article from micro-cap review magazine or newsletter banner ad? Or even your link to your website or 10q, 8k, a research report or all of the above. Let’s see what works for your company, I would try every possible combination until I achieved the best bang for the buck. SNN distribution is to an opted in audience, no spam. You simply choose your wish list from our buffet menu apply your credit card payment and send us your link message for distribution. Compare your past years return on investment from your investor relations expense. Calculate and answer the following four questions:  How many new shareholders? What is the growth in daily average volume? Are your current shareholders happy? Could you have accomplished a capital raise? My guess is your ROI could have been better. Do not make the common mistake of cutting back on investor relations when you need it the most; simply deploy your budget differently. Continue to do what works and begin a reach and frequency market awareness campaign with SNN as your service provider. n

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Marksmen Energy “The Best Place to Look for Oil is Where it’s Already Been Found.” Ticker symbol: MAH.V


ccording to Archie Nesbitt, President & CEO of Marksmen Energy; “2013, is set to be an exciting year for oil and gas exploration and development as the industry’s attention is


Micro-Cap Review Magazine

no longer dedicated solely to new pools of hydro-carbon deposits, but on new ways to monetize hydro-carbon reservoirs that have existed for decades if not hundreds of years.” As a result of an ever changing industry, • •

shale has received a lot of media attention in recent years. In particular, notice has been brought to Ohio’s Utica shale deposits, a region in which major oil companies drill deep horizontal wells. These wells typically include the costly expenditure of many millions of dollars in order to frac and develop resources that may not be economically viable due to the current global price of natural gas. As public opinion shifts demand to a more efficient management of the world’s natural resources, scientists and industry experts, have been hard at work to develop new methods of oil and gas exploration; drilling and completion techniques which can provide more efficient extraction methods of hydro-carbon resources around the world. While industry and media attention has shifted towards the more glamorous controversial oil markets, it should be noted that at the most recent turn of the century, Ohio`s Lima-Indiana region was the world`s largest oil field! In fact it is controlled by none other than the Rockefeller family whose vast wealth was built in this very region. Production records indicate that close to one billion barrels of oil were extracted from the vast reserves of the Lima-Indiana field alone. These fields were so enormously productive and they were also responsible for creating some of the world`s best oil (42 API) with production taking place very near to the surface reducing the cost of drilling leading and providing rapid return on investment (ROI) and tremendous profits for the producers and their investors. The discovery of oil gushers like Spindletop in Texas, wildcatters abandoned Ohio in favor of greener pastures. Local operators continued to explore Ohio on a hit and miss wildcat basis, without the benefits of modern scientific and technical expertise, nor the high-tech computer animated technologies that modern scientists have discovered and refined over time. So interestingly, in Ohio, without the advantage of modern technology, oil fields as large as 127,000,000; 50,000,000

While industry and media attention has shifted towards the more glamorous controversial oil markets, it should be noted that at the most recent turn of the century, Ohio`s Lima-Indiana region was the world`s largest oil field! and 40,000,000 barrels of light recoverable “Pennsylvania Crude” and high BTU gas, with associated and value liquids, were never-the- less discovered. Modern Ohio remains an economically sound region for oil producers looking to explore and develop lucrative reserves with associated natural gas and liquids potential. Many operators continue to drill without 2D Seismic interpretation and data at costs of $200,000 - $300,000. These processes and their associated costs typically yield 100,000 to 200,000 barrels of oil, making for excellent economics. Marksmen Energy Inc. has assembled a proven team of experienced public company management and resource executives for its management and Board of Directors. In addition, Marksmen is using the services of top flight technical professionals, geologists, engineers and geophysicists to direct projects and land acquisition in Ohio. The Marksmen team has been responsible for identifying and developing roughly two hundred drill locations using its own proprietary technical information over the last twenty years. Mr. Archie Nesbitt, President and CEO of Marksmen Energy Inc. started his career in public company resource exploration well before he had even obtained his business and law degrees some forty-three years ago. Archie has the following to offer about Marksmen and its future in the Ohio region: “I am very excited about what really can be said to be a once in a lifetime opportunity and the potential we have to build a significant oil company in Ohio. I have assembled a • •

talented, professional team of proven industry experts and together, I’m convinced we will create very significant shareholder value for our investors. Marksmen has developed joint ventures with a number of family owned Ohio based operating teams that have been in the business for generations and have significant land positions ready for immediate exploration and development. What we will bring to the table are the financial resources and the proven technical and engineering expertise that’s just not otherwise available to them.” “The Best Place to Look for Oil is Where it’s Already Been Found.” n

Micro-Cap Review Magazine



Direct Selling and Traditional Marketing…

Where The New Economy Meets the Best of The Old Economy!

AL International, Inc. (Ticker: JCOF) (, is a fast growing, innovative, global direct marketer dedicated to improving lifestyles through vibrant health and flourishing economics. AL International offers more than 400 highquality, technologically advanced products; including nutritional products, sports and energy drinks, health and wellness-related services, lifestyle products (pets, spa and bath, garden), gourmet fortified coffee, skincare and cosmetics. Our Nutritional and Healthy Lifestyle products and services are distributed through a global network of Preferred Customers and Distributors. AL International believes that combining the best of the direct selling industry with the fundamentals and capabilities of a traditional business model will exponentially maximize shareholder value. AL International is a newly created company that was formed in July of 2011, by the merger between Youngevity Essential Life Sciences and Javalution Coffee Company. AL International’s goal is to provide health conscious consumers with nutritional and healthy lifestyle solutions that will help them achieve their health and wellness goals. Since the merger, AL International has shown an impressive track record of steady growth and revenues. On February 12th, 2013 the Company filed its Form 10 Registration Statement with the SEC. According to a recent research report, by


Opus Group Research http://www.alintjcof. com/investors.php, AL International has had impressive revenue growth in a short period of time and is now past the half-way mark of becoming a $150 million annual revenue company by 2014. Revenues have doubled each year since 2010 and continue to exceed market expectations.

Multi-faceted Avenues of Success… Youngevity Youngevity Essential Life Sciences is the direct selling division of AL International and offers nutritional and lifestyle products and services through a global “consumer cloud” of direct selling networks. Youngevity is headquartered in San Diego, Ca., and was founded in 1997 by Dr. Joel Wallach, DVM, ND and Dr. Ma Lan, MS, MD. The world headquarters, in Southern California, has grown to 58,000 sq. feet and within five years AL International has a global network of distributors and preferred customers, including offices in Canada, Australia, New Zealand, Singapore, and Japan. A biomedical research pioneer, Dr. Joel D. Wallach, DVM, ND is renowned for his groundbreaking research on the health benefits of selenium and other minerals.

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He currently dedicates his time to lecturing throughout the world on the therapeutic benefits of vitamins and minerals and lobbying the U.S. Food and Drug Administration on behalf of the dietary supplement industry. Dr. Wallach’s work has been published in more than 70 peer-reviewed and referenced scientific journals and books. Dr. Wallach’s 40 year message of preventative health is the foundation of Youngevity’s 90 for Life marketing campaign. The 90 for Life campaign, which is the largest generator of revenue and growth for the company, has made it easier than ever for Youngevity’s large field of distributors to introduce people to the concept that the body needs a core group of 90 essential nutrients to function at optimal levels. These core products have undergone clinical studies at Clemson University’s Institute of Nutraceutical Research (, which is one of the most highly regarded organizations in the field of phytonutrients, vitamins and minerals. The 90 for Life campaign is going strong and as a result of this powerful message Youngevity’s field leaders have seen their business grow by 300 percent since the merger. Youngevity stands by its commitment to provide its customers with the most accurate • •

and thorough information needed in order for them to make comprehensive decisions regarding their health. Youngevity management feels so strongly about this that they have successfully petitioned the U.S. Food and Drug Administration to establish Qualified Health Claims for Selenium and Omega-3 Essential Fatty Acids. Youngevity’s Scientific & Athletic Advisory Boards comprises some of the most respected names in nutrition and athletics. Working together with the Company’s founder, Dr. Joel Wallach, DVM, ND, the Board’s responsibility is to keep the Youngevity products on the cutting edge of performance science and continue its relevancy in highly stressful conditions such as professional sports. On May 2nd 2013, Youngevity® will hold its national convention in Las Vegas, Nevada, where Marilu Henner (www.Marilu. com), the company’s new celebrity brand ambassador will be the key note speaker. Marilu Henner further substantiates the company’s mission in promoting active, healthy lifestyles.

CLR Roasters CLR Roasters represents the traditional marketing side of the company, based out of Miami, Florida it is a wholly-owned subsidiary of AL International. CLR Roasters produces coffees under its own boutique brands, Café La Rica®, Josie’s Java House®, and Javalution®, as well as manufactures a variety of private labels throughout various tiers of distribution. Industries served include major national sales outlets, hospitality, cruise lines, health and wellness facilities, office coffee service providers, and convenience store distribution.

CLR Roasters created a unique line of coffees with health benefits under the JavaFit® brand, marketed through Youngevity, and is the first entrant in the highly unique niche market of fortified coffee. CLR Roasters is one of the largest coffee suppliers to the cruise line industry in North America and provides private label blends to a variety of cruise lines in South Florida. CLR Roasters, which represents 12% of the company’s total revenues, has grown 160% since the merger in July of 2011. Recently, CLR Roasters executed a lease agreement to increase the size of its plant by 60% and has expanded its roasting, grinding, and packaging capacity to meet increasing demand. CLR Roasters has secured distribution with Publix, Winn Dixie, Wal-Mart, Sedano’s, and several large independent operators. (INSERT PIC OF CLR ROASTERS)

Being an Effective Direct Selling Company AL International is dedicated to bringing people the finest array of nutrition and lifestyle-related services to enrich lives and help people Live Younger, Longer! The Company has provided health-conscious consumers and independent business owners with innovative lifestyle solutions since 1997. The Company continues to grow its unique product line by continuously launching new and innovative products. One of the newest items launched through direct selling is called Root Beer Belly, a probiotic supplement, which has already shown great interest from Youngevity consumers and is sure to add to AL International’s sales for 2013. On the traditional marketing side of the business, CLR Roasters recently inked a deal with Norwegian Cruise Lines that will begin generating revenues in the first half of 2013. AL International is committed to growing aggressively through direct selling, traditional marketing, mergers and acquisitions, and organic growth. The Company’s direct sales model and international roll out strategy is ideally suited to fully lever- • •

age the significant upside potential in high growth emerging markets. AL International is dedicated to improving lifestyles through its unique nutritional and healthy lifestyle solutions that enhance the quality of life of each customer and help people achieve their health and wellness goals.

Highlights and Key Features • AL International is now well past the half-way mark of becoming a $150 million annual revenue company by 2014. • International Markets represent the greatest future opportunity. Currently only 7% of sales revenue is derived from outside the United States.  • The senior management team behind AL International commands decades of experience in the core components of the firm’s business model. • The company has completed 10 acquisitions and/or marketing alliances since 2010.  • Marilu Henner is the new celebrity brand ambassador in its effort to continue promoting active, healthy lifestyles. • Exciting results of a series of clinical research studies performed by Clemson University - Institute of Nutraceutical Research • 400-plus unique Health and Wellness products • Distinguished Medical and Sports Advisory Board • Well Capitalized and Profitable n

Micro-Cap Review Magazine


New BD  Formations  &  BD  Withdrawal  Summary     15  Jan  2013,  as  of  31  December


December:  8  New  Formations…  and  18  Withdrawals.   (The  three-­‐year  average  is  14  New  Formations  and  25  Closures  per  month.)     This  14  month  chart  shows  the  types  of  firms  admitted.  

16   14   12   10   8   6   4   2   0  

Pvt Placements   Mut  F,  Variables   Other   EquiSes  









Nov Dec   Jan   Feb   Mar   Apr   May   Jun  

2012  Total     Shuttered:       firms  


2012 Total  of  New  Firms:  







Jul Aug   Sept   Oct   Nov   Dec  


2012 Net  Loss:    

The ratio  of  NEW  formations   vs.  BDW's  is  47%,  and  the   average  net  loss  continues  at       firms    firms         about  12  firms  per  month.             2011      173  New  firms  vs:  317  Withdrawals.                  2010:    177  New  firms   vs:  325  Withdrawals.   ==================================================================================================  



105 equities  trading  firms  closed  in  2012.  The  net  loss  was  74  firms.   This  14  Month  BDW  Chart  shows  the  types  of  firms  that  are  closing.  

40 35   30   25   20   15   10   5   0  

EquiSes Clearing   Mut  F,  Variables   Other   Pvt  Placement  















Nov Dec   Jan   Feb   Mar   Apr   May   Jun   Jul   Aug   Sep   Oct   Nov   Dec  

There are  4391  FINRA  Member  firm  CRD  Numbers  as  of  Dec  31,  2012.  (Note:  There  are  some  bankrupt  firms  still  carried  in  CRD,  such   as  Lehman  Bros,  &  Stanford  Group.)     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.

David Alsup 949-468-0111


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M i c h a e l N . B re t t e , J . D . P r e s id e n t / C E O

95 1-236- 8473 m i k e b r e t te @ g m a i l . c o m • •


Trouble Is Opportunity 2013

appears to be beginning the same way 2012 ended. A divided President and Congress fighting about going over a “Fiscal Cliff” and raising our

country’s debt ceilings. An uncertain economy. Conventional lenders unwilling to provide credit to fund real estate acquisitions and projects because of the economic uncertainty. The fact is, we are still recovering from the worst economic crisis since the Great Depression. While values of real estate in 2012 are substantially less than they were in 2007, the demand for capital is increasing in order to fund real estate transactions throughout the country. Yet the ability to get loans from conventional lenders remains difficult, it creates a tremendous opportunity for those who want to be in the private/hard money lending market.

n By Jonathan Hornik, Esq.

This article will touch a little on what it takes to be successful in today’s private lending or hard money world. It is important to note that the private lending world has changed dramatically since the credit crash of 2007 and subsequent deep recession that the United States has suffered. Careful and meticulous underwriting and due diligence needs to be performed on each hard money deal being considered for a loan. Let’s begin by underwriting a private loan transaction. There are threshold questions that must be answered before one is to consider moving forward on a private money transaction. The first is understanding the borrower’s “exit strategy”. The borrower must have a realistic vision on how they plan on repaying the lender. Will they sell out the property if it’s a construction project, or bulk sale multiple properties in a collateralized package? Are they hoping for a refinance from a conventional lender. In such case, you must have some assurance the refinance will take place. Those entering into the private lending business must understand that you are a lender and not a real estate owner of property. This understanding is important as your intention is always, for each loan, to be repaid with • •

interest, points, and fees; rather than going through a costly foreclosure and becoming an owner of the property. The next threshold question that must be answered is, what I call, “skin in the game”. “Skin in the game” refers to the equity contribution of the borrower towards the purchase and/or real estate project. For purposes of clarity, all private money loans will be secured by either a Deed or Mortgage and should be in the First Priority Lien position, with equity behind it. The more equity that is required to be contributed to the project by the borrower, the safer the real estate loan. That is because in a properly structured secured private money loan transaction, 100% of the equity will be lost prior to any debt being lost. This is reflected in the Loan to Value Ratio (LTV) of the property or Loan to Cost Ratio (LTC) (in a development project). By way of example, a loan of $1,000,000.00 at a 50% LTV would have the borrower contributing $1,000,000.00 in equity. “Skin in the game” not only protects the debt, it also indicates the level of commitment the borrower has to the property. It is important to point out that when underwriting a private money real estate deal, you want to see real dollars put toward the real Micro-Cap Review Magazine


Jonathan L.  Hornik     Type  of  Real  Property  Securing  Loan  

Loan to  Value  Ratio  

Loan to  Value  Ratio  

(“as is”)  

(“as improved”)  

Non-­‐owner-­‐Occupied Single  Family   Residential  



Commercial, industrial,  or  Rental   Property  



Unimproved Land  



estate (which increases the value of the real estate as opposed to soft costs (which are paid to professionals and do not increase the value of the real estate). Be wary of those borrowers that do not want to contribute equity to their own project. The ability for any lender to lend against real estate depends on the lenders permissible LTV and LTC as discussed above. The various types of Real Estate types carry various risks. Types range from residential to commercial to industrial properties. The below matrix gives some indication of market LTV’s for specific types of real estate assets. As a general rule, the less risky the real estate, (i.e., the less suspect the value of the real estate), the higher the LTV the lender is typically willing to go to in order to close any loan transaction. As a general rule, lenders should never take uninsurable risk. Therefore, a full review of Title, Survey, and Environmental on the real estate that will be collateral for the loan must be performed. Purchasing a Title Policy to insure that the lender has a First Priority Lien with nobody ahead of the lender, will protect the lien priority of the loan. An environmental review of the real estate is strongly recommended, as an environmentally contaminated property, requiring costly remediation, can substantially impact the value of the property and the yield on the investment. It is important to note that one must not only do desk underwriting, but also must visit each and


every real estate property that is the subject of a loan. Everybody2 in the private lending business has too many stories indicating how potential borrowers have misrepresented the condition of a property that can only be discovered by a property visit. Careful Pricing is another aspect of private lending that needs to be fully understood. Pricing usually consists of a combination of interest rate, points and fees paid at the closing. The pricing matrix for private loans is directly impacted by the LTV and any other circumstance which in the analysis of the underwriter would make the loan more risky. This could include the risk of approvals not being in place, infrastructure and other similar issues which may impact the viability of any real estate project , borrower’s background and past experience. Pricing on private loans can range from 8% to 14% interest and 1 to 10 plus points. As you can see by the range of pricing, being in the private lending business can be lucrative to say the least. Should you have any questions regarding this article or to acquire further information about the private lending business, please do not hesitate to contact me at my law firm at 732-409-1144.

Micro-Cap Review Magazine

Jonathan Hornik is a founding partner in the law firm of LaRocca Hornik Rosen Greenberg & Blaha (LHRG&B) where he serves as co-chair of the Real Estate and Finance Department. His practice concentrates in the financing, investment and acquisition and generation of mortgages, mortgage pools and other real estate and commercial transactions. Mr. Hornik has successfully handled many significant financing, real estate and other corporate transactions over his career. He has advised his clients in all aspects of transactional real estate and corporate matters, including, private placement memorandums, subscription agreements, limited liability companies, the acquisition and disposition of properties, businesses and other assets, operation and financing of projects, stock and asset purchases, institutional investments, credit facilities, joint ventures, partnerships, commercial lending and leasing. Jon has developed a specific expertise in workouts and the restructuring of loan transactions, frequently advising clients on the restructuring and disposition of loans and distressed real estate in and out of the foreclosure process. Prior to joining LHRG&B as partner, Mr. Hornik was Vice President and General Counsel of one of the nation’s largest direct private lenders. Mr. Hornik is an acknowledged expert in deal structuring and negotiation. Mr. Hornik has been admitted to the Bar in New York and New Jersey. LHRG&B is a business oriented full service Wall Street law firm with offices in New York and New Jersey. Mr. Hornik is also serving his second term as Mayor of the Township of Marlboro, New Jersey. n • •


What I Learned About Graphite I

n 2008 Gregory Bowes became a director of the predecessor of Northern Graphite Corporation (NGC:TSXV, NGPHF:OTCBB) and in 2009 became the CEO. At the time, graphite was a sleepy industrial mineral that no one new anything about. Like REEs and Lithium, everyone has had to get up the learning curve including Greg who probably did more than anyone to publicize the graphite story. Now there are over 60 companies but he remains one of the most credible sources in the industry and NGC is widely regarded as the leading company. It is the only graphite company to have completed a bankable feasibility study and is in the advanced stages of permitting. NGC has a large flake, high purity, scalable deposit that is located in Canada, close to infrastructure, and has very competitive operating costs. We asked Greg to share some of what he has learned in the last four years.

n by greg bowes


1. Well, a major difference is that with base and precious metals everyone gets the same price. In industrial minerals prices vary greatly according quality. With graphite, prices are a function of flake size and purity (carbon content of the concentrates). Graphite deposits can contain little or no “battery grade” material. Or, a very large percentage of the “graphite” may be low purity, micro-flake with no commercial value or at the very least, serious marketing challenges. Impurities can also affect marketability. Grade is always important but with industrial minerals, metallurgy is often more important.

Micro-Cap Review Magazine

2. For commodities that China imports, such as iron ore and coal, its policy is to over stimulate new supply from the rest of the world to a point where there is excess capacity and low prices. For commodities where it is the dominant producer, such as REEs and graphite, China is consolidating very inefficient, fragmented industries, improving labor and environmental standards, curtailing illegal mining and moving toward more professional management of its resources. China does not want to sell scarce resources cheaply to the rest of the world as it has done for years, especially while incurring a huge environmental cost to do so. In graphite we have seen export duties, the formation of an amorphous graphite monopoly that will reduce the number of mines from 210 to 20 and serious restrictions on new and existing mines and processing plants. This trend will continue and new graphite mines outside of China are needed. 3. Graphite prices flat lined for over 15 years due to excess production capacity in China and economic cycles had little effect. After that excess capacity was used up, prices more than tripled due to growth in emerging economies. However, it also meant that graphite prices are now subject to economic cycles and slower growth in China has since resulted in them falling by about a third. So graphite is now a bet on a recovery but it is a good bet as no new mines were built during the last cycle. The supply problem will be more acute in the next cycle. • •

4. When gold, copper and other metals first broke out of historical trends, everyone was concerned about where the new price bottom would be in an economic downturn. The same is true of graphite prices which are in uncharted territory. However, it appears the bottom has been reached as prices have stabilized and may even be edging upward. We are close to the marginal cost of Chinese production when export duties, VAT and transportation costs are factored in. 5. While there are over 60 public graphite companies, there are very few serious development stage stories that can come on line in the next three or four years. This is enough to meet growing industrial and battery demand and replace aging production. There have been some very interesting new discoveries but still a lot of questions to be answered on metallurgy and infrastructure. Greenfield projects typically take 5-10 years get into production and that is in a best case scenario. 6. Our Bissett Creek deposit will produce about 20,000 tonnes of graphite per year for 23 years based on probable reserves only. We have another 50 years of inferred resources and the deposit is open on surface and down dip so it could conceivably produce in excess of 50,000 tonnes per year. A couple new discoveries have over 100 million tonnes of resources and could also produce at this level or higher. However, it would be suicide to bring on a mine at this rate as the market could not absorb the production and prices would crash. So in effect, size does not matter. Large deposits can’t really take advantage of economies of scale. Being first to market is much more important. This will enable us to establish our markets and our customer base and expand as the market grows. It is much easier to expand a mine that is located close to infrastructure in a favorable jurisdiction than it is to build a new mine in a third world country. These big, new projects really require the EV market to take off which could very well happen.

The rise in graphite prices was really the result of the ongoing industrialization of emerging economies and its affect on traditional steel and automotive markets which are still the most important ones for graphite. 7. The rise in graphite prices was really the result of the ongoing industrialization of emerging economies and its affect on traditional steel and automotive markets which are still the most important ones for graphite. However, much of the interest in graphite is the result of lithium ion batteries and their use in EVs and HEVs. Both the US and China have set a goal of one million EVs on the roads by 2015. One million EVs will need about 80,000 tonnes of graphite or approximately 15% of the current flake graphite market. If EVs gain only one per cent of the new car market and HEVs 5%, it would require 286,000 tonnes of graphite to make the batteries. This is almost half the current market. Clearly, EV/HEVs will have a substantial effect on the graphite market even if they are only modestly successful.

the foreseeable future. If a 1mm thick flake of graphite contains three million layers of graphene, then a few tonnes of graphite are enough to make a blanket that would cover New York city. 10. Graphite is a wonder material with very many attractive qualities. As reliable, high quality sources are developed outside of China it will attract many new uses. Gregory Bowes, B.Sc. (Geology), MBA has over 30 years of experience in the resource and engineering industries. He holds an MBA from Queens University and an Honours B.Sc., Geology degree from the University of Waterloo. Mr. Bowes was previously Senior Vice President of Orezone Gold Corporation (ORE:TSX) and President and CEO of San Anton Resource Corporation. n

8. Graphite is not dependent on lithium ion batteries for future success. In addition to growing industrial demand, applications such as fuel cells, vanadium redox batteries and pebble bed nuclear reactors are all big graphite users and will find increasing commercial traction. 9. Graphene is also bringing a lot of attention to the graphite space. There is still a lot of work to be done, especially to develop a commercial process to economically make graphene in scale and it remains to be seen how much it will affect graphite demand in • •

Micro-Cap Review Magazine



The Evolving Direct Public Offering Market Shows Promise for Early Stage Companies


f you are a small or development stage business and are planning to raise capital, chances are pretty good that you have either heard one, or a com-

bination of the following cautionary statements:

n by thomas carter


• The environment for raising capital is extremely tough, • Investors are more risk averse than ever, • Your deal is too small to attract an investment banking firm, • It is extremely difficult finding an investment banker willing to engage without significant up-front fees, or • If you are trying to attract VC interest, for every 100 plans submitted, 10 get reviewed and only 1 is funded. These points are all true - and depressing. Especially when you consider the fact that there are more than 27 million small businesses in the United States and it is probably safe to assume that on any given day, at least a few million of them are thinking about how to access third party capital. The good news for small businesses, whether they are not getting VC or investment banking attention because they are “too small”, “too immature”, “too ‘Main Street’”, or doesn’t measure up on some other measure, is that there is a tried and tested way to ‘do it yourself.’ To be sure, self-underwritten offerings, or “direct-public offerings” (DPOs) have been around for years. But the process was not exactly efficient. One of the primary chal-

Micro-Cap Review Magazine

lenges for the DPO company was where to take the deal. While investment banks, venture capitalists and investment professionals possess respective abilities to syndicate a transaction, and move clients through the “going to market” process with roadshows, presentations and related ballyhoo, companies “going it alone” via DPO had to knock on the doors of prospective investors that presided in their own, much smaller database. Or, still worse, cold call. And while investment banks, venture capitalists and investment professionals also bring “investment packaging” resources, assisting companies in tightening up the “pitch”, refining the business plan and client’s value proposition, companies “going it alone” via DPO have to just do their best to fine-tune their presentations and pitches. It isn’t hard to see why the DPO market hasn’t been grabbing much attention historically. But the “really” good news for smaller, “off-the-wall-street radar” companies is the emergence of a couple key trends that are changing the game: Enabling technologies and social networking trends are democratizing the early stage investment landscape, creating greater • •

B of I Holding, Inc.

Miller Energy Resources

BofI Holding, Inc. is the holding company for BofI Federal Bank, a nationwide branchless bank that provides financing for single and multifamily residential properties, small-tomedium size businesses in target sectors, and selected specialty finance receivables. With over $2.8 billion in assets, BofI Federal Bank provides consumer and business banking products through its low-cost distribution channels and affinity partners.

Miller Energy Resources, Inc. is an oil and natural gas exploration, production and drilling company operating in multiple exploration and production basins in North America. Miller's focus is in Cook Inlet, Alaska and in the heart of Tennessee's Appalachian Basin including the Mississippian Lime and the Chattanooga Shale. Miller is headquartered in Knoxville, Tennessee with offices in Anchorage, Alaska and Huntsville, Tennessee.

ENSERVCO Corporation

Stellar Biotechnologies

ENSERVCO through its various operating subsidiaries, has emerged as one of the energy service industry's leading providers of hot oiling, acidizing, frac heating and fluid management services. The Company owns and operates a fleet of more than 245 specialized trucks, trailers, frac tanks and related well-site equipment. ENSERVCO operates in Colorado, Kansas, Montana, New Mexico, North Dakota, Oklahoma, Pennsylvania, Ohio, Texas, Wyoming and West Virginia.

Stellar Biotechnologies, Inc. is the world leader in sustainable manufacture of Keyhole Limpet Hemocyanin (KLH). KLH is an important immune-stimulating protein used in wideranging therapeutic and diagnostic markets. Potent, yet proven safe in humans, KLH operates as both a vital component for conjugate vaccines (targeting cancer, autoimmune, and infectious diseases) as well as an antigen for measuring immune status.





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awareness of small and development stage companies seeking capital and greater participation; and Regulatory developments are creating pressure on the SEC to update pre-Internet rules for companies raising capital.

The Emergence of Social Networks, Social Investing and Equity Marketplaces Technology is enabling the emergence of online platforms for investors to learn about investment opportunities, more efficiently vet deals and pitches, and to gain access to other informed investor opinions as part of a community. These emerging platforms will enable small and early stage companies in the DPO process to more efficiently and effectively market their value proposition to prospective and better informed investors. Technology will enable average investors to compete with institutions. Historically, information about issuers was accessible only to investment banking patrons. The DPO community platform will enable “Joe” and “Jane Six-pack” to access issuer information like never before - at the tip of the browser - and being able to process that information in a community setting, with discussion and input from other investors, can be far more valuable than the feedback of a broker and a static research report. In addition, an important consequence of the more successful, higher-trafficked, online DPO sites will be that companies will be able to better plan for a secondary market - which has historically been a shortcoming of the DPO process. More investors will be aware of the DPO companies’ story, and more likely to participate in the business as an investor in a post-effective registration statement world.

Small Businesses Matter - They Need Capital - And Congress Gets It According to the SBA, small businesses rep-


resent 99.7% of all employer firms, employ half of all private sector employees, pay 44% of total U.S. payroll, generate 65% of net new jobs over the past 17 years, and drive more than half of nonfarm private GDP. They matter. However, the fact is that most small businesses fail. The SBA reports that while the estimated 552,600 new employer firms which opened for business in 2009, 660,900 firms closed (average an turnover of about 10%). Seven out of ten new employer firms survive at least 2 hears, five out of 10 at least 5 years and slightly more than three out of ten survive at least 10years. One of the primary causes is lack of sufficient and ready access to capital. In response to this state of affairs, Congress passed the Jumpstart Our Business Startups Act (JOBS Act). The JOBS Act is generally anticipated to be a prospective game-changer for small businesses seeking capital, describing a specific framework (equity-based crowdfunding) which will enable companies to solicit smaller financings online, through “funding portals”. The idea is, that if crowdfunding takes off, small businesses will have access to capital that historically has been either nonexistent or prohibitively expensive. Chances are, however, that the crowdfunding market will likely develop at a pace much slower than the JOBS Act legislators and its advocates want, as the Securities and Exchange Commission still needs to finalize the rules, and participants will still need to get comfortable with those rules and confident in the crowdfunding process. DPOs, on the other hand, are better understood and the rules are clearly defined. Unlike proposed rules for equity crowdfunding, DPOs allow companies to raise more than $1 million and in certain cases (SCOR and California 25102(n) exemptions) advertise the offering, selling stock directly to the public without the registration and reporting requirements of a conventional IPO and without the higher costs. While the JOBS Act is ostensibly legisla-

Micro-Cap Review Magazine

tion geared to crowdfunding, not DPOs, its being passed into law is in itself a major shift in regulatory acknowledgement that small businesses need better and more efficient access to investment capital and acknowledgement that the status quo is not acceptable. We think that a byproduct of this shift in mindset will only benefit companies undertaking the DPO process going forward. In fact, under the proposed rules of the JOBS Act, in August, the SEC proposed the elimination of the prohibition against general solicitation and general advertising to offer securities under Rule 506 of Regulation D of the Securities Act and Rule 144A of the Securities Act. At Equity Round Services Co., we believe that with an improving regulatory trend to promote transactions to accredited and institutional investors in an online environment where the social networking technologies are enabling a more transparent, efficient and informed marketplace, the outlook for the DPO financing structure has never been better. Our focus is to work with small and early stage companies, helping them structure and position their businesses to more efficiently accept capital (equity and debt), providing them with an experienced team and deep set of financial and operational resources at outsourced economics, and access to a broad pool of qualified and actionable investors, is an immense one. n • •

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Micro-Cap Company Insurance


ost articles written about the insurance needs for Micro-Cap companies focus on changes created by The Sarbanes-Oxley Act of 2002, the resulting additional responsibilities and the shift in corporate protective measures. This column, however, aims to inform C Suite executive officers, company board members, and shareholders regarding important and often overlooked insurance aspects of corporate well being and financial protection. I will be highlighting important insurance products, going over some common mistakes, providing general insurance strategies, and also offering some do’s and don’ts of coverage. Directors & Officers (D&O) insurance is purchased to protect personal assets of directors and officers as well as to protect the assets of the firm. It serves to provide reimbursement to the organization, to indemnify Ds and Os for their losses, and to help the firm monitor and provide defense costs associated with responding to lawsuits or investigations. The basic D&O policy includes coverage for the entity as well as the Ds and Os on an aggregate basis, but can leave the Ds and Os exposed should the entity use up the limits of liability and not have the means to indemnify the Ds & Os for their defense and indemnity expense. A popular D&O derivative product is Side A “DIC” policy. This is basically the same D&O coverage, except it only applies to Ds and Os (no entity) and is non-rescindable

n by Eugene B. Podokshik


by the carrier. Many SME’s and Micro-Caps already purchase this type of a program, however, I’d like to introduce another D&O derivative product, the Personal Director’s Liability Insurance (PDL).

Product HighlightPersonal Director’s Liability Insurance (PDL) PDL is essentially an individual personal liability policy for independent directors serving on one or more boards. It’s unique as the limits are not shared with other directors or with the organization and the policy can be tailored for the individual to cover one, all, or any combination of boards a director serves on. Insured directorships can be with publicly traded, privately owned, or not-for-profit organizations. This policy is an excess policy over any other D&O coverage that may be available containing drop-down and limited difference-in-conditions (DIC) features. In other words, PDL activates when indemnification is not available from any source, and losses are in excess of other D&O liability insurance, or losses are not paid by underlying D&O liability insurance and certain drop down or DIC features of the policy are triggered. Limits available are generally up to $10 million. Some positive features of PDL policy are: • No deductible • Freedom to choose defense counsel with carriers consent • Spousal coverage included • Bilateral extended reporting period • Dedicated PDL claims professionals are available to guide insureds through the claims process even if the policy is not triggered. • PDL responds as primary Insuring Clause 1 coverage if a loss is not paid under the underlying insurance because of financial

Micro-Cap Review Magazine

impairment of all underlying insurers, claim denial due to a materially false warranty made by any person or organization (other than the insured person), or if all underlying insurance is rescinded. Why consider a PDL policy? If you’re a Director or Officer of any company, it’s definitely worthwhile to consider this type of program, especially if you have assets worth protecting. Here are few of the common scenarios that a D and O can encounter with their traditional D&O policy: • D’s and O’s run the risk that large claim(s) settlements can exhaust D&O limits • Entity or individual directors can erode coverage protection for D’s and O’s • D&O program can be tied up in bankruptcy estates and defense costs may not be provided for many years (i.e. a U. S. bankruptcy court has ruled that all underlying insurance and its proceeds are assets of a bankruptcy estate and unavailable to pay any covered loss) • The D&O policies can be rescinded by the carrier for various causes • Poorly structured severability provisions can expose innocent directors

Common Insurance Mistakes: When providing insurance reviews, I often find that a great deal of time was spent on D&O insurance, but very little time was spent on the other coverages. If not structured properly, these other coverages may not respond to a claim, which can have a significant impact on the company’s balance sheet, income, and if severe enough, can even result in bankruptcy. Carriers are unforgiving when it comes to using the fine print in their policies to disclaim coverage. Someone needs to make sure that you have the right • •

Below is  a  general  guide  to  what  is  expected  to  take  pl rates    will  depend  on  the  specific  exposure  changes,  ca mandates,  loss  history  of  the  insured,  class  of  business

coverages, and that they are written correctly from a technical standpoint. Take a look at your insurance program to see if you can find some of these common insurance mistakes. • Missing names on the named insured schedule • Missing locations • Limits are too low (building, contents, liability) • No flood or earthquake insurance, no utility service interruption coverage • Insufficient business income • No hired/non-owned liability coverage • Improper classifications / Exclusions for your business activity • Professional liability definition of your services is too narrow or incorrect • Your broker, or a lower level employee completed your insurance application • The excess policy does not follow from the primary or underlying policies • You didn’t purchase the proper coverage -you can see a listing of common coverages purchased by Micro-Cap companies here

General Insurance Procurement Advice: Here are some of the generic takeaways that might be of benefit to know relating to insurance procurement. • If your insurance premiums are over $200,000, ask your broker to net out their commission and instead negotiate a service fee with them. • The name of the game is to be prepared. You need to dedicate a professional to be responsible for risk (insurance) management. For most Micro-Cap companies, this falls on the shoulders of the CFO. Whoever it is, please make sure that adequate time is spent on exposure review and analysis. Hire a consultant or engage your insurance broker to perform this service if you cannot dedicate the time or do not possess the expertise. Your broker relies on the information you give him/her, and your insurance carrier can use the submitted application to

deny coverage if they find misrepresentation. • Engage an insurance broker who can provide risk management services and act as an extension of your firm, rather than just be an insurance vendor. • No matter how solid your relationship is with your insurance provider, we recommend that you engage a third party to “check” your program at least once every three years. There may be significant gaps in your insurance program and you may not be utilizing the optimal risk transfer structure for your operations. Reviews can be confidential. • Meet your underwriter. If there’s a claim, you want to know the underwriter personally. He/she is the only one (other than your attorney and broker) that can go to bat for you when you have a questionable claim. • Understand your indemnification relationship with your company. • Read and understand your policy. Well, that actually may not be realistic, the understanding that is. It is better to hire an attorney who is familiar with insurance policies and have them liaison with your broker to secure the appropriate coverages. This additional expense will be a tiny fraction of the premiums you pay, but you will be in a better position when the claim does arrive. If you don’t want to rely on your corporate counsel who may not have this expertise and need a recommendation, please contact us, we have put together a panel of various insurance attorneys.

First Fidelity insurance rate projections for 2013: Below is a general guide to what is expected to take place in commercial insurance in 2013. The actual rates will depend on the specific exposure changes, carrier appetite changes, carrier rate increase mandates, loss history of the insured, class of business, and many other factors. I hope this information was useful. Until next time. • •

Coverage* %  Increase   Property     7%  to  12%   Casualty   2%  to  8%   Excess  Liability   3%  to  12%   Workers  Compensation   3%  to  15%   Directors  &  Officers   5%  to  10%   Errors  &  Omissions   4%  to  6%   Employment  Practices   3%  to  12%   Employee  Benefits   3%  to  10%   *Assumes  good  loss  experience.         I  hope  this   information   was  useful.    Until  next  time.   About First Fidelity

Brokerage: About First  Fidelity  Brokerage:  

Founded in 1994, First Fidelity Brokerage is aFounded leading international casualty in  1994,  First  property Fidelity  Band rokerage   is  a  leading  in insurance FirstdFidelity developed and broker.    Fbroker. irst  Fidelity   eveloped   and  administrates   sev insurance  programs   or  Micro-­‐Cap   companies.   administrates several fspecial insurance prod-  Headq differentiates   itself  by  providing   procuremen ucts, including insurance programsinsurance   for Microprofessionals.     T he   a ddition   o f   l egal   e xpertise   Cap companies. Headquartered in New York in  insura game   changer   in  insurance   procurement.”™   City, First Fidelity differentiates itself by pro-  This  servi less   c laim   d enials.     viding insurance procurement and advocacy services using experienced legal professionals. For  m ore  information   on  First  Fidelity   Brokerage,  pleas The addition of legal expertise in insurance procurement is what FFB refers to as “The   game changer in insurance procurement.”™ Biography   This service model untimely leads to better protection and less claim denials. For more information on First Fidelity Brokerage, please visit

Biography Eugene B. Podokshik, CPCU, CRIS, an insurance coverage technician, is the Principal & CEO of First Fidelity Brokerage, a specialty commercial insurance broker providing insurance risk transfer solutions to SMEs & Micro-Cap companies. Mr. Podokshik has worked in insurance product development and in various positions servicing middle market and national accounts (ranging from privately held companies to large publically traded investment banks) most recently as an EVP for a national insurance broker where he led insurance due diligence, program placement and portfolio aggregation programs (domestic and international) for private equity firms. Eugene graduated from NYU with a BS in Economics and a BA in Political Science, and holds the CPCU and the CRIS insurance designations. He also serves as Board President of CIDNY-ILS, a New York City not-for-profit Home Care Agency with nearly 700 employees, and is Treasurer of the Brighton Ballet Theater, one of the nation’s largest children’s ballet schools. If you have any questions for Eugene Podokshik, he can be reached at (212) 933-9050 x1801 or via email epod@ Mention “MicroCap Review” magazine to have First Fidelity’s fees waived when engaging them for a basic insurance review and rate comparison. n Micro-Cap Review Magazine



“Closure” J

ust as many people have trouble beginning a new project, or task, so do people frequently have trouble with ending the same, or bringing closure. In developmental psychology, in the works of Erikson and Piaget, as well as the neuropsychologists, who focus on attachment theory, from the time of earliest childhood we have trouble moving from stage to stage in human For each of us, leaving a stage in life in control. Whether as a young adult or as a development.

n By Rabbi Stephen Robbins


which we have become both comfortable and competent engenders a profound sense of loss because the hard won competence brought a feeling of wellbeing. It added to our emerging identities, a sense of ourselves, as more fully developed and able to cope with, compete with and develop our own place in the world. It is sad to let go off such feelings. It also produces an anxiety of helplessness because the next stage comes to us whether we want it or not. Having passed myself from adulthood into becoming a senior it produces all of the same kinds of emotional responses that I had as a child moving from childhood into adolescence. I don’t like to give up the strength and agility of my physical life. I worry about my capacity to compete in a world where youth, energy and potential are stressed over older age, wisdom, knowledge, and experience. When I look in the mirror I do not see me, but, my father and/or my mother. The agility of my mind is becoming filled with those “senior moments,” where my consciousness has become sluggish. This is the change that happens naturally, organically and out of my

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senior, this profound sense of loss prevents closure and transition into the next stage of life, fully and completely. This basic principle of human development teaches us that no task is ever truly completed or every really comes to closure. After having worked as a Rabbi and counselor for over fifty years, I am conscious of all those tasks in my life that I finished but was never really completed, because in some way I resisted letting them go so I could move on. At the same time, as I resist loss and anxiety, I embrace the moment looking forward to the new possibilities of what the new stage in my life, the new tasks, and the opportunity for new growth is presented to me. It is so freeing to open the door onto pathways untraveled. I feel so good about them, because all the prior years have prepared me for what is next. Even though I feel excitement and hope, there is that part of me that is anxious and frightened that I will not be able to do what is expected of me and more than that, what I expect of myself. Do you ever find yourself replaying old conversations, confrontations, presenta- • •

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One side of mind chatter keeps you in the past, the other keeps you in the future, both of them together keep you out of the here and now, and therefore, nothing ever gets completed. tions etc because you were dissatisfied with the outcome? Those replayed moments of unfullfillment, are part of the fundamental “mind chatter” of worry/anxiety that goes on in most people’s consciousness. The other part of that mind chatter is listing of all the things which are yet undone and need to be “completed.” One side of mind chatter keeps you in the past, the other keeps you in the future, both of them together keep you out of the here and now, and therefore, nothing ever gets completed. In this constant state of anxiety/worry “mind chatter,” everything we do is conditioned by past failures. Most tasks are never finished because much of the motivation that drives us is the anxiety of dissatisfaction. To truly complete anything, to come to a sense of closure, whether it’s at work, in a project, or collegial relations, whether in friendships, whether in family, whether in loving or whether in spiritual moment of insight into meaning and purpose, one must always be in the present focusing on what is in front of you. So how does all of this apply to those of us whose business lives are bound up in finance, investments and/or micro-cap? First there is the matter of closing out a year. It may be a year that we are satisfied with or even proud. In this case closure can bring a sense of elation and celebration, which also frequently is accompanied by the haunting question, “Can I do this again next year?” or “is this something that others will continue to expect of me”? The inherent conflict of emotions in such a scenario are further complicated by the deeper uniquely personal issues of loss, separation and anxiety that each of us experienced as I described above. Letting go of something successful is usually


very difficult for most people. The new level of “risk/expectation,” can raise ones inner level of self-doubt to intolerable, even panic laden, standards. Success is a very much double-edged sword. I remember throughout my years in college the feeling of turning in completed work, a paper or a project, a thesis and/or dissertation, putting all of that effort into the hands of others to judge required quite an act of surrender and a feeling of both satisfaction and helplessness at the same time. The same is true for any annual financial reports; year-end summaries and projects which we have to turn over to investors and our employers engender the same feelings. In my years of experience, doing coaching and counseling, relating to business, companies, divisions, and project groups, teams, leadership cadres etc. I have seen this as a constant threat usually expressed in those who are perpetually late in turning their final work or who get work in at the deadline. Those of us, who work in a steady way, preparing reports as the information becomes available, generally only have a compilation and editing task at the end. But those of us, who avoid completion, usually have one of those classic “all nighters or all weekenders” in which there is a furious panic accompanying the work, which could have and should have been done in a timely manor. This “completion, avoidance pattern” is reflective of much earlier attachment issues that probably characterize the individual’s life in so many different ways. There are much salutary and supportive ways to help people change their work patterns than threats and punishments, which is probably what they lived with through their childhood. Shame is always a bad motivator!

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On another level, those who struggle with completion, especially in the closing comments of making summary assessments and recommendations may be reflecting a much deeper issue about closure - the issues of purpose and meaning. The psycho-spiritual issues of purpose and meaning are not about the work itself, but rather how the work makes it possible for the person to find their purpose in the world and to act meaningfully in a way that makes them feel that their life is more than just a process of survival. There are those we know who work, especially in the financial world, are driven by material concerns. For them financial success defines their fulfillment of their purpose which is to prove their value by demonstrating it through their wealth and possessions. There are those who work in the world of finance who see it as an act of doing service for their clients. They feel responsible for the aggregate of their clients as a whole and for each individual client who they know and feel a direct responsibility for. For these individuals finance is only the means of a greater purpose. The satisfaction comes in finding meaning in ones inner life through the service that they provide for others in caring for their financial well-being. There are those in the industry who feel that sense of fulfillment by being of service, but also understand that the service they provide to individuals and companies has an impact on the lives of dozens, hundreds and even thousands of more people than one can possibly imagine. These individuals know that their work is like a pebble dropped in a pond, the ripple effect intersects with many more similar choices made by others setting up either harmonious or dissonant patterns of financial life in all levels of market places, from local to international. There are those who see only the immediacy of a recommendation for investment and there are those who have the larger vision of impact of their recommendations and actions on the financial life of so many. For them there is a deep moral/ethical imperative to, like the doctors oath, “do no harm,” but beyond that • •

like the physician, they know their work can either heal or wound the people for whom they work. Such a broad sense of vision and impact opens for those people the understanding of the power they wield to impact the lives of others who are so dependent on them. At a higher level, there are those who embody all the prior, knowing that their work serves a grander purpose in moving the world toward prosperity, harmony, growth and expansion in a moral/ethical climate. It is not greedy or rapacious. The way they begin and end their projects either in an annual or multi-year cycle, do so with all the levels of purpose and meaning that they now understand and to which they are committed. This turns finance and business from the calculation of facts and risks to the level of art and intuition driven by the need to live

a purposeful life that provides the greatest opportunity for well-being for as many as possible. For these people completion like the ending of a prayer, it is a great ‘Amen’ and an expression of gratitude. As we have come to the end of 2012 there is a stark contrast that faces us in the commitment of so many to serve the highest purposes through their work in the financial world. Contrasted by the horrible acts of death and destruction that we see going on, not in other countries, but in our cities. The recent massacre in Newtown, Connecticut, reminds us that there are fundamental illnesses in our economic systems that make it impossible to care for those with illnesses mind and spirit who wish to end their lives in a grizzly orgy of destruction that will leave their name written across the memory of

families, communities and this nation that says ‘you may not have paid attention to me when I was alive but you will never forget me and my name and how I died, the ones I massacred are my epitaph.’ At the heart of a healthy business community is a caring for and a protection of those whose anguish can lead them to such twisted acts of infamy. Their way is not a way to have closure or complete a life, it is the way those of us who get up every day and go to work, taking with us the portfolio of the highest level of duty, responsibility, creativity and intuition to provide the greatest opportunities for those who are in our care. So is the meaning of these words, ‘have a happy, healthy and prosperous New Year.’ n • •

Micro-Cap Review Magazine



For Matmown Inc., the Future is Now Matmown, Inc. and its forward looking founder and Chairman, Alex Portelli, has made a decision to move the Company into what should be a bright future as the company has announced the appointment of a highly recognized and respected new CEO. Matmown management announced recently that William A. Sawyer, former co-founder and CEO of Lucas Energy, Inc. will take the reins as new CEO of Matmown, Inc. Mr. Sawyer brings his years of experience and expertise in the area of oil and gas and in the area of public company management to Matmown.

In a February 21, 2013 press release: Matmown announced the appointment of Mr. William A. Sawyer as its President and Chief Executive Officer effective on February 19, 2013. Mr. Sawyer brings over 30 years of diverse experience in the energy industry with such firms as, ARCO, Houston Oil & Minerals, and The Superior Oil Company. He is the former President, CEO and co-founder of Lucus Energy Inc. Mr. Sawyer has a Bachelor of Science in Chemical Engineering from Louisiana State University in 1970 and his Masters of Business Administration from Southern Methodist University in 1976. For a complete copy of the press release in its entirety visit

Why did Matmown choose William Sawyer? “Mr. Sawyer represents the right CEO at the right time for Matmown and provides the company a CEO with a proven track record of success. Mr. Sawyer is a petroleum engineer with more than 35 years of oil and gas experience. His expertise in the area of micro-cap public companies and his broad experience with oil and gas operations is a perfect match for the position of CEO for Matmown,” According to Alex Portelli.


Micro-Cap Review Magazine

Mr. Sawyer worked at ARCO and The Superior Oil Company in the field and has consulted for petroleum giant, Shell Oil Company, on various field projects. Mr. Sawyer knows oil field operations, knows older wells, and knows where to look for potential new reserves. To that point, Sawyer directed Lucas Energy, Inc. in 2006, towards the Austin Chalk properties in Gonzales County, Texas, which eventually led to Lucas Energy controlling more than 15,000 acres of potentially oil rich Eagle Ford properties in that and adjacent counties southeast of San Antonio, Texas. In January 2009, when Mr. Sawyer took over as President and CEO of Lucas Energy, Inc. when the Lucas had only 500 shareholders, average daily trading volume of less than 20,000 shares per day, approximately 8 million shares outstanding, and an estimated 2 million shares in the float. The market cap was around $3.5 million, and the market price range was about $0.40 a share (about 25% of book value). During his tenure as CEO, Lucas Energy’s stock price reached above $5.00 per share, and during his administration and through his leadership led the company to greater than $50 million in market capitalization. In addition, the number of shareholders increased to • •

over 7,000 by 2011 and the daily trading volume averaged approximately 300,000 shares. In addition, Mr. Sawyer is a licensed professional engineer in the State of Texas and for more than 10 years acted as a consultant to the United States Department of Justice.

the planning he puts forth into each step of corporate development. Considering his substantial track record of success, we feel his decision to lead Matmown is one he would only do with a very strong belief in Matmown’s growth potential.”

Why did William Sawyer choose Matmown?

What is the Sawyer business plan for Matmown looking forward?

In the words of William Sawyer, “the answer to that question is quite simple, and is in three parts. Firstly, I have not felt as comfortable with anyone as I am with Alex Portelli, since the formation of Lucas Energy, Inc. in 2005 when Jim Cerna, and Peter Grunebaum, and I founded Lucas Energy, Inc. Secondly, people like Alex Portelli are rare indeed. They are the type of founders who look out for the shareholder first and create companies with solid fundamentals and growth potential.” Mr. Sawyer went on to say, “Thirdly, I am comfortable with the base of Matmown’s current assets, especially the oil and gas assets.” Sawyer added, “The Matmown oil and gas properties are centered in the upper part of the Austin Chalk Trend near Giddings Field, in Texas, with underlying Eagle Ford potential, and I like the potential for expansion.” To that point, older Austin Chalk wells have been a specialty of Sawyer’s which he exploited and capitalized upon while at Lucas Energy. Mr. Sawyer further stated, “The position of Matmown today is similar to where my previous company was in 2009. Matmown has assets, a good shareholder base, and a potential upside beyond the current market value” Sawyer continued, “The float is good, the number of shares outstanding is adequate, and the potential climate to raise money for future capital operations is excellent in my opinion.” According to Mr. Sawyer, he had several substantial companies courting his leadership, or consulting advice at the time he elected to join Matmown, Inc. Portelli added, “We are impressed with the precision at which Mr. Sawyer operates and

Considering the expertise of William Sawyer, he will most probably focus the forward looking business plan first on the development of the Matmown oil and gas assets. His prior efforts concentrated on converting low producing, and non-producing assets to cash flowing assets. In the past, Sawyer has targeted 500 BOPD and 1,000 BOPD of operated production in an effort to bring revenues up to the range of $3 million to $5 million a year. We anticipate this to be a strategy initially for Matmown. However, the primary question many companies have is where will the growth capital come for the future development? Sawyer believes that the time is right for raising capital. “The capital markets for private placements and publicly registered offerings seem to be ripe for investment capital into Matmown projects” quotes Sawyer. “It could be the time in the market for joint ventures and joint participation by investment groups to look at unique opportunities like Matmown. Smaller oil and gas investor groups seem to be actively seeking operator type partners which might be of great benefit to Matmown within the proper structure.” Taking market conditions into consideration, the timing seems to be right for Matmown to raise needed amounts of capital to grow the company. We have heard about the Matmown oil and gas properties but what about the gold? Before joining forces with Mr. Sawyer, Matmown’s strategy was to ramp up the gold production on its 17,000 acre concession in Peru, which was approximately 16.4 grams per ton during past limited beta • •

test production. As Mr. Sawyer vision the potential assets in Peru and the structure for further development, he is cognizant of the values and benefits to Matmown’s growth. However, considering his expertise and development history on oil and oil project fundings, Matmown’s initial concentrated focus will be on rapid expansion in the oil and gas area of the company and plan for the development of the gold assets of Matmown. What are the future goals of Matmown? As a part of the corporate strategy for Matmown Mr. Sawyer stated, “Matmown will continue to seek out joint venture partners starting with smaller transactions and hopefully move up into a larger size transaction within a reasonable time period.” He also stated, “ I belief that when raising capital in the public markets and seeking joint venture partners it is best for the company to go to the individual investor market and stay away from hedge funds and debt conversion capital transactions”. It is his opinion that this approach allows for better probabilities for increased shareholder values. If you followed Mr. Sawyer at Lucas Energy, you know that when he took over as CEO in 2009, in addition to his corporate duties, he also focused on stock market awareness and investor visibility. He believes that trading volume through corporate awareness in the market place is most likely a large part of the corporate strategy for the future of Matmown, Inc. With William Sawyer now at the helm, it is anticipated that the overall goals will center on increasing shareholder value. “Steady growth in stock value, an increasing market cap and liquidity is the key to shareholder loyalty and confidence” according to Sawyer. In conclusion, Mr. Sawyer’s vision, passion and capabilities combined with the Matmown assets, could provide existing and future shareholders a very good opportunity for success in the future. n

Micro-Cap Review Magazine


V I E W P O I N T S n BY Jack Leslie

Ombudsman W

hat is ahead for

the New Year?


Micro-Cap Review Magazine

The SEC has replaced Mary Shapiro with Elisse B. Walter, a commissioner, as interim chairman. Mary Jo White has been nominated as a candidate for the position of chairman. She is a former United States attorney from New York. Currently a white –collar defense attorney, she has been involved in a number of high profile cases. The obligation in this position is to assure impartial and appropriate oversight of the rules while enforcing them. What is necessary in this position is a fair individual that works to the benefit of investment in the United States free market system. We cannot allow individuals to destroy the liquidity of our markets. We also cannot over regulate our system to the extent of paralysis. There must be a common ground for the good of our economic survival. It is absurd that litigation of many of the class action suits is instigated by collusion of many of the initial parties without consideration of the harmed investors. More often than not, the lawyers make more money than investors. The establishment of a maximum allowable legal fee, if adopted, would serve to insure a more appropriate return to those actually losing money. The trustee has an obligation to carry out the duties instructed by the court. Why are the attorneys allowed to solicit lawsuits in states they are not registered in? How do they get the names of the investors of a private placement in the first place? Somewhere along the way investor’s money is diluted. This process needs to be changed. In some cases, the encouragement to litigate costs the investor more money than if he or she settled in a fair and impartial arbitration. I have been an arbitrator and an expert witness and have seen an investor misled on what the final payment to them will be. The State Department of Securities in each state needs to censure the unsavory actions of these miscreants who are creating this unfair practice. To be certain, there are a number of good and qualified Trustees as well as attorneys. The regulation needs to make sure that the return of one’s investment, if warranted, is done in a more efficient manner than we are currently doing. Limiting the legal costs is a fair and judicious start in appropriate regulation reform. To all the Broker Dealers that may face extinction in the next few years from over regulation, use the office of the Ombudsman. Contact your local congressman, the Senators in your State, and urge them to instill a fair practices act limiting legal costs that are sacrificing jobs in their State. If you are having trouble contacting the Ombudsman, email us at Investor Consultants and we will offer our assistance. Standing on the sidelines encourages more apathy, do something for you and the entity you own. n • •

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Micro-Cap Review Magazine Quarter 1 – 2013  

The #1 magazine in the Micro-Cap market is pleased to bring to you the Quarter 1 - 2013 edition of the Micro-Cap Review. This issue features...

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