Planet MicroCap Review Spring 2023

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

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

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Follow us: @StockNewsNow Published Since 2006 SNN Inc. www.SNN.Network Follow us: @StockNewsNow 4055 Redwood Ave. Suite 133 Los Angeles, CA 90066 SNN inc. www.SNN.network 4055 Redwood Ave. Suite 133 PUBLISHER Los Angeles, CA 90066 Robert K. Kraft, MBA www.SNN.network SNN Chief Executive Officer, Executive Editor & Director pUBLiSHEr rkraft@snnwire.com Robert K. Kraft, MBA SNN Chief Executive Officer, Shelly KraftEditor & Director Executive SNN Founder, Publisher Emeritus rkraft@snnwire.com skraft@snnwire.com Shelly Kraft Lynda Lou “Lulu” Kraft Emeritus SNN Founder, Publisher SNN President & Director skraft@snnwire.com lkkraft@snnwire.com Lynda Lou “Lulu” Kraft ASIAN PACIFIC & CORRESPONDENT SNN President Director Leslie Richardson lkkraft@snnwire.com SNN Compliance and aSiaN paciFic corrESpoNDENT due diligence administration Leslie Richardson Jack Leslie SNN coMpLiaNcE aND chairman of snn advisory board DUE DiLigENcE aDMiNiSTraTioN Dr. Leonard Jack Leslie Makowka

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e welcome our new subscribers and welcome back our subscribers and readers. Thank you all for your s we get bombarded withwe market information support.

Since 2006 continue to provide access to and intel in the news, social media, newsletters, “all things microcap” with content related to our community and TV ads, including YouTube etc. we have keep our experts in their the ecosystem articles fromto influencers, own perspective in mind, which is, how does what’s of up-to-date fields, opinions from industry leaders and coverage happening in the stock market affect microcap stocks?

How rule do we manage the events affecting our investment strategies, best practices, changes and holdings in our portfolio?

Howtake do we make whether we should new insights.

Issuers, please notice in our thisdecisions issue theof service provider buy, sell or hold?

As investors we do need to decipher pertinent details from ads which are intended to provide a resource for issuer’s seeking microcap the noise of those trying to sell us their ideas.

Picking up morsels of truth is still friendly sources. relevant to our decision making which brings me to the point of staying in our lane, picking sources we trust about with a ETFs, historythe of nuances accuracy,of doing this will do more We have assembled articles microcap public to protect our self-made directives while resisting a constant repetitive barrage relations and investor relations strategies, sponsored research analysis, of attempted paid influences. market making in microcaps, the cannabis report, platinum the most misunderstood metal, carbon credits, EOS, legal updates, Hong Kong market Pundits Drew in the microcap world often preach homework, believe update, Bernstein’s ASIA report, anddoing IPO vsyour Reverse Mergers vs in your own methods, stick to your plan, learn from your mistakes, and build your SPACs. This issue has something of interest and importance to everyone. sensibility to maintain focus. I believe for the most part they are correct. However,issue it’s quite difficult to 9th locate non-biased during our searching for This precedes our annual investorinformation conference Planet MicroCap it and evenheld harder to 25-27, interpret incoming you.(formerly Showcase April 2023, at theinformation Horseshoewhen Hotelit&finds Casino

Bally’s).

Although I am a market traditionalist and since I historically lean on using my own common sense, to thisattend method may be costlyno since it also embeds learning GRAPHIC PRODUCTION aDvErTiSiNg and SaLES Investors are invited and participate charge and we hope you Unitron Media Corp info@snnwire.com from one’s own mistakes.

For example, for generations investors relied on take advantage of this opportunity to meet and network with the C leveltheir info@unitronmedia.com grapHic proDUcTioN stockbroker orteams, wealthinvestment advisor to “trust” their advice, timing,Many ideas,of guidance management bankers, fund managers. the SNN CONFERENCES Unitron Media Corp and performance.

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The advent of diswhile. —Shelly Kraft unsolicited materials. Every effort has been made to assure that all Microcap Information presented in this issue is accurate and neither PlanetReview Mi©Copyright 2022 by MicroCap Review Magazine Inc. All Rights Recount brokering, and millennial DIY activity gave investors the power of making crocap Review Magazine or any of its staff or authors is responsible served. Reproduction without permission of the Publisher is prohibfor omissions or information that is inaccurate or misrepresented ited. The publishers and editors are responsible for unsolicited Innot Loving Memory of and Our Precious to the magazine. Planet Microcap Review Magazine is owned decisions added themagazine, need for discipline, research, and (and trial & error. As far as materials. Every effort has been made to assure that all Information n the lastbut issue of the I stated how Q3 2022 operated by SNN Inc. presented in this issue is accurate and neither Review Kane Kraft Daughter, andMicroCap Sister, Sammi Magazine or any of its staff or authors is responsible for omissions I’m concerned and in my opinion, I would rather fail or succeed This publication and its contents are not to be construed, under any all of 2022 up that point last year) has been a tough year forbecause of my or information that is inaccurate or misrepresented to the magazine. circumstances, as an offer to sell or a solicitation to buy or effect MicroCap Review Magazine is owned and operated by SNN Inc. 2006 s we get bombarded with market information Since transactions in any securities. No investmentPublished advice is provided or own decisions rather than to slaughter placing blame elsewhere. should be construed to be provided herein. Planet Microcap Review MicroCap investors.

Well,being 2022led called and saidand “hold my beer”, This publication and its contents are not to be construed, under any Magazine and its owners, employees and affiliates are not, nor do and intel in the news, social media, newsletters, circumstances, as an offer to sell or awww.SNN.Network solicitation to buy or effect any of them claim to be, registered broker-dealers or registered transactions in any securities. No investment advice is provided it can get worse. The Planet MicroCap Index was down 39.38% Follow @StockNewsNow investment advisors. This publication may containus: “forward-looking or should be construed to be provided herein. MicroCap Review TV ads, YouTube we have todown. keep our statements” within the meaning of the Private Securities Litigation Magazine and its owners, employees and affiliates are not, nor do Like everything in the Stock Market, etc.

MicroCaps are As of EOD on June Reform Act of 1995, Section 27A of the Securities Act of 1933 and any of them claim to be, registered broker-dealers or registered Section 21E of the Securities Exchange Act of 1934. All statements SNN inc. own perspective in mind, which is, how does what’s index tracking investment advisors. This publication may contain “forward-looking other than statements of historical fact are “forward-looking state17, 2022, the MicroCap Review (MCRI), our proprietary MicroCap statements” within the meaning of the PrivateAve. Securities Litigation 4055and Redwood ments” for purposes of federal state securities laws, including, Reform Act of 1995, Section 27A of the Securities Act of 1933 and but not limited to, any projections of earnings, revenue or other fihappening in is the stock market affect stocks?

How doiswe manage th Suite 133 Section 21E of the Securities Exchange Act of 1934. All statements MicroCap performance, down 26.73% YTD; themicrocap only index we track that nancial items; any statements of the plans, strategies and objectives other than statements of historical fact areCA “forward-looking stateLos Angeles, 90066 of management for future operations; any statements concerning ments” for purposes of federal and state securities laws, including, holdings in our portfolio?

How do we make our decisions of whether proposed new services orwww.SNN.network developments; any statements regarding doing worse is NASDAQ, which is down 31.36% YTD. I don’t want to spend time we should but not limited to, any projections of earnings, revenue or other fifuture economic conditions or performance; any statements of belief; nancial items; any statements of the plans, strategies and objectives and any statements of assumptions underlying any of the foregoing. buy,discussing sell or hold?

As Iinvestors we do need to decipher pertinent details from of management for future operations; any statements concerning Such forward-looking statements of or concerning the companies in this editorial why; highly recommend tuning into Planet MicroCap pUBLiSHEr proposed new services or developments; any statements regarding mentioned herein are subject to numerous uncertainties and risk future economic conditions or performance; anyMBA statements of belief; Robert K. Kraft, the noise of those trying to sell us their ideas.

Picking up morsels of truth is stil factors, including uncertainties and risk factors that may not be set and any statements of assumptions underlying any of the foregoing.

Podcast to hear what my guests have to say about the matter. The real quesforth herein, which could cause results to differ materially from SNNactual Chief Officer, Such forward-looking statements of orExecutive concerning the companies those stated herein. Accordingly, readers are cautioned not to place to our which brings me thereflecting point of staying in our mentioned herein are subject to numerous uncertainties and risk Executive Editor & This Director undue reliance on such forward-looking statements. publication tion is, well,relevant now what?

Thedecision summermaking is an opportune time toto start on factors, including uncertainties and risk factors that may not be set undertakes no obligation to update any forward-looking statements forth herein, which couldrkraft@snnwire.com cause actual results to differ materially from that may be contained herein. Planet Microcap Review Magazine, its lane, picking sources we trust with a history of accuracy, doing this will do mor those stated herein. Accordingly, readers are cautioned not to place what your financial goals are for the near and long term using some of the data owners, employees, affiliates and their families may have investments undue reliance on such forward-looking statements. This publication in companies featured in this publication, may purchase securities of Kraft undertakes no obligationShelly to update any forward-looking statements to protect our self-made directives while resisting a constant repetitive barrage companies featured in this publication and may sell securities of comenclosed in this issue of the magazine, as well as macro data/indicators. Few that may be contained herein.

Review Magazine,Emeritus its ownSNN MicroCap Founder, Publisher panies featured in this publication, at any time and from time to time. ers, employees, affiliates and their families may have investments However, it is the general policy of this publication that such persons skraft@snnwire.com of attempted paidnow: influences. in companies featured in this publication, may purchase securities will refrain from engaging in any pre-publication transactions in secuthings we are certain of right liquidity has dried up, interest rates have ADVERTISING and Sales cHairMaN oF SNN aDviSory BoarD info@snnwire.com Dr. Leonard Makowka

WaiTiNg oN EDiToriaL

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of companies featured in this publication and may sell securities of rities of companies featured in this publication until two trading days companies featured in this publication, at any time and from time to following the publication date.

This publication may contain Lou of “Lulu” Kraft company time. However, it is the Lynda general policy this publication that such advertisements/advertorials indicated as such. Information about a persons will refrain from engaging in any pre-publication transactions President & Director company contained in anSNN advertisement/advertorial has been furin securities of companies featured in this publication until two tradnished by the company, the publisher has not made any indepenlkkraft@snnwire.com ing days following the publication date. This publication may contain dent investigation of the accuracy of any such information and no company advertisements/advertorials indicated as such. Information warranty of the accuracy of any such information is provided by this about a company contained in an advertisement/advertorial has publication, its owners, employees affiliates. Pursuant to Section aSiaNand paciFic been furnished by the company, the publishercorrESpoNDENT has not made any 17(b) of the Securities Act of 1933, as amended, in situations where independent investigation of the Richardson accuracy of any such information Leslie the publisher has received consideration for the advertisement/adand no warranty of the accuracy of any such information is provided vertorial of a company or security, the amount and nature of such by this publication, its owners, employees and affiliates. Pursuant to consideration will be disclosed in print. Readers should always conSection 17(b) of the Securities Act of 1933, as amended, in situations SNN coMpLiaNcE aND duct their own due diligence before making any investment decision where the publisher has received consideration for the advertiseregarding the companies and securities mentionedaDMiNiSTraTioN in this publication.

DUE DiLigENcE ment/advertorial of a company or security, the amount and nature Investment in securities generally, and many of the companies and of such consideration will be disclosed in print. Readers should alJack Leslie securities mentioned in this publication from time to time, are specuways conduct their own due diligence before making any investment lative and carry a high degree of risk. The disclaimers set forth at decision regarding the companies and securities mentioned in this Planetmicropcap.com or SNN.Network - disclaimer are incorporated publication. Investment in securities generally, and many of the comherein by this reference. cHairMaN oF SNN aDviSory BoarD panies and securities mentioned in this publication from time to time, Dr. Leonard Makowka are speculative and carry a high degree of risk. The disclaimers set forth at http://www.microcapreview.com/disclaimer/ - disclaimer are incorporated herein by this reference.

gone up (and probably will continue to) in order to rein in inflation, high flying Pundits the microcap often preach doing yourof homework, believe in growth names haveintaken it on the world chin. There’s actually a bunch things your own methods, stick to your plan, learn from your mistakes, and that we’re now certain of, but at the end of the day, despite rising inflation, this build you to maintain focus. the most theycash are correct.

Howmay soundsensibility otherworldly these days, butI believe CASH ISfor STILL CASH.part Having to ever,like it’s these quite difficult locate non-biased information our searching fo deploy in times is wheretothe greats have made names forduring themselves. it and even harder to interpret incoming information when it finds At least for me, especially if we are going to continue to see declines, not justyou. in MicroCaps, but overall markets, is when I’m reflecting on how I want to deploy Although I amfor a market andinsince I historically on using my cash that will set me up financialtraditionalist independence the next 10-15-20lean years. ownall common sense,however, this method may bethis costly since it also embeds learning aDvErTiSiNg and SaLES We don’t have the answers, by reading issue of the magazine, 4 Planet MicroCap Review info@snnwire.com www.PlanetMicroCap.com from one’s own mistakes.

For example, for generations investors I hope that you’re able to walk away with a few nuggets that can help you onrelied on the grapHic proDUcTioN stockbroker or wealth advisor to “trust” their advice, timing, ideas, guidance 4 MicroCap Review Magazine your path to financial independence.

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and the iShares Micro-Cap ETF was down 23.49% for all of 2022.

But there is hope! Despite the continued nuclear winter for many growth sectors (Crypto, Cannabis, Psychedelics, and more) and the Silicon Valley Bank collapse, (as of March 24, 2023), the Planet MicroCap Index is up 3.99% so far in 2023.

My main question that I asked the Profiled Companies in this issue was: what does executing mean for you? I asked this question because throughout 2022, a lot of management teams spoke about how 2023 was the “year of execution”, a declaration that, to me, implies the company has been very clear about the goals they want to accomplish and that 2023 was the year those goals will materialize, or not.

What I’ve found is the answer to that question is quite subjective. Experienced MicroCap investors are painfully aware of this.

This is important for this issue of the magazine and I think for MicroCaps moving forward in 2023. Based on earnings so far this year, companies are being rewarded for performance. Sure, management will always blame an outside force for underperformance, a time-honored tradition in public markets, and sure, current macro conditions are difficult to navigate. BUT, investors want to see perseverance, they want to see creativity, they want to see companies survey the landscape and start to figure out how they are going to generate alpha for their constituents.

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In my Q&A with Joe Koster, we discuss how there’s a shift towards “real economy” businesses and current profits, where he states, “I think, in general, there was more of a focus on technology in the last decade, and now people are beginning to understand the importance of the infrastructure, raw materials, and supply chains that go into making the economy operate.” I want to take this a step further, MicroCap investors want to see growth companies take that next step, go to market with an MVP, establish a market need for their product or service. And guess what, those growth companies in some cases NEED to take that next step in order to survive.

This is one of the greatest times of my lifetime to be a MicroCap investor; there’s almost too many ideas to do research and due diligence on right now.

With basically all MicroCaps taking a haircut across the board and the need for management teams to get creative, as a reader, you have to keep turning over every rock. As my father said in the first part of this editorial, we have our conference coming up in Las Vegas, which a great opportunity to get direct feedback from issuers. Please visit: www.PlanetMicroCapShowcase.com to learn more.

Thank you all for your continued support, please enjoy the Spring 2023 issue of the Planet MicroCap Review and look forward to seeing you all in Las Vegas. —Bobby Kraft

Planet MicroCap Review 5

CONTENTS Features 8

Navigating the Biotech Bear Market and Biotech’s 4 Hottest Trends for 2023

15

by Seth Forman, Socialsuite

Q&A with David Sable, Portfolio Manager for the Special Situations Life Sciences Fund & Life Sciences Innovation Venture Capital Funds

30

Market Maker Corner: Why is it So Difficult? by Eric Flesche, Glendale Securities

22

The Art of Uplisting

26

38

Will Investor Optimism Return to Asia in 2023? Q&A with Michael Fritzell, Asian Century Stocks

90

Asia Corner: End of Pandemic Restrictions Fuel revival in Hong Kong’s IPO Market

by Leslie Richardson, Elite IR

by Joseph M. Lucosky Esq., Lucosky Brookman

94

How OTC Companies Can Utilize SPACs to Get Listed on a National Exchange

Ask Mr. Wallstreet: “Play Ball Stock Picking” by Shelly Kraft, Founder, SNN Incorporated

96

MicroCap Investing in 2023

by Roger Pondel, PondelWilkinson

by Gustave Passanante, Esq., The Basile Law Firm

32

Value Investing in 2023 Q&A with Joe Koster, Sorfis Investments

Insig hts 12

Your Sustainable Supply Chain: It’s Time for MicroCaps to Report on ESG

Never Discount the MicroCap CFO

100 50 Years of Seasoned IR Advice

by Mike Porter, Porter, LeVay & Rose

by Kelly Anderson, Executive Solutions, LLC

To DTC or Not to DTC, That is the Question?

42

Small Business Growth Starts with Right Framework by Jackie Kibler, Vistage Worldwide

102

46

Sponsored Research: Covering the Uncovered

104 Platinum Risk in South Africa

by Claire Aitchison, Independent Investment Research

112

64

by Richard Revelins, Peregrine Corporate Limited

by David Morgan and Ryan Blanchette, The Morgan Report

ETF Corner: There’s An ETF for That

by Michael Krause, AltaVista Research

Public Filing Compliance: Dealing with Late SEC Filings

by Neil Reithinger, Eventus Advisory Group

68

IPO, De-SPAC or Reverse Merger: Who Wins, and Why? by Andrea Cataneo, Esq., Mitchell Silberberg & Knupp LLP (MSK)

72

The Luckiest City State on Earth

by Drew Bernstein, CPA, MarcumAsia

80 83 86

48

Overview of the Planet MicroCap Index

Profiled Companies

Cannabis Corner: Cannabis Year End 2022

20 DATA Communications Management Corp. (TSX: DCM) (OTCQX: DCMDF)

by Seth Yakatan, Katan Associates

34 QuoteMedia, Inc. (OTCQB: QMCI)

How is Carbon Footprinting Transforming Banking? by Julie Lindenberg, APAC Region at Cogo

60 Tingo Group, Inc. (NASDAQ: TIO)

Legal Corner: Pushing Back: Navigating the Rise in SEC Enforcement Actions

76 Data I/O Corporation (NASDAQ: DAIO) 50-59 MCRI Q1 2023 Constituent List

by Jon Uretsky, Esq., PULLP

6 Planet MicroCap Review

www.PlanetMicroCap.com

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Planet MicroCap Review 7

Feature

Navigating the Biotech Bear Market and Biotechs 4 Hottest Trends for 2023 Q&A with David Sable, Portfolio Manager for the Special Situations Life Sciences Fund and Life Sciences Innovation Venture Capital Funds The biotech industry has been in a TwoYear bear market. According to the S&P Biotechnology Select Industry Index, the sector has been down ~45-50%. Why has this been the case? And, how come 2022 didn’t fare much better than 2021 for the biotech industry?

I think there are three factors that, combined, can explain a lot of the biotechnology market performance over the past couple of years. The first is that the 2021-2022 underperformance followed an exuberant 2018-2020, when the number of companies going public in biotechnology hit a record high, and the amounts of capital invested and the valuations relative to the development stage of the assets were unprecedented. Those of us in the industry knew that this was unsustainable, and early in 2021, just as some of these companies were approaching the need to go back to the market and sell equity again, the public market appetite for these assets had been satisfied. Demand disappeared pretty quickly.

The second factor relates to the type of biotech company that was going public. Historically, new biotech companies are development stage and pre-revenue, so we replace the usual financial metrics, hard numbers like earnings, revenue and cash flow, with less precisely defined value inflections, like clinical trial results and regulatory approvals. These create

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a schedule by which experienced biotech investors can gauge the progress of a company and place a valuation in the absence of financial data. The classes of 2019 and 2020 were filled with companies with earlier stage drug development projects, assets which are more difficult to time and handicap, as well as some platform companies in areas like gene editing and synthetic biology — even earlier stage in product development — great science projects that were much more difficult to financially model, and for those without deep scientific expertise, stocks that are tough to understand. Logically, valuations for companies like these are imprecise, and subject to cycles of optimism and pessimism — even when the fundamentals remain constant. In 2021 that cycle turned pessimistic. A fundamental factor, the slower than hoped-for progress in some of these early stage assets, progress completely in-line with how basic science works but not at a pace that matched the expectations from the IPO roadshows, exacerbated this turn in sentiment.

Finally, the macroeconomy affected the sector in a big way. Since drug development and scientific platform maturation are long processes, ten or more years from idea to viable product, businesses in these areas face a decade or more of cash burn and are extremely sensitive to the cost of capital.

Years of near zero interest rates made risk capital, whether at the seed, venture, crossover or public

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level, readily available. Inflation is a real headwind for cash burning companies like biotech, and sector performance the past two years correlates with interest rates and fears of inflation.

At the same time, in 2023, also according to the S&P Biotechnology Select Industry Index, the sector is up about 4-5% already on the year (as of January 20, 2023); why do you think that is and is this a signal for change in sentiment?

Two weeks is much too short an interval from which to infer sector moves; this could merely be a manifestation of the new year, and the sudden absence of tax loss selling.

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How would you say macroeconomic events are affecting institutional perspective towards the biotech industry? Some context, all biotechs have a much longer runway to actualize more value for their businesses, which some folks perceive to be a hedge against short term factors, like, if the US goes into a recession - what do you think?

Biotech is one of the poster sectors for “risk-on.”

It’s imprecise to model, outcomes and value inflections are hard to handicap, even for those with maximal fundamental expertise, and there are a lot of participants in the equity marketplace who really don’t understand what they are buying and selling. When times are heady, traders’ risk tolerance

Planet MicroCap Review 9

increases, and retail investors perceive the high risk - high reward biotech sector differently than when times are uncertain. And, as we saw earlier, the fundamental relationship between interest rates and costs of capital for cash burning businesses like biotech, equates to these companies having higher barriers to success in a down economy, even if they do everything right, if every laboratory experiment and clinical trial works and the FDA grants approvals every time an approval is sought.

You were just at the JP Morgan Healthcare conference in San Francisco, which is the seminal Healthcare industry event of the year that happens in early January - what were some of your takeaways from the event in terms of: what areas of healthcare are hot, what’s not, most innovation happening - love to hear your notes here.

In biotech there are four types of hot.

There’s hot science, and that arises organically when things like CRISPR gene editing are developed and announced.

There are hot companies and sub-sectors when a new drug category opens up a market to suddenly help people with previously unmet needs like. Alzheimer’s Disease is a good example.

There are hot markets when the market is hungry for IPO’s and secondaries, as we discussed before.

And finally, there are hot M&A markets, when big Pharma’s need for new drugs to manufacture and sell in order to replace existing drugs that lose patent protection produces a critical mass of a lot of deals in a short period of time.

Of course these factors are not independent, and scientific advances fuel faster drug development, which can heat up M&A, which can raise public market valuations and fuel banking activity.

real world use, the scenario is right for those with the greatest expertise coupled with acute business need to go shopping for discounted assets.

To close us out, if you had to make one prediction regarding the biotech industry for 2023, what would that be?

I’ll give two. The first is: lots of big companies buying small companies, in a marketplace where the big companies are dealing from strength and the small companies’ sometimes desperate financial conditions give them little leverage to negotiate. This will translate into modest deal premiums. The few blockbuster deals will come from truly unique bestin-class solutions for large markets.

The second is that the biggest, most important market moving event will likely be something that none of us were smart enough to predict.

For more information about Special Situations Fund, please visit: www.ssfund.com David Sable MD directs healthcare and life science investing for the Special Situations Funds and is portfolio manager for the Special Situations Life Sciences Fund and Life Sciences Innovation Venture Capital funds.

After graduating from the Wharton School and the University of Pennsylvania School of Medicine, he trained in obstetrics and gynecology at New York Hospital - Cornell Medical Center, and in reproductive endocrinology at the Brigham and Women’s Hospital. He co-founded and served as director of the Institute for Reproductive Medicine and Science at Saint Barnabas Medical Center in New Jersey, was founder of Assisted Reproductive Medical Technologies, which was acquired by Saint Barnabas in 1999, and cofounder of Reprogenetics, acquired by Cooper Surgical in 2015. After leaving clinical medicine, Dr. Sable managed a proprietary healthcare portfolio at Deutsche Bank before joining the Special Situations Funds.

Dr. Sable is an adjunct in the department of biology at Columbia University, and teaches “Entrepreneurship in Biotechnology” at Columbia’s Graduate School of Arts and Sciences. He serves on the boards of directors for Hamilton Thorne Ltd, and Celmatix Inc, is a clincal advisory board member and board observer for TMRW Life Sciences and a member of the medical advisory board for Conceivable. He previously served as a board member for Ohana Biosciences, Genenews Inc, for the nonprofit advocacy organization RESOLVE, on the medical advisory board for Progyny Inc and on the scientific advisory board of Ovascience Inc. In addition to his academic publications, he has written for the Newark Star-Ledger, Yoga Journal, Xconomy, Genetic Engineering and Biotechnology News, the Timmerman Report, Wharton Magazine, and Forbes.

If I had to judge this years’ sentiment, I would predict the market heat will come from M&A. With public valuations down sharply, with approximately two hundred negative enterprise value biotech companies (cash in the bank greater than the market cap of the company) and lots of basic science maturing into Note: This article is not an attempt to provide investment advice. The content is purely the author’s personal opinions and should not be considered advice of any kind. Investors are advised to conduct their own research or seek the advice of a registered investment professional.

10 Planet MicroCap Review

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Take the first step toward better risk management; we’ve got your back. www.PlanetMicroCap.com

Planet MicroCap Review 11

M ma ar r k ET et Ma mak kEr er co corner rnEr

// By Eric Flesche

pAyment why is it so for order difficult? flow Why is it so difficult to find securities brokerage firminwilling At Glendale Securities, Inc., awe mainly make markets OTC to accept for my our stock deposit orWe even let meour buy or sell microcap securities customers. charge customers a stocks? commission for execution and use our market making capabilities to facilitate customer executions.

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ne answer comes in the form of good intentions e are by often regulatory askedagencies why we and don’tunintended offer consequences commission from free trading those good like some intentions. of the online retail brokerage firms offer. Wait, how Fraud can occurs a broker in corporations dealer offeracross commission all market free trading? capitalizations, The answer including to that large, question mid, small requires and microa discussion on the practice of payment of order flow, and a clarification on when payment for order flow is paid to brokers. Many large retail brokerage firms including the online ones you are probably familiar with do not make markets in stocks. To fill your order, brokerage firms have a couple of options, each with their own cost/profit structure. They can

80 12 Planet microcap MicroCap reviewReview magazine

cap. Remember Enron, WorldCom, HealthSouth? send Fraudyour comes order in many to an forms exchange including or ATS, butbut notthose often limitedcharge to FCPA theviolations, broker onmarket a net basis manipulation, for execution. and They accounting can execute fraud. the In 2022, ordernames internally likeas Honeywell a market maker, International but that Inc,requires Oracle Corporation, staff, technology, and Stericycle and risk capital Inc all paid that fines may be for too FCPA cost violations. prohibitive.

DidAnother your option is to send customer orders to a wholesale market maker who pays the brokerage firm for its order flow. If you must choose between the three options outlined above, receiving payment for order flow for sending orders to a wholesale market maker seems like it’s the smartest option for the brokerage firm. The brokerage firm eliminates costs, doesn’t

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brokerage firm turn off trading in these securities?

Probably not.

While large cap fraud cases may get the big headlines, many believe that fraud is more prevalent in the microcap space. Microcaps are usually lower priced, have fewer shareholders, and have lower trading volumes, all of which could make them more susceptible to market manipulation. Microcaps that trade on the OTC and do not trade on an exchange like Nasdaq or the NYSE do not benefit from the extra regulatory scrutiny provided by these exchanges. Rather, the extra regulatory review falls in part to the brokerage firms trading these securities on the OTC. Regulatory agencies frequently publish guidance to securities professionals regarding red flags to look out for when trading microcap securities. Compliance departments at these brokerage firms are then faced with a business decision. Do they take the time to implement the additional reviews necessary to comply with the guidance or do they just turn off microcap trading to focus on trading large cap stocks like Oracle and Honeywell?

Wholesale market makers that pay brokerage firms for order flow do not pay for OTC orders. If a brokerage firm offers $0 commission because it is relying on payment for order flow, the decision to turn off OTC microcap trading is easy, since there is no money in it. If the compliance department is willing to look past profitability, they are then forced to come up with reasonable rules to comply with the securities laws and guidance published by regulatory agencies regarding these laws. Many brokerage firms opt out of microcap trading or at minimum opt out of deposits to avoid the regulatory burden.

There are a few brokerage firms left that are willing to do the work. Glendale Securities, Inc. accepts OTC, OTCQB, and OTCQX securities for deposit along with exchange traded microcap securities, subject to compliance review. Glendale Securities, Inc. makes markets and can apply for DTC Eligibility for issuers. Contact us today to learn more at 818-907-1505 option 2.

Here is the answer I received: Microcap securities are generally considered riskier investments than large cap securities due to their smaller market capitalization and typically less established companies. However, it is difficult to make a blanket statement about fraud being more prevalent in microcap securities compared to large cap securities, as fraud can occur in any type of security or market.

That being said, there are some factors that may contribute to fraud being more prevalent in microcap securities. For example, microcap companies may have less scrutiny from analysts and institutional investors, making it easier for fraudulent activity to go undetected. Microcap companies may also be more vulnerable to manipulation by insiders or other market participants due to their smaller size and lower trading volume.

Furthermore, microcap securities are often sold through less regulated channels, such as penny stockbrokers or unregistered broker-dealers, which can increase the risk of fraudulent activity. These channels may also attract unsophisticated investors who are more susceptible to fraud.

Overall, while it is difficult to say whether fraud is more prevalent in microcap securities compared to large cap securities, it is important for investors to exercise caution and conduct thorough due diligence before investing in any security, particularly those that are more speculative or less well-known.

I think chatgpt provided a mostly well-balanced answer to a complicated question.

Eric Flesche is the CFO/CCO of Glendale Securities, Inc. a market maker in OTC securities since 2006.

GlendaleSecurities.com MEMBER FINRA/SIPC Note: ChatGPT is an AI chatbot that uses natural language processing to create humanlike conversational dialogue. The language model can respond to questions and compose various written content, including articles, social media posts, essays, code and emails.

After I wrote this article, I asked chatgpt the following question to see if maybe the machine knew better: is there more fraud in microcap securities than in large cap securities?

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

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Feature

// By Seth Forman

Your Sustainable Supply Chain It’s time for Microcaps to report on ESG

As the old saying goes, “If you are not taking care of your customer, your competitor will.”

W

ith the start of a new year, comes a fresh list of priorities for microcap organizations.

But what does caring for your customer mean in 2023?

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Climate change is on everyone’s radar. The gamechanging US climate Bill (the Inflation Reduction Act) of 2022, underscores that every investor, company and member of the public has direct exposure to

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climate change, and that we need unambiguous information about how organizations are contributing to greenhouse gas emissions. As for Environmental, Social & Governance (ESG)? It’s the mega-trend of the decade.

Reporting on non-financial activities is no longer just for large corporations. The urgency for microcaps to address their impact on our planet, and our society, is here. As for your stakeholders? They’re going to continue to put the pressure on a commitment to transparency.

panies already have important ESG-related policies, mechanisms and data in place. Yet measuring and reporting on ESG seems to fall into the ‘too hard basket’, even for listed companies. Avetta states: “Given the lack of transparency, many investors are wary of the hidden ESG risks stemming from complex supply chains of portfolio companies. To manage exposure to supply chain risks, investors are asking portfolio companies to integrate ESG considerations into supply chain due diligence, risk assessment, and compliance”.

Emerging global regulation.

In this article, we’ll focus-in on ESG driven supplychain pressures that if your microcap isn’t already experiencing, you’re likely to in the months ahead.

ESG is here to stay Action on ESG is essential for companies seeking investor dollars, regulatory approvals, and the social license to operate. As companies, large and small, face increasing demands from their stakeholders, ESG disclosure is officially no longer a ‘nice to have’.

Under growing pressure from government regulators, investors, customers and employees, leaders of listed companies understand the economic realities of ESG – and its impact on people, planet and prosperity.

As demand for action intensifies, it will be increasingly important for companies to share comprehensive information on tangible metrics and goals, and how they plan to achieve them. More than 90% of S&P 500 companies now publish ESG reports in some form, and the US Securities and Exchange Commission (SEC) is considering requirements for detailed disclosure of climate-related risks and emissions.

Regulators around the world, including in the United States, Australia, Canada and Europe, have passed or proposed a variety of ESG requirements making compliance a top of mind priority.

While regulatory requirements and enforcements vary around the world, it is universally expected that mandatory disclosures will become increasingly prevalent. That’s why it’s important to start benchmarking performance now – ideally against a globally recognized framework like the World Economic Forum’s Stakeholder Capitalism Metrics.

Being an early adopter can protect your company’s market position while local regulations continue to evolve – and will also give you a robust model for mitigating compliance risks.

Consumers are demanding action Society expects companies to change, and consumers are looking for visible action on ESG goals.

Investors Care about ESG

Forrester research suggests companies with a sustainability focus will generate revenue growth from new opportunities, as well as improved employee retention.

Today’s investors are deploying over $30T in capital based ESG factors, and are influencing companies to adopt ESG best practices. What’s more, 82% of retail investors have reported an interest in backing companies that are socially and environmentally responsible, and 9/10 institutional investors are now using ESG factors to make their decisions.

What’s more, the 2023 Edelman Trust Index revealed that society expects businesses to leverage their comparative advantage to inform debate and deliver solutions on climate, with 82% looking for CEO’s to act on climate change. Meanwhile, Forbes reports the likes of Shell, Starbucks and IBM all linking CEO salaries to ESG metrics.

Investors value transparency and clear communication about ESG initiatives and their potential impact on performance and enterprise value. Many com-

ESG reporting shows you are walking the talk. And by sharing incremental progress with tangible impact,

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it avoids being seen as ‘greenwashing’. Greenwashing is used to describe companies who publish misleading and deceptive communications surrounding their commitments to climate change -- or a lack of ESG progress after a big and bold statement. In November 2022, for example, the SEC fined Goldman Sachs Asset Management $4M for not following its ESG investments policies.

As ESG implementation continues to rise, consumers, alongside funders and regulators, are looking to organizations to commit to genuine, actionable, and visible positive change.

ESG in your Supply Chain With global investors, consumers and regulatory bodies setting greater expectations of corporate social responsibility, measuring and reporting ESG information is becoming common-place. Multinational organizations are taking action by implementing frameworks such as The Task Force on Climate Related Financial Disclosures (TCFD), which asks companies to report on their Scope 1, 2, and 3 emissions. Scope 3 emissions include all indirect emissions that occur in a company’s value chain.

Even though these emissions are out of the control of the reporting company, they can represent the largest portion of its greenhouse gas emissions inventory.

As a result, organizations must set a plan, organize and push down to their suppliers requesting for various sets of ESG related information. What does this mean for microcaps who rely heavily on large corporations in their buying and selling practices?

The time to start ESG reporting is now.

Real-world examples ESG is mission critical for global supply chains.

Executives and supply chain leaders are meeting the world’s net-zero challenge head-on. It’s about commiting today, or getting left behind.

In 2022, General Motors launched a company-wide initiative to drive its entire supply chain to report on ESG driven criteria. Eventually, this will likely become a requirement in doing business with the auto manufacturer giant.

the world, enacted a plan to drive its supply chain to address climate change, report on ESG criteria and other actions.

A 2021 McKinsey report found that two-thirds of an organization’s ESG commitments lie with its suppliers. Choosing the right supplier partners and managing them well is perhaps the most impactful decision a company can make when it comes to sustainability - and one that shouldn’t be overlooked.

A Win for the Planet, a Win for Business Given the ever increasing demands for businesses to prioritize sustainability, ESG driven supply-chain pressures are growing. The stakes are high with ESG transparency becoming a condition of doing business with many multinational organizations. By starting their ESG journey today, microcaps can unlock useful partnerships with these major players while also leveraging their ESG position as a competitive advantage.

The small and micro cap companies that get ahead of ESG trends and start their journey sooner rather than later will be in a better position to capitalize on establishing closer relations with their large customers and win more business.

As we work towards a more sustainable future, the world will continue to expect more from microcaps.

My recommendation for microcaps across the globe is to future-proof your operations by starting your ESG journey today.

Seth Forman President of ESG Socialsuite helps companies to get started with Environmental, Social & Governance (ESG) disclosure by offering an easy-to-use reporting software that operationalizes popular ESG frameworks, including the World Economic Forum’s globally recognized Stakeholder Capitalism Metrics ESG framework. With support from best-in-class ESG coaches, this approach allows small/mid cap companies that lack large ESG teams to quickly commence ESG reporting and demonstrate ongoing progress.

Over 90 companies across the ASX, NASDAQ, NYSE, and OTC Markets trust Socialsuite to track and disclose the changes they are making to the world. Socialsuite has offices in Austin, Texas, Melbourne, Australia, and Vancouver, Canada.

Learn more about our Socialsuite ESG: https://www.socialsuitehq.com/

Also in 2022, Apple, one of the largest companies in Note: This article is not an attempt to provide investment advice. The content is purely the author’s personal opinions and should not be considered advice of any kind. Investors are advised to conduct their own research or seek the advice of a registered investment professional.

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Relationship Focused. Results Driven.

Lucosky Brookman is a corporate law firm directly serving the small and middle markets. With offices in New York, New Jersey and Philadelphia, we represent domestic and international clients in a variety of sophisticated corporate and securities transactions, mergers and acquisitions, secured and unsecured lending transactions, PIPEs, SPACs, commercial and securities litigation, intellectual property, insurance coverage and defense, real estate and general corporate matters.

• NYSE, NASDAQ and NYSE Amex Listings • Uplistings • Public Offerings • Private Placements / PIPEs • Recapitalizations (Reverse / Forward Splits) • Rule 144 Matters • Joint Ventures • SEC Compliance Matters • SPACs and De-SPACs

NEW YORK OFFICE 111 Broadway, Suite 807, New York, NY 10060 Tel: (212) 417-8160, Fax: (212) 417-8161 www.PlanetMicroCap.com

• Mergers & Acquisitions • General Corporate Matters & Governance • Term and Revolving Lending transactions • Asset-based Lending transactions • Revolving Lines of Credit • Bridge Loans • Registration Statements (S-1, S-3, S-8, Form 10) • Commercial Litigation and Arbitration • Regulatory Investigations (SEC / FINRA)

NEW JERSEY OFFICE 101 Wood Avenue South, 5th Floor, Woodbridge, NJ 08830 Tel: (732) 395-4400, Fax: (732) 395-4401

info@lucbro.com | www. lucbro.com

Planet MicroCap Review 19

DATA Communications Management Corp. (TSX: DCM) (OTCQX: DCMDF)

Q&A with Richard Kellam President & CEO of DATA Communications Management Corp.

Let’s start with a quick overview of the business.

DCM is one of Canada’s largest marketing and communications providers, currently serving 70 of the top 100 corporations in Canada as well as 3 of the top 5 government agencies.

Supporting multiple verticals such as financial services, retail, healthcare, and other regulated industries, DCM is well positioned as a leader in the Canadian market. Known primarily as a legacy print communications provider, DCM uncovered a number of digital capabilities within their print offering that has led to the evolution of DCM as a tech-enabled marketing workflow and digital asset management provider. The focus on digital has created a more comprehensive service offering for its 2,500+ clients, as well as increased the potential growth for DCM as technology has been a key catalyst in landing new customers. DCM has made great strides over the past few years in transitioning enterprise clients to using its online platform (called DCM Flex) for design, review, regulatory compliance, and ordering that integrates with a wide variety of ERP, CRM and marketing technology software platforms. The DCM Flex solution now drives about 30% of revenues, has helped to improve gross margins, and has been responsible for several major client wins.

While DCM currently only generates a modest ($6 million/ year) of digital-related revenues, they have over 40 years of experience in handling clients’ digital assets (graphic files, content scripts, letterhead, website content) that are used for print and digital marketing and client communications programs. This has led to DCM moving upstream and launching subscription-based cloud services to make marketing workflows easier to handle. Not surprisingly, the first offering is a high- margin subscription-based digital asset management (DAM) solution called ASMBL that enterprise clients use to store and share their corporate media content.

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Under the experienced leadership of President and CEO Richard Kellam, and CFO James Lorimer, DCM has been driving, and executing on an aggressive 5-year growth strategy.

The company is well positioned for digital acceleration due to its impressive, and sizeable list of enterprise clients, strong capabilities, and consistent Cash flow conversion rate supporting the business. Over the last two years DCM has invested in building a better business and is now in a strong position to build a bigger business that incorporates both conventional print solutions and a growing stack of tech-enabled workflow and asset management solutions.

Reflecting on 2022, how would you describe the company’s performance in the previous year? Did the company reach the milestones and goals that you set for the company?

While the company is yet to release the Q4 results, it is fair to say that 2022 was a strong year of growth for DCM on both the financial and organizational sides the business. On the financial side, DCM posted record results, achieving growth across the board YTD through September 30, 2022, vs. 2021 as Revenue up 15.1%, Gross Profit up 17.1%, Net income up 201% and EBITDA up +34.2%. From an organizational side DCM has achieved this growth with zero restructuring costs and DCM continued to pay down the higher cost fixed-term debt, which is now at $25.1 million, down from $34.1 million at the end of 2021. DCM remains focused on executing their strategy of helping clients simplify their marketing and communication workflows while delivering more value against their market competitors. As a result, DCM has an extremely high retention rate and believes there is an opportunity for expanded wallet share with existing clients as they continue to bring more digital capabilities to the table. As reflected in 2022, the financial results show management’s focus www.PlanetMicroCap.com

on building a better business than the years prior, and as DCM continues to evolve its technological capabilities, we believe that there are substantial growth opportunities to build a bigger business. On that note, a milestone in 2022 was to focus on its digital capabilities, and YTD the company has generated over $30M in new business, all tech-enabled.

Are there any industry tailwinds to push forward some of the company’s goals and objectives?

DCM’s five-year strategy focuses on key areas such as digital transformation, revenue and EBITDA growth, debt reduction, client revenue expansion, customer growth, leadership development, and employee satisfaction. The company has seen revenue and EBITDA momentum in 2022 as it recovered from the impacts of the COVID-19 pandemic, however due to supply-side issues in the industry, DCM has continued to maintain a higher inventory level than normal to ensure that it could meet client demands. DCM continues to expect working capital improvements as the raw material market normalizes and inventories are reduced to more traditional levels. Additionally, while more of an opportunity than an industry tailwind, only 1/10 companies in currently are using a Digital Asset Management solution. As more companies evolve to meet the growing demands of the digital world, DCM should experience increased tailwinds on its DAM sales amongst its 2,500+ customers.

In a number of interviews in 2022, a lot of management teams spoke about how 2023 was the “Year of Execution” - ranging from executing the business model to surpassing internally derived growth goals; what does “executing” mean for you?

DCM remains focused on executing against their strategy of helping clients simplify their marketing and communication workflows while delivering a better and bigger business. If 2022 can be looked at as a year of building a better business, 2023 can be seen as a year of building a bigger business. By expanding our service offering amongst existing

clients, while also adding new clients via their techenabled solutions, DCM feels confident in their ability to grow the business in 2023. The company has released 5-year objectives of: +5-10 Revenue CAGR, 35-40% Gross Margin, 18-20% SG&A, Adjusted EBITDA 18-25% and Debt <1.0x. Executing on these objectives in 2023 would be a sign of success for the company and something that the company feels is within range given their recent success.

What are some of the company’s value catalysts for 2023?

DCM is a cash positive business with significant growth ahead in 2023. Building off a record 2022 year, the company continues to drive hard on building a bigger business and should be able to continue growing its tech-enabled/digital revenue in 2023.

The company’s objective to grow digital revenue to drive higher margins and cash flow.

However, the true value catalyst for DCM in 2023, is people recognizing the attractive valuation it trades at today. Despite its impressive Clients, Capabilities and Cashflow – the company has a fully diluted market capitalization of roughly $70M on $34.2M in TTM Adjusted EBITDA. When compared to the sector averages of Conventional Print Solutions (EV/ Revenue of 1.0x), DAM (EV/Revenue of 3.5x), and Tech-Enabled Marketing Workflow (EV/Revenue of 1.9x), DCM is trading well below market comps.

In accordance with some of the value catalysts for 2023, we just announced on February 23, 2023, has entered into a share purchase agreement to acquire the Canadian operations of R.R. Donnelley & Sons for a total cash purchase price of CDN $123 million.

As the company continues to grow the top line and drive margins up, there is a significant opportunity for investors to get in before the true value of the company is realized in the market.

For more information about DATA Communications Management Corp., please visit: www.datacm.com

DISCLAIMER AND FORWARD-LOOKING STATEMENTS NOTICE: This article is provided as a service of SNN Inc. or an affiliate thereof (collectively “SNN”), and all information presented is for commercial and informational purposes only, is not investment advice, and should not be relied upon for any investment decisions. We are not recommending any securities, nor is this an offer or sale of any security. Neither SNN nor its representatives are licensed brokers, broker-dealers, market makers, investment bankers, investment advisers, analysts, or underwriters registered with the Securities and Exchange Commission (“SEC”) or with any state securities regulatory authority.

SNN provides no assurances as to the accuracy or completeness of the information presented, including information regarding any specific company’s plans, or its ability to effectuate any plan, and possess no actual knowledge of any specific company’s operations, capabilities, intent, resources, or experience. Any opinions expressed in this article are solely attributed to each individual asserting the same and do not reflect the opinion of SNN. Information contained in this presentation may contain “forward-looking statements” as defined under Section 27A of the Securities Act of 1933 and Section 21B of the Securities Exchange Act of 1934. Forward-looking statements are based upon expectations, estimates, and projections at the time the statements are made and involve risks and uncertainties that could cause actual events to differ materially from those anticipated. Therefore, readers are cautioned against placing any undue reliance upon any forwardlooking statement that may be found in this article.

SNN does not receive compensation for, nor engage in, providing advice, making recommendations, issuing reports, or furnishing analyses on any of the companies, securities, strategies, or information presented in this article. SNN recommends you consult a licensed investment adviser, broker, or legal counsel before purchasing or selling any securities referenced in this article. Furthermore, it is encouraged that you invest carefully and consult investment related information available on the websites of the SEC at http://www.sec. gov and the Financial Industry Regulatory Authority (FINRA) at http://finra.org.

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

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insi g hts

// By Joseph M. Lucosky Esq.

The Art of Uplisting Uplisting to a senior exchange like the New York Stock Exchange (NYSE) or Nasdaq is a significant milestone for any company aiming to increase exposure, gain credibility, and attract investors.

T

he process, however, is complex and challenging, requiring a deep understanding of regulatory requirements, knowledge of marketplace dynamics, and strategic planning. Lucosky Brookman LLP, a leading securities law firm in the United States, has become the premier uplisting law firm, successfully guiding companies quoted on the OTC Markets into the national marketplace.

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Recognizing that the uplisting process is not onesize-fits-all, Lucosky Brookman’s tailored approach addresses each company’s unique needs and challenges. They work closely with management teams to identify goals and develop a customized plan for uplisting. This personalized approach ensures a smooth transition to a senior exchange while meeting the management team’s objectives.

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Lucosky Brookman has successfully completed dozens of uplistings for the benefit of its clients. The firm’s expertise spans a wide range of industries. Working with companies of varying sizes and spanning various market sectors allows them to better understand the nuances of each industry, providing tailored advice that caters to the specific needs of their clients.

In addition to their uplisting expertise, Lucosky Brookman has a proven track record of raising millions of dollars in firm commitment underwritten financings during the uplisting process. These financings enable companies to raise capital, which is crucial for growth and continued success in the national marketplace.

Lucosky Brookman has developed a practical, business-oriented approach to legal work that enables clients to achieve their uplisting goals while minimizing costs and maximizing value. This approach focuses on understanding the client’s business objectives and aligning the uplisting process with these goals. By doing so, the firm ensures that clients gain the most value from the uplisting process, including increased exposure, enhanced liquidity, and the ability to raise capital.

The firm’s extensive knowledge of regulatory requirements, combined with its deep understanding of the marketplace dynamics, makes them an essential partner for companies seeking to uplist. Their team of experienced attorneys provides comprehensive and coordinated guidance throughout the uplisting process, ensuring that companies navigate the complexities of regulations and market conditions successfully.

One of the significant advantages of working with Lucosky Brookman LLP is the firm’s ability to provide innovative solutions to complex problems. They understand that each company has unique needs and challenges, and their creative problem-solving skills enable them to address these issues effectively.

Joseph Lucosky, Managing Partner and Head of the Securities Practice Group at Lucosky Brookman LLP, is widely recognized as an expert in uplisting. His experience and expertise extend to all aspects of the uplisting process. He has a deep understanding of the regulatory landscape, which is essential to the success of the uplisting process. He is familiar with the various rules and regulations governing national

stock exchanges and can help companies navigate these complexities with ease. Joseph Lucosky has developed strong relationships with key stakeholders, such as investment banks and market makers, which can be crucial for a successful uplisting. His strategic thinking and ability to find creative solutions to complex challenges have helped many companies overcome obstacles and achieve their uplisting goals.

Uplisting to a senior exchange like the NYSE or Nasdaq can offer companies significant benefits, such as increased exposure, enhanced liquidity, and the ability to raise capital. However, navigating the complex process requires a deep understanding of regulatory requirements, knowledge of marketplace dynamics, and strategic planning. Companies looking to uplist should engage Lucosky Brookman LLP to ensure a successful transition.

By partnering with Lucosky Brookman LLP, companies can confidently navigate the uplisting process and achieve their goals of enhanced exposure, credibility, and investor attraction, setting the stage for future growth and success in the national marketplace.

With their tailored approach, extensive industry expertise, and innovative problem-solving capabilities, Lucosky Brookman LLP has established itself as the premier uplisting law firm in the United States. Their monthly publications, including the Uplisting Report, the Microcap IPO Report, and the Microcap SPAC Report, further demonstrate their commitment to providing cutting-edge insights and guidance to companies seeking to uplist and unlock their full potential.

For further information on the firm, companies should see their website at www.lucbro.com and review their various monthly publications at https://www.lucbro. com/our-firm/uplisting-report; https://www.lucbro. com/our-firm/micro-cap-ipo; and https://www.lucbro. com/our-firm/micro-cap-spac-report.

Joseph M. Lucosky is the founding and managing partner of Lucosky Brookman LLP and oversees both the transactional and litigation departments.

Mr. Lucosky has a broad multidisciplinary practice that includes extensive experience in litigation and dispute resolution, regulatory investigations (including FINRA and SEC matters), negotiated mergers and acquisitions; domestic and cross-border investments/joint ventures; the representation of private equity; venture capital and other private investment funds, placement agents and underwriters; securities offerings; private and public financings (including secured and unsecured lending); bankruptcy transactions; real estate matters; and various other types of commercial transactions. In addition, he counsels corporate boards, board committees (including special committees) as well as being a personal adviser to many entrepreneurs, business leaders and corporate executives. He has counseled clients on significant litigation, regulatory and transactional matters across a number of industry sectors.

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

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Leading Firm

2023

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insi g hts

// By Gustave Passanante, Esq.

How OTC Companies can Utilize SPACs to get Listed on a National Exchange What is a SPAC? A Special Purpose Acquisition Company (“SPAC”) is a publicly traded company that has no formal commercial operations. A SPAC usually has a lifespan of about 2 years and is formed with the sole purpose of effecting a merger with another company.

Since the 1990’s, Special Purpose Acquisition Companies have been successful in raising hundreds of billions of dollars. The money raised in its IPO is deposited into an interest-bearing trust account that cannot be disbursed except to consummate a business combination. To start, a SPAC must supply its own capital when issuing its IPO. This is ultimately provided by the SPAC’s sponsors. The sponsors receive founder shares in return for providing capital to the company for its operations. This includes the SPAC’s professional fees and due diligence it undertakes when identifying and acquiring a target company. After the SPAC successfully completes its IPO, the sponsor begins searching for a target company to merge with. SPACs have a specified time to complete its special purpose, generally around 2 years, or it must return the capital raised in its IPO to investors.

In short, a SPAC is a freely trading public company that’s seeking a company to merge with to continue its existence.

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In short, a SPAC is a freely trading public company that’s seeking a company to merge with to continue its existence. Since a SPAC itself is a publicly traded company that’s subject to strict federal securities laws and exchange listing requirements, SPAC sponsors take into consideration the target’s ability to abide by these requirements since their goal is to ensure they deliver as much value as possible to the SPAC and its shareholders.

What Makes a Company a Good Target for a SPAC? A publicly traded company makes for a powerful SPAC acquisition candidate. Typically, a SPAC will target a private company. A conventional IPO process could take the target company more than a year, while the route to public offering using a SPAC may take a mere few months. Traditionally, the target company is a third party, such as a start-up firm.

There are a few key factors the SPAC will often look at when evaluating a target company: A strong management team, financial systems and reporting in place, corporate governance familiarity and alignment, a mature company lifecycle, and growth opportunities.

A strong management team and prior company experience will be more attractive SPAC targets. A strong, experienced CFO is necessary to implement and meet the financial and reporting requirements of a publicly traded company. A mature company lifecycle is reflected in a company’s history of healthy

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growth coupled with plans for a sustainable future.

Ultimately and arguably the most important factor, is the potential growth of the target company. The success of a SPAC transaction will depend on the growth of the acquired company.

Lastly, one of the biggest hurdles when consummating a merger for any public company is the registration statement that needs to be filed with the SEC which is called Form S-4. Form S-4 is required to disclose material information with respect to a merger or acquisition upon the registration of a company’s securities. It consists of information regarding the terms of the transaction, risk factors, ratios, pro-forma financial information, and material contracts with the company being acquired. Most importantly, in order to file Form S-4 both companies need 2 years’ worth of audited financials. This poses a problem

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for private companies targeted by SPACs because they need to undergo the audit process and incur additional expenses. This could make the transaction timelier and more expensive. Thus, if a company is audited, it significantly enhances the likelihood of the completion of the transaction because it decreases time and costs.

With these key factors in mind, what kind of company seems like a perfect fit? That’s right, a publicly traded company.

How can an OTC Company Get Targeted by a SPAC? Of course, a public company can always become the target of a SPAC through the traditional due diligence process where the sponsors take a liking to a company, the sponsors target the company, they

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While a merger with a SPAC may cost more than an uplist, it’ll likely be quicker and decrease the chances of a company getting delisted for failing to meet certain exchange requirements.

ties. Further, stocks trading on OTC markets are, generally, not known for their large volume of trades, therefore the OTC marketplace is an alternative for small companies or those who would have trouble listing national exchanges due to their financial capabilities. It’s incredibly possible to outgrow the OTC. The quicker the process, the better. For example, on the other hand, stocks listed on NASDAQ experience less volatility, tighter spreads, and more depth.

Tighter spreads and more depth at the inside quote decrease costs to investors. In addition to tighter spreads making it cheaper to trade, this also makes it easier for investors to get larger trades done.

Conclusion

begin due diligence and, eventually, close the deal.

Of course, the chances of this are rather slim simply because the number of OTC companies far outweigh the number of SPACs looking for targets. Luckily, this isn’t the only way an OTC company can get targeted and eventually merge with a SPAC. Another route for a company to merge with a SPAC is by a company stepping into the shoes of the sponsor where it will appoint independent leadership for the SPAC. The SPAC then targets the OTC company for a business combination.

While a merger with a SPAC may cost more than an uplist, it’ll likely be quicker and decrease the chances of a company getting delisted for failing to meet certain exchange requirements. The entire process can take a mere few months, risk is minimized, and the potential benefits that come with becoming listed on a national exchange are tenfold. With a typical reverse merger, a lot of due diligence is required to combat potential liabilities.

It ends with an OTC company landing itself on NASDAQ. Since the sponsor-and-target company has already had experience being on the OTC markets, management will be prepared to handle the demanding regulatory and compliance requirements that go along with being a public company.

The familiar risks associated with SPAC mergers and the obvious inexperience of a private target company seemingly melt away when the sponsor-and-target is an established, publicly traded company. This method provides microcap companies another option to grow. The popularity and use of SPACs will continue to find success as faster merger speeds benefit companies involved in this seamless transaction.

Gustave (“Gus”) Passanante is a partner at the Basile Law Firm, P.C. He specializes in corporate restructuring, complex commercial litigation, and mergers and acquisitions to achieve practical outcomes for clients.

Gus is recognized for his work as an entrepreneur, advisor, and litigator to best counsel companies at all stages.

The Basile Law Firm, P.C. provides a range of legal services for their OTC clients including debt remediation, restructuring, corporate finance litigation, shareholder derivative actions, corporate dispute resolution, and mergers and acquisitions. Founded by Mark Basile, former CEO of several OTC companies, the Basile Law Firm, P.C. offers clients a unique legal perspective and thorough understanding of how to achieve their goals.

Contact: Thebasilelawfirm.com gus@thebasilelawfirm.com 516-455-1500

OTC to NASDAQ OTC companies are commonly smaller companies which makes it difficult to meet the listing requirements of national exchanges. Investors face greater risk when investing in more speculative OTC securiNote: This article is not an attempt to provide investment advice. The content is purely the author’s personal opinions and should not be considered advice of any kind. Investors are advised to conduct their own research or seek the advice of a registered investment professional.

28 Planet MicroCap Review

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Planet MicroCap Review 29

Feature

Value Investing in 2023 The Shift Towards “Real Economy” Businesses and Current Profits-Q&A with Joe Koster, Founder of Sorfis Investments

Let’s start by reflecting on 2022 - you run a newsletter called Value Investing World, in covering the value investing universe, what we’re some key trends and storylines that caught your attention in your coverage?

For me, one of the most interesting storylines of 2022 was the divergence of the value vs. growth factors. Most of us consider growth a component of value, so don’t blindly buy things at low multiples like the factor ETFs, but those factor ETFs saw just slight declines, or even gains, while the growth and broad markets saw more significant losses. And Berkshire Hathaway, run by the world’s most famous value investor, Warren Buffett, was also up on the year.

So from a broad market perspective—while 2022 seemed volatile and maybe a little stressful for some investors—if you had entered the year leaning heavily toward value, it seemed fairly normal and uneventful, at least from an investment return point of view.

As things started to take a turn for the worse in 2022, every financial news pundit starting espousing the idea that we need to “return to fundamentals” - why is it that this phrase sometimes gets confused or linked to “value investing”? If so, would you say that’s a good or a bad thing?

I don’t think it’s a bad thing. Value investing is simply the process of acquiring more than you are paying

30 Planet MicroCap Review

for. And to attempt to do that, you need to focus on valuation.

Now, valuation is imprecise and often tricky, but company fundamentals are the north star that guides the process. If people start paying more attention to things like profit margins and cash flows, we may get at least a little less speculation in the financial world, and maybe those of us that have stayed disciplined to the value process will get noticed a little more as well.

The investing universe is huge, but it seems harder and harder to find value; more and more rocks need to be turned over, and even then, folks smarter than I have probably already found the asymmetric opportunity and are pouncing. What do you think?

I think that’s true. The internet and information age have made it easy to find things and have made it easier for more people to learn about investing and how lucrative it can be to find a good company early in its life cycle, buy it, hold it, and let compounding do the work for you. And the professionalization of the investment industry has created new job categories and institutional investment dollars trying to find the next great investment or next great investment manager.

But there’s always value out there somewhere, and the difficulty of finding value can change in a hurry.

The popularization of investing and ease of buying

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stocks has also made it more likely that, when fear and panic enter the market, as they do from time to time, great companies will get sold too—and reach great valuations. You may have to act more quickly than in the past, so having a list of companies ready to buy ahead of time in case they reach your desired buy prices is important. As Charlie Munger has said, “Really good investment opportunities aren’t going to come along too often and won’t last too long, so you’ve got to be ready to act. Have a prepared mind.”

Looking ahead to 2023, what are some trends you’re looking at more closely in the value investing world?

We’re seeing more of a shift to ‘real economy’ businesses. I think, in general, there was more of a focus on technology in the last decade, and now people are beginning to understand the importance of the infrastructure, raw materials, and supply chains that go into making the economy operate. And people are trying to uncover the big, competitiveadvantaged players in those areas, as well as the small niche players in those industries.

I also think people are putting more emphasis on current profits, and less emphasis on a future story that has yet to be proven. A good story can make any investment seem like a value investment when it’s told. Over the last several years, many investors have been willing to forego proof of current profits and pay up for future cash flows.

This is a perfectly valid strategy that got taken too far. The role of competition and difficulty of business in general were underestimated, and in many cases, the future cash flows either never materialized or have little hope of materializing.

And so I think that trend is changing—not completely, but there seems to be much more emphasis on profits and the validity of a company’s business model than there has been in recent years.

And lastly, if you had to make one prediction for 2023, what would it be?

where you are, even if you can’t know precisely where you’re going. Knowing where you are in a cycle and what that implies for the future is very different from predicting the timing, extent and shape of the next cyclical move.”

I lead with that Marks wisdom because my prediction is based on my analysis of where we currently are in the business and economic cycle, but I have no idea how the shape of things will play out.

And so, the prediction is that what worked in 2022 is likely work throughout 2023 as well. Passive value investing will be a better place to be than the S&P 500, which is still significantly overvalued compared to its history, and the opportunity for active value investing is even greater. There are values to be found in all industries, and some of the big winners over the next few years are likely to be found in beaten-down, small-company technology stocks that got sold along with the route in overall technology stocks in 2022.

I think we’ll see plenty of volatility in the economy, inflation, and markets. And that volatility will create opportunities for active value investing. The 1970s saw similar volatility, and one of the biggest winners of the 1970s was Warren Buffett, as he made some of his best investments of all-time during that period.

So, if you can keep your head when things get volatile, there will be some great opportunities to invest in things where you can buy right and sit tight for a long period of time.

For more information about Sorfis Investments, please visit: www.sorfis.com, and you can subscribe the Value Investing World Newsletter on Substack here: www.valueinvestingworld.substack.com Joe Koster bio: Joe started his career as a financial analyst and has been a Portfolio Manager or Co-Portfolio Manager since January 2007.

He founded Sorfis Investments, LLC, which began its life as a Registered Investment Adviser in January 2019, and serves as the firm’s Managing Member and Portfolio Manager for individual client accounts. Joe earned a Bachelor of Science Degree in Business Administration with a concentration in Finance from Coastal Carolina University, where he is currently a member of the Wall Fellows Program Board of Directors as well as a member of the Finance and Economics Advisory Board at the Wall College of Business Administration.

One of my favorite Howard Marks memos was one he wrote in 2001 titled “You Can’t Predict. You Can Prepare.” In that memo, Marks wrote: “In my opinion, the key to dealing with the future lies in knowing Note: This article is not an attempt to provide investment advice. The content is purely the author’s personal opinions and should not be considered advice of any kind. Investors are advised to conduct their own research or seek the advice of a registered investment professional.

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Planet MicroCap Review 31

insi g hts

// By Kelly Anderson, CPA

Never discount the Microcap CFO

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avigating the microcap space has been a career endeavor for me. As I look back and reflect on how the heck did I get here, I noticed that there were a couple of driving forces behind why I found my home as a microcap executive and ultimately board member. I am sharing my insights to help others to consider, why not microcap? As you contemplate what your career trajectory looks like, I hope my insights can help you find your path.

First, I don’t think anyone starts their career thinking – Microcap – that is where I want to be. I think it is the love of the entrepreneur and work with companies to be successful. Microcap is its own unique animal. You find everyone from the idea person to the perpetual executive trying to “make it”. One thing continues to shine bright, everyone has an idea/company that they are looking to grow and need capital to get there. They may have tried other avenues, but were not successful, or were really looking to get into the public markets for the liquidity.

I started my career in public accounting and ended up at a Fortune 100 company, which is where I really learned about public company and public markets. In addition, we were acquisition happy and acquired 50-100 companies a year. What a fun time that was, seeing a vision come together and putting all of the pieces into organized chaos. This is where I really learned about entrepreneurs, how they thought about their “baby” and the pride they had in their business.

In addition, I realized how hard it was for them to “give up” their business and now be an employee to another company. This was not an easy transition and some were not very successful in the transition.

Working with these entrepreneurs, I realized that they were nimbler in their thinking and were able to make the changes and pivots in their businesses without the committee approval. In addition, their ability to efficiently allocate capital, both human and

32 Planet MicroCap Review

monetary was amazing. I also realized that there was a significant lack of truly understanding how a CFO can be a partner to these entrepreneurs. The majority of the CEO’s didn’t view the CFO as necessary. This was due in part to their ability to understand and manage the cash of the business very efficiently. They just did not see how a CFO brought value. In addition, a lot of the CFO’s in this market segment were really controllers and perpetuated the idea that they were not a true partner. I quickly realized that I could help these entrepreneurs bring the financial acumen to their business. Shareholders and investors were clamoring for the CFO that could talk to the street, understand the business and help drive the business forward.

I knew that I could be that person and thus began my search for a company I could help achieve their goals and bring the financial discipline lacking in a lot of the microcap companies. In addition, knowing there was a growth opportunity was key to working with a company.

I landed in an alternative energy company and started my journey into the microcap space. There were very few women in the market. I took this as a challenge to see how I could bring awareness that yes, we did make great executives. I dove into the company, learned everything there was to learn, put together the much-needed financial controls and started the process of uplisting to a national exchange.

A major part of my job was meeting with investors, some of which only took the meeting as they were curious about a female in the space. I chose not to focus on the fact that I was female and focus on the fact that I was a kick ass CFO who knew their stuff and could give investors’ confidence that I would be able to help the company effectively allocate their capital. Almost every meeting ended with the investor saying “wow, you really know your stuff”. I could have taken that the wrong way, but one thing

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you realize quickly in the business world, execution is everything. If the investors have the believe in your product, market, etc., but don’t think you can execute, you are dead in the water. On the other hand, I also noticed that having an OK product and market position, but executing to the best of the ability, was more attractive to investors. So, I keep coming back around, execution is key.

A big part of the microcap world are the conferences. I loved attending the conferences. It was a great opportunity to introduce the company to potential investors and update existing investors.

In addition, being a female was a huge advantage.

When you attended a conference, all you saw was a sea of blue or black suits. The CEO’s were not able to differentiate themselves from the other CEO’s. I quickly realized that I had an opportunity to wear color, no dark colors for this gal. I made sure that every suit I wore was a bright color. Red, Pink, white, cobalt blue, I found the most colorful professional suits that stood out among the crowd. It was an advantage when coordinating meetings, as I would just let the investor know to look for the uniquely colored suit. It quickly became a thing when attending conferences. I would have the investors reach out prior to the conference to ask what color suit they should look for.

As I wrapped up my career as a CFO and moved onto board seats, I reflected back to how my boards interacted with management and how a board can really make or break a microcap company.

The board is a key factor into really helping the executive team hone in on enacting their strategic plan, as well as keeping accountability on the execution. I believed that there were opportunities in the space to increase the partnership between the board and the executive team in the microcap space.

In addition, as a CPA, public company CFO and president, I was able to sit on the audit committee of these companies. Many of you are aware that audit committee chair is the hardest board position to fill in the microcap space. In fact, many are filled with board members that have some financial acumen, but not the true background larger companies are able to attract as audit committee chair. This is due to the perceived liability and lack of controls in the space. Since I spent a big portion of my career in microcap, I am very comfortable with the risk and also instilling the right level of discipline and accountability within the microcap companies. I am able

to have very frank conversations with the auditors and work through a lot of the key issues. My board work has been some of the most fulfilling of my career and I look forward to continuing the services.

As I wrap up this journey with you, it is important to reflect that I believe my success is due to my love of entrepreneurs and my ability to really understand the business and being able to bridge the gap between the business needs and the compliance obligations. I am very good at solving problems and thinking about solutions that make sense for the company but don’t break the bank in the process.

The constant feedback I receive is that I always have the company’s best interest when I am making decisions. This can be very difficult as you need to break through the egos and focus on the business needs and opportunities.

My hope is that anyone reading this will consider their career in microcap markets, while there are a lot of frustrating times and moments, overall, it is an awesome career choice and very rewarding.

I look forward to meeting some of you in the future, feel free to reach out if there is anything that I can do to help you with your careers.

Kelly Anderson is the Founder and CEO of CXO Executive Solutions, LLC, a national woman-owned company providing executives to clients on an interim, advisory or permanent basis. Kelly’s 25+ years as a public and private company CFO is critical to the success of CXO and the ability to have peer discussions with CXO clients. With Kelly’s capital market, strategic development, financial acumen, organizational and communication experience, she is able to partner with clients and partners to solve their issues/problems/concerns.

Kelly/s approach to her clients is as a strategic member of the management team. she takes responsibility for team’s ability to report on performance, trends and business issues that affect the execution of client’s goals. These roles require working closely with her clients, including board of directors and executive management to present and communicate company-wide achievements and provide ideas on how to seize new opportunities and mitigate shortfalls.

Current Board Seats: Tomi Environmental Services (TOMZ) – Board member since 2016, Audit Committee Chair, Compensation Committee AgEagle (UAV) Board member since 2022, Audit committee chair, compensation committee, nomination/governance committee Accounting Advisory Committee – California State University, Fullerton Association for Corporate Growth – Board Member and Awards Committee Woman Corporate Directors – Co-Chair LA/OC chapter Past Board Seats: Marygold Companies (MGLD) Audit committee, Nomination/governance committee Guardion Health Services (GHSI) – Audit and Strategic Committee Member Education: Kelly has a Bachelor of Arts, Accounting Concentration, from California State University, Fullerton and is a California CPA. Her license is currently inactive.

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

www.PlanetMicroCap.com

Planet MicroCap Review 33

Quotemedia, Inc. (OTCQB: QMCI)

Q&A with Dave Shworan Director, President & CEO of Quotemedia, Inc. Let’s start with a quick overview of the business.

QuoteMedia is a stock market data, research and application provider. QuoteMedia provides

banks, brokerage firms, private equity firms, financial planners and sophisticated investors with a more economical, higher quality alternative source of stock market data and related research information.

We compete with several larger legacy organizations and a modest community of other smaller companies. QuoteMedia provides comprehensive market data services, including streaming data feeds, on-demand request-based data (XML/ JSON), web content solutions (financial content for website integration) and applications such as Quotestream Professional and Quotestream Web Trader.

What this means is that we get raw streaming data for equities, options, commodities, futures, funds, etc., from all of the exchanges and other venues, and we normalize it and redistribute that data to clients. We do this in many ways, including through low-latency raw feeds so our clients can power their own applications and platforms, as web content solutions for display in web portals and mobile friendly websites, and within our own Quotestream applications which are web and mobile trade terminal style applications for traders to monitor the financial markets and track their portfolio holdings. We package the data with a wide range of complimentary data and

34 Planet MicroCap Review

information, including news from financial and press wires, analyst ratings and estimates, charting and analytics, and virtually anything else that a financial firm, broker or advisor, or even an individual at-home investor could want.

We do this by designing cutting edge products with industry leading technologies, so we are able to provide unmatched functionality and performance, while maintaining a significant advantage in cost effectiveness. This has lead to our landing some major industry players as our clients, including Nasdaq Stock Exchange, London Stock Exchange Group, TMX Group (Toronto Stock Exchange), Canadian Securities Exchange (CSE), FIS, U.S. Bank, Scotiabank, Bank of Montreal (BMO), Broadridge Financial Systems, JPMorgan Chase, Charles Schwab, CI Financial, Canaccord Genuity Corp., Hilltop Securities, HD Vest, Stockhouse, Business Wire, Cision, Regal Securities, ChoiceTrade, Credential Qtrade Securities Inc., Industrial Alliance, Ally Invest, Inc., Suncor, Firstrade Securities and others.

Reflecting on 2022, how would you describe the company’s performance in the previous year? Did the company reach the milestones and goals that you set for the company?

2022 was a very good year for QuoteMedia. Not only did we close some excellent long term con-

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tracts with industry leading financial institutions, but we also released a lot of new products, software, and proprietary data sets.

We achieved a major milestone in 2022 by attaining SOC2 accreditation, which means we have been audited to ensure we adhere to industry best practices for information security, etc. This is becoming more and more important for our clientele, and ensures we are able to satisfy the security needs of any clients - particularly the major banks and brokerage firms.

2022 also marked the real end to the pandemic, and the transition back to business as usual. We are very proud of the way in which we were able to pivot from virtually all staff working on site to nearly everyone working remotely when the pandemic hit, and now we have comfortably settled into the new normal which is definitely a hybrid. It seems simple enough, but there were certainly challenges, and we were able to take them in stride - while also growing revenue by 15%+.

Are there any industry tailwinds to push forward some of the company’s goals and objectives?

We are actually in a position to capitalize on a wide range of industry conditions. Obviously, when the financial industry as a whole is on an upturn this floats all boats - with increased budgets for a wide range of market data products and services, especially some of our cutting edge applications and analytics products that can help our clients capture a larger share of the investment marketplace. On the other hand, unlike most of the major legacy firms we compete against, when financial markets are down, and cost pressures become more acute across the industry, we are able to bring substantial cost savings with the efficiencies we have developed, and actually grow our own market share as we land

clients looking to spend less, or achieve more for their dollars.

In a number of interviews in 2022, a lot of management teams spoke about how 2023 was the “Year of Execution” - ranging from executing the business model to surpassing internally-derived growth goals; what does “executing” mean for you?

Executing means a lot of different things for us this year. In 2022, we landed several very large contracts where each of which, only a few years ago, would have been the largest contract our company had ever closed. These are all rolling out throughout this year, so successful launch of these deployments is definitely a key point of execution for us. Executing also means capitalizing on this momentum, as we seem to have truly broken into the highest tiers in our industry, and we are now at the table when it comes to data provisioning for the biggest banks and brokerages in the world. On top of all of this, we also want to maintain the hallmarks of our company, like great customer service and agility in responding to customer needs (regardless of the size of the client), technological excellence, economic efficiency and visionary product development. We have always been a disrupter, and we certainly plan to continue down that path.

What are some of the company’s value catalysts for 2023?

This year will see us closing more major contracts, launching exciting new products and data sets, and kicking off important new partnerships. It really is all about those things… more products, more data, and more services.

For more information about Quotemedia, Inc., please visit: www.quotemedia.com

DISCLAIMER AND FORWARD-LOOKING STATEMENTS NOTICE: This article is provided as a service of SNN Inc. or an affiliate thereof (collectively “SNN”), and all information presented is for commercial and informational purposes only, is not investment advice, and should not be relied upon for any investment decisions. We are not recommending any securities, nor is this an offer or sale of any security. Neither SNN nor its representatives are licensed brokers, broker-dealers, market makers, investment bankers, investment advisers, analysts, or underwriters registered with the Securities and Exchange Commission (“SEC”) or with any state securities regulatory authority.

SNN provides no assurances as to the accuracy or completeness of the information presented, including information regarding any specific company’s plans, or its ability to effectuate any plan, and possess no actual knowledge of any specific company’s operations, capabilities, intent, resources, or experience. Any opinions expressed in this article are solely attributed to each individual asserting the same and do not reflect the opinion of SNN. Information contained in this presentation may contain “forward-looking statements” as defined under Section 27A of the Securities Act of 1933 and Section 21B of the Securities Exchange Act of 1934. Forward-looking statements are based upon expectations, estimates, and projections at the time the statements are made and involve risks and uncertainties that could cause actual events to differ materially from those anticipated. Therefore, readers are cautioned against placing any undue reliance upon any forwardlooking statement that may be found in this article.

SNN does not receive compensation for, nor engage in, providing advice, making recommendations, issuing reports, or furnishing analyses on any of the companies, securities, strategies, or information presented in this article. SNN recommends you consult a licensed investment adviser, broker, or legal counsel before purchasing or selling any securities referenced in this article. Furthermore, it is encouraged that you invest carefully and consult investment related information available on the websites of the SEC at http://www.sec. gov and the Financial Industry Regulatory Authority (FINRA) at http://finra.org.

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

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Planet MicroCap Review 35

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Feature

Will Investor Optimism Return to Asia in 2023?

Q&A with Michael Fritzell, Editor of Asian Century Stocks

In 2022, (as of January 19, 2023), the S&P Asia Pacific BMI is down 11.45%. Why do you think 2022 was a tough year for folks with exposure to Asia?

The weakness in Asian stocks in 2022 was due to a confluence of factors. One important factor was that the US Dollar strengthened throughout most of 2022. Flows tend to follow performance, and if you measure performance in US Dollars, it increases the hurdle for Asia-focused investors. Outflows out of emerging markets continued, and they remain deeply out of favour.

38 Planet MicroCap Review

Another major event was the drop in the share prices of COVID-19 beneficiaries. Consumer electronics companies, rubber glove manufacturers, technology platforms and so on. As most of Asia recovered from the pandemic, their businesses suffered.

Then there was a shift in investor sentiment towards Chinese stocks.

Until late 2020, overseas investors were massively bullish on Chinese technology stocks, for example.

At that time, they were seen as “compounders” - buy-and-forget stocks that you should be willing to pay up for.

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Then, in November 2020, Alibaba’s founder Jack Ma was taken in for questioning. The Chinese government took a tougher approach to deal with what it considered monopolistic behaviour. It all snowballed from there.

Since then, many Chinese tech companies have had to provide so-called “golden shares” to the government. These golden shares have provided the government board representation and - in many cases - actual control of them.

What also happened in late 2020 was a government push for private enterprises to introduce so-called “Communist Party Committees”. In theory, these committees enable the communist party to replace the private sector management teams it doesn’t like.

Since those events, we have seen many tech CEOs resigning, including Zhang Yiming at TikTok’s parent Bytedance, Jack Ma at Alibaba, Richard Liu at JD, and so on.

Tencent and Alibaba’s donations of CNY 50 billion (US$7 billion) each to community projects also raised eyebrows. Some investors viewed these donations as hidden taxes connected to Chairman Xi Jinping’s vision of wealth redistribution in the name of “common prosperity”.

Another issue that caused Chinese shares to fall was the crackdown on private property developers. The government introduced strict leverage requirements on the country’s developers. Anecdotal evidence also suggests that private developers were cut off from bank financing. At the same time, the government made it more difficult for individuals to get mortgages. The result was that many private property developers started a slow descent into bankruptcy. Asian junk bond investors suffered severe losses.

In 2022, the Chinese government doubled down on its policy of trying to completely eradicate COVID-19.

But when Omicron started spreading in late 2021, it became increasingly difficult to achieve full eradication. Local governments introduced increasingly heavy-handed tactics to deal with the pandemic, most famously through the 2-month lockdown in Shanghai in April-May last year. By the third quarter of 2022, roughly 250 million people were locked inside their homes.

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The final bottom for Asian stocks came with China’s Communist Party Congress in October 2022, when General Secretary Xi Jinping secured a coveted third term. Investors realised that Xi would stay on as a ruler of the country for the foreseeable future. Since he is not a reformer, investors panicked, leading to a final puke in late October 2022.

Conversely. (as of January 19, 2023), Yearto-Date, the S&P Asia Pacific BMI is up 5.29%.

Why do you think that is and is this a signal for change in sentiment?

Since Xi secured his third term, the government’s COVID-19 policy has shifted completely. For example, in early November 2022, Chinese state media started downplaying the threat of Omicron, saying that the symptoms were no worse than the flu. On 11 November 2022, the government introduced 20 new COVID-19 policies that, in practice, reduced the risk of strict lockdowns.

A few weeks later, anti-COVID protests emerged nationwide, and state media reported on those protests without much censorship. Whether the protests influenced decision-making or not, COVID-19 restrictions have largely gone away. For example, on 7 December 2022, the government stopped mass testing for COVID-19.

Since then, a significant percentage of China’s population has been infected with COVID-19.

Nobody knows the exact numbers, but if I had to guess, the rate of infection probably peaked in early January 2023.

Finally, on 8 January 2023, China’s borders opened up as well. Cross-province travel has now resumed, and we’re also seeing significant overseas travel for the first time since early 2020.

It’s tragic that so many people have died from COVID-19 but at the same time, China’s reopening also provides hope for the future for so many of the country’s businesses, which suffered for so long.

The main beneficiaries of China’s reopening will be consumer- and travel-related companies listed in Hong Kong and mainland China. You can feel the optimism in the air.

Planet MicroCap Review 39

How would you say macroeconomic events are affecting institutional perspective towards Asia as a whole?

Some folks perceive investing in global equities as a hedge against short term factors, like, if the US goes into a recession - what do you think?

Investing in global equities could well serve as a hedge. In my view, what happened during the pandemic is that the Federal Reserve monetised an unprecedented budget deficit used to fund COVID19-related cash handouts. Those budget deficits rose 40% in just two years. That should be US Dollar negative, in the long-term. The recent tightening in monetary policy is to deal with this oversupply of dollars floating around.

But we never had such stimulus programs in Asia.

There was real suffering in emerging markets during COVID-19. These economies are only now recovering from the pandemic. So fundamentals in terms of economic growth are improving, in my view.

The same is true for China. Monetary policy has been tight since the deleveraging campaign started in 2017. The economic picture was horrendous throughout most of 2022.

So we’re now in an unusual situation where most of the world is tightening its monetary policy while China is in full-on easing mode. While I will agree that Xi is hardly market-friendly, I also cannot deny the fact that fundamentals are improving rapidly in many of the Chinese stocks that I look at.

I think it’s clear that US monetary policy is tight right now, and whether that will tilt the world into a recession is unclear. But I believe that the US inflation rate is coming down rapidly, in which case you’ll want to own long-duration assets such as US Treasuries. At the same time, Asian consumer stocks are cheap and the fundamentals are heading in the right direction. So perhaps global stocks will serve as a hedge, to some extent.

You were recently on the Planet MicroCap Podcast, where you shared that Consumer companies with exposure to China markets may be interesting because of China’s re-opening and loosening of their COVID restrictions. How has that

thesis played out so far in 2023, and what other Asian countries should folks look more closely at for 2023 and why?

That thesis continues to play out. Casinos in Macau and Southeast Asia rallied after China’s borders opened in early January. Shares of Hong Kong hotels and retailers continue to rise steadily. Transport stocks such as airports and toll roads are also benefitting. Investors are also starting to become more bullish about oil demand now that Chinese travel is coming back. Fundamentals are clearly heading in the right direction.

The most exciting story in Asia is undoubtedly the reopening of China’s borders and the removal of COVID-19 restrictions. It will benefit not just mainland Chinese companies, but also consumer-related companies in Hong Kong, South Korea, Taiwan, Japan and Southeast Asia. Before COVID-19, mainland Chinese tourists had a massive impact on the economies of Southeast Asia. Those tourists are now coming back.

Another theme I like is the end of the semiconductor chip shortage. The competing demand for chips from consumer electronics is slumping. Auto- and machinery production is now coming back, and many of these companies have record order books.

While the demand for autos in the US and Europe might weaken a bit due to the recent rate hikes, I believe that US interest rates will eventually fall towards the end of 2023.

To close us out, if you had to make one prediction regarding Asia for 2023, what would that be?

My single biggest prediction is that optimism will return to Asia - not just among consumers but also investors. The region has been left for dead for so many years. We’ve seen outflows from Japan and Southeast Asia for years. And Chinese stocks became highly unpopular at the bottom last October.

With improving fundamentals for many consumer companies across the region, I’d imagine that investors will one day get excited again.

You can subscribe to Michael Fritzell’s newsletter, Asian Century Stocks, here: www.asiancenturystocks. com

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

40 Planet MicroCap Review

www.PlanetMicroCap.com

Tuesday's Children provides a lifetime of healing for those whose lives have been forever changed by terrorism, military conflict or mass violence.

Be an agent of change in the life of a child who has lost a parent.

Become a mentor, join our endurance team or reach out to get involved further.

We look forward to hearing from you.

For more information, please call 212-332-2980 or visit www.PlanetMicroCap.com www.tuesdayschildren.org. Planet MicroCap Review 41

insi g hts

// By Jackie Kibler

Small Business Growth Starts with Right Framework As a Certified EOS Implementer® I talk to executives from across the business spectrum about the challenges that worry them most.

H

eading into 2023, the biggest concern for many small businesses is how to get beyond the hurdles impeding their growth. Ubiquitous chatter about economic headwinds isn’t making things easier.

42 Planet MicroCap Review

Every business hits a growth ceiling numerous times over the course of development. Stagnation can have external causes, which anyone plugged into a global supply chain over the last few years can attest. But even in those cases, lack of growth usually has an internal source as well.

www.PlanetMicroCap.com

Growth starts—and stops—at the top What many successful entrepreneurs don’t always recognize is that what got them this far may also be holding them back. The highly motivated, supremely talented founder who has built a winning organization by doing it all is often the biggest reason growth has stalled.

The Entrepreneurial Operating System®, or EOS®, calls these talented entrepreneurs Visionaries.

Throughout my travels around the country I’m lucky to meet with Visionaries every day. They tend to be smart and inspiring. They also tend to be both obsessed with control and not particularly enthusiastic about process, especially if the process threatens to take away their sense of control.

The reasons behind a Visionary’s controlling instinct aren’t difficult to spot. After building a great company with sweat equity, it can be hard to know when that winning formula isn’t working anymore. Letting go also means handing off to someone else, and finding employees who are competent and trustworthy isn’t always easy.

In short, letting go is scary. Most CEOs I work with struggle with it. One of my clients is in the early stages of delegating her responsibilities. She told me she imagines the experience of a self-driving car is similar: although she’s still in the driver’s seat, something else is making important decisions she used to make, and it’s uncomfortable.

The confidence of structure A management framework like EOS offers Visionaries a way to let go with confidence. The framework consists of streamlined decision-making tools and a language shared across the leadership team.

With consistency and accountability throughout an organization, barriers to growth crystalize into well-defined targets for attack.

Most businesses that hit a ceiling have reached it using a mishmash of approaches cobbled together around one or two strong personalities. One of my clients, a boutique design firm, offers an example.

Prior to the pandemic they’d built a strong portfolio of clients relying on a project-by-project approach.

Their co-founders could take charge of each account and run it according to their own preferences.

www.PlanetMicroCap.com

The pandemic brought them a huge volume of opportunities, and their model couldn’t keep up. When I met her, their CEO said, “I’m a juggler with too many balls in the air and someone keeps tossing dinner plates at me.” These are the kinds of good problems entrepreneurs hope to have, but the question then becomes how to handle it all.

For the CEO and her partner, letting go was only half the struggle. “We’re like ketchup and fries,” she told me. “We go great together, but we’re nothing alike.”

To expand, they needed to answer a lot of tough questions, many of which they didn’t yet know to ask.

Thinking within the box Design is a talent-driven business. They both agreed they needed to hire someone with experience. But they quickly discovered their identity as a business wasn’t defined beyond themselves. “We want to build something bigger than us,” their CEO said to me, “but we don’t know how to get out of our own heads.”

A good management framework starts with foundational analysis centered on the business as something distinct from any one individual. In EOS we call this process Vision Building®. We work to answer the most fundamental questions: What values drive the business? What features of its services or products are central to its brand promise? Where is the business headed?

Answering these questions is much harder than it looks. Even with a single Visionary leading the way, articulating the team’s vision and values can take many hours of effort. For “ketchup and fries,” the struggle took several long meetings, a few dinners, and even some tears.

Some duos never get beyond this point. Even if they manage to let go enough to overcome a capacity shortfall in the short term, their differences become sources of conflict that make the next growth ceiling hard to overcome.

In their case, their different personalities became their most treasured asset. EOS provided a readymade structure for their partnership: the Visionary and Integrator®. It fits them well: while the CEO took charge of imagining possible futures for the business,

Planet MicroCap Review 43

her partner took charge of the Integrator’s role to make the best of those futures into a reality.

From there, letting go became much easier. “I was feeling lost,” their CEO told me. “I felt like I had to have all the answers. No longer.”

Frameworks for action Self discovery is only the beginning. Growth comes from taking the right actions.

Consistent meeting patterns, rigorous self-analysis, and sustained accountability are all features of a strong framework. One of my favorite features of EOS is its simple approach to solving problems. IDS® stands for Identify, Discuss, Solve. For many teams, the requirement to first identify the real problem is what makes IDS effective.

During a quarterly meeting a few years ago one of my clients spent a big chunk of their morning focused on one important issue. Their employee retention rate took a hit in 2022 and they wanted to take concrete steps to turn it around. When the six members of the management team wrote down what they thought were the root causes of the problem, they uncovered a remarkable range of issues to solve.

Following the IDS process, the team broke down what it would take to address each of their concerns.

They prioritized the challenges and assigned people to be responsible for fixing the most urgent ones.

Over the next six months, they held each other accountable to tackling their assignments. By the end of the year, their retention rate had reversed, and last year they had no employees quit.

The IDS process helped this team in two ways. First, it provided a shared process grounded in communication. Second, it provided a path for tackling a big issue in manageable chunks as a team.

Jackie Kibler grew up in an entrepreneurial family with her father in the music and entertainment business. Her father had a passion for music and like many entrepreneurs, wasn’t able to create a solid business infrastructure to grow the business. At a very early age, Jackie realized her passion was to help business owners get more from their businesses.

After college, Jackie worked for larger companies like Dun and Bradstreet, Wells Fargo, Corporate Executive Board and Vistage Worldwide to learn best practices. She progressed through the leadership ranks and over the next 25 years, quickly became known as the “go-to person” for underperforming offices, regions, or companies using a strategic mix of goal setting, process development, and personal accountability.

At Vistage Worldwide, and partnered with over 100 entrepreneurial CEOs to help them improve their businesses. Within 12 months her region improved in rankings from #10 to #2 nationally. It was there that she learned about EOS and when she read the book Traction, she immediately aligned.

I encourage small-business leaders to think hard about whether their lack of a sufficient management framework is hindering growth. Putting the right system in place might be the hammer your team needs to break through the ceiling.

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

44 Planet MicroCap Review

www.PlanetMicroCap.com

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Planet MicroCap Review 45 Learn more about MD Logic Health at www.mdlogichealth.com

*These statements have not been evaluated by the FDA. This product is not intended to diagnose, treat, cure, or prevent any disease

insi g hts

// By Claire Aitchison

Sponsored Research Covering the Uncovered

Equities research has long been provided by investment banks and brokers, however the scope of equity research provided by these entities is reducing due to a combination of market dynamics and reforms.

R

esearch is often provided by these players to support a capital raising or corporate action with which the broker or investment bank is involved. It is often the interest of these parties to

46 Planet MicroCap Review

provide a positive outcome for the company in question. To address this there have been a number of reforms introduced to reduce the risks surrounding conflicts of interest, including strengthening disclo-

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sure that analysts and firms must make regarding potential conflicts and changes to the ways in which research can be paid for and analysts remunerated.

A large number of small and microcap companies globally are uncovered by brokers and investment banks due to size, liquidity and regulatory risks.

These companies need to find a way to raise their profile within the marketplace and that is where sponsored research coverage comes into play. It is important to differentiate between sponsored research and promotional research. Promotional research is often undertaken by IR firms and does not contain editorial independence. Sponsored research, whilst commissioned by the company is conducted independently by the research house.

There is an element of scepticism regarding the independence of company sponsored research with parties questioning whether the independent provider would express a negative view on a company funding the research report. This scepticism is warranted in the same way that investors should be conscious of the payment and method of payment being received by brokers and investment banks. Investors should pay close attention to the disclosures that firms and analysts make to ensure they are fully aware of any conflicts that may exist regarding the coverage. Further to this, investors should never rely solely on an analyst’s recommendation. Investors should always ensure the investment fits within their goals, time horizon and risk tolerance levels.

While Independent Investment Research (IIR) can’t speak on behalf of other independent research houses, independence is key to our research and to ensure independent research is provided, an upfront fixed fee is charged. No shares in companies have or will ever be taken as compensation for research coverage. Upfront payment ensures that the analyst can provide the research outcome independent of payment for the research (i.e., payment cannot be withheld to ensure a positive outcome for a company). So, what happens in the event of a negative outcome? Given the company is commissioning the research they have the ultimate say as to whether research is published or not. Therefore, in most cases companies with a negative outcome will choose not to publish the report, leaving investors without access to an in-depth analysis.

scepticism regarding price targets and whether they are overly bullish given the company is sponsoring the research. We have found in most cases IIR’s target prices are below that of brokers. Brokers have much more incentive to be overly optimistic regarding target prices given they often have a conflicting interest through trade execution agreements and potentially owning shares in a company.

There are a number of benefits for both companies and investors regarding the use of independent research houses, including: •• Companies that are not covered by brokers and investment banks have the chance to engage research and raise the profile of the company through a range of distribution channels, including Bloomberg, Reuters, FactSet, Capital IQ, etc.

•• Investors get access to in-depth analysis of small and microcap companies.

•• Research is independent and unbiased.

•• Research is available to both wholesale and retail investors.

•• Given the company is paying for the research, investors receive access to the research for free.

•• Independent research houses are regulated by ASIC in Australia and the SEC in America with onerous compliance requirements to ensure conflicts of interest are minimised.

Sponsored research can be an important tool for companies and investors. Sponsored research can raise the investor insight into how management operates and separates the company from its peers who do not have research. Sponsored research is content for websites, webinars/webcasts and investor relations with companies able to take advantage of the distribution channels of the sponsored research provider.

Claire has over 15 years’ experience as an analyst specialising in equities and managed investments. Claire commenced her career with the Aegis Group (sold to Morningstar in 2009) as an analyst in 2005 specialising in equities, fixed interest and hybrid research. She also was part of the team that studied listed managed investments and unlisted funds. She has a Bachelor of Commerce with Distinction and a Grad Diploma in Accounting from Deakin University. Claire now supervises all the research outputs across for the firm except for Metals & Mining.

Claire Aitchison Head of Equities & Funds Research Independent Investment Research Melbourne Ph: +61 413 796 022

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

www.PlanetMicroCap.com

Planet MicroCap Review 47

OVERVIEW OF THE PLANET MICROCAP INDEX The MCRI is as pure an index for microcap stocks as can be. We believe the MCRI provides a much more accurate, in-depth, benchmark of the microcap stock universe, with equal weighting given across the board, regardless of size.

M

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

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

WHY MCRI In my experience in the MicroCap space, the idea of “discovery” has been a singular driving force for me. Whether its helping folks discover new MicroCap investing strategies or discover new companies that may not show on their screen.

CRITERIA • U.S. (NYSE/AMEX, NASDAQ, OTCM) or Canada (TSX, TSX Venture, CSE, NEO) • Primary Listing only (meaning, primary symbol dual-listed companies

MICROCAP REVIEW INDEX PLANET Microcap 40 Planet MicroCap ReviewReview Magazine 48 MicroCap

From there, the index comprises the Top 50 companies from each sector based on 90-day share price appreciation. At most, MCRI will consist of 550 constituents, all equally weighted. While you may expect most, if not all, the Top 30 for each sector will have positive share price appreciation for the quarter, but that’s not always the case, and in my opinion what makes MCRI the purest index for MicroCaps.

MICROCAP REVIEW INDEX PLANET Microcap www.SNN.Network www.PlanetMicroCap.com

Q1 2023 Key Data Points

GENERAL CRITERIA

Select Data Points

• U.S. (NYSE/AMEX, Nasdaq, OTCM) or Canada (TSX, TSX Venture, CSE, NEO)

Active Constituents:

519

• Primary Listing Only

Total Market Cap:

$66.47B

• Average Daily Trading Value of $25,000 or more in the preceding 3 months

Average Market Cap:

$128.07M

Median Market Cap:

$115.65M

• All public companies between $10 and $300 million in market capitalization • File a 10Q Or 10K in the preceding quarter • The index comprses the Top 50 companies from each sector based on share price appreciation

Average Performance By Sector

- As of rebalance date January 3, 2023 - Final inclusion determination is affected by available information as per our calculation agent - No compensation is paid or will be accepted for inclusion in the MicroCap Review Index

PLANET Microcap INDEX www.PlanetMicroCap.com

PLANET Microcap INDEX Planet MicroCap Review 49

PLANET Microcap INDEX Q1 2023 Constituent List

PLANET Microcap INDEX AACG AAG:CA AAIC AAMC ACER ACOR ACR ACT:CNX ACU ADN ADW.A:CA

ATA Creativity Global

ANPC

Aftermath Silver Ltd.

AOUT

Arlington Asset Investment Corp Class A (new)

APCX

Altisource Asset Management Corp Com

APDN

Acer Therapeutics Inc.

APEI

Acorda Therapeutics Inc.

APM:CA

ACRES Commercial Realty Corp.

AQB

Aduro Clean Technologies Inc.

AQMS

Acme United Corporation.

ARAV

Advent Technologies Holdings Inc.

ARC

Andrew Peller Limited/Andrew Peller Limitee Class A Non-voting Shares

AREN

Consumer Defensive Basic Materials Real Estate

Financial Services Healthcare Healthcare

Real Estate Industrials

Consumer Defensive Utilities

Consumer Defensive

ADZN:CA AE AE:CA AENZ AEP:CA AGRI AGX:CA AIRT AJX AKBA AKT.A:CA ALCO ALV:CA AMAM

PLANET Microcap INDEX

Adventus Mining Corporation

Basic Materials

Adams Resources & Energy Inc.

Energy

American Eagle Gold Corp.

Basic Materials

Aenza S.A.A. American Depositary Shares

Industrials

Atlas Engineered Products Ltd.

Industrials

AgriFORCE Growing Systems Ltd.

Consumer Defensive

Silver X Mining Corp.

Basic Materials

Air T Inc.

Industrials

Great Ajax Corp.

Real Estate

Akebia Therapeutics Inc.

Healthcare

Akita Drilling Ltd. Class A Non-Voting Shares

Energy

Alico Inc.

Consumer Defensive

Alvopetro Energy Ltd.

Energy

Ambrx Biopharma Inc. American Depositary Shares (each representing seven)

Healthcare

ARG:CA ARR:CA ASA ASPS ASRT ASUR AT:CA ATNF ATX:CA AVCR:CA AVTX AXR AZRE BABY:CA BBB:CA

AnPac Bio-Medical Science Co. Ltd.

Healthcare

American Outdoor Brands Inc.

Consumer Cyclical

AppTech Payments Corp.

Technology

Applied DNA Sciences Inc.

Healthcare

American Public Education Inc.

Consumer Defensive

Andean Precious Metals Corp.

Basic Materials

AquaBounty Technologies Inc.

Consumer Defensive

Aqua Metals Inc.

Industrials

Aravive Inc.

Healthcare

ARC Document Solutions Inc.

Industrials

The Arena Group Holdings Inc.

Communication Services

Amerigo Resources Ltd.

Basic Materials

Altius Renewable Royalties Corp.

Utilities

ASA Gold and Precious Metals Limited

Financial Services

Altisource Portfolio Solutions S.A.

Real Estate

Assertio Holdings Inc.

Healthcare

Asure Software Inc

Technology

AcuityAds Holdings Inc.

Communication Services

180 Life Sciences Corp.

Healthcare

ATEX Resources Inc.

Basic Materials

Avricore Health Inc.

Healthcare

Avalo Therapeutics Inc.

Healthcare

AMREP Corporation

Real Estate

Azure Power Global Limited Equity Shares

Utilities

Else Nutrition Holdings Inc.

Consumer Defensive

Brixton Metals Corporation

Basic Materials

Note: As of rebalance date January 3, 2023, please see Planet MicroCap’s criteria for inclusion in the Planet MicroCap Index on Pages 48 & 49

50 Planet MicroCap Review

www.PlanetMicroCap.com

PLANET Microcap INDEX Q1 2023 Constituent List

PLANET Microcap INDEX BDI:CA BDSX BEEM BGI BGSF BHM BHR BIG:CA BIVI BKTI BLZE BNE:CA BRAG:CA BRE:CA BRID BRN BRW:CA BSET BSVN BTB BU:CA BWMN BYRN BYSI CAAS CABA

PLANET Microcap INDEX

Black Diamond Group Limited

CAKE:CNX

Biodesix Inc.

CALB

Beam Global

CCLP

Birks Group Inc.

CCRD

BGSF Inc.

CDZI

Bluerock Homes Trust Inc. Class A

CET:CA

Braemar Hotels & Resorts Inc.

CHCI

Hercules Silver Corp.

CHMI

BioVie Inc.

CIDM

BK Technologies Corporation

CIX

Backblaze Inc.

CJJD

Bonterra Energy Corp.

CLEU

Bragg Gaming Group Inc.

CLPR

Bridgemarq Real Estate Services Inc. Restricted Voting Shares

CLRO

Bridgford Foods Corporation

CLWT

Barnwell Industries Inc.

CMB:CA

Brunswick Exploration Inc.

CMCM

Industrials

Healthcare

Technology Consumer Cyclical Industrials Real Estate Real Estate

Basic Materials Healthcare Technology Technology Energy

Communication Services Real Estate

Consumer Defensive Energy

Basic Materials

Bank7 Corp.

Financial Services

Bit Brother Limited

Consumer Cyclical

Burcon Nutrascience Corporation

Consumer Defensive

Bowman Consulting Group Ltd.

Industrials

Byrna Technologies Inc.

Industrials

BeyondSpring Inc.

CMCT CMLS CNC:CA CNTY CODA COE

Healthcare

China Automotive Systems Inc.

Consumer Cyclical

Cabaletta Bio Inc.

Healthcare

California BanCorp

Financial Services

CSI Compressco LP

Energy

CoreCard Corporation

Technology

Cadiz Inc.

Utilities

Cathedral Energy Services Ltd.

Energy

Comstock Holding Companies Inc.

Real Estate

Cherry Hill Mortgage Investment Corporation

Real Estate

Cinedigm Corp

Communication Services

CompX International Inc.

Industrials

China Jo-Jo Drugstores Inc.

Healthcare

China Liberal Education Holdings Limited

Consumer Defensive

Clipper Realty Inc.

Real Estate

ClearOne Inc.

Technology

Euro Tech Holdings Company Limited

Industrials

CMC Metals Ltd.

Basic Materials

Cheetah Mobile Inc. American Depositary Shares each representing fifty (50) Class A

Communication Services

Bassett Furniture Industries Incorporated

Consumer Cyclical

Radio Fuels Energy Corp.

Energy

Creative Media & Community Trust Corporation

Real Estate

Cumulus Media Inc.

Communication Services

Canada Nickel Company Inc.

Basic Materials

Century Casinos Inc.

Consumer Cyclical

Coda Octopus Group Inc.

Industrials

51Talk Online Education Group American depositary shares each representing 60 Class A

Consumer Defensive

COFS CORE:CA

ChoiceOne Financial Services Inc.

Financial Services

Paycore Minerals Inc.

Basic Materials

Note: As of rebalance date January 3, 2023, please see Planet MicroCap’s criteria for inclusion in the Planet MicroCap Index on Pages 48 & 49

www.PlanetMicroCap.com

Planet MicroCap Review 51

PLANET Microcap INDEX Q1 2023 Constituent List

PLANET Microcap INDEX CORR CPHC CPS CPSS CRMD CSPI CTIB CTRN CURI CVCY CVGI CVLY CVR CWC:CA CWCO CXDO DAIO DALN DC.A:CA DCM:CA DE:CA DII.B:CA DIT DME:CA DOMA DPSI DRCT

PLANET Microcap INDEX

CorEnergy Infrastructure Trust Inc.

DRR.U:CA

Canterbury Park Holding Corporation

DRT:CA

Cooper-Standard Holdings Inc.

DTEA

Consumer Portfolio Services Inc.

DV:CA

CorMedix Inc.

EARN

CSP Inc.

EDRY

Yunhong CTI Ltd.

EDSA

Citi Trends Inc.

EDUC

CuriosityStream Inc.

EEIQ

Central Valley Community Bancorp

EEX

Commercial Vehicle Group Inc.

EGAN

Codorus Valley Bancorp Inc

EHTH

Chicago Rivet & Machine Co.

ELTK

CWC Energy Services Corp.

EMAN

Consolidated Water Co. Ltd.

EML

Crexendo Inc.

EMPR:CA

Data I/O Corporation

ENSV

DallasNews Corporation

EPF:CA

Dundee Corporation Class A Subordinate Voting Shares

EPM

Data Communications Management Corp

EPRX:CA

Decisive Dividend Corporation

EPSN

Dorel Industries Inc. Class B Subordinate Voting Shares

EQTY:CA

AMCON Distributing Company

ESN:CA

Desert Mountain Energy Corp.

EVGN:CA

Doma Holdings Inc.

FARM

DecisionPoint Systems Inc.

FCCO

Direct Digital Holdings Inc.

FDBC

Real Estate

Consumer Cyclical Consumer Cyclical Financial Services Healthcare

Technology Consumer Cyclical Consumer Cyclical Communication Services Financial Services

Consumer Cyclical Financial Services Industrials Energy

Utilities

Communication Services Technology

Communication Services Consumer Defensive Industrials Industrials

Consumer Cyclical

Consumer Defensive Energy

Real Estate

Technology

Communication Services

Dream Residential Real Estate Investment Trust

Real Estate

DIRTT Environmental Solutions Ltd.

Industrials

DAVIDsTEA Inc.

Consumer Defensive

Dolly Varden Silver Corporation

Basic Materials

Ellington Residential Mortgage REIT of Beneficial Interest

Real Estate

EuroDry Ltd.

Industrials

Edesa Biotech Inc.

Healthcare

Educational Development Corporation

Communication Services

EpicQuest Education Group International Limited

Consumer Defensive

Emerald Holding Inc.

Communication Services

eGain Corporation

Technology

eHealth Inc.

Financial Services

Eltek Ltd.

Technology

eMagin Corporation

Technology

Eastern Company (The)

Industrials

Empress Royalty Corp.

Basic Materials

Enservco Corporation

Energy

Everyday People Financial Corp.

Financial Services

Evolution Petroleum Corporation Inc.

Energy

Eupraxia Pharmaceuticals Inc.

Healthcare

Epsilon Energy Ltd.

Energy

Equity Metals Corporation

Basic Materials

Essential Energy Services Ltd.

Energy

Evergen Infrastructure Corp.

Utilities

Farmer Brothers Company

Consumer Defensive

First Community Corporation

Financial Services

Fidelity D & D Bancorp Inc.

Financial Services

Note: As of rebalance date January 3, 2023, please see Planet MicroCap’s criteria for inclusion in the Planet MicroCap Index on Pages 48 & 49

52 Planet MicroCap Review

www.PlanetMicroCap.com

PLANET Microcap INDEX Q1 2023 Constituent List

PLANET Microcap INDEX FEIM FET FGH FHYD:CA FIP FKWL FLL FLNT FLUX FNGR FO:CA FOSL FPH FRAF FRD FREE FREQ FRGI FSBW FSI FSP FTG:CA FTHM FTK FUNC FUU:CA FWZ:CA

PLANET Microcap INDEX

Frequency Electronics Inc.

GASX:CA

Forum Energy Technologies Inc.

GATO

FG Group Holdings Inc.

GCI

First Hydrogen Corp.

GEHI

Technology Energy

Consumer Cyclical Consumer Cyclical

Franklin Wireless Corp.

Technology

Full House Resorts Inc.

Consumer Cyclical

Fluent Inc.

Communication Services

Flux Power Holdings, Inc.

Industrials

FingerMotion Inc.

Communication Services

Falcon Oil & Gas Ltd.

Energy

Fossil Group Inc.

Consumer Cyclical

Five Point Holdings LLC Class A

Real Estate

Franklin Financial Services Corporation

Financial Services

Friedman Industries Inc.

Basic Materials

Whole Earth Brands Inc.

Consumer Defensive

Frequency Therapeutics Inc.

Healthcare

Fiesta Restaurant Group Inc.

Consumer Cyclical

FS Bancorp Inc.

Financial Services

Flexible Solutions International Inc. (CDA)

Basic Materials

Franklin Street Properties Corp.

Real Estate

Firan Technology Group Corporation

Industrials

Fathom Holdings Inc.

Real Estate

Flotek Industries Inc.

Energy

First United Corporation

Financial Services

Fission 3.0 Corp.

Energy

Fireweed Metals Corp.

Gatos Silver Inc.

Basic Materials

Gannett Co. Inc.

Communication Services

Gravitas Education Holdings Inc. American depositary shares each representing twenty Class A

Consumer Defensive

FTAI Infrastructure Inc.

Industrials

NG Energy International Corp.

Energy

GENC GGE GHL GIFI GIGM GIP:CA GIPR GLMD GLSI GLYC GMGI GMNG:CNX GNE GNSS GNUS GOCO GPMT GRPN GRVY GRWG GSQ:CNX GXE:CA

Gencor Industries Inc.

Industrials

Green Giant Inc.

Real Estate

Greenhill & Co. Inc.

Financial Services

Gulf Island Fabrication Inc.

Industrials

GigaMedia Limited

Communication Services

Green Impact Partners Inc.

Utilities

Generation Income Properties Inc.

Real Estate

Galmed Pharmaceuticals Ltd.

Healthcare

Greenwich LifeSciences Inc.

Healthcare

GlycoMimetics Inc.

Healthcare

Golden Matrix Group Inc.

Communication Services

Gamelancer Media Corp.

Communication Services

Genie Energy Ltd. Class B Stock

Utilities

Genasys Inc.

Technology

Genius Brands International Inc.

Communication Services

GoHealth Inc.

Financial Services

Granite Point Mortgage Trust Inc.

Real Estate

Groupon Inc.

Communication Services

GRAVITY Co. Ltd.

Communication Services

GrowGeneration Corp.

Consumer Cyclical

Gamesquare Esports Inc.

Communication Services

Gear Energy Ltd.

Energy

Basic Materials

Note: As of rebalance date January 3, 2023, please see Planet MicroCap’s criteria for inclusion in the Planet MicroCap Index on Pages 48 & 49

www.PlanetMicroCap.com

Planet MicroCap Review 53

PLANET Microcap INDEX Q1 2023 Constituent List

PLANET Microcap INDEX HAPP HBB HEO:CA HFFG HGBL HHS HLGN HOFT HOT.UN:CA HOV HPS.A:CA HQI HTIA HTOO HUIZ HURC HUSA HWO:CA ICD ICLK IH IMMR IMMX INO.UN:CA INTT IPDN IPHA

PLANET Microcap INDEX

Happiness Development Group Limited

IPO:CA

Hamilton Beach Brands Holding Company Class A

ISDR

H2O Innovation Inc.

ISIG

HF Foods Group Inc.

IVAC

Heritage Global Inc.

JFIN

Harte-Hanks, Inc.

JILL

Heliogen Inc.

KA

Hooker Furnishings Corporation

KAVL

American Hotel Income Properties REIT LP

KDK:CA

Hovnanian Enterprises Inc. Class A

KEI:CA

Hammond Power Solutions Inc. Class A Subordinate Voting Shares

KFS

HireQuest, Inc.

KIRK

Healthcare Trust Inc.

KLXE

Fusion Fuel Green PLC

KNDI

Huize Holding Ltd - ADR

KOPN

Hurco Companies Inc.

KPT:CA

Houston American Energy Corporation

KRKR

High Arctic Energy Services Inc.

KRMD

Independence Contract Drilling Inc.

KTN:CA

iClick Interactive Asia Group Limited

KUKE

Consumer Defensive Consumer Cyclical Utilities

Consumer Defensive Financial Services

Communication Services Utilities

Consumer Cyclical Real Estate

Consumer Cyclical Industrials Industrials

Real Estate Utilities

Financial Services Industrials Energy Energy Energy

Communication Services

Immersion Corporation

Technology

Immix Biopharma Inc.

Healthcare

Inovalis Real Estate Investment Trust

Real Estate

inTest Corporation

Technology

Professional Diversity Network Inc.

Industrials

Innate Pharma S.A.

Issuer Direct Corporation

Technology

Insignia Systems Inc.

Communication Services

Intevac Inc.

Industrials

Jiayin Group Inc.

Communication Services

J. Jill Inc.

Consumer Cyclical

Kineta Inc.

Healthcare

Kaival Brands Innovations Group Inc.

Consumer Defensive

Kodiak Copper Corp.

Basic Materials

Kolibri Global Energy Inc.

Energy

Kingsway Financial Services Inc. (DE)

Consumer Cyclical

Kirkland’s Inc.

Consumer Cyclical

KLX Energy Services Holdings Inc.

Energy

Kandi Technologies Group Inc.

Consumer Cyclical

Kopin Corporation

Technology

KP Tissue Inc.

Consumer Defensive

36Kr Holdings Inc.

Communication Services

KORU Medical Systems Inc.

Healthcare

Kootenay Silver Inc.

Basic Materials

Kuke Music Holding Limited American Depositary Shares each representing one

Communication Services

iHuman Inc. American depositary shares each representing five Class A

Consumer Defensive

InPlay Oil Corp.

Energy

LAKE LCNB LCUT LDI LFT LFVN

Lakeland Industries Inc.

Consumer Cyclical

LCNB Corporation

Financial Services

Lifetime Brands Inc.

Consumer Cyclical

loanDepot Inc. Class A

Financial Services

Lument Finance Trust Inc.

Real Estate

Lifevantage Corporation

Consumer Defensive

Healthcare

Note: As of rebalance date January 3, 2023, please see Planet MicroCap’s criteria for inclusion in the Planet MicroCap Index on Pages 48 & 49

54 Planet MicroCap Review

www.PlanetMicroCap.com

PLANET Microcap INDEX Q1 2023 Constituent List

PLANET Microcap INDEX LGD:CA LINC LITB

Liberty Gold Corp.

MDWD

Lincoln Educational Services Corporation

MEC

LightInTheBox Holding Co. Ltd. American Depositary Shares each representing 2

MFH

Basic Materials

Consumer Defensive

Consumer Cyclical

LIVE LIZI LMB LMNR LNKB LOAN LRFC LSAK LSEA LUNA LVO LWAY LYLT MACK MARK MAW:CA MAXX:CNX MAYS MCHX MDF:CA MDP:CA MDRR MDV

PLANET Microcap INDEX

Live Ventures Incorporated

Consumer Cyclical

LIZHI INC.

Communication Services

Limbach Holdings Inc.

Industrials

Limoneira Co

Consumer Defensive

LINKBANCORP Inc.

Financial Services

Manhattan Bridge Capital Inc

Real Estate

Logan Ridge Finance Corporation

Financial Services

Lesaka Technologies Inc.

Technology

Landsea Homes Corporation

Real Estate

Luna Innovations Incorporated

Technology

LiveOne Inc.

Communication Services

Lifeway Foods Inc.

Consumer Defensive

Loyalty Ventures Inc.

Technology

Merrimack Pharmaceuticals Inc.

Healthcare

Remark Holdings Inc.

Technology

Mawson Gold Limited

Basic Materials

Max Power Mining Corp.

Basic Materials

J. W. Mays Inc.

Real Estate

Marchex Inc.

Communication Services

mdf commerce inc.

Communication Services

Medexus Pharmaceuticals Inc.

Healthcare

MICT MITT MLP MMMB MND:CA MNPR MNSB MR.UN:CA MRCC MTEX MTRX MUR:CA MUX MXG:CA NAII NATR NBVA:CA NCRA NCSM NDLS NECB NEN

Medalist Diversified REIT Inc.

Real Estate

Modiv Inc. Class C

Real Estate

MediWound Ltd.

Healthcare

Mayville Engineering Company Inc.

Industrials

Mercurity Fintech Holding Inc.

Financial Services

MICT Inc.

Technology

AG Mortgage Investment Trust Inc.

Real Estate

Maui Land & Pineapple Company Inc.

Real Estate

MamaMancini’s Holdings Inc.

Consumer Defensive

Mandalay Resources Corporation

Basic Materials

Monopar Therapeutics Inc.

Healthcare

MainStreet Bancshares Inc.

Financial Services

Melcor Real Estate Investment Trust

Real Estate

Monroe Capital Corporation

Financial Services

Mannatech Incorporated

Consumer Defensive

Matrix Service Company

Industrials

Murchison Minerals Ltd.

Basic Materials

McEwen Mining Inc.

Basic Materials

Maxim Power Corp.

Utilities

Natural Alternatives International Inc.

Consumer Defensive

Nature’s Sunshine Products Inc.

Consumer Defensive

Nubeva Technologies Ltd.

Technology

Nocera Inc.

Consumer Defensive

NCS Multistage Holdings Inc.

Energy

Noodles & Company

Consumer Cyclical

NorthEast Community Bancorp Inc.

Financial Services

New England Realty Associates Limited Partnership Class A Depositary Receipts Evidencing Units of Limited Partnership Real Estate

NEON

Neonode Inc.

Technology

Note: As of rebalance date January 3, 2023, please see Planet MicroCap’s criteria for inclusion in the Planet MicroCap Index on Pages 48 & 49

www.PlanetMicroCap.com

Planet MicroCap Review 55

PLANET Microcap INDEX Q1 2023 Constituent List

PLANET Microcap INDEX NET.UN:CA NFLD:CNX NGS NGVC NICU:CA NILI:CA NKSH NLSP NOVC:CA NREF NRXP NTZ NWFL OB OBT OCG:CA OCN OCUP ODC OESX OFS OGO:CA OMEX OPAL OPRT ORC.B:CA ORIC

PLANET Microcap INDEX

Canadian Net Real Estate Investment Trus

OSG

Exploits Discovery

OSI:CA

Natural Gas Services Group Inc.

OTMO

Natural Grocers by Vitamin Cottage Inc.

OVLY

Magna Mining Inc.

PANL

Surge Battery Metals Inc.

PBFS

National Bankshares Inc.

PBIT:CNX

NLS Pharmaceutics Ltd.

PBPB

Nova Cannabis Inc.

PBYI

NexPoint Real Estate Finance Inc - Ordinary Shares

PCYO

NRX Pharmaceuticals Inc.

PEA:CA

Natuzzi S.p.A.

PEBK

Norwood Financial Corp.

PED

Outbrain Inc.

PEGY

Orange County Bancorp Inc

PEI:CA

Outcrop Silver & Gold Corporation

PET

Ocwen Financial Corporation

PFIE

Ocuphire Pharma Inc.

PFMT

Oil-Dri Corporation Of America

PFSW

Orion Energy Systems Inc.

PHX

OFS Capital Corporation

PIF:CA

Organto Foods Inc.

PINE

Odyssey Marine Exploration Inc.

PIXY

OPAL Fuels Inc.

PKE

Oportun Financial Corporation

PKT:CA

Orca Energy Group Inc.

PLBC

Oric Pharmaceuticals Inc.

PNG:CA

Real Estate

Basic Materials Energy

Consumer Defensive Basic Materials Basic Materials

Financial Services Healthcare Healthcare

Real Estate Healthcare

Consumer Cyclical Financial Services

Communication Services Financial Services Basic Materials

Financial Services Healthcare

Basic Materials Industrials

Financial Services

Consumer Defensive Industrials Utilities

Financial Services Energy

Healthcare

Overseas Shipholding Group Inc. Class A

Energy

Osino Resources Corp.

Basic Materials

Otonomo Technologies Ltd.

Technology

Oak Valley Bancorp (CA)

Financial Services

Pangaea Logistics Solutions Ltd.

Industrials

Pioneer Bancorp Inc.

Financial Services

POSaBIT Systems Corp - Ordinary Shares

Technology

Potbelly Corporation

Consumer Cyclical

Puma Biotechnology Inc

Healthcare

Pure Cycle Corporation

Utilities

Pieridae Energy Limited

Energy

Peoples Bancorp of North Carolina Inc.

Financial Services

Pedevco Corp.

Energy

Pineapple Energy Inc.

Technology

Prospera Energy Inc.

Energy

Wag! Group Co.

Technology

Profire Energy Inc.

Energy

Performant Financial Corporation

Industrials

PFSweb Inc.

Industrials

PHX Minerals Inc.

Energy

Polaris Renewable Energy Inc.

Utilities

Alpine Income Property Trust Inc.

Real Estate

ShiftPixy Inc.

Industrials

Park Aerospace Corp.

Industrials

Parkit Enterprise Inc.

Real Estate

Plumas Bancorp

Financial Services

Kraken Robotics Inc.

Technology

Note: As of rebalance date January 3, 2023, please see Planet MicroCap’s criteria for inclusion in the Planet MicroCap Index on Pages 48 & 49

56 Planet MicroCap Review

www.PlanetMicroCap.com

PLANET Microcap INDEX Q1 2023 Constituent List

PLANET Microcap INDEX PNRG POL PPTA:CA PRIZ:CNX PRME:CNX PRQR PRYM:CA PSTL PWM:CA PWOD PXS QTWO:CA QUAD QUIS:CA RAIN RAVE RCKY RDCM RDI REFI REKR RELL RENT RET.A:CA REVO:CA RGCO RGF

PLANET Microcap INDEX

PrimeEnergy Resources Corporation

RGS

Polished Inc.

RMCF

Perpetua Resources Corp.

RNGR

Prismo Metals Inc.

RNLX

Prime Drink Group Corp Com

ROK:CA

ProQR Therapeutics N.V.

ROOF:CA

Prime Mining Corp.

RSMX:CA

Postal Realty Trust Inc. Class A

RVPH

Power Metals Corp.

RVSB

Penns Woods Bancorp Inc.

RVSN

Pyxis Tankers Inc.

S:CA

Q2 Metals Corp.

SACH

Quad Graphics Inc Class A

SAMG

Quisitive Technology Solutions Inc.

SANW

Rain Oncology Inc.

SCOT:CA

Rave Restaurant Group Inc.

SCPE:CNX

Rocky Brands Inc.

SDI:CA

Radcom Ltd.

SDPI

Reading International Inc

SELF

Chicago Atlantic Real Estate Finance Inc.

SEVN

Rekor Systems Inc.

SGA

Richardson Electronics Ltd.

SGC

Rent the Runway Inc.

SILC

Reitmans (Canada) Limited

SIOX

RevoluGROUP Canada Inc.

SJ

RGC Resources Inc.

SKIL

The Real Good Food Company Inc.

SMHI

Energy

Consumer Cyclical Basic Materials Basic Materials Utilities

Healthcare

Basic Materials Real Estate

Basic Materials

Financial Services Industrials

Basic Materials Industrials

Technology Healthcare

Consumer Cyclical Consumer Cyclical

Communication Services Communication Services Real Estate

Technology Technology

Consumer Cyclical Consumer Cyclical Technology Utilities

Consumer Defensive

Regis Corporation

Consumer Cyclical

Rocky Mountain Chocolate Factory Inc.

Consumer Defensive

Ranger Energy Services Inc. Class A

Energy

Renalytix plc

Healthcare

ROK Resources Inc.

Energy

Northstar Clean Technologies Inc.

Industrials

Regency Silver Corp.

Basic Materials

Reviva Pharmaceuticals Holdings Inc.

Healthcare

Riverview Bancorp Inc

Financial Services

Rail Vision Ltd.

Industrials

Sherritt International Corporation

Basic Materials

Sachem Capital Corp.

Real Estate

Silvercrest Asset Management Group Inc.

Financial Services

S&W Seed Company

Consumer Defensive

Scottie Resources Corp.

Basic Materials

Scope Carbon Corp.

Technology

Stampede Drilling Inc.

Energy

Superior Drilling Products Inc.

Energy

Global Self Storage Inc.

Real Estate

Seven Hills Realty Trust

Real Estate

Saga Communications Inc.

Communication Services

Superior Group of Companies Inc.

Consumer Cyclical

Silicom Ltd

Technology

Sio Gene Therapies Inc.

Healthcare

Scienjoy Holding Corporation

Communication Services

Skillsoft Corp. Class A

Consumer Defensive

SEACOR Marine Holdings Inc.

Industrials

Note: As of rebalance date January 3, 2023, please see Planet MicroCap’s criteria for inclusion in the Planet MicroCap Index on Pages 48 & 49

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Planet MicroCap Review 57

PLANET Microcap INDEX Q1 2023 Constituent List

PLANET Microcap INDEX SMLP

Summit Midstream Partners LP Representing Limited Partner Interests

Energy

SNAX SND SNFCA SOHO SOIL:CA SONX SOU:CA SQFT SRAX SRR:CA SRT SSVR:CA STBX STCN STG

Stryve Foods Inc.

Consumer Defensive

Smart Sand Inc.

Energy

Security National Financial Corporation Class A Common Stock

Financial Services

Sotherly Hotels Inc.

Real Estate

Saturn Oil & Gas Inc.

Energy

Sonendo Inc.

Healthcare

Southern Energy Corp.

Energy

Presidio Property Trust Inc.

Real Estate

SRAX Inc

Communication Services

Source Rock Royalties Ltd.

Energy

StarTek Inc.

Technology

Summa Silver Corp.

Basic Materials

Starbox Group Holdings Ltd.

Communication Services

Steel Connect Inc.

Communication Services

PLANET Microcap INDEX TACT TAO:CA TAYD TBLT TBNK TBRD:CA TCBX TCF:CNX TCMD TEA:CA TECT:CA TEDU TESS TGO:CA THRN TKLF

Sunlands Technology Group American Depositary Shares representing Class A

TKNO

Neuronetics Inc.

TLF

Stratus Properties Inc.

TLYS

Superior Industries International Inc. (DE)

TNZ:CA

Grupo Supervielle S.A. American Depositary Shares each Representing five Class B shares

TOUR

Consumer Defensive

STIM STRS SUP SUPV

Healthcare

Real Estate

Consumer Cyclical

Financial Services

SURG SWAG SXP:CA SY SYPR

SurgePays Inc.

Technology

Stran & Company Inc.

Communication Services

Supremex Inc.

Consumer Cyclical

So-Young International Inc.

Healthcare

Sypris Solutions Inc.

Consumer Cyclical

TROO TSBK TSQ TTSH TZOO UCL

TransAct Technologies Incorporated

Technology

TAG Oil Ltd.

Energy

Taylor Devices Inc.

Industrials

ToughBuilt Industries Inc.

Industrials

Territorial Bancorp Inc.

Financial Services

Thunderbird Entertainment Group Inc.

Communication Services

Third Coast Bancshares Inc.

Financial Services

Trillion Energy International Inc - Ordinary Shares

Energy

Tactile Systems Technology Inc.

Healthcare

Tearlach Resources Limited

Basic Materials

Tectonic Metals Inc.

Basic Materials

Tarena International Inc.

Consumer Defensive

TESSCO Technologies Incorporated

Technology

TeraGo Inc.

Communication Services

Thorne Healthtech Inc.

Consumer Defensive

Yoshitsu Co. Ltd

Consumer Defensive

Alpha Teknova Inc.

Healthcare

Tandy Leather Factory Inc

Consumer Cyclical

Tilly’s Inc.

Consumer Cyclical

Tenaz Energy Corp.

Energy

Tuniu Corporation

Consumer Cyclical

TROOPS Inc.

Technology

Timberland Bancorp Inc.

Financial Services

Townsquare Media Inc. Class A

Communication Services

Tile Shop Holdings Inc.

Consumer Cyclical

Travelzoo Communication Services uCloudlink Group Inc. Communication Services

Note: As of rebalance date January 3, 2023, please see Planet MicroCap’s criteria for inclusion in the Planet MicroCap Index on Pages 48 & 49

58 Planet MicroCap Review

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PLANET Microcap INDEX Q1 2023 Constituent List

PLANET Microcap INDEX UG UGE:CA UIHC UONE UPC UPXI USEA USIO UTI VAPO VATE VIA VISL VLE:CA VLI:CA VNCE VNP:CA VNRX VRA VWE WAM:CA WAVE WEB:CA WFCF WHG WHLR WILC

PLANET Microcap INDEX

United-Guardian Inc.

WLDN

UGE International Ltd.

WMC

United Insurance Holdings Corp.

WML:CA

Urban One Inc.

WNEB

Universe Pharmaceuticals Inc

WTT

Upexi Inc.

XIN

United Maritime Corporation

XNET

Usio Inc.

XPON

Universal Technical Institute Inc

XTRA:CA

Vapotherm Inc.

XYF

INNOVATE Corp.

Y:CA

Via Renewables Inc.

YGR:CA

Vislink Technologies Inc.

YOSH

Valeura Energy Inc.

YQ

Vision Lithium Inc.

YRD

Vince Holding Corp.

YTRA

5N Plus Inc.

ZAC:CA

VolitionRX Limited

ZVIA

Consumer Defensive Technology

Financial Services

Communication Services Healthcare

Communication Services Industrials

Technology Consumer Defensive Healthcare Industrials Utilities

Technology Energy

Basic Materials

Consumer Cyclical Basic Materials Healthcare

Willdan Group Inc.

Industrials

Western Asset Mortgage Capital Corporation

Real Estate

Wealth Minerals Ltd.

Basic Materials

Western New England Bancorp Inc.

Financial Services

Wireless Telecom Group Inc.

Technology

Xinyuan Real Estate Co Ltd American Depositary Shares

Real Estate

Xunlei Limited

Technology

Expion360 Inc.

Industrials

Xtract One Technologies Inc.

Technology

X Financial American Depositary Shares each representing six Class A

Financial Services

Yellow Pages Limited

Communication Services

Yangarra Resources Ltd.

Energy

Yoshiharu Global Co.

Consumer Cyclical

17 Education & Technology Group Inc.

Consumer Defensive

Yiren Digital Ltd. American Depositary Shares each representing two

Financial Services

Yatra Online Inc.

Consumer Cyclical

Zacatecas Silver Corp.

Basic Materials

Zevia PBC Class A

Consumer Defensive

Vera Bradley Inc.

Consumer Cyclical

Vintage Wine Estates Inc.

Consumer Defensive

Western Alaska Minerals Corp.

Basic Materials

Eco Wave Power Global AB (publ)

Utilities

Westbridge Renewable Energy Corp.

Utilities

Where Food Comes From Inc.

Technology

Westwood Holdings Group Inc

Financial Services

Wheeler Real Estate Investment Trust Inc.

Real Estate

G. Willi-Food International Ltd.

Consumer Defensive

Note: As of rebalance date January 3, 2023, please see Planet MicroCap’s criteria for inclusion in the Planet MicroCap Index on Pages 48 & 49

www.PlanetMicroCap.com

Planet MicroCap Review 59

Tingo Group, Inc. (NASDAQ: TIO)

Q&A with Darren Mercer CEO of Tingo Group, Inc.

Let’s start with a quick overview of the business.

In November 2022, Tingo Group, Inc. (NASDAQ: TIO), formerly MICT, acquired 100% of Tingo Mobile Limited which is the leading Agri-Fintech company operating in Africa, with a comprehensive portfolio of innovative products, including a ‘device as a service’ smartphone and pre-loaded platform product.

As part of its globalization strategy, Tingo Mobile has recently begun to expand internationally and entered into trade partnerships that are contracted to increase the number of subscribed farmers from 9.3 million in 2022 to more than 32 million, providing them with access to services including, among others, the Nwassa ‘seed-to-sale’ marketplace platform, insurance, micro-finance, and mobile phone and data top-up. Other Tingo business verticals include: TingoPay, a SuperApp in partnership with Visa that offers a wide range of B2C and B2B services including payment services, an e-wallet, foreign exchange and merchant services; Tingo Foods, a food processing business that processes raw foods into finished products; and Tingo DMCC, a commodity trading platform and agricultural commodities export business based out of the Dubai Multi Commodities Center.

Tingo Group is a financial technology business principally focused on the growth and development of a suite of consumer fintech services across approxi-

60 Planet MicroCap Review

mately 130 cities in China, with planned expansion into additional markets. Tingo Group has developed highly scalable proprietary platforms for insurance products (B2B, B2B2C and B2C) and financial services/products (B2C), the technology for which is adaptable for other applications and markets.

Tingo Group has acquired and holds the requisite license and approvals to deal in securities and provide securities advisory and asset management services. Tingo Group’s financial services business and first financial services product, the Magpie Invest app, can trade securities on the Nasdaq, NYSE, TMX, HKSE, China Stock Connect, LSE, Frankfurt Stock Exchange and Paris Stock Exchange.

Reflecting on 2022, how would you describe the company’s performance in the previous year? Did the company reach the milestones and goals that you set for the company?

2022 was a year of transition and transformation, and we are proud of what we achieved.

We navigated our fintech and insurance businesses in China and Hong Kong through the significant challenges created by the widespread and stringent Covid related lockdown measures and restrictions.

Our insurance business revenue in Q3 2022 grew 15% quarter over quarter, from $12.0 million to $13.8 million, and achieved our highest ever reported

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gross margin of 23%. We began to pivot our financial services business towards a “platform-as-a-service” model and prepare it for expansion into payment services and foreign exchange brokerage, including through successful application for a Capital Markets Service License from the Monetary Authority of Singapore.

In addition, we completed the acquisition of a significantly larger business than our own, namely of Tingo Mobile Limited and its group of highly profitably and fast-growing fintech and agri-fintech businesses.

Tingo’s Q3 2022 results returned an annualized revenue run rate approaching $1.2 billion and a net income before tax run rate approaching $650 million, and we expect to see significant growth in Q4 2022, followed by a substantial improvement in both revenue and net income run rates in 2023. We have also helped Tingo Mobile accelerate its globalization strategy, with expansion into three new countries, and the launches of TingoPay, Tingo Foods and Tingo DMCC. Are there any industry tailwinds to push forward some of the company’s goals and objectives?

Our insurance and financial services fintech businesses in China and Hong Kong are beginning to benefit from the Chinese Government’s recent lifting of the Covid related restrictions. The Chinese economy is expected to grow strongly in 2023 as it recovers from two years of major disruption.

The Tingo Mobile fintech and agri-fintech group of companies we acquired in Q4 2022 are, in the main, currently focused on Africa, where the farming industry is highly dislocated with no real infrastructure to get products to market. The Tingo Mobile range of products, in particular its Nwassa agri-fintech marketplace platform, is proving to be very successful in helping farmers to overcome their challenges.

In addition, Tingo Mobile, Tingo DMCC and Tingo Foods are benefiting from the world’s food supply problems and shortages, as well as from food price inflation. Tingo Mobile is already proving it can make a material difference to increasing crop yields, reducing post-harvest losses, increasing food supply and improving food security.

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In a number of interviews in 2022, a lot of management teams spoke about how 2023 was the “Year of Execution” - ranging from executing the business model to surpassing internally-derived growth goals; what does “executing” mean for you?

As mentioned, 2022, was very much a year of transition, in particular due to our focus between May and October on completing the acquisition of the Tingo Mobile group of companies.

Execution for us means a combination of continuing to grow our longer-standing businesses of insurance and financial services in China and Asia, achieving growth from existing products, launching new products and expanding geographically. In addition, to grow the Tingo Mobile group of companies, which have enormous potential.

For Tingo Mobile, we must execute on the continued growth and geographical expansion of its core products, for example through its recently signed trade partnerships and recent new country launches, and by launching into more countries throughout Africa, Asia and other parts of the world.

It is also important that we execute on the recently launched Tingo DMCC, TingoPay and Tingo Foods businesses. With all these businesses we must continue to strengthen the foundation, while driving revenue, profitability and margins.

What are some of the company’s value catalysts for 2023?

We have an abundance of value catalysts in 2023, including: In our insurance technology business, we are expanding outside of our current B2B agent model, to work with some of China’s largest online and consumer businesses to launch a B2B2C model and a B2C insurance business.

In our financial services business in Hong Kong and Singapore, we are preparing to launch a payment services business and foreign exchange brokerage, which will be offered on a global basis.

For Tingo Mobile, we signed a trade partnership with All Farmers Association of Nigeria, the umbrella

Planet MicroCap Review 61

organization for all the agricultural and commodities cooperates in Nigeria, which is set to triple our current number of customers in the country to approximately 30 million. We have expanded into Ghana, where we signed a trade partnership with the Kingdom of Ashanti to enroll 2 to 4 million new customers, and into Malawi as a gateway to West Africa. Building on this, we plan to launch into other countries in Africa later in the year.

We recently launched our commodities trading platform and export business from the Dubai Multi Commodities Centre, which is expected to generate more than a billion dollars of high margin business in 2023 exporting agricultural produce.

We recently acquired a food processing business, Tingo Foods, to process raw agricultural produce into finished food products such as rice, noodles, pasta and beans initially, expanding into a wider produce range including chocolate, coffee, tea and carbonated beverages.

We also recently launched the TingoPay Super App through a pan-African partnership with Visa, which offering a wide range of value-added services, including a digital Tingo Visa card, e-wallet, utility bill portal, airtime and data top-up, insurances, finance, pensions, travel bookings and retail marketplace.

TingoPay also includes a merchant and business portal, enabling businesses to accept payments easily and securely from customers and manage their finances.

A particularly large value catalyst on the horizon, which was also a major reason for the Tingo Mobile acquisition, is the expansion and rollout of the Tingo Mobile and TingoPay businesses into China through Tingo Group’s infrastructure and connections. China has the largest agricultural sector in the world, and some key similarities to Africa’s agricultural sector. Companies like Pinduoduo (Nasdaq: PDD), with a $115 billion market cap, have only scratched the surface there.

For more information about Tingo Group, Inc., please visit: www.tingogroup.com

DISCLAIMER AND FORWARD-LOOKING STATEMENTS NOTICE: This article is provided as a service of SNN Inc. or an affiliate thereof (collectively “SNN”), and all information presented is for commercial and informational purposes only, is not investment advice, and should not be relied upon for any investment decisions. We are not recommending any securities, nor is this an offer or sale of any security. Neither SNN nor its representatives are licensed brokers, broker-dealers, market makers, investment bankers, investment advisers, analysts, or underwriters registered with the Securities and Exchange Commission (“SEC”) or with any state securities regulatory authority.

SNN provides no assurances as to the accuracy or completeness of the information presented, including information regarding any specific company’s plans, or its ability to effectuate any plan, and possess no actual knowledge of any specific company’s operations, capabilities, intent, resources, or experience. Any opinions expressed in this article are solely attributed to each individual asserting the same and do not reflect the opinion of SNN. Information contained in this presentation may contain “forward-looking statements” as defined under Section 27A of the Securities Act of 1933 and Section 21B of the Securities Exchange Act of 1934. Forward-looking statements are based upon expectations, estimates, and projections at the time the statements are made and involve risks and uncertainties that could cause actual events to differ materially from those anticipated. Therefore, readers are cautioned against placing any undue reliance upon any forwardlooking statement that may be found in this article.

The company profiled has paid consideration to SNN or its affiliates for this article. SNN does not engage in providing advice, making recommendations, issuing reports, or furnishing analyses on any of the companies, securities, strategies, or information presented in this article. SNN recommends you consult a licensed investment adviser, broker, or legal counsel before purchasing or selling any securities referenced in this article. Furthermore, it is encouraged that you invest carefully and consult investment related information available on the websites of the SEC at http://www.sec.gov and the Financial Industry Regulatory Authority (FINRA) at http://finra.org.

62 Planet MicroCap Review

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Public Filing Compliance Dealing with Late SEC Filings

The Securities and Exchange Act of 1934 (“34 Act,” or “Exchange Act”) regulates transactions of securities in the secondary market.

A

s such, the 1934 Act regulates the exchanges on which securities are sold. In general, companies with registered publicly held securities and companies of a certain size are called

64 Planet MicroCap Review

“reporting companies,” meaning that, under the ’34 Act, they must make periodic disclosures by filing annual reports (called a Form 10-K) and quarterly reports (called a Form 10-Q). For non-accelerated

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filers, deadlines for 10-Qs are 45 days from the end of a company’s quarter-end and 10-Ks are 90 days from the end of a company’s year-end. Furthermore, for companies that are not subject to the Exchange Act and whose securities trade on the OTC Markets Group Pink Market (“OTC Market”), federal securities laws require such issuers to still provide current information to the public markets through the OTC Market Group’s website under an Alternative Reporting Standard (“ARS”). The due dates of these filings generally mirror the due date of Exchange Act companies. But, what happens if a filing is late? And how does it get fixed?

Missing Deadlines If a company misses the deadline and is late on its Exchange Act or ARS filing, while the ramifications for national exchange-listed companies has continued to be critical, the leash has also gotten shorter for those companies listed on the OTC Market. While exchange-listed companies are subject to delisting if such late filing is not cured within a specified time period, those companies trading on the OTC Market now also face more severe ramifications required

by FINRA under Rule 15c2-11 for a company’s securities to be eligible for public quotations. Essentially, this rule regulates a company’s ability to trade between buyers and sellers in order to maintain a liquid market. When this is revoked, the company is required to essentially re-apply with FINRA to regain its compliance under Rule 15c2-11, which could take months, thereby stifling shareholder liquidity and value.

The national exchanges, the SEC, FINRA and OTC Markets Group expect that listed firms have accounting teams responsible for reporting. Often smaller companies fail to report on time due to resource issues and, therefore, end up struggling to keep up and risk delisting or losing their public quotations.

Neither a national exchange nor the company wants a delisting, but the company can only keep trading if it has an actionable plan that is facilitated by a team that can execute a solution.

tion and deficiencies in a company’s financial close process, an inability to prepare compliant financials acceptable to a Company’s auditor are common causes for delay. Key executive and finance team departures can also impact filings. If the responsible parties are gone, and there’s still accounting work to be done, the financial statements must be finished.

Regardless of the reason, identifying and addressing the problem is the only path toward getting current.

Also, finalizing the report is not only about completing the financial statements. Especially in the case of 10-Qs and 10-Ks, other financial disclosures have to be completed, including management discussion and analysis and internal control assessments. Typically, getting all the work done needed to complete the report means bringing in third parties to provide specific technical skills to bring order and completeness to the filing process.

After the filing is complete Once the company submits its filing, the immediate crisis may be over, but a full “post-mortem” review is required. Was this a one-time issue or a recurring problem? Systems, people, and resources need to be put into place so that, in the future, the company not only files on time but strives to file early.

When a company fails to rectify the recurring issues that contribute to its late Exchange Act or ARS filings, the risk for continued delinquency or delisting increases exponentially. Delisting shrinks access to capital and the investor base that is able to trade the stock – not to mention credibility. Thankfully, in most situations, avoiding such a devastating result simply requires having the right team in place, a solid plan to deliver against a deadline, and the commitment to get it done.

Neil Reithinger is an experienced CFO and CPA with over 25 years of experience. Prior to forming Eventus Advisory Group in 2009, Neil served in leadership roles in a broad range of industries including life sciences, consumer products, energy services, and manufacturing. Reithinger helps his clients streamline finance and accounting processes; establish and maintain SEC compliance programs; develop capital markets strategies; optimize operations; and spearhead deal due diligence.

Identifying and fixing the problem A company in this predicament needs to get to the bottom of why the filing is late - ASAP. Valuation issues pertaining to a business combination or acquisiNote: This article is not an attempt to provide investment advice. The content is purely the author’s personal opinions and should not be considered advice of any kind. Investors are advised to conduct their own research or seek the advice of a registered investment professional.

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MINING THE METAVERSE: HOW DATA MANAGEMENT HAS EVOLVED The Real World

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The Digital World

The Metadata World

@DatavaultUS

the_datavault

the_datavault

Data Vault Holdings

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// By Andrea Cataneo, Esq.

IPO, De-SPAC or Reverse Merger Who Wins, and Why?

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hat if there was no mystery to accessing the US capital markets, and a private issuer’s going-public strategy hinged only on time and money? For those with both, the traditional underwritten IPO might be the obvious choice. For those with money and limited time, a deSPAC might be the recommended path- and if the issuer has neither the time nor the available funds, a Reverse Merger into a distressed publicly traded company (or other shell) might be best.

While these generalizations are not entirely off base, factors including market conditions, regulatory changes and circumstances of each issuer need to be considered before making such an important move. Also, an issuer would be ill-equipped to face these decisions without examining historical trendsand thankfully, there is plenty of data available to analyze and to digest.

year. In 2022, there were 83 SPAC IPOs on national (U.S.) exchanges raising $13.4 billion in proceeds vs. 613 in 2021 totaling $162.6 billion in proceeds. In 2020, there were 248 SPAC IPOs raising $83 billion.

Quite a contrast. The de-SPAC transactions in 2022 also declined significantly from 2021 and 2020 with 101 de-SPACs in 2022 vs. 199 in 2021. Notably, however, as reported by Bloomberg Law, some very large de-SPACS were completed in 2022, including the $4.5billion Lucid Motors Inc.–Lucid Group Inc. (formerly Churchill Capital Corp. IV) electric vehicle (EV) transaction.

Note that in 2020, there were only 93 de-SPACs as reported by Refinitiv, an LSEG entity. Removing the most unusual stand-out year of 202 once again makes the trend look a lot less dismal. Still, we can surmise and learn from the conditions that influenced the 2021-2022 decline, which include many things that fell outside the scope of anyone’s individual control: increased regulatory scrutiny, inflation, poor performing de-SPAC’d companies immediately post transaction and high redemption activity to name a few.

By now, we have all heard and lamented the extraordinary drop in IPOs from 2021 to 2022 - 1,035 vs.

181 respectively, as reported by many independent sources but here credited to Statista, a portal for market data. If we agree that 2021 was an odd year by most accounts, it may be worth looking back further in time to 2020 before declaring IPOs dead. In 2020, notably, 431 companies went public on national (U.S.) exchanges. Of these, 52 were foreign private issuers (FPIs), 230 were special purpose acquisition companies (SPACs) and 5 were real estate investment trusts (REITs). If we exclude SPACs and REITS from that total so we are comparing apples to apples, that leaves 201 IPOs in 2020- suddenly making 2022’s 181 number look a lot less glum. Yes, those who know me say I may be the poster child of eternal optimists, but that aside, the numbers are the numbers.

Now let’s look at Reverse Mergers. Often characterized as the option of last resort for issuers too weak to attract an underwriter, reverse mergers continue to have their time and place. In September of 2022, data provider Dealogic reported 152 reverse mergers in 2022 (not including de-SPACs) for a total value of nearly $335 million, with an average of approximately $2.2 million per transaction. The largest non-SPAC reverse merger announced in 2022, as reported by Bloomberg,was the $4.6 billion Hempacco Co. Inc.–Green Globe International Inc. cannabidiol (CBD) industry deal. Not too shabby.

De-SPACs have also been in flux and should viewed through the prism of recent history and not just one

Also according to Bloomberg Law, a total of 398 reverse mergers were completed in 2021 valued at

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over $134.8 billion including de-SPAC transactionsbut without de-SPACs the number of traditional reverse mergers reported was 152, which is quite a coincidence –so it was worth a double check. Intelligize, on the contrary, reported this total at 200 but may have included some other business combination transactions that were not easily flagged as reverse mergers by Bloomberg. In any event, the state of the union for traditional reverse mergers is, they are alive and well and may be the answer for certain issuers.

Here is a quick, and by no means exhaustive list of Advantages and Disadvantages of each, however, in deciding on a path, an issuer absolutely must consult a competent securities attorney and an experienced public company accounting firm to explore which of these options, if any, is most appropriate. It may be that outside of these three paths, a Direct Listing or a Crowdfunding solution is best based on the issuer’s profile, criteria and circumstances - but we can leave that discussion for another day. Discuss it with people who know what they are doing to avoid expensive mistakes.

IPO Pros: •• Potentially in less than a year, IPO proceeds can help an issuer acquire other business entities, finance R&D, acquire assets and IP, hire new employees, reduce debt and can expedite an issuer’s mission.

•• It creates an exit strategy/opportunity for founders and investors.

•• Issuers tend to have more control over their initial investor base, they receive more attention from Wall Street analysts and IPOs typically get support in marketing and managing their initial trading volume from their underwriter.

IPO Cons: •• This is a costly, time-consuming option, which, all in, can be upwards to $1.5M and can take nine months to a year to complete depending on how quickly financial statements can be audited by a PCAOB (Public Company Accounting Oversight Board) registered accounting firm.

•• Regulatory requirements and responsibilities don’t end with the Securities and Exchange Commission. NASDAQ or NYSE American impose strict listing standards that must be maintained.

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•• Market pressure and potential loss of control are very real risks. de-SPAC Pros: •• Faster than an IPO, potentially achievable in 90 days if the issuer has audited financial statements, even considering the comprehensive S-4 preparation, proxy solicitation and combined financial statement disclosures.

•• The “blank check” nature of the SPAC means there are no potential liabilities connected to an existing or former business operation and there is little or no likelihood of prior shareholder problems, bad actors, etc. since the SPAC IPO investors were vetted (hopefully) by the underwriter. de-SPAC Cons: •• There is a genuine risk that the de-SPAC will not get done. More than 55 de-SPAC transactions, valued at approximately $20 billion were terminated in 2022 according to industry reports, with an additional 65 SPAC sponsors shutting down transactions entirely.

•• Lack of publicity/credibility.

•• Substantial dilution to the issuer, possibility of no money being available in the entity post de-SPAC due to professional and other fees, and of course, redemptions.

Reverse Merger Pros: •• The legal steps are generally fewer and simpler, and there is no requirement to raise capital for the reverse merger transaction, which reduces the overall timeline. If a private issuer has its audited financial statements done, the process can be completed in as little as two months’ time.

•• It is considerably less expensive.

•• Revers mergers are less dependent on market conditions.

Reverse Merger Cons: •• Extensive due diligence is required as there may be skeletons in the closet that are difficult to detect- even if the public entity is relatively recent IPO or “fallen angel” de-SPAC company.* •• Other potential legal and shareholder liabilities may exist from past operational activities.

•• Unless the public entity/shell is not really a

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shell (e.g. is still an operating company) neither Nasdaq not the NYSE American will permit the surviving reverse merger company to list until it is seasoned the combined entity has demonstrated trading on OTC Markets or a national or regulated foreign for at least one year following the filing of all required information, including the merger transaction documents, audited financial statements, etc.- which will likely pose an extreme deterrent for investors to invest.

•• Lack of publicity/credibility.

•• Fallen Angel is an informal term given to a private company that previously merged into a SPAC (post SPAC IPO) in a traditional de-SPAC transaction and has performed so poorly that it either cannot maintain its listing or has other problems, encouraging the underwriters or controlling shareholders to seek a replacement or enhancing private company to maintain the listing and to make investors less frustrated.

Which is best: There is no one-size-fits-all answer to which method is “best” for a company to go public, as each method has its own advantages and disadvantages that can be better or worse depending on the circumstances of the company.

For example, an IPO may be the best option for a well-established private company issuer with a strong track record and a well-defined growth plan, and if it can generate significant capital and provide more visibility and credibility with investors, underwriters will consider that issuer to be a relatively safe bet. On the other hand, a de-SPAC may be a better option for a company that is still in its growth phase and needs capital quickly, as it can be a faster and less expensive process (maybe 30% less expensive than an IPO). Similarly, a reverse merger may be a good option for a private company that has a clear and defined path to profitability but does not meet any listing criteria yet and lacks the financial resources or reputation to pursue an IPO or de-SPAC. The decision is not one to be made lightly. A thorough evaluation of an issuer as a unique organism, including a study of its distinctive set of circumstances, its desired outcome, its budget, etc. all should factor in. And again, after diligent analysis, the path should be chosen in consultation with legal, financial, and other professional advisors.

Andrea Cataneo is a partner in MSK’s Corporate & Business Transactions Practice Group in the firm’s New York office, and serves the following teams and industries: Capital Markets & Securities, Healthcare, Alternative Energy, FinTech, Food/Beverage/Cannabis, Crypto Assets & Blockchain Technology.

Andrea’s practice focuses on preparing companies for capital raises, structuring secured and unsecured equity and debt financing transactions, and taking private companies public via traditional IPOs, self-underwritten registration statements, deSPAC transactions and through equity crowdfunding. Additionally, through her extensive relationships in the investment banking community, Andrea offers her clients introductions to targeted sources of capital.

On the regulatory and compliance side, Andrea represents public companies with respect to 1934 Act reporting obligations to the Securities and Exchange Commission for a flat monthly fee. She performs a variety of corporate transactions for her clients, including mergers and acquisitions, joint ventures, proxy contests, restructurings, corporate governance, NASDAQ and NYSE-American listing applications and all related compliance matters. Her practice covers domestic and international transactions, and she has been active over the years in Italy, Mexico, Argentina, Canada, China, Israel and Kenya. Andrea has also been a leading voice in the Cannabis space, helping private and public clients navigate the developing legal landscape.

Andrea Cataneo has a 24 year history as a corporate & securities/capital markets lawyer. To her clients, she is more than a skilled attorney. Andrea is a recognized deal-team builder, funding source connector and business developer for her clients. Typically, in a private or public company transition, whether it is a financing, a merger, a SPAC, a PIPE- Andrea has made the introduction to the investment banker, family office, high net worth or placement agent, negotiating fair (and safe) terms for the companies she represents. As an advocate for her clients, Andrea maintains solid relationships with the investment banking community. Serving on the National Investment Banking Association (NIBA) for over a decade, Andrea is known on Wall Street has access to the 9,000 plus active national NIBA members as well as a robust LinkedIn following.

The “uplist” is shorthand for a public company’s rise from a lower-tier trading platform to a national exchange. By all account, the uplist requires more skill and precision than an IPO for a private company. To be successful, project management and focus are core requirements. Andrea’s most recent uplist to NASDAQ was for a growing technology company that develops digital communities and has a burgeoning publishing platform called Vocal. Leading the team, dealing with agencies, participants and oversight groups such as the SEC, NASDAQ, FINRA, DTCC, the investment bankers, the stock transfer agent and selling groups- Andrea quarterbacked the deal and got the company listed. Time, again, to ring that bell!

Andrea was the New York Diversity, Equity and Inclusion working group leader for her former AmLaw 100 firm, developing initiatives that were later mirrored throughout the firm’s other offices nationally, and she plans to continue in some capacity at MSK. She pioneered the monthly DEI Happy Hour where a “Cultural Ambassador” would present a family story, with food, a cocktail and maybe even music from their childhoods or communities. Those events brought the office closer together and helped them learn about and know each other better. By advocating a commitment to diversity, Andrea believes we are better equipped to attract the best talent and improve employee satisfaction. She has noted what has been well documented -- that companies promoting gender, racial and ethnic diversity are more likely to have better financial returns.

Andrea also served for four years as Director and Secretary to Together1Heart Foundation, led by AnnaLynne McCord and supported by many voices and active participants, including Susan Sarandon. The Foundation trains and empowers women and girls that have been previously trafficked out of Cambodia and other developing countries. She is also a veteran Woman to Watch on the WABC Radio Legal Watch Team.

Leadership style is not just about taking on the world. She is not afraid to enthusiastically say “yes” and she is also not uncomfortable saying no.

From her perspective, successful leaders are lauded for their track records of attempts vs. accomplishments. Being selective about projects, and taking on those that not only incite the required passion and drive- but that have received a green-light assessment after a careful factual analysis (e.g. does it have the essential elements- and how difficult a climb will it be?) enables Andrea, as a leader, to have continued success.

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

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microcap Planet review MicroCap magazine Review 27 71

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// By Drew Bernstein, CPA

The Luckiest City State on Earth With attractive tax incentives, business-friendly regulations, and an enviable location, some are calling Singapore the “Hong Kong of the Future”

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lobal investors have long seen Hong Kong as a glowing portal into Asia’s limitless opportunities. The “Fragrant Harbour” has traditionally been the financial center of Asia, thanks to its favorable business environment, a welldeveloped legal system, and a commitment to free market principles — not to mention the outstanding Dim Sum.

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But here’s the thing: The future of Asian investing isn’t in Hong Kong, it’s in Singapore.

The Singapore government recently announced it’s investing $150 million in research and development of space capabilities for key industrial sectors to maintain its position as a research hub in emerging technologies. That’s the kind of deep technology

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thinking that draws attention from the global investment community.

It’s said that it’s better to be lucky than smart. The thing about Singapore is that they have been both.

They have been the primary beneficiaries of China’s crackdown on the excesses of private enterprise and Hong Kong’s deeper integration with the PRC’s legal and financial system. But they have also quite consciously worked to become a magnet for money and talent, seeking a safe port from the gyrations of Chinese policy.

And wealth is flooding in from mainland China. As recently reported by the Financial Times, the number of Rolls-Royce cars registered in Singapore remains at record levels, and the new buyers are “overwhelmingly” Chinese. This aligns with an influx of people moving to Singapore overall: According to the Singapore Department of Statistics, the total population grew by more than 3 percent from last year, many of these newcomers being made up of expatriates tiring of the strict COVID protocols and restrictions on free speech in Hong Kong or Chinese looking for a safer base to operate multi-national businesses.

Over the past decade, due to a comprehensive suite of economic policies, a liberal approach to business and taxation, and a more attractive environment for entrepreneurs and investors alike, Singapore has emerged as the region’s definitive financial hub, recently overtaking Hong Kong to become Asia’s top financial center — and the third in the world behind New York and London, per the Global Financial Centres Index 32.

Hong Kong slipped to fourth place, struggling to revive its role as a global finance hub while attempting to follow China’s lead in keeping COVID cases to a minimum despite the rest of the world opening up. In a somewhat frantic attempt to preserve China’s connection with the international markets, a “Hello Hong Kong” promotion campaign worth HK$100 million (US$12.75 million) was recently launched to attract businessmen, investors, and tourists from around the world back to “the world’s freest economy.”

As Hong Kong becomes increasingly integrated into mainland China, though, it may no longer be a reliable or safe jurisdiction for storing wealth. With growing political and economic uncertainty across

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the region, investors must take extra precautions when deciding where to park their money. Storing wealth in stable offshore jurisdictions like Singapore, with strong legal protection of assets, might be a better choice for those looking to preserve their funds and protect them from unforeseen risks.

Relatedly, increasing Geopolitical tension between the United States and China has led companies to rethink their presence in Hong Kong to prevent the perception of being “a Chinese company.” Chinese companies with global ambitions, like fast-fashion giant Shein, are rebranding their companies and even changing the citizenship of top management to Singapore to provide easier access to global capital markets and reduce the risk of getting caught up in trade disputes.

A decision to side with Singapore is made easy by the nation-state’s business-friendly environment, pro-enterprise policies, and robust infrastructure. Indeed, few western companies are currently listed in Hong Kong, and those that remain are thinly traded.

2023 will likely test whether the territory can remain dispassionately international or slip further under the thumb of Beijing. (Over 200,000 Hongkongers left the city between mid-2020 and last summer.)

All the while, Southeast Asia’s emergence as a major economic force has been nothing short of remarkable and cannot be ignored. In the last few decades, the region has seen rapid growth in both its GDP and trade figures, making it one of the most dynamic and competitive economies in the world. The impressive performance can be largely attributed to Southeast Asia’s commitment to open markets and free trade, as well as its willingness to embrace new technologies and business models. Countries like Singapore are becoming increasingly attractive destinations for foreign businesses seeking a foothold in the region.

To wit: Alberta Investment Management Corp., the Canadian $129 billion investment manager, is looking at Singapore rather than Hong Kong for its first office in Asia as it plots an international expansion of its private equity group.

Without a doubt, Singapore has quickly established itself as a top rival in the Asian financial center market. The city-state has advantages that make it more attractive than Hong Kong, such as its political neutrality and low tax rates. While Singapore

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was traditionally seen as a safe haven for banking services, it has now developed a robust financial ecosystem with well-developed infrastructure, deep capital markets, and a strong talent pool. Singapore is also an attractive destination for foreign investors due to its commitment to regulatory certainty and transparent legal system.

capital raising and enables them to take advantage of Singapore’s zero capital gains tax regime, strict and established rule of law, and well trained and diverse professionals. Whether you are transacting in the US, China, UK, EU, India, Cambodia, or beyond, you will find Singapore based lawyers and accountants who will be able to provide the proper experience to be compliant.

What does this mean for US investors?

Keep an eye out for new listings from Southeast Asia. So far, there have only been a handful of companies from Southeast Asia that have listed in the U.S., including Sea Limited, a tech conglomerate headquartered in Singapore; Grab, Southeast Asia’s leading super-app providing everyday services; and PropertyGuru Group, Southeast Asia’s #1 digital property marketplace. In 2023 and beyond, investors should expect a stream of new listings coming to U.S. markets, either through IPO or SPAC mergers, in sectors spanning technology, consumer, biotech, financial services, resources, and many others. As more of these names come to the U.S. markets, Southeast Asia will increasingly become an investable asset class rather than a handful of names for US retail and institutional investors.

Consider Singapore to be now a major fundraising stop for companies and private equity funds looking to raise capital. Singapore currently has about 700 family offices, up from 400 in end-2020 and up sevenfold from 2017, according to government estimates. As such, the city-state will be as (or more) reliable than Hong Kong as a go-to stop for reliable fundraising efforts.

Expect Singapore and Southeast Asia overall to be the new venture and private equity investment hub for a region spanning from The Philippines to India. There are now dozens of sizable venture and private equity funds based out of Singapore that span from seed financing through Series D and even venture debt. Companies can now access the full capital stack in Singapore without having to tap Silicon Valley or China-based funds, many of whom are setting up branch offices in Singapore.

Oh, and by the way, Singapore has some pretty great Dim Sum, too…

Drew Bernstein, Co-Managing Partner Marcum Bernstein & Pinchuk (MBP)a leader in SEC audit accounting and consulting services to Chinese companies seeking access to capital markets.

In 1983, Drew Bernstein co-founded Bernstein & Pinchuk. Additionally, he co-founded MarcumBP, which is a member of the Marcum Group and an affiliate of Marcum LLP. a leading U.S. accounting and advisory firm. Both firms have multiple offices within the United States and Asia.

Bernstein is a distinguished expert with deep knowledge of the China and U.S. financial ecosystem with experience extending across Asia. Europe and Africa. Industry experience encompasses technology. retai l. manufacturing, hospitality, pharmaceutical and real estate. Bernstein directs a global team, featuring highly trained PCAOB and SEC accounting experts and financial consultants working in New York as well as Beijing. Tianjin.

Shanghai. Shenzhen. Hangzhou. and Guangzhou.

Additionally, Bernstein is considered a valuable thought leader and news commentator. He has published articles for Forbes.com and China Daily and is a frequently called upon source by prominent media such as China Global Television Network. CNBC. Bloomberg TV. The Financial Times.

The South Chino Morning Post. The Wall Street Journal. Yahoo! Finance. and more regarding Chinese IPOs. China’S economic growth. investment appetite, innovation trends, corporate governance, SEC regulations and more.

Bernstein graduated from the University of Maryland with a B.S. in Accounting. Currently, he resides in New York City with his wife and children.

About MBP Marcum Bernstein & Pinchuk LLP (MBP) offers specialized audit and advisory services to support SPAC sponsors and SPAC targets in Asia.

MBP and its parent company, Marcum LLP. have been involved in more SPAC transactions than any other audit firm. MBP is the only audit firm to have a dedicated SPAC team for Asia. MBP performs all audits for Marcum in Greater China. and MBP is a top-five auditor for Chinese companies listed in the United States.

The dedicated SPAC team has worked with SPAC sponsors, underwriters, and targets. MBP draws on wide-ranging experience with the initial publiC offerings and subsequent business transactions forged by such companies.

MBP has designed its audit platform to deliver the technical expertise. efficiency. and urgency required by SPAC IPOs. This includes high-quality.

PCAOB-compliant audits for private Asian companies that are contemplating entering a SPAC merger.

Website: U.S.: https://www.marcumbp.com: China: https://cn.marcumbp.com

Welcome to your new headquarters. Increasingly, companies from many parts of the region, including India and Indonesia, will establish corporate headquarters in Singapore rather than Hong Kong because it provides greater flexibility for international Note: This article is not an attempt to provide investment advice. The content is purely the author’s personal opinions and should not be considered advice of any kind. Investors are advised to conduct their own research or seek the advice of a registered investment professional.

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EMPOWERING LIVES THROUGH SPORT Sports create purpose and fuels dreams. That’s why the Challenged Athletes Foundation is committed to providing athletes with permanent physical disabilities access to life-changing sports equipment, coaching, and competition expenses.

CAF is ready to deliver more impact, create more invaluable opportunities for mentorship, and strengthen our adaptive athlete community.

Learn how your organization can be part of the movement that’s breaking barriers, igniting futures, and changing lives. challengedathletes.org/partner

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challengedathletes.org l 501(c)(3) Tax ID #33-0739596 Planet MicroCap Review 75

Data I/O Corporation (NASDAQ: DAIO)

Q&A with Anthony Ambrose President and CEO of Data I/O

Let’s start with a quick overview of the business.

Data I/O Corporation (NASDAQ: DAIO) is the leading global provider of advanced security and data deployment solutions for microcontrollers, security ICs and memory devices. We believe we’ve built a brand that positions the Company as the gold standard in high-speed, secure programming, with an impressive and expanding intellectual property (IP) portfolio.

The Company has developed innovative solutions to enable the design and manufacture of electronic products for automotive, Internet-of-Things, medical, wireless, consumer electronics, industrial controls, and other electronics devices. Today, our customers use Data I/O’s data programming solutions and security deployment platform to secure the global electronics supply chain and protect IoT device intellectual property from point of inception to deployment in the field. OEMs of any size can program and securely provision devices from early samples all the way to high-volume production prior to shipping semiconductor devices to a manufacturing line.

Data I/O enables customers to reliably, securely, and cost-effectively bring innovative new products to life. These solutions are backed by a portfolio of patents and a global network of Data I/O support and service professionals, ensuring success for our customers.

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Reflecting on 2022, how would you describe the company’s performance in the previous year? Did the company reach the milestones and goals that you set for the company?

Operationally, it was feast or famine in 2022. Our Shanghai facility was closed during the government mandated lockdowns in Q2, delaying several shipments and impacting the overall supply chain. We recovered from that, into a very strong second half of 2022. Our financial and operating performance improved progressively throughout the year, although we’ve only reported results through the first three quarters.

Performance in the third quarter was outstanding as we delivered strong bookings, operating income, and cash generation. For the fourth consecutive quarter, we achieved bookings in excess of $6.0 million, with third quarter 2022 bookings of $7.1 million reaching the highest level in the past year, and the highest level for the third quarter in 5 years. Backlog at the end of the 2022 third quarter of $4.9 million was at the highest level for any third quarter period in the past 10 years. With a strong sales funnel and high backlog and deferred revenue, we expect very solid fourth quarter results as well, and will report financial results on Feb. 23.

Our growth prospects are bolstered by a projected growth in the automotive electronics market of

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10-15% per year for many years to come. We continue to gain share in automotive, which is our most prominent target market. Automotive electronics represented 70% of third quarter bookings, and 63% of bookings so far this year. We had 4 new customer wins in automotive and industrial.

From a product perspective, we had some exciting announcements. We announced VerifyBoostTM technology to support the automotive memory market. VerifyBoost is a patent pending technology that significantly improves UFS memory programming times by speeding up the verify portion of the programming cycle by 4.5x. This is game-changing for our automotive customers. This technology is available as a license for new and existing systems with our Lumen®X programmers.

As I’ve stated, it’s an exciting time for Data I/O as we see our momentum carrying over into 2023.

Are there any industry tailwinds to push forward some of the company’s goals and objectives?

The growth in the automotive electronics market continues to represent a key tailwind for us. Growth in data programming demand in the automotive sector is amplified by electrification (EV), where there is an estimated 2-3 times the amount of electronics content per vehicle as compared with traditional internal combustion engine (ICE) vehicles. Whether EV or ICE, the semiconductor content and the amount of bits to be programmed going into each vehicle is increasing and becoming more and more complex. Customers need a programming engine that can support these trends, and there is no better technology than what comes from Data I/O. There also are increasing opportunities in the industrial market, and the broader silicon/board ecosystem including security measures to bridge the electronic and physical value chains. Beyond our core data programming solutions, we also developed our SentriX® Security Deployment Platform as a natural extension of our award-winning PSV family of data programming devices. The SentriX Security Deployment Platform enables Data I/O to expand into new markets by securely provisioning IoT devices during the pre-programming process.

With the SentriX Security Deployment Platform, we

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VerifyBoost is a patent pending technology that significantly improves UFS memory programming times by speeding up the verify portion of the programming cycle by 4.5x.

created new business models including introducing the Security Deployment as-a-Service, as well as moving forward with licensing and other recurring revenue opportunities associated with SentriX enabled systems, including leveraging over 440 PSV systems worldwide. Our focus here is the burgeoning market for next generation technologies for life cycle product protection, counterfeit defense, and securing of the supply chain.

Finally, there is the reorientation of global supply chains towards North America. Data I/O, as the global leader and domiciled in Washington State, enjoys a home field advantage as more businesses relocate back to the USA and Mexico. We see increasing opportunity here in automotive, industrial, and medical markets.

In a number of interviews in 2022, a lot of management teams spoke about how 2023 was the “Year of Execution” - ranging from executing the business model to surpassing internally derived growth goals; what does “executing” mean for you?

Execution in this context is doing what you say you are going to do.

For our customers, we continue to invest in our global support organization and our IP platform to make our solutions even stronger. The fact that we have taken market share while selling more systems for the past several years says to me that we are addressing their needs.

For our employees, we have a near 100% retention rate throughout the pandemic. As a company, we

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have created a place where our global staff can prosper personally and professionally.

For our shareholders, we must deliver strong financial results and show improvement in many metrics with expectations for continued growth.

What are some of the company’s value catalysts for 2023?

The rise of EVs – or electric vehicles -- continues to be a major catalyst. Lately there have been a few major OEMs taking the lead by reducing vehicle prices. This could stimulate automobile demand and, when coupled with easing of semiconductor supply chain disruption, these factors could be very favorable for overall production and the need for our equipment, services, and consumables.

Further progress on managing the cyclicality of the semiconductor sector continues to benefit our financial performance. The Company has been transitioning capital equipment sales into a recurring revenue model, highlighting the emergence of our SentriX® security deployment services.

On our SentriX platform, we have several use cases that are beginning to scale, including utilization for remote metering (electricity and water), smart locks, and electric vehicle charging networks.

Finally, there’s the US dollar normalizing in 2023 after strengthening in 2021 and 2022. About 90% of our business comes from international markets, so a weakening dollar is favorable overall.

For more information about Data I/O Corporation, please visit: www.dataio.com

DISCLAIMER AND FORWARD-LOOKING STATEMENTS NOTICE: This article is provided as a service of SNN Inc. or an affiliate thereof (collectively “SNN”), and all information presented is for commercial and informational purposes only, is not investment advice, and should not be relied upon for any investment decisions. We are not recommending any securities, nor is this an offer or sale of any security. Neither SNN nor its representatives are licensed brokers, broker-dealers, market makers, investment bankers, investment advisers, analysts, or underwriters registered with the Securities and Exchange Commission (“SEC”) or with any state securities regulatory authority.

SNN provides no assurances as to the accuracy or completeness of the information presented, including information regarding any specific company’s plans, or its ability to effectuate any plan, and possess no actual knowledge of any specific company’s operations, capabilities, intent, resources, or experience. Any opinions expressed in this article are solely attributed to each individual asserting the same and do not reflect the opinion of SNN. Information contained in this presentation may contain “forward-looking statements” as defined under Section 27A of the Securities Act of 1933 and Section 21B of the Securities Exchange Act of 1934. Forward-looking statements are based upon expectations, estimates, and projections at the time the statements are made and involve risks and uncertainties that could cause actual events to differ materially from those anticipated. Therefore, readers are cautioned against placing any undue reliance upon any forwardlooking statement that may be found in this article.

SNN does not receive compensation for, nor engage in, providing advice, making recommendations, issuing reports, or furnishing analyses on any of the companies, securities, strategies, or information presented in this article. SNN recommends you consult a licensed investment adviser, broker, or legal counsel before purchasing or selling any securities referenced in this article. Furthermore, it is encouraged that you invest carefully and consult investment related information available on the websites of the SEC at http://www.sec. gov and the Financial Industry Regulatory Authority (FINRA) at http://finra.org.

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

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cannabis CORN E R

// By Seth Yakatan, Katan Associates

CANNABIS YEAR END 2022 US cannabis industry revenue grew 4% in 2022, according to Needham & Co.

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arkets in the Western U.S. saw in some cases double-digit declines in revenue, while most markets east of the Mississippi continued to experience growth. In ‘23, most experts expect +8% growth. This acceleration in growth compared to ‘22 will primarily be driven by new adult-use markets coming online or continuing to ramp (NJ, NY, CT, MO, etc.) and continued growth from medical market programs. Expect to see some continued decline in markets in the Western US driven primarily by price compression, with the rate of decline to be lower on a % and dollar basis than the declines experienced in ‘22.

The largest MSOs currently comprise ~22% of overall industry retail revenue. As limitations on the number of licenses exist and most markets undergoing conversion to adult-use, expect to see overall industry consolidation levels to decline for public operators over the next few years. Western U.S. markets have generally seen retail productivity decline from the drop in revenue (mostly driven by price decline), while retail capacity addition has exceeded market growth in many Eastern U.S. markets and in other markets price decline has been a factor.

Wholesale price declines occurred in nearly every market in ‘22 with the most pronounced price declines occurring in markets that converted to adult-use over the last 2-3 years.

Cash flow generation will critical in ‘23.

Amid price decline and a less robust wholesale market as operations have become more vertically integrated, shrinking the cost base will be imperative to offset margin decline and to generate cash flow in ‘23. To that end, a number of MSOs reported corporate headcount reduction, consolidation of cultivation, and in a few instances, the decision to exit underperforming markets. Restructuring activities will result in asset impairments, inventory write-offs, and charges related to overhaul in operations in 4Q. MSOs with larger cash balances, cleaner balance sheets, and perhaps most critically, those with the ability to generate cash flow, will be the best performing equities, and will have an advantage in acquiring distressed assets.

Source: Needham & Co.

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Seth Yakatan C-Level Corporate Finance Specialist • Instituted a turn around at Eaze since 2019 • Raised in excess of $300.0 million • Culminating in Eaze acquiring multi-state retail leader Green Dragon, creating nation’s largest MSO Delivery operation and biggest California-

headquartered MSO • Over the past eighteen years as a co-founder of Katan Associates (KAI), Seth has successfully structured and managed strategic alliances and deals, based on his insight and expertise in the US and Global Cannabis and Life Science sectors

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

Seth Yakatan does not own any of the stocks mentioned in this article.

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insi g hts

// By Julie Lindenberg, BPlan Honrs

How is carbon footprinting transforming banking?

Cogo announced last week that its carbon footprint management software is now listed on AWS Marketplace, a digital catalogue with thousands of software listings from independent software vendors, making it easy to find, test, buy, and deploy software that runs on Amazon Web Services (AWS).

The listing gives more than 325,000 active AWS customers around the world (including banks) access to Cogo’s cloud-based carbon footprint technology which enables individuals and businesses to measure, understand, and reduce their impact on the climate.

At first glance, you could be mistaken for thinking “Ok, just another listing…” - but it’s a far bigger deal than that. It’s the democratisation of software that is helping banks transition to a low carbon economy.

It’s empowering hundreds of millions of individuals and businesses across the world to be more conscious of the impact of their spend on people and the planet.

How it works The Cogo Personal and Business Carbon Manager solutions enrich transactional data - such as spend on electricity and fuel - and assign a carbon emission to each transaction.

individual or business. In addition, customers can also access tailored advice around the actions they can take to make easy, positive changes to help lower their carbon footprint. For businesses, the optimized end to end solution also enables customers to share their progress which can help them retain and attract customers, having a positive impact on the business’ bottom line.

Cogo can then calculate a carbon footprint for the

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Cogo also enables banks to accurately segment customers who might be interested in greener’ lending or banking products. Cogo increases the sustainability of a bank’s portfolio; assists with compliance around ever-tightening legal requirements, including possible climate related financial disclosure, and comes with significant brand benefits from being a sustainability champion. In line with this, Bank of America alone has committed to $1.5 trillion in sustainable financing by 2030.

The solution in action In 2021, NatWest contracted Cogo to integrate a carbon footprint tracker via an API into its retail banking app to support the bank’s transition towards a net-zero, climate-resilient and sustainable economy.

Agility, security, and low latency were requirements for the carbon footprint tracking feature to process large volumes of data from customer transactions on the mobile app.

As an AWS Partner, Cogo built the API for NatWest on AWS using Amazon API Gateway, AWS Lambda, and Amazon Aurora. The bank had experience with other partners’ solutions on AWS, which gave them confidence in Cogo’s proposed solution. By integrating the feature into its retail banking app, NatWest’s retail customers can track how their spending impacts the climate and receive recommendations on how to reduce their carbon footprint.

The bank and Cogo had a tight launch timeline of six months, aiming to introduce the tracking feature before the UN Climate Change Conference of the Parties (COP26) in Glasgow, Scotland, later that year.

sale ‘behavior change’ is needed from the country’s biggest players.

American banks don’t need a crystal ball to read the writing on the wall; but the truth is, they’re lagging behind globally where carbon footprint integration is fast becoming a ‘hygiene issue’. Across the US, customers are looking for help to understand and reduce their impact on the climate.

Many banks are already on the journey to reduce their operational emissions. Carbon footprint management tools will help them bring customers, who collectively have at least 100 times the footprint of the bank, along on the journey to deliver planetsaving action at scale, with bottom-line benefits.

Cogo is currently in discussions with several of America’s biggest banks around carbon footprint integration into their everyday banking apps. It believes first mover banks who commit to bolder, braver climate action will find it easier to attract employees looking for value-aligned businesses. What’s more, amidst a recession, the banks which enable their customers to make more conscious spending decisions that could help them save on their total spend will corner a definite competitive advantage.

Carbon footprint integration is fast becoming a strategic priority for businesses, as customers seek ways to make more sustainable buying decisions and reduce their impact on the climate. Cogo is excited to scale its solution globally by joining AWS Marketplace and making it easily available to AWS customers who share a desire to make a positive impact on our climate.

COGO.CO

Who’s using it Cogo currently works with 12 banks globally, including NatWest, Westpac, the Commonwealth Bank of Australia, ING, OTP, Suncorp Bank, and most recently Kiwibank, to provide carbon emissions data for banking transactions such as spend on groceries and clothing.

Where are we at in the US?

Julie Lindenberg, a respected leader in the digital banking and carbon emissions industry, is CEO of the APAC region at Cogo. Tasked with building Cogo’s reputation as a category leader in climate solutions, Julie is building a cross-disciplinary team that will empower millions of businesses and consumers to understand their carbon footprint and how they can take action to reduce and offset their impact. She’s passionate about the power of collective change and the fact that we can all take steps to lower our carbon footprint and move the sustainability conversation forward individually and together. Having worked in senior roles in some of the most innovative brands in the Fintech and banking sectors, Julie is influential in all aspects of change but is best known for her ability to inspire teams to achieve audacious goals.

Cogo believes that the US could become one of its biggest markets, alongside its already established markets, the UK, NZ and Australia, but that wholeNote: This article is not an attempt to provide investment advice. The content is purely the author’s personal opinions and should not be considered advice of any kind. Investors are advised to conduct their own research or seek the advice of a registered investment professional.

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LEG ga A L COR co r N ER Er

// By Jon Uretsky, Esq.

Pushing gETTiNg STaRTED Back ON ESg DiSClOSuRES Navigating the Rise in SEC Enforcement Actions

ThE SEC’S NEw ENviRONMENTal, SOCial aND gOvERNaNCE (“ESg”) RulES I.

SEC Enforcement by the Numbers

The SEC’s Enforcement Division had an extraordinary year he SEC in 2022, recently by virtually proposed any a series measure. of new The $6.4 billion rules which in penalties will significantly and disgorgement increase that disclosure the Enforcement requirements Division that posted relateinto: 2022 (1) climate was a record, related and risks,it (2) is unlikely greenhouse that the gasrecord emissions, was and the result (3) climateof more related malfeasance financial metrics. by the The people SECand partly institutions modeled subject the proposed to SECclimate regulation. disclosure Instead, framework it seems clear on the that the SEC’s Enforcement Division is simply taking far more aggressive positions every chance it can get - and obtaining settlements in amounts

T

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far greater than in the past. This all stems from the policies implemented by SEC Enforcement Division Director Gurbir Grewal, who has indicated his prioriTask ties inForce quiteon a number Climate of Related speeches Financial over the Disclosure past year. (“TCFD”) Notably, and the in 2021, Greenhouse SEC Enforcement Gas Protocol obtained (“GHG orders Protocol”) forcing emissions its targets reporting to disgorge framework. $2.4 billion As a law and pay firm penalties focused on of providing $1.5 billion. services By wayand of contrast, counsel to in 2022, the microcap the $6.4space, billionwe total fully breaks embrace downthe differently. challenge The these parties new requirements charged by the pose SEC forwere the microcap ordered to pay penalties of $4.2 billion and disgorge $2.2 billion.

Why the change? And what does it mean for the microcap industry in particular?

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II. The SEC’s Mission Director Grewal answered those questions in a speech at the Securities Enforcement Forum on November 15th. Director Grewal first analyzed the period from 2017 through 2021, noting that the SEC ordered more than twice as much in disgorgement as it did in penalties in those 5 years. His takeaway from those results is telling: “To me, that ratio is backwards because it means, on a macro level, that the potential reward for getting away with violating the securities laws was much greater than the potential downside of being caught,” he said. He explained his point further, “If you get $2 for violating the law, but are only fined $1 if you get caught, and required to return your ill-gotten gains, some people may see that as an acceptable calculated risk.” Plainly, that is Director Grewal’s real goal - to increase Enforcement actions overall, and to ensure that penalties vastly exceed disgorgement. Of course, whether penalties should exceed disgorgement is debatable - but this new policy’s danger to the microcap industry should not be understated.

To be fair, Director Grewal gave an explanation for his policies. He indicated that he was focused on restoring the public’s dwindling trust in our institutions and financial markets. He further clarified that the SEC is doing three things to achieve this end, including: 1.

obtaining penalties and remedies that deter misconduct and meaningfully hold bad actors accountable, protect investors, and, where possible, help harmed investors recover their losses;

2.

proactively investigating and charging cases across a spectrum of market participants and harm; and

3. continuing to incentivize proactive compliance and meaningful cooperation.

The issue is, Director Grewal’s policies apply across the board - regardless of the size of a company.

III. The Effect on Microcap Companies “To deter future misconduct and enhance public accountability, the SEC in a number of actions recalibrated penalties for certain violations, included prophylactic remedies, and required admissions

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where appropriate,” the SEC said in a statement.

For example, Director Grewal suggested proactive compliance. Proactive enforcement is an approach where law enforcement agencies demand market participants to take charge and not wait for an enforcement action to be put in place. Although proactive enforcement may be beneficial for large public companies, when this enforcement is applied to small microcap companies the effects are far different. Large corporations can easily use their funds to handle such problems. On the other hand, this approach is all but impossible with a small, microcap company, which likely has enough trouble paying for ongoing business operations and growth. Spending extra on legal proceedings that don’t yet exist is a great way to cause financial problems.

Further - the increase in fines hurts microcap companies far more than others. To illustrate this point, if the SEC targets a large company such as Google (Alphabet Inc.), Google can just pay a larger fine (say, $20 million). That amount will have no effect on operations - or the stock price. However, when you apply the same approach to a microcap company, after giving back the amount wrongfully obtained (disgorgement) an extra-large penalty (say, the same $20 million) will likely cause bankruptcy and several people to lose their jobs.

IV. Defense Counsel’s Perspective As the premiere firm in the microcap litigation space, PULLP has represented numerous microcap companies against the SEC. Defense counsel’s role is integral to maintaining stability and growth in the industry. While the SEC is a frequent adversary, PULLP’s attorneys always make a point to be polite, professional, and respectful to the SEC’s staff. It is frustrating to hear Director Grewal say “the conduct of defense counsel in some cases frustrates and delays our truth-seeking mission.”1 It is not defense counsel’s job to help the SEC further its mission. In fact, defense counsel’s ethical obligation is the exact opposite - to aggressively defend and advocate for companies and their officers and directors.

Until the SEC proves in Court that a target of its investigations actually did something wrong, they should be treated like any other plaintiff. According 1 Gubir. S. Grewal, Remarks at Securities Enforcement Forum West 2022 (May 12, 2022)

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to Director Grewal, defense counsel wrongly uses tactics like missing production deadlines, producing too few or too many documents, interrupting testimony with objections, coaching witnesses and asserting “frivolous” privilege claims. However, what Director Grewal perceives as conduct that frustrates or delays the SEC’s “truth-seeking mission,” is, at least at PULLP, hard work done in good faith. The SEC should have to overcome a full defense before obtaining the vast penalties it now seeks.

V. The Takeaway While the SEC is concentrated on restoring the public’s trust, defense counsel should be dedicated to defending the interests of public companies.

Companies and counsel should be empowered to push back against the SEC’s increasingly aggressive agenda. As the target of an SEC Enforcement Action, you have the right to a vigorous defense. If the SEC

is a concern for you or your company, we invite you to contact adelstein@pullp.com or (203) 856-5847 for a complimentary analysis.

PULLP is one of the only law firms specializing in microcap litigation. Anna Adelstein is a Partner and Director of Litigation at PULLP. Ms. Adelstein has a broad multidisciplinary practice that includes extensive experience in litigation and dispute resolution, regulatory investigations (including FINRA and SEC matters like those described above). In addition, she counsels corporate boards, board committees (including special committees) as well as being a personal adviser to many entrepreneurs, business leaders and corporate executives. She has counseled clients on significant litigation, regulatory and transactional matters across multiple industry sectors.

Additionally, the PULLP team has extensive experience negotiating mergers and acquisitions (including reverse mergers); domestic and cross-border investments/joint ventures; the representation of private equity; venture capital and other private investment funds; securities offerings; and private and public financings.

Notes: 1. Special thanks to Amanda Rangasammy and Abbie Sebastianelli, Law Clerks at PULLP, for their assistance in researching and the preparation of this article, as well as their help in the many matters PULLP handles.

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

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

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AS I A CO R N ER

// By Leslie Richardson

End of Pandemic Restrictions Fuel Revival in Hong Kong’s IPO Market With the complete removal of Covid restrictions, Hong Kong has fully reopened to the world.

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merging from a year of devastation due to stifling pandemic curbs, business closures and plummeting stock prices, 2023 outlook brings optimism as business activity picks up. Investors betting on a post Covid recovery pushed the Hang Seng Index up nearly 15% in January. Since lifting all travel restrictions including all vaccine requirements, the government is working to regain foreign business investment as it set a goal of attracting 1,130 companies to the city by 2025. Additionally, with the border between Hong Kong and the mainland opening after a three-year closure and cross-border flow resuming, financial activities are anticipated to ramp up as capital flow increases. In the wake of business and tourism normalizing, experts estimate GDP will rebound to 3.8 percent in 2023, compared to a 3.5 percent contraction in 2022.

Globally, 2022 was a brutal year for the IPO markets and Hong Kong’s IPO market was no exception.

Despite ranking 3rd worldwide in terms of funds raised, 2022 was Hong Kong’s worst year for IPOs in more than ten years. The Hong Kong Exchange saw a dismaying 71 percent drop in funds raised compared to 2021, with 75 listings raising US$12.7 billion in proceeds in 2022, according to data provided by Refinitiv. However, with the improving macro environment breathing new life into the IPO market, PwC forecasts over 100 new listings will raise around HK$200 billion (US$25.6 billion) for the year. Additionally, Deloitte predicts in 2023, Hong

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Kong will maintain its third place globally in terms of funds raised. The most anticipated IPOs in 2023 include: Ant Group, ByteDance, Syngenta, Amer Sports, FWD Group and Didi Global. Leading the way for blockbuster IPOs is Chinese battery maker for electric vehicles, REPT Battery Energy. The company is looking to raise as much as US$1 billion (HK$7.8 billion) in an IPO which could take places as early as the first half of the year. Most recently, ride-share company, Didi, refiled for its IPO. The company didn’t provide any details, but expectations are the company will raise up to US$200 million (HK$1.56 billion).

Hong Kong’s IPO market is also expected to get a boost from its biggest listing reform in five years as it moves to attract tech and international firms.

Looking to become a major tech fundraising hub, the reform opens the way for pre-revenue Big Tech companies with a valuation of at least HK$15 billion (US$1.9 billion) to apply to apply for a listing. Due to launch in the first half of 2023, the proposed Chapter 18C of the HKEx listing rules target five types of tech firms: cloud computing, artificial intelligence, electric and autonomous vehicles, semiconductors and metaverse. The addition of Chapter 18C, is projected to inject new vitality into Hong Kong’s capital markets as PwC estimates around 10 to 15 specialist technology companies will list in Hong Kong under the new rule in 2023, raising about HK$50 billion to HK$60 billion.

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On top of the reforms, Hong Kong is further raising its attractiveness to foreign listings by leveraging its edge in assisting foreign corporations access mainland Chinese investors. As of last November, 1,395 China-domiciled companies were listed in Hong Kong, accounting for 54 per cent of all listings and 77 per cent of the exchange’s capitalisation. In contrast there are 158 international listings on the HKEX representing about 6% of the market. In an effort to deepen stock market access between Hong Kong and the mainland, the two regions have agreed to expand the scope of eligible stocks for the Northbound and Southbound trading links.

Northbound trading, which allows offshore investors to buy China-listed shares, will include stocks with a market capitalization of 5 billion yuan ($717 million) or above and meet certain liquidity criteria. For Southbound trading, which allows mainland investors to buy Hong Kong stocks, the scope will be expanded to include stocks of foreign companies with primary listings in Hong Kong that are constituents of Hang Seng Composite Indices. The inclusion of international companies with a primary Hong Kong listing in the Stock Connect schemes is believed to be a game changer that enhances the city’s super-connector position. Under the new measures, international issuers are able to benefit from a listing in the city while also gaining access to China’s significant investor base.

Hong Kong exchange is especially focused on attracting companies from the Middle East and Southeast Asia, particularly Indonesia, Malaysia, Vietnam and Singapore. With public listings becoming more relevant for up-and-coming companies in SE Asia, many companies have stated that Hong Kong offers the best value for them. Indonesian courier services startup, J&T Express, is expected to list in Hong Kong in the second half of 2023 as it looks to raise up to $2 billion after putting its IPO on hold in 2022, which would make it one of the biggest deals for the year. Additionally, Thailand’s largest cryptocurrency exchange, Bitkub, is contemplating Hong Kong as its listing destination when it goes public, possibly as early as 2024. Founder and CEO, Jirayut Srupsrisopa, noted the exchange’s geographical location, high liquidity and sound rule of law as top considerations.

In a move to bolster Hong Kong’s relationship with Middle East companies, Chief Executive, John Lee accompanied with a delegate of business profes-

sionals on a high-profile week-long trip to the region in early February. During the trip, Hong Kong and Saudi Arabia signed six bilateral agreements to strengthen cooperation between their stock exchanges, business associations and technology firms.

Furthermore, the holding company for the Saudi Exchange, Saudi Tadawul Group Holding Company and Hong Kong Exchanges and Clearing (HKEX) agreed to explore collaboration opportunities in fintech, ESG and cross listings. The agreement opens up an avenue for companies like Saudi Aramco to access to mainland investors though a secondary listing on the Hong Kong Exchange.

Reinforcing Hong Kong’s position as an international financial centre connecting East with West, the HKEX opened a New York office in December. The new office is expected to play a vital role in connecting overseas investors with the China markets. Currently, international investors account for around 41 per cent of Hong Kong’s cash equities market trading turnover, with US investors accounting for 10 per cent of total turnover.

As for the Chinese US listed companies under threat of forcibly being delisted and fuelling a wave of homecoming listings, this will no longer materialize.

At the end of 2022, the US and Chinese regulators reached an agreement over the inspections of Chinese’s companies audits with PCAOB announcing in mid-December it secured “complete access” to inspect the audit work papers.

Ms. Leslie Richardson has over 20 years of investment management and equity research experience. She operates a boutique investor relations firm in Hong Kong for Asian companies listed in the U.S. and Hong Kong. She also assists private companies develop investment material and build an investor following in preparation for a public listing. Additionally, she is the Asian Correspondent for Micro-Cap Review, www.microcapreview.com, a financial magazine focused on mirco-cap companies. Previously, she worked for CCG Elite in assisting Asian-based, U.S. listed clients formulate key communication strategies. Ms. Richardson began her investment career at U.S. Trust Company then went on to join Odyssey Advisors as a portfolio manager and Director of Research. Ms. Richardson specialized in high growth sectors such as bio-tech, alternative energy, IT and telecommunications. She earned her M.B.A. from the University of Southern California. Ms. Richardson is based in Hong Kong. www.elite-ir.com.

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

Leslie Richardson does not own any of the stocks mentioned in this article.

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insi g hts

// By Shelly Kraft

AsK Mr. Wallstreet “Play Ball Stock Picking”

I

was thinking the other day about what it takes to build and manage a microcap portfolio. What does it compare to? Since my days on Wall Street and my love for baseball, my number one bucket list item is owning a baseball team, even a minor league, low level team with maybe a few likeminded baseball junkies just like me. From time management for due diligence, scouting for new tickers, scouring for research, digging into statistics, or even bringing in quality personnel to assist managing day to day operations and minute to minute trading with me can all be compared to owning a baseball team.

Steve Cohen owner of the Mets certainly comes to mind.

With MLB opening day just weeks away I reflected how after all my years in buying and selling penny stocks, microcaps, emerging growth companies I was able to compare what I did to running a professional baseball team. I dreamed of buying a minor league team affiliated with an MLB team even in West Podunk, or East Yemmetsville. How does running a baseball team compare to managing a microcap portfolio, big or small let’s examine.

It all starts with developing my opening day 25 player roster compared to putting together my portfolio. For lack of a true comparison for this exercise I will be owner, general manager and dugout skipper, coaching staff and scouts working together to win the “World Series” or at least to make more money than I lose at the end of the day. Building the opening day roster which will not be the yearend roster simply because of trades, injuries, use your

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imagination in stocks, injuries can be devastating for instance coming up short of a projected milestone, or over promising and under delivery. To the best of my ability, I use stock due diligence which I liken to spring training where I get to become familiar with different players, their statistics, tendencies, as I would learn about each companies’ management team, capabilities under pressure, and comparisons to their peers either on the field or in the boardroom.

Are they winners? Will they beat my expectations?

Have they performed well over time?

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By rite of passage once the season opens and my roster is in place roster depth is important like near misses of inclusion in my portfolio but still promising however, I am always looking to add or subtract to improve my team/portfolio. Stock price is very similar to batting average, fielding percentage, (OBP) on base percentage, (OPS) on-base plus slugging combined and consistency of positive cashflow, earnings, price ascension and liquidity will hold a place in my portfolio. I never intend to be a “mad” trader but for sure once all chances of remaining on the team or in the portfolio have been given, I may have to make a trade.

It’s a long season and I must expect the unexpected such as inflation rising, interest rates rising, instability in the market, lack of liquidity so I go forward truly relying on my experience of knowing when to hold or to fold. As a lifelong fan of both baseball and microcaps I look forward to each season and hopefully making money, somehow, they just go hand in hand.

My baseball beginnings: Growing up in Brooklyn I was a devoted Dodger fan, even going to games at Ebbets field until 1958 when the Dodgers moved to

Los Angeles. This was a tragic blow to my 7-yearold self. Thankfully I lived through it and shifted my loyalty immediately to my favorite American League team the New York Yankees and never looked BACK! So even though I live in Los Angeles and still revere Sandy Koufax, the Yanks are my team!

My stock market beginning: As a 13-year-old investing my Bar Mitzvah money under my mom’s tutelage.

Her guidance and influence were the impetus to giving me my earliest of early business acumen and made me a great Monopoly player and math student which helped when trading shifted from fractions to decimals.

As opening day approaches and my MLB TV package is in place, I’ll have one eye on a game and the other eye on the stocks & news screen. I have a feeling I’m not alone in this daily practice and I’m sure you can relate to my comparisons and have your own as well. So, go Yanks and knock your microcap portfolio out of the park!

Ask Mr. Wallstreet is Shelly Kraft. He began on Wall Street in 1984 as a penny stockbroker, investment banker, rising to President of Emanuel & Company, a boutique IPO underwriter and microcap market maker.

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

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Planet MicroCap Review 95

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// By Roger Pondel

Microcap Investing in 2023 A Promising Year Ahead for Great Companies and Astute Investors

A Q&A with PondelWilkinson’s Roger Pondel

W

hile the stocks of great companies in any size range usually perform well over time, regardless of general market conditions, great microcap companies – those under $300 million in valuation – often perform even better.

Many forecasters believe 2023 will be a good year for the market, so identifying the often maligned and under-the-radar great microcaps could pay off with some solid returns.

the market in general holds true, microcaps could perform better than “good.” Many quality small company stocks got the short end of the stick in 2022. There was a flight to the perceived safety of bigger companies, and not necessarily just because of performance. So this year, the opposite can occur, because smaller companies have more room for growth, both for their businesses and for their share prices.

SNN’s Shelly Kraft recently sat down with veteran investor relations and corporate communications advisor Roger Pondel, CEO of PondelWilkinson Inc., to ask a few questions about why 2023 is expected to be an outstanding year for microcap companies and what investors should look for to identify the best of the best.

SK: Is it easier for a $1 stock to hit $2 than it is for a $50 stock to reach $100?

SK: To set the stage, why should 2023 be a good year for the market?

RP: While forecasting market performance is always fraught with uncertainty, and the prognosticators are about 50-50 in their forecasts about this year, 2023 is starting off on the right track—at least so far. Market performance is up, inflation has slowed, the rapid acceleration of interest rate hikes seems to be moderating. And since last year’s average returns were so dismal, some market pundits believe this year is bound to be better.

SK: But why in particular should 2023 be good for microcaps?

RP: If the premise of 2023 being a good year for

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RP: I would answer “yes,” with some caveats. Just as it is easier to see huge percentage increases in sales and profits when growing a business from the start-up and early stages, likewise, it is often a quicker road to see large stock price gains when starting from a lower price. There is more room and more opportunities to grow a small business, just as there is more room for a microcap stock to grow its valuation. But unlike the chicken and egg, the astute investor should know that solid company fundamentals should be evident first.

SK: What fundamentals should investors be looking for in a microcap company in order to see growth and mitigate their risk?

RP: To be certain, the rewards of investing in microcap companies can be extraordinary. Having a degree of risk tolerance is imperative and paying close attention to certain business fundamentals can help mitigate that risk. Granted, these are basics

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to follow for investing in companies of any size, but they are particularly important for microcap investing: •• Strong management with operating experience in the sector.

•• An independent board of directors and attention to good governance.

•• A sector with strong growth prospects.

•• Timely and up-to-date SEC filings.

•• A business model that is real, believable and understandable in plain English.

•• A balance sheet with cash in the bank, little debt and devoid of complex financing.

•• Potential appeal to institutional investors.

•• Regular, transparent communication of positive developments, as well as forthright articulation of challenges.

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SK: Are there any red flags to watch out for?

RP: With microcap companies, or for that matter with any size public company, there are always certain red flags. Aside from those that are operational and financial in nature, I’d be particularly cognizant about the people first…the quality and backgrounds of management. Watch for paid promoters, email spam, cold-calling investors and questionable press releases. As the saying goes, “a few bad apples can spoil the entire barrel,” so particularly with the smallest of microcap companies, it’s well worth the time to look at the fundamentals and watch for any red flags. There are shining stars to be discovered, regardless of market cap…and potentially lots of money to be made.

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SK: You provided some solid suggestions for investors in microcap companies, but do you have any advice for the issuers?

RP: Regardless of size, consistent, thoughtful and realistic communications are key. Communicating well and issuing news that is real, both on traditional wire services and via social media, is highly beneficial. Staying in front of analysts who follow the company’s sector also is important. For many microcaps, analysts may not be able to issue a research report, but one day, as the company grows, they will. And often, analysts write sector round-up reports and mention up-and-comers that they do not formally cover.

SK: Lasty, I have asked this question before, but it bears repeating. Is it really possible for microcap companies to enhance valuation during uncertain market environments?

SK: How does one identify microcap companies in the first place, since they typically are under-followed by traditional Wall Street analysts and under-covered by the business and financial news media: RP: That’s a bit of a challenge, but doable. There are approximately 7,000 microcap companies listed on exchanges and OTC-traded, so identifying the best ones with great growth potential is not easy.

A few suggestions: Look at indices, such as the quarterly Planet Microcap Index; identify growth sectors or industries you like and understand; look for companies of the products and services you use, then screen for companies in the news; check out microcap companies that present at investor conferences; and identify companies that are included in microcap funds. Once a target is identified, the real work of looking into each one begins.

RP: My answer remains the same, absolutely! But it takes both patience and performance. As in virtually any market environment, it’s up to the company to perform financially and operationally - and effectively tell its story - for enhanced valuation to occur. The “telling” part means proactively seeking to attract attention, getting in front of the right investors, communicating the company’s financial performance, participating in non-deal roadshows, presenting at conferences, issuing a steady flow of real news, seeking and accepting speaking opportunities, and judicious use of social media.

Roger Pondel is CEO of PondelWilkinson Inc., a full-service investor relations and strategic public relations firm operating for more than 50 years that has earned a national reputation for innovative, aggressive, professional service, representing pre-public and publicly traded companies in multiple sectors, from microcap to big cap. He can be reached at rpondel@pondel.com, or 310-279-5965.

Roger Pondel is CEO of PondelWilkinson Inc., a full-service investor relations and strategic public relations firm that has earned a national reputation for innovative, aggressive, professional service. He can be reached at rpondel@pondel.com, or 310-279-5965.

For more information about PondelWilkinson, please visit: www.pondel.com

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

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LUCOSKY BROOKMAN GIVES BACK

Lucosky Brookman LLP, a leading corporate law firm, is devoted to contributing time and resources to giving back to the community through a hands-on approach to charitable activities. Since 2014, Lucosky Brookman, together with its friends, clients and colleagues, has donated over $775,000 to charitable endeavors throughout the world. In 2017, Lucosky Brookman founded the Lucosky Brookman Foundation, a public 501(c) (3) charity, through which the Firm uses the power of philanthropy to impact the lives of those less fortunate.

Lucosky Brookman invites you to join it in supporting The Save A Child’s Heart Foundation (SACH). SACH is a global humanitarian organization, with a mission to provide life-saving cardiac care to children of all backgrounds, regardless of race, religion, gender, nationality, or financial status, who suffer from congenital and acquired heart defects and have no access to quality care in their native countries. SACH is also committed to providing training to doctors from developing countries to set up local centers of competence. To date, SACH has have saved the lives of 5,000 children from 58 countries and has trained over 120 international medical personnel.

To learn more or make a donation visit www.theLBF.org

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Planet MicroCap Review 99

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// By Mike Porter

50 years of seasoned IR advice In 1967 I was hired by a mid-sized brokerage firm as a trainee trader-analyst.

M

y first assignment was to take a 5:56 AM train into New York, run to One Battery Park and pick up 15 copies of the Pink Sheets. The Pink Sheets were hundreds of pages, two-sided that encompassed every closing trade, by every dealer, from the previous day. The Pink Sheets were the property of and published by the National Association of Security Dealers, which was the precursor to NASDAQ. I delivered the Pink Sheets to the office, to each trader, by 8:00 AM, and they marked their positions – at 9:30 AM everyone began trading. started to trade. Everyone put their activities down on paper, then submitted the paper to the back office, or cage, at 4:00 PM. This was all done without computers.

I immediately began studying for a number of licenses required by the SEC. My boss was fully behind me, and he gave me a book titled Security Analysts, by Graham & Dodd, which he called “The Holy Grail of Wall Street.” I bring this up to explain my background and underline the decades of experience I have in the investment community. I have been through seven or eight bull and bear markets, and I’ve seen everyone on Wall Street make adjustments and move on. Today, in 2023, corporate officers at public companies are faced with challenges heretofore unseen. History is being rewritten once again.

In 2023 we are seeing instant execution and more data than ever before. It feels like an overload, one shrinking the investment profession while increasing the power of individual investors. In today’s market, the investment community is primarily interested in companies lead by knowledgeable, credible managers.

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In the current era, corporate officers wear many hats. He or she runs a business with a number of key goals and objectives: generating revenue and earnings, growth, effective sales and marketing, product development and/or services and, last but not least, a strategy for stock growth capital appreciation and capital raises. These executives need to communicate with the investment community in an effective, efficient and ethical manner, with an emphasis on education and communication.

There is no shortcut to successful investing – you have to put in the time and do the work. There are many professionals in the market and, if relied upon by their clients, can give these clients quality, timely information to assist them in analyzing a company and making an investment decision. There is no such thing as a quick buck. If only the public would realize the company itself is their best source for accurate information, fewer people would make bad, “message-board” decisions.

The company is required by SEC regulations to report at a minimum on a quarterly basis and whenever there is a material event: press releases are one of the most important implements in your tool kit, and they should always be written for the investment community. Releases should be factual, definitive and able to convey the event’s importance; they should also be written so readers understand the event’s impact on the company. This will give management credibility, which is of paramount importance (many investors have told us the jockey is more important to them than the horse).

Every public company should have a communications strategy, one that educates current and potential investors in step with company developments.

Company leadership should develop key messages and make sure these messages are highlighted in all communications. They should also regularly examine and analyze their industry and their peer group to find out how investors feel about the former and the latter. Management should also plan and target new investors by attending conferences, meeting with members of the investment community and making sure the investor page on the company website is comprehensive and easy to navigate. Remember, loyal shareholders always begin as well-educated investors.

If the news is technical in nature, it may be appropriate for management to host a conference call to educate the investment community about the news and the company’s technology. In all my years working with the investment community I have learned people can accept and understand good news or bad news; what they can’t understand is news that’s confusing and could cause selling – a release can have an impact on shareholder value as well as on the reputation of the company. After the release is published the company can produce a podcast to further educate investors; the internet offers myriad, excellent tools for disclosing information to a large audience.

Let’s talk about social media. It offers incredible benefits beyond the message boards, which are nothing more than gossip columns for individual investors who, in most cases, doesn’t understand the fundamentals of investing. In all my years in the market I am horrified when I hear from investors that something they read on a message board inspired them to buy or sell. The shame of it is these investors usually lose. The message boards do not provide information about what’s going on at a company or how this information will affect the stock.

Companies should always use quarterly conference calls as a tool to market the company to investors, and to update existing stockholders on the company’s progress. These calls offer an ideal way to explain, informally, the more technical aspects of the business.

All corporate managers should realize there are many opportunities and effective ways to raise awareness in the investment community. The more information distributed, the more you educate potential investors and inspire them to become loyal shareholders confident in the company’s story.

For more information about Porter, LeVay & Rose, please visit: www.plrinvest.com

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

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Planet MicroCap Review 101

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// By Richard Revelins

To DTC or not to DTC, that is the question?

Many ASX, and other foreign listed companies, are coming to the US capital markets, including the Over the Counter Market, looking to generate liquidity and interest in the world’s largest investor market and are considering the advantages of being DTC eligible.

I’m pretty sure Shakespeare was not contemplating DTC eligibility when he penned Act 3, Scene 1 of Hamlet. DTC has nothing to do with anger and revenge which saw the downfall of a king, a queen and particularly, poor old Hamlet himself. A secondary interpretation describes how “in life you will be able to get away with something but not forever”.

So, how important is it to be DTC eligible, when is the right timing to apply and what benefits does being DTC eligible bestow?

What is DTC eligibility and why is it important?

The Depository Trust Company (“DTC”) is a depository for securities and facilitates electronic trading in the United States. It was created to eliminate the reliance on paper certificates. DTC electronically records changes of ownership using an electronic book entry system and delivers those securities to customer accounts. After a broker/dealer initiates an order to buy or sell securities, the information is sent to the National Securities Clearing Corporation (“NSCC”) to confirm trade details, issue a summary of the trades, and then sends instructions to DTC to settle the trade. It is an industry owned and operated body that administers and clears all trading and is mandatory for the NYSE and NASDAQ trading, there is reason for this! Companies that trade on OTC markets can apply and be granted DTC eligibility.

What benefits does DTC eligibility provide? Eligibil-

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ity prevents challenges and issues from brokers in respect to the settlement process and most broker/ dealers will not execute trades for non-DTC eligible securities. DTC eligible shares are traded more quickly, at significantly less cost and accordingly can facilitate increased trading volume. The combination of these factors presents a strong argument for companies to pursue DTC eligibility.

When should companies apply for DTC eligibility and what is involved in the process? There are differing views in respect to timing. Some companies elect to complete their OTCQX or OTCQB applications first and pursue DTC as a subsequent initiative.

There is no strategic or commercial reason, save for the initial cost, to separate these activities and I would usually recommend both processes are undertaken in parallel. OTC trading and DTC eligibility generally can both be achieved within 8 weeks respectively and one is not dependent upon the other. OTC trading is a well understood process and OTC markets representatives are contactable, available and communicative. DTC is somewhat a different animal and operates as a quasi-regulatory authority. DTC officers only interact with DTC participants and are not inclined to discuss their processes or the state of a DTC application with companies or their advisers.

What is the cost of becoming DTC eligible? Costs vary depending on the parties involved and where

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the issuer is domiciled. A general indication of out-of-pocket costs for ASX dual trading entities, which includes filing the eligibility application, US and foreign legal opinions (required for non-US or nonCanadian issuers), transfer agent costs, DTC lodgment fees and in-house legal fees will total around $29,000. There are no ongoing DTC costs, apart from maintaining the US sub-register which is minimal. Once DTC has been granted a company has 30 days to lodge shares with Cede & Co (DTC’s share repository), either as a physical share certificate or electronically. As simple as this sounds, in practice it is not so simple, particularly for a foreign issuer.

Firstly, the company must find a friendly shareholder willing to transfer some shares to the new US sub-register. That shareholder needs to have, or subsequently establish, a US trading account, which can be a very difficult and time-consuming exercise………just ask any foreigner who has attempted to do this. Once the account is operational, you may then encounter an issue with having your US broker complete the DTC share lodgment. Most brokers I have approached have either declined to assist, or require substantial financial compensation, to lodge with DTC. My advice to companies looking to become DTC eligible is to carefully read your

engagement agreement and inquire with the DTC filer how they intend to complete lodgment. The last thing you want to have to deal with is waking up to find “something is rotten in the state of Denmark.”

To DTC or not to DTC? DTC is not the panacea that guarantees strong OTC markets trading. DTC is important because it expands the market of broker/dealers who can trade your securities and significantly lowers transaction costs for investors, which are both valuable considerations. It is equally important to establish a well thought out and consistent investor awareness program because how are investors going to be motivated to buy your shares unless they are aware of the company’s activities.

Accordingly, a multi-facetted approach should be properly evaluated and implemented “there are more things in Heaven and earth Horatio, than are dreamt of in your philosophy.” Happy trading.

Richard Revelins has worked as an international investment banker for over 35 years and specializes in listed public companies. He is a co-founder of Peregrine Corporate Limited based in Australia and is also a Managing Director at Cappello Group Limited based in Los Angeles, USA. He currently resides in Venice, California and divides his time between the US and Australia.

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

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Planet MicroCap Review 103

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// By David Morgan and Ryan Blanchette

Platinum Risk in South Africa Platinum, a precious metal 20 times rarer than gold, once surpassed gold by double in the mid 2000’s – but now sits at nearly half of spot gold in 2023.

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eing an industrial metal, its decline in price can be linked to the shift from platinum to palladium in catalytic converters and the rise in electric vehicle investment and production which, as the West hopes, sounds the death knell for internal combustion engines. However, this does not mean platinum’s days as a useful industrial metal are over.

Autocatalysts will still be in demand for the mid-term, and those looking towards the long-term future of

green and efficient transportation look to the possibility’s platinum could provide for hydrogen fuel cells and an overall “hydrogen economy”.

From what we have determined the actual implementation of platinum into the hydrogen economy is NOT economic at this time. Therefore, we are discounting that demand at the time of this writing.

Figure 1. The Bushveld Complex. Source: Minerals Council South Africa

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Figure 2. Yearly South African platinum supply. Source: Johnson Matthey, Davis analysis and estimates

The most critical issue with platinum is the main source, South Africa. Since 1924, South Africa has been the central source for the world’s supply of platinum and has bestowed to the world approximately 85% of all platinum ever produced.

(Figure 2). This is mainly due to the declining grade of the excavated metal as well as unequal depletion of reserves1.

South Africa’s energy crisis is key to the platinum industry. Blackouts crippled the country in 2022 (see Figure 3), along with its platinum mining efforts, which were 6% below producer’s expectations and the worst output in two decades2. The electrical problems initiate a cascade of issues for platinum mines, including workforce cuts, refining constraints, and early season closures.

The Bottleneck As stated by the World Economic Forum in their 2023 Global Risks Report, “State intervention is centered on the resource most exposed to a concentration of supply”. For platinum in South Africa, this is true – the 300-kilometer-wide Bushveld Complex (Figure 1), nestled in the northeastern region of South Africa, is the primary source of platinum mining in the world.

An even larger risk may be the loss of future investment due to the nation’s grid and geopolitical probThe inherent risk of any physical asset or commod- lems. South Africa has no solution on the horizon for ity is based in part on its ability to be squeezed. For this issue and foresees continual blackouts. platinum, the potential squeeze comes in three main forms, the first being geographical (natural concen- At these high rates of power cuts, the estimated mintration), the second being national (nearly all within ing supply of platinum in South Africa is expected South Africa), and the third being the rarity of the to decrease by 10% in 20233. With every year that metal itself. The fact platinum is traded in the futures power cuts remain a factor, the mining supply is in market also adds to the possibility of a squeeze. turn negatively affected, and the growing deficit will continue to mount.

If we look at the total platinum mined per year in South Africa, we see a gradual decline in output

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Planet MicroCap Review 105

Figure 3. South Africa’s daily power cuts. Source: Bloomberg

The Violence Unfortunately for South Africans, the nation is no stranger to violence and upheaval. During one brutal stretch in 2022 from July 1 to September 30, more than 7,000 inhabitants were murdered, 4,000 were kidnapped, and over 10,000 rapes were reported throughout the country5. The illegal gun trade is also a major concern to the public safety, with nearly 10,000 weapons reported stolen each year. South Africa’s police face widespread shortages of trained officers along with entrenched corruption.

To make matters worse, it also faces social unrest from the citizens themselves – mass protests broke out in July 2021 over the jailing of former president Jacob Zuma (see Figure 4) for contempt of court during the controversial Zondo Commission, which was formed by Zuma himself to investigate fraud and corruption within the public sector. The protests turned into riots, leaving nearly 100 dead and over 1,000 arrested, with businesses closing their doors for fear of violence. COVID lockdowns have also hampered economic output; in 2021 the unemployment number reached over 30%6.

The BRICS of Foundation Another major roadblock to the West’s supply of platinum is South Africa’s growing relationship with

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the major powers of the East, Russia and China. BRICS (Brazil, Russia, India, China, and South Africa) is an intergovernmental organization founded in 2006 that was born from the fires of global multi-polarity. The leaders of the organization, Russia and China, devised a strategy to harness the power of key developing nations not specifically aligned with Western interests to coordinate future economic power with the eventual aim of de-dollarization. The actions undertaken by the United States and the West in response to Russia’s invasion only accelerated Russia’s desire to be unhinged from the forces of the world’s prevailing reserve currency. The African National Congress, South Africa’s ruling party, encouraged the addition of new BRICS members to further enhance the organization’s political and economic power to counter Western dominance10. The party is also outspoken in their criticism for NATO’s continued supply of weapons and arms to Ukraine and holds NATO responsible for the actions that precipitated Russia’s invasion.

South Africa’s military expenditure is quite small, averaging just 1% of its GDP since its admittance into BRICS11. However, its military has regularly participated in large-scale training & exercise drills with Russia and China “as a means to strengthen the already flourishing relations between South Africa, Russia and China”, in a statement by the South African National Defense Forces12.

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Figure 4. Zuma riots. Source: Al Jazeera

Fighting for Influence The schism of East and West continues to grow larger by the year and the ever-apparent minerals war of the 2020s and 30s puts Africa right in the middle.

Each side understands how important these critical resources are to accomplishing their set objectives – for the West, to create a carbon-neutral green future dependent on these metals; for the East, to control the supply of those metals to dictate on their own terms how, when, and if the West receives those metals. Energy is the most powerful commodity man can harness, and a multitude of wars have been fought over energy alone, most notably and recently

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the conflicts over vast oil reserves in the Middle East since the 1970s.

Not only do Russia and China have immense resources in-country (resources the West wants), but they have already planted themselves in Africa and have prepared accordingly well in advance of the competing side. China has a firm stake in West Africa, whose lands are rich in gold. Russia has even brokered deals with African nations by supplying mercenaries and troops in order to secure vital gold and diamond mines within their borders13 through political means in order to deter Eastern influence.

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Figure 6. Estimated platinum demand for the hydrogen economy. Source: Anglo American Platinum

In the past, concerns over the ability of South Africa to supply platinum to the world has resulted in significantly higher spot metal prices, and this occurrence is likely to happen again. Looking to green energy, Figure 6 shows what a future hydrogen economy could mean for platinum demand going into the late 2020s and early 2030s.

Remember, this is what the platinum use could look like in the future, it is not viable at this time. However, the difficulties of obtaining platinum in the long term due to geopolitical barriers or internal disturbances may also divert would-be green technology seekers to other metals instead. Those wishing to use platinum as an investment vehicle would be wise to keep informed on in the complex situation in South Africa, the central source of the world’s platinum supply.

He is the author of “The Silver Manifesto” and a featured speaker at investment conferences worldwide. David has appeared on CNBC, Fox Business, Yahoo Finance, MSNBC, and BNN in Canada.

Additionally, he provides the public with a tremendous amount of information. David is a macroeconomist -educating people about honest money and the benefits of a sound financial system.

Ryan is a former DOD intelligence analyst turned critical metals analyst, who views the industry through the lens of geopolitics, risk, & conflict.

Twitter: @MetalsDesk Email: palezerogroup@gmail.com

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, a world-class publication designed to build and secure wealth.

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

David Morgan nor Ryan Blanchette does not own stocks of any companies mentioned in the article.

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YES, YOU CAN CONTINUE TO GROW YOUR WEALTH REGARDLESS OF THE ECONOMY MicroCap www.PlanetMicroCap.com A N D T H E F I N A N C I A L M A R Planet KET S . Review 109

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ET F CO RN ER

// By Michael Krause

There’s An ETF For That A Challenging Year Twenty twenty-two has been a challenging year for investors so far, and not just because the stock market is down. As inflation proved to be anything but transitory, it brought the four-decade secular bull market in bonds to an abrupt end. As a result, even the most basic diversification strategy such as the typical 60/40 stock and bond portfolio failed to provide much of a benefit.

20%. Meanwhile stocks in the iShares Micro-Cap ETF (IWC)—likely of particular interest to readers of this publication—have declined almost 19% through November 14. Table 1 below shows returns of the major equity benchmarks, along with each fund’s current price-to-earnings ratio versus its 10-year average.

Through November 14, stocks as represented by the S&P 500 SPDR (SPY) have lost 16% year-to-date, while the bond market—tracked by the iShares Core U.S. Aggregate Bond ETF (AGG)—shed 14% (including the value of interest payments received by the fund and paid out to investors as distributions).

Among sectors, only Energy (XLE) managed to post gains, and it is up a whopping 73% year-todate. But at such a small weight in the S&P 500 (the sector started the year at just over 3% of the index), even investors who positioned themselves substantially overweight in the sector likely still didn’t have enough exposure to make much of a difference. Even gold (GLD), which is supposed to be the ultimate hedge against inflation, is down 3.5%.

Foreign stocks didn’t help returns either. The iShares MSCI EAFE ETF (EFA) which includes stocks from developed markets outside the U.S., is down 16% through November 14 while the iShares MSCI Emerging Markets ETF (EEM) tanked more than

Not everything has declined this year; investors just had to have ventured into more exotic areas.

For example, the Simplify Interest Rate Hedge ETF (PFIX), which holds interest rate options, Treasuries and TIPS to hedge against increases in interest

Table 1: Equity Benchmark ETFs

YTD Returns and P/E Ratios as of November 14, 2022 Ticker

Fund

Return

Fwd. P/E

10 yr. Avg

Prem/Disc.

SPY

SPDR S&P 500 ETF Trust

-15.9%

17.1

17.8

-3.9%

QQQ

Invesco QQQ Trust

-27.9%

21.4

20.4

4.9%

MDY

SPDR S&P Midcap 400 ETF

-10.8%

13.0

15.0

-13.3%

IWM

iShares Russell 2000 ETF

-16.1%

16.6

37.0

-55.1%

EFA

iShares MSCI EAFE ETF

-15.8%

12.7

17.6

-27.8%

EEM

iShares MSCI Emg. Mkts. ETF

-21.6%

11.8

17.9

-34.1%

IWC

iShares Micro-Cap ETF

-18.6%

59.5

n/m

Source: FactSet and www.etfrc.com

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Figure 1: How to Find ETF Comps ETF Research Center

Source: www.etfrc.com

rates, has returned 92% year-to-date. That kind of performance won’t persist once rate hikes start to moderate; when that will happen is of course a hotly debated matter.

Silver Lining One upside of such a challenging year is that you likely have no shortage of investments to use for tax-loss harvesting. There are a couple of free tools on ETF Research Center (www.etfrc.com) that can help investors maintain the exposure they want while avoiding the Wash Sale Rule (which disallows any tax-loss if you repurchase the same security within 30 days).

For investors with losses in single stocks, consult the Stock Finder tool for a list of all ETFs with exposure to a given stock. For example, if you want to harvest tax losses from Meta (FB) but still want to maintain exposure to the stock (any many other similar stocks), you can choose from among 290 different ETFs, including the Communication Services SPDR (XLC) which has more than 12% allocation to FB (it was even higher before FB tanked!).

1000 ETF (PRF), for example, enter its ticker in the box and then click on the ‘Comps’ tab. First on the list is the Schwab Fundamental U.S. Large Co. Index (FNDX) with more than 87% overlap, with a cost savings of 14 basis points on the expense ratio. There are plenty more to choose from, with slightly lower overlap but even bigger cost savings.

Spoiled for Choice Despite challenging markets, ETF issuers’ enthusiasm for launching new products has hardly waned.

Through early November, issuers have launched 356 new ETFs in 2022, compared with 461 in all of 2021, heading for their second-most prolific year ever, according to data gathered by Tidal Financial Group, an independent ETF growth platform. Part of this

Figure 2: ETF Launches by Year 2010 – 2022 YTD 500 450 400 350 300

Meanwhile investors who are sitting on losses in a given ETF can have a look at the ‘Comps’ tab on any ETF’s focus page. Comps are based on the percentage of overlap in underlying holdings. Here you’ll find similar funds to choose from, possibly even at a lower expense ratio!

250

To see the comps for the Invesco FTSE RAFI US

Source: Tidal Financial Group

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200 150 100 50 0 2010

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surge is due to passage of the so-called “ETF Rule” by the SEC in late 2019 that significantly lowered barriers to entry and the costs to launch an ETF. The largest share of these—representing about 15% of total launches by our count—can broadly be grouped under the banner of ESG, where constituents are selected for their perceived adherence to a set of Environmental, Social and Governance standards (and other constituents are excluded due to their perceived lack of adherence). ESG investing became notably more controversial in 2022, both because of pushback by some states, as well as widespread underperformance due to limited exposure to “dirty” Energy, which as mentioned above was the only major sector to see gains this year.

Another “innovation” was the advent of single-stock ETFs, which at first glance might seem antithetical to the whole notion of ETFs as a diversified basket of stocks or bonds that give you instant exposure to broad segments of the market. Single-stock ETFs typically use derivatives to provide investors with leveraged or inverse returns (i.e., 2x, -1x, etc.) on an actively-traded stock such as Tesla Motors (TSLA).

These reset daily and so may be useful to traders looking to express a strong, short-term conviction, but they are probably best avoided by long term investors, even those with strong views on a particular stock. Nonetheless, prepare to see a lot more single-stocks ETFs debut in the months and years to come.

Trends in the Year Ahead January 2023 marks the 30th anniversary of the first—and still the biggest—ETF to list in the U.S., the S&P 500 SPDR (SPY). The industry has grown incredibly since that time, to over $6.5 trillion in assets under management, a figure that is still dwarfed by the more than $21 trillion invested in mutual funds as of September 2022, according to the Investment Company Institute. As ETFs continue to gain market share, the number of funds available will no doubt continue to increase, slicing and dicing the investment universe into ever-more custom variations.

The industry also continues to push new areas. The hottest topic in the industry is if the SEC will ever permit a spot Bitcoin or other cryptocurrency ETF to list in the United States. While the decline in cryptocurrency prices and the collapse of the FTX exchange may dampen enthusiasm, others will argue that is exactly why a well-regulated vehicle for retail investors like an ETF is needed. Only time will tell, but for now whether you need a broad slice of the equity market, an exotic corner of the bond market or structured derivatives, there’s most likely an ETF for that.

Mr. Krause is a pioneer in the research of Exchange Traded Funds, having developed a process for aggregating a fundamental analysis of the funds’ underlying constituents into a unique, forward-looking set of ratings and metrics for each ETF. He founded AltaVista Research in 2003, which today tracks more than 2,400 ETFs. The company publishes its ratings and analysis, along with portfolio building tools, on the ETF Research Center website (www.etfrc.com).

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

Michael Krause does not own stocks in ETFs mentioned in this article.

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