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sprIng 2018 The Official Magazine of the MicroCap Stock Market Since 2006

Drone Delivery Canada Corp. TSX-V: FLT, OTCQB: TAKOF Marrone Bio Innovations, Inc. NASDAQ CM: MBII

12 16
Page Tony Di Benedetto, CEO and Director Page Pam Marrone, CEO and President

DPW Holdings, Inc. NYSE American: DPW MJ Holdings, Inc. PINK: MJNE

20 48
Milton “Todd” Ault III, Chairman & CEO Page Paris Balouras, President, CEO & Director

26 Microcaps’ Current Trend is Your Friend but 44 Mastering the Mekong Region’s MicroCap 62 Fixed
Income MichaelFlickr
E. Lewitt 84 Looking to Catch
Twitter Retweet
a New Trend Early?
it will END! Companies Peter Pham Follow the Canucks Brady Fletcher
Steven M. Shelton, MS, MBA, CFP , CLU, CHFC, TEP, CIMA , CMT
64 Exploration Insights Brent Cook
46 Derivatives are 15 Times World GDP 90 Welcome to Blockchain
® ®

72 Canada at the Table Ralph Garcea

34 Investor Relations FAQ - Q&A Egon Von Greyerz Facebook MySpace Alexandra
StumbleUpon Levin
DiggKramer, Esq. and
Jeffrey Goldberger, Rob Fink, and Ted J. Haberfield 77 Investing in Australian Small and Marina Fyrigou-Koulouri, Esq.
50 Can Cord Shaving Save Cable Companies Microcap Companies John Kimber
38 Beltway Corner from Cord Cutting? Jason Gurwin 98 How Macroeconomic News Impacts
Dina Ellis Rochkind, Esq. and Casey Miller, Esq. 80 Three Strong Points for SME Markets MicroCap Stocks: Interview with
56 Crosswinds for the Cannabis Industry Slash Dot
Cromwell Coulson Mixx Skype Technorati
Charles V. Payne
42 Seeing the Light, The Case for Nuclear Alan Brochstein
Power in the 21st Century 82 Trading Cryptocurrencies
Scott L. Montgomery and Thomas Graham Jr.
58 Family Offices Karl Douglas Mark Shore, MBA
Reddit FriendFeed YouTube LinkedIn
see arTICle page 8

Page 24

In Loving Memory of Our Precious Daughter, all Street’s big board has seen biopesticides. Drone Delivery Canada Corp.,
and Sister, Sammi Kane Kraft
historical moves over the last FLT.V: TSX.V, TAKOF: OTC MARKETS,
Published Since 2006 18 months. This isn’t just using technology to create and commercial-
abnormal, but rather extreme. The bullish ize new and innovative logistics platforms trend fueled by Washington tax cuts, increas- for retailers and government agencies. DPW
Follow us: @StockNewsNow ing corporate expansion, positive earnings Holdings, Inc., DPW: NYSE, a diverse hold-
and greater cash flow, along with an overall ing company acquiring undervalued assets,
SNN Inc.
5839 Green Valley Circle growth in the economy, has turned the disruptive technologies, and sustainable and
Suite 205 bullish market sentiment into a frenzy. The impactful ventures to develop for long-term
Culver City, Ca. 90230 increase in investor profits and capital gains growth. MJ Holdings, Inc., MJNE: PINK is
has led to abundant discretionary income a diversified holding company, providing
PUBLISHER in retirement accounts, trading accounts, turnkey solutions and services to the regu-
Shelly Kraft broker accounts and bank accounts. Investor lated cannabis industry and has a two page
SNN Chairman/Founder/CEO
buying is creating new highs on most indi- centerfold layout.
ces as both retail investors and institutional On the inside front cover is SRAX:
Lynda Lou “Lulu” Kraft investors are committing more capital to NASDAQ CM, an Internet advertising and
SNN President
new investment ideas benefiting emerging platform technology company. The inside
EXECUTIVE EDITOR growth opportunities. In the past I have back cover is SPYR, Inc., SPYR: PINK, a
Robert Kane Kraft referenced the “trickle down effect” of profit mobile games publisher.
SNN Chief Operating Officer
taking by investors, which feeds new invest- Here are the remaining profiled com-
ment in the microcap market. The microcap panies: MagneGas Corporation, MNGA:
Wesley Ramjeet ecosystem is in full spring bloom, especially NASDAQ CM, a green tech renewable tech-
SNN Chief Financial Officer
emerging growth companies looking to raise nology company, CanAlaska Uranium Ltd.,
capital. More investment capital available CVV.V: TSX.V, CVVUF: OTC MARKETS, a
ASIAN PACIFIC CORRESPONDENT means more opportunities and new listings Uranium exploration company, and Cel-Sci,
Leslie Richardson
for investors. There is a rush to market while an immunotherapy drug company treating
SNN COMPLIANCE AND DUE DILIGENCE investors are flush. The new issues through head and neck cancer.
ADMINISTRATION Reg A+, Reg CF, and the return of S-1s, We have covered many sectors in this issue
Jack Leslie
SPACs, M&A deals, ATMs and RDs, invest- and provided extra focus on blockchain,
CHAIRMAN OF SNN ADVISORY BOARD ment bankers, lawyers, CPAs and related cryptocurrencies and ICOs.
Dr. Leonard Makowka service providers haven’t been this busy in Thank you to this issue’s contributors and
many years. Companies are getting funded to our loyal subscribers, readers and fol-
ADVERTISING and SALES and in select sectors stocks are performing lowers. Please visit our website www.stock-
424-227-9018 well in the aftermarket. Market gyrations, and subscribe to receive this
increased volatility, tariff wars, higher inter- magazine in its electronic format as we move
Unitron Media Corp est rates and “politics” notwithstanding, the to become a green company. economy is booming and fueling the micro-
cap public and private emerging growth Shelly Kraft, Publisher n
424-227-9018 This issue highlights 9 profiled compa-
nies, including, on the front cover: Marine
Bio Innovations, Inc., MBII: NASDAQ
CM, transforming pest management with

Micro-Cap Review Magazine is published periodically. POSTMASTER send

address Changes to Micro-Cap Review Corporate Offices. ©Copyright 2018
by Micro-Cap Review Inc. All Rights Reserved. Reproduction without per-
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affiliates are not, nor do any of them claim to be, registered broker-dealers or registered investment advisors. This publication may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of
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Micro-Cap Review is owned and operated by SNN Inc. not made any independent investigation of the accuracy of any such information and no warranty of the accuracy of any such information is provided by this publication, its owners, employees and affiliates. Pursuant to Section 17(b) of the Securities Act of 1933, as amended, in situations where the publisher
has received consideration for the advertisement/advertorial of a company or security, the amount and nature of such consideration will be disclosed in print. Readers should always conduct their own due diligence before making any investment decision regarding the companies and securities mentioned in this
publication. Investment in securities generally, and many of the companies and securities mentioned in this publication from time to time, are speculative and carry a high degree of risk. The disclaimers set forth at - disclaimer are incorporated herein by this reference. MicroCap Review Magazine 3

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The CSE is not afraid to
be bold and neither are
our clients. Our model
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WE BELIEVE IN growth stage companies
INNOVATION. pursuing bold projects
across diverse sectors.
WE BELIEVE IN The CSE is Canada’s first exchange
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Spring 2018

26 Microcaps’ Current Trend is Your Friend but it will END! 60 Reverse Mergers with Crypto Companies–A
By Steven M. Shelton, MS, MBA, CFP®, CLU, CHFC, Craze or Crazy! By John Lowy, Esq.
67 Continental Stock Transfer
40 On the Market By Dr. John L. Faessel By Robert “Bobby” Kraft with Steven Nelson

42 Seeing the Light, The Case for Nuclear Power in 72 Canada at the Table – From Poker and
the 21st Century Sportsbook, to Slots/Casinos, Bingo and
By Scott L. Montgomery and Thomas Graham Jr. Lotteries – Place Your Bets By Ralph Garcea

44 Mastering the Mekong Region’s MicroCap Companies 88 Zinc Could Be Set to Zoom in Electric Vehicle Era
By Peter Pham By Max Porterfield

46 Derivatives are 15 Times World GDP 90 Welcome to Blockchain

By Egon Von Greyerz By Alexandra Levin Kramer, Esq. and
Marina Fyrigou-Koulouri, Esq.
52 Giants Back Machine Learning For Energy Pipelines
By Sean Peasgood 96 Oil Market 2018, What to Look For?
By Frederic Scheer
58 Family Offices
By Karl Douglas 98 How Macroeconomic News Impacts MicroCap
Stocks: Interview with Charles V. Payne

Accounting Corner Australia Corner Profiled Companies

23 The Auditor’s Report Gets a 77 Investing in Australian Small
Makeover and Microcap Companies 8 SRAX
By John Lucas, CPA By John Kimber NASDAQ CM: SRAX

Legal Corner Commodities Corner 12 Drone Delivery Canada Corp.

25 What Did I Just Invest In? 82 Trading Cryptocurrencies TSX-V: FLT, OTCQB: TAKOF
By Louis A. Bevilacqua, Esq. By Mark Shore, MBA
16 Marrone Bio Innovations, Inc.
Beltway Corner NASDAQ CM: MBII
38 The Buzz in Washington
20 DPW Holdings, Inc.
about Initial Coin Offerings Opinion NYSE AMERICAN: DPW
By Dina Ellis Rochkind, Esq. and 34 Investor Relations FAQ - Q&A
Casey Miller, Esq. By Jeffrey Goldberger, Rob Fink, 24 CEL-SCI Corporation
and Ted J. Haberfield NYSE: CVM
Cannabis Corner
56 Crosswinds for the Cannabis 50 Can Cord Shaving Save Cable 30 MagneGas Corporation
Industry Companies from Cord Cutting? NASDAQ CM: MNGA
By Alan Brochstein By Jason Gurwin
48 MJ Holdings, Inc.
Fixed Income Corner 75 Stock Promotion Commentary
62 Fixed Income
From OTC Markets Group 55 CanAlaska Uranium Ltd.
By Michael E. Lewitt
Resources Corner 80 Three Strong Points for SME 106 SPYR
64 Exploration Insights PINK: SPYR
By Brent Cook
By Cromwell Coulson
Asia Corner Comic Strip
70 Hong Kong A Top Market 84 Looking to Catch a New Trend
104 WallStreet Chicken - Episode 17
Performer In Global Bull Market Early? Follow the Canucks
Cleaning Up on Wall Street
By Leslie Richardson By Brady Fletcher MicroCap Review Magazine 7

nasDaq Cm: sraX

Providing the toolsProviding

to unlock the value of data
across marketing channels.
the tools to unlock
across marketing channels.
the value of data

The growth in consumer data collection

and analysishehas revolutionized
growth in consumer the
data way
companies approach advertising. Since its
tion and analysis has revolutionized SRAX Gross Margin Providing the tools to
inception in the2010, SRAX has been at the
way companies approach adver-
tising. Since its inceptionmarket,
of this burgeoning creat-
in 2010, SRAX
across marketing chan
ing and delivering multiple revenue-gen-
has been at the forefront of this burgeon- 56% 56%
erating products
ing market, in and
creating advertising and
delivering multiple
consumer dataerating
revenue-gen targeting for in
products marketers
advertising 41% The growth in consumer data collection
and online content owners.
and consumer data targeting for marketers 32% and analysis has revolutionized the way
companies approach advertising. Since its
and online content owners.
inception in 2010, SRAX has been at the
The company has thrived,
The company in part
has thrived, in through a
part through forefront of this burgeoning market, creat
focusaon developing
focus on developinghigh-margin
revenue, ing and delivering multiple revenue-gen
reducing operations costs and strengthen-
reducing operations costs and strengthening erating products in advertising and
Q3 2016 Q4 2016 Q1 2017 consumer data
Q2 2017 targeting for marketers
Q3 2017
ing itsitssales
and online content owners.
uted uted to expanded
to expanded grossgross margin,
margin, improved
Adjusted EBITDA
EBITDA 1 and ananenhanced
and enhanced posi- The company has thrived, in part through a
*Guidance provided in the November 14, 2017 press release
position as aa leading
leading digital
marketing and data
and focus on developing high-margin revenue
management platform. reducing operations costs and strengthen
data management platform.
ing its sales force. This strategy has contrib
As a digital marketing and data manage- Technology and systems designed to
uted to expanded gross margin, improved
DelIverIng new bloCkChaIn ment platform company working extensively resolve the core challenges
Adjusted faced
EBITDAby 1consum-
and an enhanced
soluTIon on all sides of the advertising market, SRAX ers and corporations standastoa take
position a signifi-
leading digital marketing and
Delivering New Blockchain Solution has experienced firsthand the inefficiencies cant portion of thedata management
digital data andplatform.
SRAX’s greatest strength is in identifying issues and inaccuracies that analytics market, currently valued at over
that can be solved with unique technology. challenge corporations working with con- $150.8 billion.
SRAX’sToday, this expertise is the basis for an excit- sumer data.corporations
greatest strength is in identifying challenge Marketers depend working
on access andwith This dissatisfaction
the threat has of created
New Blockchain
consumera spillover
issuesingthat can be
new avenue solvedthewith
of growth: unique of consumer
development data. data,
usage of verified Marketers
yet, due todepend
silos, this on
is effect ondissatisfaction
corporate other connected immediatelymarkets.and For
technology. Today, this expertise is the access and usage of verified
cutting-edge blockchain technology designed restricted and available only at a, yet, due example,
decisively notit only
will remove into
a growing
strength is in identifying
basis tofor antheexciting
disrupt digital advertising market. of to silos,
new avenue SRAX thishas
is restricted and aavailable
also developed deep under- only demand for
inhibiting continued ad blocking
expansion products.
that can be digital
of the solved with unique
growth: the development of cutting-edge at standing a premium.of the limited awareness, choice, and advertising market,technology.
but also willToday, this expertise is the
reveal new
basis for an exciting new avenue o
blockchain technology designed to compensation consumers face when it comes Technology
avenues of growth. and systems designed to
growth: the development of cutting-edge
disrupt the digital advertising market. SRAX
to thehas also
data developed
they a deep
produce online. Theunder-
data resolve the core
This fall, SRAX unveiledchallenges
blockchain the BIG faceddesigned
technology by to
standing of the limited
market derives most of awareness,
its value from choice,
con- itsconsumers
Blockchain and corporations
disrupt Graphstand
the digital to take
advertising market.
As a digital marketing and data manage- and compensation
sumers, consumers
yet,it offers them little valueface when
in return. a significant
ogy. Through its portion
the digital data and
As a digital marketing and data manage
ment platform company working exten- it comes This to the data they
dissatisfaction has produce
created aonline.
spill- businessInc.,
BIGtoken, analytics
SRAX market,
intends tocurrently valued
be the first
ment platform company working exten
sively on all sides of the advertising The over effect on other connected markets.value
data market derives most of its For at over $150.8 billion.
company to deliver sivelya consum2
on erall data
of the advertising
market, SRAX has experienced firsthand from consumers,
example, yet,it offers
it has developed into them
a growinglittle that enables a transpar entSRAX
market, data has
experienced firsthand
the inefficiencies and inaccuracies that value in return.
demand for ad blocking products. the inefficiencies
through a secure blockchain and inaccuracies
platform, token that

1 Adjusted EBITDA is defined as earnings before interest,

Adjusted EBITDA is defined as earnings before interest, taxes, depreciation
1 Adjusted EBITDA is defined as earnings before interest, taxes, depreciation andPlease
see the 10-Qand certain
or the quarter-end results press rele
and amortization and certain additional one-time expense.
additional one-time expense. Please see the 10-Q or the quarter-end results press release for the GAAP to
Please see the 10-Q or the quarter-end results press release for the GAAP to Non-GAAP reconciliation. 2 International Data Corporation, 14 March 2017.
Non-GAAP reconciliation.
2 International Data Corporation, 14 March 2017.
Chris Miglino, CEO 2
International Data Corporation, 14 March 2017.

8 MicroCap Review Magazine

Meeting the threat of consumer and
corporate dissatisfaction immediately and
decisively andonlyopen will
source governance
remove structure.
the friction Revenue from big data and business analytics worldwide
Meeting the threat of consumer and
The platform
inhibiting continuedis being expansion
built for threeof corethe
con- from 2015 to2020 (in billion U.S. dollars)
corporate dissatisfaction immediately and
digital 1) consumers
advertising market, whobut produce
also digital
decisively not only will remove the friction Revenue from big data and business analytics worldwide
reveal newandavenues
2) developers who build consumer
of growth.
inhibiting continued expansion of the from 2015 to2020 (in billion U.S. dollars)
applications and commercial advertising data
digital advertising market, but also will 250
fall, along
SRAXwith 3) media
unveiled thebuyers
BIG and agencies.
reveal new avenues of growth.
SRAX’s new product
its Blockchain takes advantage
Identification Graph of

Revenue in billion U.S. dollars

U.S. dollars
the big data
technology. and digital
Through its advertising
wholly market
owned 181
This fall, SRAX unveiled the BIG platform, 162
subsidiary BIGtoken, to propose
Inc., a model
SRAX for sustain-
intends to
its Blockchain Identification Graph 145

Revenue in billion U.S. dollars

150 203
be the andcompany
exponential growth.aSRAX
to deliver consum- COO 200 130.1
technology. Through its wholly owned

122 181
er data platform
subsidiary Nelsonthatstated,
BIGtoken, Inc.,“By
enables aparticipating,
SRAX transpar-
intends to

100 145
consumers first will be rewarded with a digital

in billion in
ent be
datathe relationship
company through
to deliver a asecure

Revenue Revenue
er dataBIGtoken™,
blockchain platform,that
platform for sharing
token and
enables a verifying
ent data. Develop
data governanceers andthrough
relationship media companies
structure. a The
will beisable
blockchain to
being build webtoken
platform, destinations,
for three
reward, social
core and
networks, and utilities on top of the BIG 0 50
constituents: 1) consumers
open source governance structure. The who produce
2015 2016* 2017* 2018* 2019* 2020*
digital data and
platform toisfacilitate data
2) developers
being orthree
forwho purchases
with theapplications
constituents:complete awareness
1) consumers of consumers.
and commercial
who produce 0
Source: IDC, March 2017
2015 2016* 2017* 2018* 2019* 2020*
We believe
digital data
data weandare 2)
tools solving
along awith
developers 3)who
media and
buyers problem, and ourand
and agencies. BIGtoken™
commercialgives $3 billion,with December being the most The SRAX team’s
Source:extensive knowledge
IDC, March 2017 and
greater validity
advertising data to blockchain
tools along with technology
3) media active month for funding, according to experience in digital advertising technology,
and theand
buyers token market.” While most inves- Out of those categories,
agencies. software development, and consumer target-
tors have heard of cryptocurrencies, such as commerce and advertising represented a ing data puts the company in an outstanding
Bitcoin, many are not yet owners. In 2017, notable share of the market and has dem- position to address this new opportunity in
211 ICOs (Initial Coin Offerings) raised over onstrated potential for growth. a dynamic market.

Consumer in Ecosystem
Consumer in Ecosystem

Website 1

Consumer Data Market Media Buyer

Website 1
Website 2
Consumer id Data Market Media Buyer
Website 2
Website 3
Website 3
DSP/Exchange Website
DSP/Exchange Website

Data Data stored

app collection in BIG Ad

Data Data stored

app collection BIG in BIG
BIGosg Data is bought
based on Consumer determines use in exchange and Consumer
consumer earns cases and
BIGosg paired
Data iswith
bought shares in data
opt in on BIGtoken
based Consumer integrations
determines use inad media and
exchange purchase
consumer earns cases and paired with shares in data
opt in BIGtoken integrations ad media purchase MicroCap Review Magazine 9

SRAX’s new product takes advantage of build web destinations, social networks, cryptocurrencies, such as Bitcoin, many
With more than 16 years of experience tising. SRAXmd’s ability to positively impact sTraTegIC founDaTIon for-
the big data and digital advertising market and utilities on top of the BIG platform to are not yet owners. In 2017, 211 ICOs
in digital advertising and media, SRAX patient outcomes through Non-Personal ConTInueD growTh
opportunities to propose a model for facilitate data sales or purchases with the (Initial Coin Offerings) raised over $3
Co-Founder, Chairman and CEO Christo- Promotion is tremendous and continues to
sustainable and exponential growth. complete awareness of consumers. We billion,with December being the most
pher Miglino has immersed himself in the evolve at a more rapid rate than traditional The launch of SRAXfan in November and
SRAX COO Kristoffer Nelson stated, "By believe we are solving a commercial and active month for funding, according to
cryptocurrency market and appeared as marketing and advertising. the BIG white paper in December demon-
participating, consumers will be rewarded consumer problem, and our BIGtoken™ Out of those catego-
a guest expert on Fox Business’ Making Other verticals focus on CPG (Consumer strate SRAX’s continued commitment to a
with a digital token, BIGtoken™, for gives greater validity to blockchain ries, commerce and advertising represent-
Money and Countdown to the Closing Bell, Packaged Goods), auto and sports. SRAX- growth strategy focused on identifying value
sharing and verifying their data. Develop- technology and the token market." ed a notable share of the market and has
sharing how the decentralization of control fan targets sports fans at home, the stadium in each of its business units and launching
ers and media companies will be able to While most investors have heard of demonstrated potential for growth.
of the monetary system is changing the or out-of-home gathering locations during technology that meets unique market needs.
dynamics of business. live sporting events with products includ- The promise of the company was recently
Nelson has also brought his extensive pro- ing; StadiumTRAX, which delivers loca- recognized by its inclusion on Deloitte’s 2017
fessional experience in operations and sales tion-targeted ads to mobile devices in or Technology Fast 500. SRAX ranked number
in the media and technology industries to around stadiums and other sporting venues; 123 of the 500 fastest growing technology,

ICOs by Month in 2017

$1,400,000,000 Total: $3,880,018,203
Total Number of ICOs: 211

$1,000,000,000 Top TEN ICOs of 2017

Position Project Total Raised
$800,000,000 1 Hdac $258,000,000
2 Filecoin $257,000,000
3 EOS Stage 1 $185,000,000
4 Paragon $183,000,000
5 Bancor $153,000,000
6 Status $90,000,000
7 BANKEX $70,000,000
$200,000,000 8 TenX $64,000,000
9 Nebulas $60,000,000
$0 10 MobileGO $53,069,235
Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec


the blockchain sector and is a current mem- FanTRAX, which combines sports interest media, telecommunications, life sciences and
ber of the Interactive Advertising Bureau’s and behavior data to identify sports fanatics; energy tech companies in North America.
Blockchain Working Group. and SportsViewTRAX, which reaches sports Over the past year, SRAX has implement-
The SRAX team’s extensive knowledge Nelson has also brought his extensive
SRAX CTO Dustin Suchter, has a deep fans in out-of-home viewing locations such ed strategic initiatives to expand its opportu-
and experience in digital advertising professional experience in operations and
background and knowledge of all levels of as bars, restaurants, and universities. nities and leverage its data management plat-
technology, software development, and sales in the media and technology indus-
internet technology and business strategy, The SRAXmd product has delivered a form. This significant transformation has
consumer targeting data puts the compa- tries to the blockchain sector and is a
including blockchain’s game-changing tech- prescription for success that SRAX is actively produced a sound foundation for growth in
ny in an outstanding position to address current member of the Interactive Adver-
nology, and is poised to lead the BIG plat- applying across its business. “Brands and 2018, while the development of the BIG plat-
this new opportunity in a dynamic market. tising Bureau’s Blockchain Working Group.
form’s technical operations. agencies have experienced tremendous form presents an exciting opportunity for
results with SRAXmd,” stated Miglino. “We disruption in the consumer data market. n
With more than 16 years of experience in SRAX CTO Dustin Suchter, has a deep
CaTegory-speCIfIC believe there is a significant opportunity to
digital advertising and media, SRAX background and knowledge of all levels of
eXpansIon replicate that success through an array of
Co-Founder, Chairman and CEO Christo- internet technology and business strategy,
vertical products. SRAXfan represents the
pher Miglino has immersed himself in the including blockchain’s game-changing SRAX: The article may contain forward-looking state-
An additional avenue for growth is repre- first in a series of category-specific tools for ments about SRAX. See SRAX’s periodic filings with
cryptocurrency market and appeared as a technology, and is poised to lead the BIG the Securities and Exchange Commission for more
sented by SRAX’s vertical strategy. buy-side digital marketers.”
guest expert on Fox Business’ Making platform’s technical operations. complete information.
SRAXmd works with healthcare and phar- In October, the company announced it
Money and Countdown to the Closing
maceutical companies and their agencies to would explore strategic alternatives for the
Bell, sharing how the decentralization of
engage healthcare professionals, patients and SRAXmd business to maximize shareholder
control of the monetary system is chang-
caregivers through digital and mobile adver- value.
ing the dynamics of business.
The company paid consideration to SNN or its affiliates for this article.
10 MicroCap Review Magazine
National Expertise at
Local Market Value

Counsel to Microcaps and

Blockchain Technology Companies

Smith Anderson brings a real confidence and calmness to a transaction and

are strategically excellent. They walked us through the process really well and
the work they did was flawless.
– Client quote in Chambers USA – America’s Leading Lawyers for Business |

MicroCap Review Magazine 11
P R O F I L E D C O M PA N Y TsX-v: flT, oTCqb: Takof

Drone Delivery Canada Corp.

ommercial drones; increasingly
used for the mapping, photography,
the inspection of utility and energy
infrastructure, etc., fall into the category of
a disruptive technology. A small company
named Drone Delivery Canada (TSX.V:
FLT / OTC: TAKOF), is trying to tap into
this market from the far less competitive, but
incredibly important software side.
Drone Delivery Canada (“DDC”) is This is a huge step for the Company, 4
poised to become a significant beneficiary of years in the making. Drone Delivery Canada
this disruptive technology by facilitating the (“DDC”)  is pioneering a game-changing
inevitable revolution in autonomous com- technology that will enable commercial
mercial drone delivery logistics. drones to perform autonomous deliveries
CEO Tony Di Benedetto describes this of goods & services.   First in remote areas
unique opportunity, of Canada, (DDC  has identified up to 1,000
“We have developed a highly sophisticat- remote northern communities) then in more
ed software platform that will allow our owned populated areas, then in the U.S. and other
& operated autonomous commercial delivery countries. 
drones to operate safely & efficiently  in In very remote locations, running a rou-
Canada.  We will be a trusted, outsourced tine errand can take hours, involve multiple
drone logistics provider, with the entire opera- modes of transportation, while polluting the
tion seamless to our customers.” environment along the way.   Nearby drone
Earlier this month DDC announced that delivery pick-up/drop-off points would be
Transport Canada had granted the Company a win-win-win for the consumer, retailer &
a Compliant UAV Operator Special Flight community. 
Operations Certificate (“SFOC”). Regarding these sparsely populated areas,
Tony Di Benedetto, CEO & Director
This milestone is both essential and nec- President Richard Buzbuzian told me,
essary for any UAV operator wanting to “A key customer for us could be postal agen-
conduct Beyond Visual Line-of-Sight opera- cies.  It stands to save a tremendous amount of
tions; and for the specific purpose of drone money by switching (where applicable) from
delivery services. Mark Wuennenberg, VP trucks, vans, planes, boats & helicopters; to
of Regulatory Affairs commented, autonomous commercial drones.”
“The Company has been working around the According to CEO Tony Di Benedetto,
clock to achieve compliant status and is both “We are on the cutting-edge of commercial
grateful and appreciative of being recognized as drone technology, one of the hottest tech-
a professional and safe operator of unmanned nologies in the world, one that’s ushering in
aircraft (UAS) by Transport Canada.” a paradigm shift in how goods & services are

12 MicroCap Review Magazine

delivered.  The commercial drone logistics Staples, and interested parties from around Is Drone DelIvery CanaDa a
revolution is poised to change the world in the world.  Takeover TargeT?
ways we can’t even imagine, and it’s happen- “The benefits to the customer will be spec-
ing this decade, not in 10 or 20 years.” tacular improvements in delivery time, cost & If one thinks about what companies
Think of DDC as an “air traffic control” reliability. Because DDC will be working with might want to own a potential leader in
for a fleet of commercial smart drones that remote communities in northern Canada, the future of commercial drone logistics–
it will own & operate on behalf of blue-chip where delivery costs can be quite high, savings the number and variety of potential suit-
customers that are integrated onto DDC’s should be substantial.   In some cases, from ors is staggering.   Companies such as Fed-
highly-specialized software platform. It all hundred(s) of dollars to under five or ten dol- Ex, UPS & DHL are monitoring companies
starts with DDC’s network platform for com- lars, delivery times cut from several days to at the forefront of this sea change.  
mercial drones– a railway in the sky.  There just a few hours.” In addition, trucking companies like; YRC
can be no commercial delivery drone indus- Early-stage, high-tech companies are Worldwide  &  J.B. Hunt Transportation,
try without companies like DDC.   risky, especially before revenues start to retailers; Best Buy, Walmart & Staples, drug
The Company is on the cutting-edge of a flow.  Cash burn is usually high, with operat- stores;  CVS,  Walgreen, supermarkets, auto
paradigm shift, a must-have technology for a ing losses as far as the eye can see.  DDC has parts stores, pharmacies, hospital/labs,
number of industries.  Once companies start made giant strides over the past 4 years in schools, etc. are eyeing industry movers.
delivering products by drone, all companies de-risking its business model and position-
will want that capability.  The ones who gain ing itself for robust, profitable operations. key members of
it will thrive, those who don’t could flounder.   Commercial revenue is expected to start in managemenT Team & boarD
The overall supply / fulfillment chain— the second half of this year, and really pick
including savings in manufacturing, ship- up in 2019.   Tony Di Benedetto, CEO & Director, has
ping & warehousing—with drone logistical been actively involved in the Canadian tech-
networks, will be one of the largest margin
capture opportunities of the next decade for
On the drone logistics / software side of
the commercial drone business, barriers to
entry are high because, unlike on the hard-
ware side, software teams have to deal with
the really hard stuff; regulation, compliance,
legality, safety, privacy.  
In an environment like this, a “first mover”
advantage makes a huge difference.   DDC
has over C$20 M in cash, comfortably fund-
ing the Company for the next 12 months.  It
has received substantial interest from a num-
ber of multi-national corporations including MicroCap Review Magazine 13

Accredited Risk Manager Michael  received
The overall supply / fulfillment chain— his  degree from the Royal Military College
of Canada in Kingston, Ontario  and served
including savings in manufacturing, shipping & in the Royal Canadian Air Force as an
warehousing— with drone logistical networks, will Aerospace Engineering Officer.
be one of the largest margin capture opportunities As a first mover in Canada, with high bar-
riers to entry protecting it, DDC is a leader
of the next decade for retailers. embracing one of a handful of paradigm
shifts engulfing the world.  As such, DDC is
nology services sectors since the early 1990’s Affairs, is an expert in UAS with vast domes- among just a small handful of commercial
and has built a number of tech companies tic & international experience in the regula- drone companies (on the software side)
including; internet hosting providers, man- tory, operational, airspace access & training leading the way forward in drone delivery
aged service providers, wireless broadband aspects of UAS. Most recently, he was a Civil systems.   Not just in Canada, but a global
networks and data center facilities.    Tony Aviation Inspector with Transport Canada leader with 4 years’ experience in Canada.
is active in a number of other ventures as an expert responsible for the develop- Canada is among the top countries lead-
which includes; Data Centre Realty and Di ment of the proposed UAS regulatory frame- ing the charge in delivery drones, not the
Benedetto Group.  Tony brings over 17 years work and the creation & implementation of hardware, the drones themselves, the soft-
of IT entrepreneurship, technology M&A numerous key UAS initiatives. ware that will make it all work. Different
and capital markets experience to Drone As a 33-year veteran of the Royal jurisdictions are moving at different speeds,
Delivery Canada’s management team. He Canadian Air Force he accumulated over that’s why DDC’s first mover advantage is so
received his degree at York University. 4,300 hours in numerous aircraft and valuable and why other companies and gov-
Richard Buzbuzian President & held staff/instructor positions in National ernment entities are playing close attention
Director, is a capital markets executive with Defense Headquarters NORAD, U.S. Space to DDC’s progress.
over 20 years of experience in the technol- Command, the Canadian Forces Instrument
ogy and the resource sectors. Mr. Buzbuzian Check Pilot School, and the U.S. Air Force’s Company website:
was responsible for the Company’s public Flight Standards Agency.
offering process. He is now responsible While not flying he was very active in Tickers: (TSX.V:FLT  OTC:TAKOF) n
for corporate finance matters, investor rela- regulatory development (both manned and
Drone Delivery Canada Corp.: The article may con-
tions, and all day to day finance actives. Mr. unmanned aviation), operational airworthi-
tain forward-looking statements about Drone Delivery
Buzbuzian is also director of CT Developers ness and classroom instruction. He has Canada Corp. See Drone Delivery Canada Corp.’s
and President & CEO of Oriana Resources also served on numerous international UAV periodic filings with SEDAR and the Securities and
Exchange Commission for more complete information.
Corp., a Canadian capital pool company. committees/working groups within ICAO,
Paul Di Benedetto, Chief Technology NATO, and the U.S. Department of Defense.
Officer, is responsible for overseeing DDC’s Michael Della Fortuna, Director, is the
R&D, engineering, and technical operations.  CEO of Nexeya Canada – a provider  of
Along with his brother Tony, Paul has co- mission critical products and solutions for
founded a number of high successful tech- space, aviation and  transportation applica-
nology enterprises in the Canadian mar- tions.  Prior to joining Nexeya Michael held
ketplace and has always led the technology VP  and Director level roles in engineer-
oversight roles in all these entities.  Paul ing, operations and sales &  marketing for
is instrumental in implementing technol- General Electric, SPAR Aerospace, Husky
ogy structures which maximize organiza- Injection Molding and Mircom.  
tional growth to achieve maximum return Michael was also a partner in nCompass
on investments for all stakeholders.     Paul Capital which launched and  supported a
brings over 15 years of technology archi- number of ventures including PowerSure
tecture and engineering experience to the Techonologies,  Platinum Coachworks,
DDC’s management team. ShipForLess and EnviroBlue / ZipBinz. 
Mark Wuennenberg, VP of Regulatory A licensed Professional Engineer and
The company paid consideration to SNN or its affiliates for this article.
14 MicroCap Review Magazine
Platform Exchange Partners

We’ve Broadcasted We’ve Delivered We Manage

22,000+ 160+ Million 4+ Million

Earnings Events Investor Kits Globally Shareholder Records
US Toll-Free: 877.481.4014 MicroCap Review Magazine 15
P R O F I L E D C O M PA N Y nasDaq Cm: mbII

marrone bio Innovations, Inc.

Transforming Pest Management with Biopesticides

T hese days, consumers are increasingly concerned about the envi-

ronment, their health, and food safety. The world needs effective,
sustainable pest management solutions that are both safe for human
consumption and protect the earth’s natural resources.
Dr. Pamela Marrone, CEO of Marrone Bio The company’s products, which are used
Innovations (NASDAQ: MBII), understood in agricultural, turf and ornamental, and
these challenges and founded MBII in 2006 water treatment applications, help custom-
to discover and develop effective, sustain- ers around the globe control pests, improve
able, biologically-based products for pest plant health, and increase crop yields.
management and plant health. Equally impressive, MBII’s products reduce
MBII has proven to be very efficient at the environmental pesticide load, decreas-
discovering, developing, and commercial- ing chemical residues in foods and prevent-
izing naturally derived pest management ing the development of pest resistance.
and plant health solutions, and has cre- Marrone Bio Innovations’ natural prod-
ated an industry-leading product portfolio. ucts, commonly called biologicals, are cre-

Dr. Pamela Marrone, President & CFO

Above: Marrone Bio Innovations Founder & CEO, Dr. Pamela Marrone, and
President & CFO, Jim Boyd, in MBII’s greenhouse

16 MicroCap Review Magazine

ated from plant extracts and microorgan- the beneficials, such as bees.”
isms isolated from samples collected from “Second, our products are biodegradable,”
unique niches and habitats worldwide, such she continued, “offering environmentally
as flowers, insects, soil, and compost. The friendly protection. Biologicals are generally
company’s proprietary technology enables safe for field workers to handle, so farmers
them to isolate and screen naturally occur- can manage their labor more efficiently, as
ring microorganisms and plant extracts in work crews can enter the field much more
a highly efficient manner and to identify quickly after spraying, reducing downtime.
those that may have novel, effective, and safe Biologicals don’t leave residues to worry
pest management or plant health promoting about like synthetic chemicals do, which is
characteristics. particularly important for branded food,
MBII’s proprietary product development retail, and export markets with very strict
process includes two important components: maximum residue level standards.”
(1) a manufacturing process that increases Aside from the significant benefits to
the active natural compounds produced by growers, which result in a near 100% con-
the product candidate microorganism or in version from “on-farm demo” to sale, there
the plant extract and 2) formulations that are also major benefits to the company in
stabilize the natural compounds. Through producing these biological products. MBII’s
Above: Research Scientist for
these improvements, MBII’s R&D group technology and science-based approach has
Marrone Bio Innovations, conducts
works to continuously drive gross margins an experiment led the way to main-streaming biologicals.
up. Biologicals cost less than $10 million to
MBII’s thorough understanding of natural develop and take only about 4 years to
product chemistry leads to the develop- for crop protection and biostimulants for enter the market. As a comparison, synthetic
ment of product formulations that are tai- crop enhancement. Growers, regardless of chemicals cost, on average, close to $300
lored to meet customers’ needs and possess whether they are organic, transitioning to million to develop and take about 12 years
enhanced performance characteristics, such organic, or conventional, will benefit from to enter the market. This means biological
as effectiveness, shelf life, compatibility with implementing biologicals as part of their products can be better positioned to answer
other pesticides, and ease of use. integrated pest management and crop pro- the rapidly changing needs of growers.
The company’s portfolio of commercially duction programs. “Our strategy is to uniquely take advan-
available products includes insecticides to In fact, conventional farmers who use tage of a capital-light model. Given our
manage insects and mites (e.g. Grandevoâ synthetic chemicals account for around 70% experience, it takes us less than five years and
and Venerateâ), fungicides to control dis- of the company’s sales. “The benefits are less than $10 million to get a new product
ease (e.g. Regaliaâ, StargusTM, AmplitudeTM, significant,” explained Pam Marrone. MBII’s to the U.S. market,” shared Ms. Marrone.
Jet-Agâ and Bio-Tamâ 2.0), nematicides to CEO. “First, by implementing biologicals as “We get into the market quickly with early
eliminate roundworms that feed on the roots part of integrated pest management and crop adopter growers. The growers give us feed-
of plants (e.g. Majesteneâ), and a mollusci- production programs, growers can improve back that in turn helps us develop consecu-
cide to control invasive zebra and quagga their yields and quality of their crops, creat- tive versions, which can develop new uses
mussels (e.g. Zequanoxâ). MBII’s first non- ing a higher return on investment. A notable for our products, as well as crop and label
pesticidal product, Havenâ, is derived from example was in strawberries, where one trial expansion. This in turn expands our market
coconut oil, and works as a sun protectant implementing MBII’s products resulted in a opportunity.”
for numerous crops, reducing sun stress, sun $1,400/acre increase in revenues, or a >9x This agile, innovative model provides
burn and scalding. The company also has ROI on the investment. Higher ROIs have valuable early insight from customers, which
seven product candidates in various stages of been demonstrated on many crops, includ- in turn gets fed back into R&D for the
its rapid development pipeline, including an ing potatoes, tomatoes, almonds, rice, alfalfa, next generation product, allowing rapid and
advanced herbicide that controls glyphosate- corn, soybeans, and wheat. Pest resistance, a continuous innovation. This is important
resistant pigweeds. common problem with synthetic chemicals, given the size and growth of the biologicals
MBII’s products are all biologically- is reduced or eliminated through the use market.
based and fall into two categories under of our products, again increasing return on The global pesticide market is huge, total-
the umbrella of biologicals: biopesticides investment. Our products also do not harm ing over $50 billion, and is growing at a MicroCap Review Magazine 17

sity of cannabis production requires heavier
use of inputs relative to traditional agricul-
ture, increasing the urgency for growers to
switch from toxic chemicals to biologicals.
To provide some scale of the market
opportunity, a study from the UC Davis
Graduate School of Management estimated
the current cannabis inputs market in just
Colorado, Oregon, and Washington to be
$91 million. The study estimates this pes-
ticide and fertilizer inputs market, includ-
ing California due to recent changes in
California legislation, will grow to $1.4 bil-
lion within the next five years.
As volumes increase, vertical integration is
a key focus for MBII. In 2012, the company
Above: Marrone Bio Innovations recognized by NASDAQ for the EPA purchased its own manufacturing facility,
Approval of Stargus in October 2017 and has since brought several products in
house, with plans to bring additional pro-
duction in house in the future. Key benefits
compound annual growth rate of about product on the market, in addition to a to in-house manufacturing include flexible
2%. While the newly emerging biopesticide growing pipeline of new products, all pro- and faster scale-up times, better margins,
market is much smaller, $3-4 billion, it is tected by a very robust patent portfolio of cost controls, and controlled intellectual
growing at a compound annual growth rate over 400 issued and pending patents cover- property.
between 10% and 20%. The biostimulant ing microorganisms, natural product chem- Noteworthy catalysts the company expe-
market, which MBII entered in 2017 with istry, mixtures, formulations, new uses, and rienced in 2017 include launch of Haven
their new product, Haven, is growing about new pests. Having discovered and commer- for reducing yield robbing crop sunburn,
10% to 15% annually. cialized seven highly effective new products successful market entry of one of our insec-
MBII’s growth is significantly outpacing in 11 years is an unprecedented accomplish- ticide/nematicide microorganisms in MBI’s
both the traditional pesticide market and ment in the ag industry. partner’s cotton, soybean and corn seed
the biologicals market. The company expe- An area of growth and opportunity for treatment, EPA approval of a novel biofungi-
rienced 31% YoY revenue growth in the first the company is the rapidly growing cannabis cide, several new international distribution
nine months of 2017, reaching $14.8 million. industry. MBII’s products are impacting can- agreements with regionally significant firms
The company is well positioned to take nabis production through the reduction of and continued positive field trial results
advantage of the significant market oppor- toxic chemicals and pesticide residues that across the company’s product portfolio,
tunity. MBII has six EPA-approved bio- are harmful to both the environment and to including in the largest pesticide markets in
pesticide products and one bio-stimulant consumers. Additionally, the resource inten- the world like Brazil.
MBII has made significant progress in
meeting unmet market needs by launching
An area of growth and opportunity for the new products and growing in the U.S. and
abroad, and is well positioned to continue to
company is the rapidly growing cannabis industry. gain market share in the crop protection and

MBII’s products are impacting cannabis production plant health market. n

through the reduction of toxic chemicals and

Marrone Bio Innovations, Inc.: The article may

pesticide residues that are harmful to both the contain forward-looking statements about Marrone
Bio Innovations, Inc. See Marrone Bio Innovations,
environment and to consumers. Inc.’s periodic filings with the Securities and Exchange
Commission for more complete information.

The company paid consideration to SNN or its affiliates for this article.
18 MicroCap Review Magazine MicroCap Review Magazine 19
P R O F I L E D C O M PA N Y nyse amerICan: Dpw

Dpw holdings, Inc.

A Phoenix Rising; Evolving from Analog to FinTech

PW Holdings, Inc. (NYSE com). This company has the potential to
AMERICAN: DPW), (“DPW”), solve the second largest source of pollution
(, for- in the world by manufacturing innovative
merly known as Digital Power Corporation, machines for the textile industry. It’s easy to
was on the verge of being delisted by the overlook the prevalence and pervasiveness
NYSE American after 10 years of declining of textiles in our everyday lives. This tech-
sales when Milton “Todd” Ault, III led the nology will drastically alter the landscape
effort that resulted in the change in control of how textile-based products are made,
of the company and culminated with Mr. eliminating harmful chemical runoff in the
Ault joining DPW’s Board of Directors in environment. The designer of these unique
September 2016. machines, MTIX, Ltd. (
Mr. Ault’s vision focused on leveraging created a patented process that combines
Milton “Todd” Ault III, Chairman & CEO DPW’s 48 years of advanced power supply plasma and lasers to treat fabrics by trans-
manufacturing experience, bringing it to forming their surfaces to be fire retardant,
new markets not yet served and expand- waterproof, and color absorbent from a
ed its customer base with those who are longer list of attributes. Not only does
dependent on rugged and efficient power this process eliminate the harsh chemicals
solutions. Upon Mr. Ault’s first visit to previously necessary to treat the fabric,
the Company’s subsidiary, Digital Power, the fabric performs better than when it
Ltd. in Great Britain, the Company saw is treated with the old standard method.
the opportunity to make a strategic invest- The everyday quality of life could improve.
ment in MTIX (www.mtixinternational. Imagine the day when a new standard for

Digital Power Lending

20 MicroCap Review Magazine

textiles in the home and in hospitals could ( Super
reign from consumer demand that weren’t Crypto Mining is now on track to have over
dismissed as cost prohibitive. Products 10,000 mining machines by the end of 2018,
ranging from blankets to clothing to car- making it one of the largest U.S. domestic
pet and upholstery could be fire retardant, mining companies.
anti-microbial, water repellent and stain not only mines the top ten cryptocurrencies
resistant. For over 100 years, the but also offers cloud-hosted mining
worldwide textile industry has contracts to retail customers who
experienced little change in its want to take part in the mining
toxic processes. MTIX’s propri- experience without the hassle of set- MLSE Machine
etary Multiplex Laser Surface ting up and maintaining complex
Enhancement (MLSE®) tech- mining equipment.
Super Crypto
nology is disruptive and poised Miner Quickly rising from the ashes of subsIDIarIes
to become the textile industry the old Digital Power Corporation
standard fabric treatment process. DPW’s is now a fast-growing diversified hold- Digital Power Lending LLC, (“DPL”), (www.
subsidiary, Coolisys Technologies, Inc. is ing company with its sights on acquir-, operating under
responsible to fulfill the $50 ing and creating high growth California Finance Lender License #60DBO-
million purchase order to subsidiaries. Digital Power 77905, is engaged in providing commer-
manufacture MTIX’s patented Corporation changed its name cial loans to growth companies. DPL has
MLSE® machines. to DPW Holdings, Inc. on announced that it will develop a network of
Starting just days after the December 29, 2017 to reflect cryptocurrency ATMs starting in California
change in control of DPW, its new vision. anticipating expansion over time nation-
Mr. Ault had its President, DPW’s strategy is to seek wide.
Super Crypto Power
Amos Kohn, work with a Supply aggressive growth through Digital Power Limited dba Gresham
team to explore the develop- acquisitions and the creation Power Ltd., (,
ment of alternative power supplies. The of new divisions that enhance its existing designs and manufactures power conver-
team identified natural synergies in their businesses. DPW anticipates the Company’s sion and distribution equipment focusing
area of expertise and the need for more gross consolidated revenues for 2018 will on solutions for the Naval sector. Gresham
efficient power supplies for the mining of range from $44 to $49 million, marking a also provides high density and customized
cryptocurrency. For those familiar with the substantial increase over the consolidated power solutions for commercial markets
mining of cryptocurrency such as Bitcoin gross revenues estimated for 2017. and is based in Salisbury, UK; Microphase
and Ethereum, it is known that power is Corporation,, found-
an integral aspect and usually the most
significant cost consideration other than
one’s mining equipment. The cost of power
always effects an operator’s bottom line.
With DPW’s long history of designing and
developing power solutions, it was destined
that the area crypto-mining power sup-
plies would be ripe for DPW’s disruption.
Through the creation of its new division,
Super Crypto Power, (“SCP”) and SCP’s
work with Coolisys Technologies that DPW
intends to deliver world-class products and
services to this rapidly growing sector.
The sales success of the cryptocurrency
mining power supplies led Mr. Ault into
creating a cryptocurrency mining division
aptly named Super Crypto Mining, (“SCM”), Super Crypto - Data Center MicroCap Review Magazine 21

ed in 1955, designs, develops, and manufac-
tures state-of-the-art RF, microwave com-
ponents, devices, subsystems and integrated
modules for wireless, defense, aerospace,
satellite, and homeland/global security
markets. Its headquarters is in Shelton, CT
Power-Plus Technical Distributors, www., a wholesale distributor
is a value-added authorized technical dis-
tributor for a large number of power supply
lines, components and accessories includ-
ing UPS systems, fans, filters, line cords,
and other power-related components. The
subsidiary is based in Sonora, CA (1-800-

aCquIsITIons 2018

Coolisys Technologies, Inc., anticipates com-

pleting its acquisition of Enertec Systems
2001 Ltd. (“Enertec”), the Israeli-based DPW Microchip
defense/aerospace electronics manufacturer
supplying advance power solutions and sys- managemenT: mIlTon “ToDD” ($120,000,000). As observed, Mr. Ault is a
tems during the first half of 2018. aulT, III, aCTIvIsT InvesTor leader in identifying undervalued assets and
DPW has entered into an agreement anD vIsIonary operations.
to acquire the operations of Flexisphere,, an IT managed ser- Milton “Todd” Ault, III is a seasoned busi- an evolvIng growTh
vices provider that will work with Super ness professional, entrepreneur and experi- Company
Crypto Mining, DPW’s wholly owned sub- enced investor who has spent more than 27
sidiary, to leverage its curated blockchain years identifying value in financial markets DPW in 2018 plans to complete its transition
and cloud mining technology and expertise. and searching for the latest in disruptive from being a supplier of advanced power
Flexisphere will provide a host of services technology and innovative processes. Mr. products and solutions to the new busi-
including supporting Super Crypto Mining’s Ault has a proven track record as a seasoned ness model as a diverse holding company.
development of an online cloud mining activist and visionary. The Company’s growth strategy is acquiring
platform for consumers interested in pur- Mr. Ault is a leader in identifying innova- undervalued assets, disruptive technologies,
chasing hash-rate at a very competitive rate. tive and disruptive technologies as exem- and sustainable and impactful ventures to
The cloud mining platform will feature a plified by his activist takeover of Franklin develop for long-term growth.
comprehensive dashboard readily providing Capital Corp which consequently changed DPW Holdings, Inc.’s headquarters is
historical and real-time operational data to its name to Patient Safety Technologies, located at 48430 Lakeview Blvd., Fremont,
its subscribers. Upon the completion of the Inc. (OTCQB: PSTX) (“PST”) purchasing California, 94538; 1-877-634-0982. For
acquisition of Flexisphere, the new subsid- SurgiCount Medical, Inc., the developer Investor inquiries:
iary will be focused on developing block- of the SafetySponge® System; a bar coding or 1-888-753-2235. n
chain technology-based service solutions technology for inventory control that aims
and exploit the distributed open nature of to detect and prevent the incidence of for-
blockchain and its other intrinsic attributes eign objects left in the body after surgery.
DPW Holdings, Inc.: The article may contain for-
to deliver a more efficient and reliable suite Stryker Corporation (NYSE:SYK) acquired ward-looking statements about DPW Holdings, Inc.
of services. PST at the beginning of 2014 in a deal val- See DPW Holdings, Inc.’s periodic filings with the
Securities and Exchange Commission for more com-
ued at one hundred twenty million dollars plete information.
The company paid consideration to SNN or its affiliates for this article.
22 MicroCap Review Magazine

The Auditor’s Report Gets a

irtually unchanged for nearly 70
years, the auditor’s report has just “Essentially, CAMs are the kind of things that keep
received a major makeover. Late
last year, the SEC unanimously approved auditors up at night.”
the Public Company Accounting Oversight
Board’s new auditor’s reporting standard.
The most significant change requires that A CAM could also be the company’s eval- cern that it could provide the basis for legal
auditors augment their traditional pass/fail uation of goodwill impairment if goodwill claims, leading to increased litigation costs
opinion with a discussion of “critical audit is material, as well as the evaluation of the and audit fees. The PCAOB said it intends to
matters” (CAMs). The PCAOB says that company’s ability to continue as a going con- monitor the results of implementation of the
the new format is a direct response to inves- cern. Other factors in establishing a CAM new standard, including consideration of any
tors asking for an expansion of the auditor’s could involve the difficulty of obtaining unintended consequences.
report “to include information about the dif- adequate audit evidence or matters that The new auditor’s report, which involves
ficult parts of the audit.” required outside consultation. such things as auditor independence and
A CAM is defined as any matter that is Looking at a simple financial statement, auditor tenure, became effective for all audits
required to be communicated to the audit a CAM could include matters related to for fiscal years ending on or after December
committee that relates to accounts or dis- revenue recognition, management override 15, 2017. However, communication of CAMs
closures that are material to the financial of controls, receivables, inventories, intan- will be phased in.
statements and involve especially challenging, gibles, covenants, investment valuations, Accelerated filers will need to comply on
subjective or complex auditor judgment. derivatives, fixed assets, lease accounting, audits relating to fiscal years ending on or
Essentially, CAMs are the kind of things pension accounting, expenses, reserves, and after June 30, 2019. All other companies will
that keep auditors up at night. related parties, just to name a few. Indeed, it need to comply on audits relating to fiscal
Matters required to be communicated to is a long list from which the PCAOB expects years ending on or after December 15, 2020.
the audit committee that may result in a most audits to render at least one CAM. Though CAM requirements generally
CAM includes, among other things: signifi- The change to audit reports has already apply to all audit reports filed with the
cant risks identified by the auditor; matters occurred in many other areas of the world. SEC, including by foreign private issuers, it
regarding the company’s accounting policies, In its December 31, 2013 audit report on will not apply to emerging growth compa-
practices, and estimates; significant unusual Rolls-Royce, auditors at KPMG identified nies, certain brokers and dealers, investment
transactions; certain matters regarding relat- 18 key matters. Many within the accounting companies other than business development
ed parties; and other matters arising from community have pointed to that particular companies and benefit plans. n
the audit that are significant to the oversight audit report as a good example of additional
John Lucas is Director of Assurance & Audit Practice
of the company’s financial reporting process. information that can be disseminated by an
at Weinberg & Company, a multi-office, PCAOB
auditor. and CPAB-Registered firm specializing in the audit,
Some observers however, including the assurance and tax needs of micro and small cap
companies. John has over 25 years of experience in
United States Chamber of Commerce, have public accounting with extensive experience in audit-
criticized CAM disclosure requirements ing SEC reporting companies in manufacturing and
distribution, real estate, high technology, and other
arguing that disclosure of such communica-
industries throughout the U.S., Europe and Asia, with
tions could increase the potential liability for a particular expertise in China. John also has experi-
issuers and auditors, in addition to disclosing ence in due diligence, valuation, expert witness and
restructuring engagements. Email John at johnl@
sensitive company information to the public. or contact him at 310-601-2200.
n BY JOHN LUCAS, CPA The PCAOB has acknowledged the con- MicroCap Review Magazine 23

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

Cel-sCI Corporation
A New Immunotherapy to Treat Head and Neck Cancer is
on the Path Towards FDA Approval

oosting the body’s immune system diagnosed head and neck cancer. All patients is given as a first line treatment before surgery,
against cancer before the body is have completed treatment and are now being radiation or concurrent radio-chemotherapy
ravaged by chemotherapy, radiation monitored for overall survival, per the Phase because that is when the immune system is
and surgery – this is the strategy CEL- 3 study’s protocol. thought to be the strongest. The goal is to help
SCI Corporation (NYSE:CVM) is effectively The primary endpoint of the study is a 10% the intact immune response detect and kill the
deploying against head and neck cancer. improvement in overall survival for patients tumor and micro metastases that usually cause
CEL-SCI has fully enrolled the world’s larg- treated with Multikine plus the Standard of Care recurrence of cancer.”
est clinical trial in head and neck cancer, a (SOC) vs. patients treated with SOC alone. SOC CEL-SCI’s approach is unique because most
global, pivotal Phase 3 study in over 90 of involves surgery to remove the tumor, followed other cancer immunotherapies are used only after
the world’s leading hospitals. If the primary by radiation or radiation and chemotherapy conventional therapies have been tried or failed.
endpoint of the study is met, this could lead combined. The primary endpoint of the Phase
to marketing approval for Multikine, CEL- 3 study can be determined when a total of 298 In ConClusIon
SCI’s immunotherapy, in some of the largest patient deaths have occurred.
markets in the world, including the U.S. A 33% increase in overall survival was CEL-SCI is close to finding out results from
reported, as compared to patient survival its pivotal Phase 3 trial. If the primary end-
heaD anD neCk CanCer: In reported in the scientific literature, in CEL- point is successfully achieved, then the com-
neeD of effeCTIve TreaTmenT SCI’s prior Phase 2 study that used the same pany plans to file for regulatory approval
treatment regimen as the pivotal Phase 3 not only in the U.S., but worldwide. The
The 6th leading cancer worldwide, head and study. These Phase 2 results are a very global trial spanned 24 countries, in North
neck cancer incidence is about 600,000 per encouraging data point. America, Europe and Asia. For more infor-
year, causing 300,000 deaths annually. It is mation please visit n
an indication in dire need of a new and effec- suCCess Through boosTIng
CEL-SCI Corporation: The article may contain for-
tive treatment. Over 60 years have passed The Immune sysTem whIle IT
ward-looking statements about CEL-SCI Corporation.
since the FDA approved a new therapy for Is sTIll InTaCT See CEL-SCI Corporation’s periodic filings with the
advanced primary head and neck cancer. Securities and Exchange Commission for more com-
plete information.
“When it comes to cancer immunotherapy,
pIvoTal phase 3 CompleTeD CEL-SCI believes it is most logical to boost the
immune system while it is still intact in order to
CEL-SCI completed its pivotal Phase 3 clini- have the greatest possible impact on survival,”
cal trial by enrolling 928 patients with newly says CEL-SCI CEO Geert Kersten. “Multikine
The company paid consideration to SNN or its affiliates for this article.
24 MicroCap Review Magazine
A Closer Look At
What Did I Just Invest In? Investing In ICOs
Investors around the globe are excited about a new decentralized blockchain, raised $232 purchased equity (e.g., common or preferred
opportunities to invest in initial coin offer- million; and Sirin Labs, the developer of an stock) in the token issuer’s company or if the
ings, or ICOs, and the opportunities are open source blockchain smartphone, raised token itself represented an equity interest in the
increasing because companies are equally $157 million. token issuer, which is possible, but presently
excited about raising capital through ICOs. not as common in ICOs.
In fact, many of my clients, whose companies why are InvesTors so
currently have nothing to do with blockchain eXCITeD abouT Tokens? InCreaseD regulaTory
technology, are working hard at figuring out sCruTIny of ICos
how to tokenize their products or services and Think about it. Most token issuers are early
launch compliant ICOs. If you are planning to stage companies who intend to successfully The U.S. Securities and Exchange Commission
invest in an ICO, then you don’t want to find build companies and platforms. However, (SEC) created a Cyber Unit in 2017 to target
yourself asking the following question, “What these token issuers have no track record of misconduct involving ICOs. In many cases
did I just invest in?” In the famous words of performance, minimal or zero assets and plan where the SEC has investigated or halted an
legendary investor Warren Buffet, “Never to rely on ICO proceeds to build the compa- ICO, it has taken the position that the tokens
invest in a business you can’t understand.” nies and platforms that will work with the sold were security tokens rather than utility
issued token. In most cases, the issued token tokens. The sale of security tokens must be
whaT Is an ICo? merely represent the potential future right to registered, exempt or they are in violation of
buy a good or service on a platform that does the federal securities laws. The SEC often
The majority of ICOs by early stage companies not yet exist. Furthermore, the issued token relies on the multi-pronged Howey test to
attempt to raise money to build new technol- does not represent an equity interest in the determine whether a token should be classified
ogy platforms that will enable them to create company that is issuing them. This means as a security or utility token. In simple terms, if
their own digital currencies, or tokens. Tokens that even if a company successfully builds a the token purchaser expects the token value to
can be used for a variety of purposes and can platform and sells its products or services on increase solely due to the efforts of others, then
be classified as security or utility tokens (see the platform in the future, the token investor it would be safe to assume it is a security token.
below). An example in the Ethereum ecosys- will not participate in the upside in value of Many token issuers have unsuccessfully tried to
tem is the Ethereum token which is a smart the company itself. Despite this, the tokens take the position that their tokens were utilities
contract built on the Ethereum blockchain. may appreciate and, hopefully, the investor and not securities. Future token issuers should
Tokens are typically issued to the public in will be able to sell his tokens at a premium. be careful about taking this position given SEC
exchange for cash, Bitcoin, Ether or other cryp- Chairman Jay Clayton’s statement during a U.S.
tocurrencies and the proceeds may be used to whaT are you really buyIng? Senate hearing “I believe every ICO I’ve seen
develop a platform upon which token hold- is a security.”
ers can buy goods or services from the token As you consider purchasing tokens in an ICO, If you want to know how to issue and sell
issuer. In 2017, there were many successful ask yourself what you are buying. Remember your token in a regulatory compliant manner,
ICOs. For example, Filecoin, a data storage that there are two separate pools of value. One give me a call and I will be happy to assist. n
and retrieval service, raised $257 million ($135 pool of value is associated with the token and
Mr. Bevilacqua is the founding member of Bevilacqua
million in the first hour); Tezos, the creator of the platform itself. Do you know what that is
PLLC (, a boutique transac-
worth? The token will only have value if people tional corporate and securities law firm. Mr. Bevilacqua
want to buy the product or service that will be counsels companies of every size ranging from entre-
preneurs with just an idea to established companies
represented by the token in the future. The whose securities trade on the NYSE or NASDAQ. He
other pool of value is represented by the value has broad experience representing issuers in public
offerings and private placements of securities (including
of the company itself. How will you estimate
private placements under Rule 506(c) of the Securities
the value of the company? In most cases, as Act, crowdfunding offerings under Title III of the
a token investor, you will not participate in JOBS Act, and Regulation A+ offerings), Exchange Act
compliance, angel and venture capital financings, other
this second pool of value. You would only areas of equity and debt financing and mergers and
participate in this second pool of value if you acquisitions. MicroCap Review Magazine 25


Microcaps’ Current Trend is Your

Friend but it will END!
CORNERSTONE GLOBAL • Given the historic extreme senti- 2009 “cyclical” bull market trend and
GROUP “T-REPORT” ment and momentum and perhaps a lasting crest, a decisive breakdown
the potential for new global mon- form its lower 2009 trend line and 200
In brIef etary or fiscal stimulation attempts, week moving average, will strongly
a major crest may be delayed but indicate a trend change. A decisive
Major Takeaways the market will have its way in due move under the February 2016 low
• The Russell Microcap® Index break- season. Global governments and will confirm the long term trend is
ing out of a six month near sideways central banks have proven they can down.
consolidation led to an impulsive distort, extend and delay but cannot • Until it is technically confirmed, the
bullish move up to the current test- ultimately prevent economic “resets”, trend is up.
ing of its upper trend line. It remains which are so evident and necessary
in a confirmed uptrend but is subject for healthy growing global econo- To well establish these takeaways, this
to downward corrections, as it moves mies, even those who are centrally Cornerstone Global Group (CGG) “T
toward its end of trend, a anticipated controlled. Report” will comment on the economic
historic crest or at least a “truncated” • With the topping of the 250 revolu- and general market outlook, as well as, the
crest tionary cycle that began in the late Russell Microcap® Index weekly chart and
• Select technical indicators, stock mar- 1700s, a declining 500 year cycle conclusions:
ket cycles, Elliott Wave analysis, Prof. and the impact of other shorter term
Wheeler’s cycle analysis, Benner cycle cycles, the “exact” timing of a major eConomIC anD markeT
analysis and more are suggesting a crest may be in question but not CommenTary
near term short term top, followed the “eventual” event. However, as
by a corrective decline into early events unfold, timing will become From a long term historical perspective,
2018 and a major top ideally in mid- more reliable, based upon market most USA equity markets continue to reflect
2018 but no later than end of 2018, and intermarket internal construc- the LONG TERM “topping process” of a 250
with a potential crash 2018-2019 tion and not fundamentals, which year cycle that began during the time of the
will “show” up and take associated American and French Revolution, the late
credit for the critical event 1780s:
• As anticipated in the DJIA, S&P 500, • The new historic highs in microcaps,
NASDAQ Composite, and Russel small caps and large caps, reflect his-
2000, a major Microcap crest will toric “exuberance” of extreme opti-
probably result in a high volatility mism, resulting in historic extreme
“ratcheting” downward trend lead- complacency. In fact, the VIX, a
ing to a long term bottom, with CBOE Market Volatility Index cre-
a probable low in 2020 to 2023. If ated in 1993 and nicknamed the “fear
history rhymes, microcap and small gauge”, reached its lowest recorded
cap indices will diverge and decline level of compliancy among market
before the large cap indices top participants in November 2017. Thus,
n BY STEVEN M. SHELTON, • Until more definitive index market the herd’s assumption that market
MS, MBA, CFP®, CLU, CHFC, TEP, action takes place that allows for do indeed grow to the moon, has
CIMA®, CMT calling a high probability end of the returned! So pervasive is this “over

26 MicroCap Review Magazine

Weekly Russell Microcap® Index chart

the moon” mentality, 24 hour trading prime car loans and personal debt. • As for when the great and final reset
is now available from TD Ameritrade. This does not even include the lack might begin and end, Elliott Wave
That is eerily similar to the pre-mar- of sufficient assets for many retiring interpretation, Long Wave Cycle
ket trading and limited post close Americans and fewer workers to sup- analysis, Prof. Raymond H Wheeler’s
trading, initiated in the late 1990s. We port a shrinking tax base and rates to cycle research, Benner cycle research
know how that all ended with an 84% pay the entitlement programs for the and other technical considerations,
decline in the NASDAQ 100 from large number of baby boomers retir- merge to project a major crest in
24 March 2000 to 11 October 2002, ing each year. All of these and more 2018, a potential panic in 2019 and
approximately 19 month! factual reasons are a logical basis for a major bottom range of 2020-2023
• Such euphoria is in do in part to years a grand global reset, as the parabolic
of central bank accommodation of melt-up reverts to a significant melt- analysIs anD CommenTs:
low rates, increased money supply down.
and yet a declining money velocity • Historically, there has been an ongo- • The above weekly Index chart clearly
of M1 and M2, as well as, the Trump ing upward bias in USA equity mar- indicates the Index is above both its
election’s strong emotional appeal kets but they have always been “punc- 200 week and 50 week Simple Moving
to “Make America Great Again”, the tuated” by minor and major resets in Averages, confirming the current
long awaited income tax law changes excessive optimism and an attitude long term trend is up
and corporate buy backs, which all that ultimately leads to financially • As of date, the index is in the window
combined with market participant destructive behavior in governments, for a 23 week crest, therefore, a crest
behavioral factors to create a para- companies and households, which is very much a near term potential
bolic melt up. ultimately results in a painful reset. but whether it’s a minor or major
• Going on unnoticed is the ever That dreaded but necessary period crest will be determined by index
increasing national debt of of rebasing the economy is cyclically market action
$20,617,584 360,644 or $170,000 per dead ahead. • Currently, a reliable technical indica-
every taxpayer or a gross national • When it “eventually” occurs, natu- tor, Relative Strength Indicator (RSI),
debt of 107% to GDP. That ranks the rally reoccurring self-cleansing cycles is exhibiting bearish negative diver-
USA just behind Jamaica at 116%, will reduce excess debt and exces- gence in both the daily, weekly and
Bhutan 122.1%, Cape Verde 122.2%, sive capacity to more optimal levels, monthly charts
Portugal 127.3%, Eritrea 127.5%, Italy which ultimately results in a new • When such is noted on a daily chart,
132%, Lebanon 147% and finally, “spring season of economic renewal”, a decline of some magnitude is in the
Japan leading at 250%!! as well as, a new secular equity bull making sooner than later
• Additionally, there are the ongo- market, typically accompanied by • When such is noted on a month-
ing financial crises regarding states, slowly rising interest rates and infla- ly chart, it is indicative of a major
cities, pensions, student loans, sub- tion decline but given its a monthly reflec- MicroCap Review Magazine 27

tion the decline can be months out • End of trends and major TOPS are DISCLAIMER:
Broker/Dealer services and investments are offered
• Additionally, the Index is overbought inevitable in USA equity indices and by Steven M. Shelton, independent contractor and
basis the daily, weekly and monthly that includes the Russell Microcap® FINRA Registered Representative, through Weild &
Co.,, a Member of FINRA
charts, at least a signal of an eventual Index and SIPC,
decline, at least a downward correc- • The exact timing is always an Cornerstone Global Group LLC is not affiliated with
tion followed by a move back up unknown but as a farmer knows, Weild & Co.; Cornerstone Global Group LLC does
not offer securities nor securities advice and is not a
(Preferred Scenario) or the beginning when storm clouds appear, there is a member of FINRA/SIPC. Cornerstone Global Group
of a major change of trend (Alternate very real “potential” for a storm and LLC,  3240 North Lake Shore Drive, Suite 11-D,
Chicago Illinois 60657, may provide institutional
Scenario) its wisdom to be prepared.
Non-FINRA related consultancy on farming as well
• As a side note, the RSI of the DJIA • The markets are quite similar, as as marketing, distribution and product/service devel-
is at its highest over bought reading there are technical indicators that are opment to and for institutional use only, without
contact with any of the individual clients of the con-
ever, dating back to the 1880s alerting those aware and vigilant of a sulted firms. Cornerstone Global Group LLC is also
• In essence, all indications are that “potential” historic top and decline, a financial literacy newsletter publisher of the CGG
Global Market Technical Report and CGG Technical
the microcap index is headed for an as well as, a call to have an action
Research Notes, all of which are general informa-
eventual major top and substantial plan ready for an unemotional imple- tional services regarding Global Macro Economics
decline, which requires “vigilance” as mentation and Market Technical Analysis. Cornerstone Global
Group LLC’s independent contractor consultants are
to timing of a trend change • The great news is that the potential not investment advisers. At no time may a reader,
• However, be aware that technical occurrence for such a top and decline caller, viewer or consultancy client be justified in
inferring that any advice from Cornerstone Global
indicators may “hang in place” until is a once in a lifetime opportunity to
Group or its Non-FINRA registered consultants
the “Greater Fool” hits the final bid profit from the change in a trend to is intended as investment advice or as investment
and then the index falls, while the down. That may include profiting recommendations directed to any particular person
or in view of the particular circumstances of any
indicators reflect the decline from the decline itself and to consider particular person. Investing carries risk of losses,
• NOTE: the Russell 2000 small cap taking advantage of deeply discount- and trading futures or options is especially risky
because these instruments are highly leveraged, and
index has much more market his- ed assets at the next major low, as
traders can lose more than their initial margin
tory and such history has noted that well as, to protect current wealth for funds.  Before investing consult with your invest-
after each market rise from 1998 to retirement and the next generation! n ment advisor. Cornerstone Global Group LLC does
not render tax, accounting or legal advice and the
2000 and 2002 to 2007, the index has information contained in this communication should
Steven Shelton is a Financial Services veteran of more
returned to its origin; that would sug- not be regarded as such. Information provided by
than 30 years, having served in senior management Cornerstone Global Group is expressed in good faith
gest a potential decline of the Russell in both the insurance and broker/dealer community, but is not guaranteed in any way.
Microcap® Index to around 130-150 on and off shore. He has expertise in economics,
financial market analysis, wealth management, tra-
for a major low ditional and alternative investments, financial plan-
• Historically market crashes tend not ning, marketing, insurance, sales and consulting as
well as an international speaking regarding global
occur at the top of the market but
economics and financial markets. This is evidenced
come later in an already established by advanced degrees in business administration and
downtrend, just as the DJIA and S&P economics as well as six professional designations
to include, Certified Financial Planner, Chartered
500 did in 1987, 2000, 2007 Life Underwriter, Chartered Financial Consultant,
• Lastly, recall from history, markets Certified Investment Management Analyst, Tax and
Estate Practitioner and Chartered Market Technician.
top on GOOD news, not bad news!
He is the Managing Member of Cornerstone Global
• Caveat Emptor Group LLC, an institutional consultancy and finan-
cial services publishing entity as well as Managing
Partner of Shelton Farms and Enterprises LLC. He is
ConClusIon a personal affiliate of Weild & Co., member FINRA/
SIPC, an institutional Broker/Dealer focused on
investment banking.
• Currently, the long term trend of the
Russel MicroCap® is still UP!
• It often said that history “rhymes”
and I do believe it is “rhyming” loud
and clear, with a market topping pro-
cess that no one alive has seen, a 250
cycle year top!

28 MicroCap Review Magazine

PPMT Capital Advisors, Inc. DO WE HAVE










Get the edge with PPMT insight and expertise!
Capital Advisors to successful growth companies, their CEOs,
Boards and institutional investors since 2009. MicroCap Review Magazine 29
P R O F I L E D C O M PA N Y nasDaq Cm: mnga

magnegas Corporation
Powerful, Renewable Technology: From lene replacement market. MagneGas fuel
its humble start in Tampa, Florida (US), is quickly emerging as the only renewable
MagneGas® Corporation has steadily grown and vastly safer alternative to acetylene as a
into a green tech company at the fore- metal cutting fuel.
front of the industrial gas sector –and offers Safer: As a hydrogen based fuel, it has
the only renewable acetylene replacement many advantages over acetylene, which has
fuel available on the market today, called been the legacy cutting fuel of choice for
MagneGas2®. With its third-generation pro- over a century. Years of safety testing have
duction systems, this gas can be economical- indicated that MagneGas is a fundamentally
ly produced closer to, or even at, the point of more stable than acetylene and safety and
use and offers many environmental benefits purchasing directors are taking note of a
to the producer. Since the early 2000s the product that can help provide their work-
company has been developing its patented ers with a safer working environment while
Submerged Plasma Arc Gasification system, offering a superior and no compromise
which produces MagneGas2®, a metal cut- renewable cutting fuel. MagneGas2® visibly
ting gas from renewable feedstocks. This burns cleaner than acetylene and has a sig-
renewable fuel is comparable, and in many nificantly higher flame temperature reduc-
ways superior to acetylene, a legacy gas ing or eliminating rework such as
that is inherently unstable and environmen- grinding which is an additional health
tally damaging to produce. With this renew- and safety risk factor. In fact, MagneGas 2®
able fuel, MagneGas is steadily penetrating has been independently certified at 10,500ºF
the industrial gas industry and the acety- / 5,800ºC; it can cut faster and cleaner, with

MagneGas has been adopted by many world class clients, including several
of the world’s largest automotive manufacturers.

30 MicroCap Review Magazine

of water in a four-week period while the
MagneGas system consumes no water in the
process. In respect to raw material, a com-
parable acetylene system consumes approxi-
mate 38,000 lbs while the MagneGas system
consumes less than 7,000 lbs of a renewable
feedstock. One of the most significant envi-
ronmental factors is the complete elimina-
tion of slurry pits required in acetylene pro-
duction. MagneGas gasification systems are
modular, scalable and can be shipped turn-
key ready to gas producers, industrial gas
distributors and large job sites around the
globe for permanent and/ or mobile instal-
lation. The combination of much smaller
The MagneGas gasification technology is highly modular. The unit shown footprint, significantly less raw material con-
can be towed by standard pickup truck, delivering clean fuel almost
anywhere. sumption, elimination of water usage and
elimination of slurry pits make these gasifi-
cation systems very attractive to the industry.
little to no slag, and uses one third less oxy- tions and one foreman. MagneGas has five The renewability of MagneGas 2® fuel offers
gen than acetylene. More specifically, it can units in operation in the US, Europe and industry a completely new opportunity to be
cut a two-inch carbon steel plate at a rate of Australia today. environmentally conscious by opening their
over 18 inches/45cm per minute – a full 38% Environmentally Friendly: This system industrial gas consumption to green alterna-
faster than acetylene, with some customers consumes less raw material and has very tives which were never available.
reporting they are experiencing double the few waste streams, requiring only electricity, Global Appeal: Additionally, carbon cred-
cutting speed of acetylene. electrodes and a renewable liquid feedstock its may be available in some markets for the
Clean, Efficient Production: The which is a dramatic departure from acety- transformation of a renewable feedstock into
MagneGas gasification technology has been lene systems. For example, a comparable MagneGas, and in certain cases our system
in continuous operation since 2007 and is acetylene system consumes 30,000 gallons can transform a customer’s liquid waste
produced with a simple gasification unit
whose reaction chamber fits inside the space
half the size of a standard 55-gallon drum.
The system transforms a renewable feedstock
resulting in a significantly smaller environ-
mental impact than acetylene production
methods. The average turnkey MagneGas
system occupies less than 6,500 sq. feet or
604 sq. meters which is 70% less than com-
parable acetylene systems. In terms of pro-
duction it produces approx. 240,000 ft3 or
6,796m3 per four-week period approximate-
ly more than 30% of a comparable acetylene
system. Additionally, since MagneGas2® is a
compressed fuel, costly and time-consuming
requirements associated with acetylene pro-
duction such as long cylinder fill times and
costly cooling is eliminated.
The MagneGas fully patented gasification unit shown here can easily fit
The unit is also easily operated. A stan- in single industrial garage bay. The unit emits no odors, no harmful waste
dard production team includes two opera- streams, and has a minimal environmental foot print. MicroCap Review Magazine 31

no compromise renewable alternative fuel
to acetylene available on the market today.
Since it’s discovery in the 1800s there has
really been no viable alternative to acetylene
until MagneGas. Today MagneGas Corp.
proudly supplies our acetylene replacement
gas to the US armed forces, fire departments,
fabricators, scrap yards, energy companies
and automobile manufacturers. While our
approach has been measured, we have seen
a tremendous response to our fuel and its
ever-growing demand.”
The Future: So, what is the ultimate
potential for MagneGas2® fuel and produc-
tion systems? “Quite simply we will become
MagneGas now has location in five states (shown in red), with nine locations the new standard in the industrial gas sector
highlights as stars on the US map above.
and just as acetylene was the legacy fuel of
choice for over a century, we are confident
that we will occupy a similar position for the
stream into a usable gas providing additional acquire up to a 70% stake in Infinite Fuels, next century. With its renewability, much
cost savings and environmental benefits. The a German-based bio fuels technology com- smaller footprint and simpler, safer opera-
industrial gas sector spends a significant pany. Infinite Fuels has shown significant tion, our MagneGas gasification systems
amount of costs on warehousing and logis- promise in the European market, winning will one day become the standard of the
tics. MagneGas gasification systems with a $7 million grant for clean fuel solutions industry.” n
their much smaller and safer footprint can from the European Commission in February
be placed closer to point of use, significantly of 2018. MagneGas and Infinite Fuels are
reducing these costs and increasing cylinder planning to launch combined operations,
MagneGas Corporation: The article may con-
asset turnover which in turn have further including the sale of MagneGas2® into the
tain forward-looking statements about MagneGas
financial and environmental impacts. Our major shipping hubs of northern and west- Corporation. See MagneGas Corporation’s periodic
smaller MagneGas gasification systems offer ern Europe beginning as early as the Q2 filings with the Securities and Exchange Commission
for more complete information.
gas distributors the ability to produce their 2018. This joint venture will help solidify
own acetylene replacement fuel on site offer- MagneGas’ presence on the continent and
ing them a new strategic advantage previous- open up an entirely new market for expan-
ly unavailable. There is, then, little doubting sion.
the positive attributes that MagneGas2® as a CEO Ermanno Santilli: Reflecting on
cutting fuel and the MagneGas production these critical breakthroughs for the com-
methods offers in productivity, safety and pany and the product’s ability to rival the
renewability while opening completely new stronghold that acetylene has long held over
capabilities to industrial gas distributors. the cutting fuels market, CEO Ermanno
Financial Impact: MagneGas has articu- Santilli commented, “Our plan is to succeed
lated a clear vision to become a leader in in Europe as we are in the Americas. The
the largest industrial gas and metal cutting industrial gas industry has not only been
markets in the US, and the results so far have looking for a replacement for acetylene as a
been compelling. Revenues are already pro- fuel, it has also been looking for a replace-
jected to grow more than 500% in 2018, and ment for acetylene production itself due its
there is potential for even fast growth with inherent high instability and unfavorable
the current pipeline of acquisitions. environmental impact which is becoming
Europe and Beyond: Recently, MagneGas more stringently regulated .”
signed a Letter of Intent (LOI) in January to “MagneGas2® is truly the first, and only,
The company paid consideration to SNN or its affiliates for this article.
32 MicroCap Review Magazine MicroCap Review Magazine 33

Investor Relations FAQ - Q&A

why Ir? keting to effectively communicate the proper A successful investor relations program
investment message to the capital markets will create significant shareholder value by:
Investor Relations is the communica- and investor community at large. A successful • Accelerating market recognition
tions life blood of MicroCap companies. investor relations program requires a cohe- • Reducing the cost of raising capital
Corporate communications are the outreach sive unit typically made up of the corporate for future expansion
from companies to investors, shareholders, management team, an IR professional or • Exposing management to critical per-
professionals, media, institutions, and the an IR team and SEC legal counsel. Specific ception feedback
financial community. We asked three top objectives for this program are as follows: • Diversifying shareholder base and
IR firms each the same four questions to • Implement best IR practices - improving the forward looking valuation
provide their expert advice and opinions Successfully map, benchmark, devel-
to C level executives of public and private op and support the execution of the KCSA: Investor Relations is a practice of
companies for our curious readers. Company’s positioning towards value communicating directly with the investment
creation for shareholders. This includes community through various means includ-
1. whaT Is InvesTor a quarterly and annual schedule with ing press releases, conference calls, presenta-
relaTIons? milestones, the review and update of tions, etc. Companies use investor relations
all communication pieces to investors. to tell their story, achieve proper valuation
Hayden: Investor Relations involves deploy- • Assist management in developing a and access the markets for capital. Ultimately,
ing best practices to effectively and consis- cohesive investment story and cor- investor relations allow companies to provide
tently communicate with appropriate inves- porate strategy that flows through all information to assist investors make a buy,
tors to maximize the exposure of news, investor communications and posi- sell or hold investment decision.
manage expectations, and navigate chal- tions the Company as a credible, high
lenges, with the ultimate goal of achiev- quality investment. 2. shoulD CompanIes have an
ing a fair valuation. A strategic IR pro- • Conduct targeted and effective com- Ir fIrm, someone InTernal,
gram involves the careful coordination of munications activities to enhance the boTh anD/or noThIng aT all?
financial communications (press releases), Company’s profile in the investment
regulatory filings with the SEC and other community by strengthening valu- Hayden: Larger companies with coverage from
regulatory agencies, quarterly earnings calls, able relationships with shareholders, several analysts can certainly benefit from an
meetings and calls with targeted investors, investors, analysts, and other key in-house IR program. Most companies seek-
the corporate website, analyst engagement constituents. This will include finan- ing to achieve or maintain a fair valuation can
and conference presentations. cial media. benefit significantly from outsourced IR firm.
o   Direct outreach and conference calls Micro-cap and small-cap companies, in par-
MZ: Investor Relations  incorporates knowl- o      Non-deal roadshows in mul- ticular, will benefit from a strategic, ethical and
edge of finance, communications and mar- tiple geographic markets focused outsourced IR relationship.
o   Investor conference participation Smaller companies face tremendous com-
o      Internet marketing and finan- petition for attention from a relatively small
cial media audience of potential investors, and challenges
• Assist senior management and the such as volatility, illiquidity, and a lack of
board in obtaining in-depth feed- research coverage heavily impact the potential
back and intelligence as to how the audience for these organizations. A good IR
Company is perceived in the capital firm that has strong buy- and sell-side rela-
JEFFREY ROB FINK, TED J. markets and accurately addressing tionships, a track record of implementing best
GOLDBERGER, HAYDEN IR HABERFIELD, information gaps that can impact practice IR efforts for companies with similar
trading and valuation. profiles can help smaller companies reach

34 MicroCap Review Magazine

appropriate investors who have the interest KCSA: The need for investor relations depart- IR strategy include a focus exclusively on the
and the ability to build a meaningful position ments increased with the passing of the short-term, and mismanagement of expecta-
in a company at every step of its evolution. Sarbanes Oxley Act, which required increased tions. Often, these two failures coincide. If a
Hayden IR has had great success working corporate governance and regulatory com- single event is overhyped, or described with
with clients that have an in-house IR team pliance for public companies. While most hyperbolic projections, it can indeed attract
and we have added significant incremental companies whose market caps range from short-term investors. However, companies
value to enhance and expand existing efforts. mid to mega-cap have internal investor rela- find that when the promises don’t material-
We have found these arrangements to be well- tions departments, it is often not economical ize, or progress takes longer than expected,
organized and efficient, organizing analysts, for companies of smaller size to absorb this these investors quickly exit. The result is an
non-deal road shows, internal communica- expense and therefore opt to work with exter- overhang of disgruntled shareholders who
tions and conference presentations. However, nal agency investor relations firms. All public are looking to “get out” as soon as the price
it is important to note that the CEO and CFO companies that report to the SEC should have returns to their entry point. It can take com-
must be actively involved in any successful IR an internal employee dedicated to investor panies months of strong financial results to
effort, and usually, the Board of Directors must relations, but depending on the degree of overcome this self-inflicted wound.
play a role in driving a successful campaign. services required, an issuer may find it vital Hayden IR counsels its clients to carefully
to hire an investor relations agency to imple- manage expectations, and communicate based
MZ: Larger companies with coverage from ment a successful investor relations program. on facts, not hopes. It is important to convey
several analysts can certainly benefit from an the potential, but expectations must be clear
in-house IR program. Most companies seek- 3. whaT Is gooD Ir sTraTegy, and achievable. Our belief is that Satisfaction
ing to achieve or maintain a fair valuation CompareD To maybe baD Ir equals performance, minus expectations, plus
can benefit significantly from outsourced IR sTraTegy you›ve seen ouT perception. All too often, companies discov-
firm. Microcap and small cap companies, in There? er that strong performance does not lead to
particular, benefit from a strategic, ethical price appreciation, because the expectations of
and focused outsourced IR relationship. Hayden: Most good IR strategies are fact- investors was for even stronger performance.
Smaller companies face tremendous com- based and maintain a long-term perspective. Another component that determines suc-
petition for attention from a relatively small Most failed IR strategies seek short-term ben- cess in IR is transparency. Companies which
audience of potential investors, and challeng- efits that are not sustainable usually because fail to provide investors with metrics by which
es such as volatility, illiquidity, and a lack of the underlying performance does not support to track progress find that either investors are
research coverage heavily impact the potential the thesis. No IR program can overcome poor disinterested, or learn that investors will select
audience for these organizations. A good IR operational and financial performance indefi- their own metrics, and these mile markers
firm that has strong buy- and sell-side rela- nitely. Ultimately, performance determines val- may be inaccurate, incomplete or optimistic.
tionships, a track record of implementing best uation. A strategic and professionally executed Conversely, companies that provide transpar-
practice IR efforts for companies with similar IR program can accelerate value creation. ency that turns out to be inaccurate will pay a
profiles can help smaller companies reach The best IR programs seek to communi- stiff penalty. The challenge is to hone forecast-
appropriate investors who have the interest cate a clear, fact and data-based, long-term ing and provide detail with confidence.
and the ability to build a meaningful position investment thesis to as wide and broad- Hayden IR works with its clients to deter-
in a company at every step of its evolution. based an audience of appropriate investors mine the appropriate metrics, which may not
Hayden IR has had great success working as possible, with the goal of creating an be traditional revenue and earnings per share
with clients that have an in-house IR team attentive audience of retail investors, smaller projections, to help investors understand man-
and we have added significant incremental institutions, larger institutions, the media agement’s expectations and long-term goals.
value to enhance and expand existing efforts. and analysts. As the thesis comes together,
We have found these arrangements to be well- a wide audience will include early adopt- MZ: A successful investor relations program is
organized and efficient, organizing analysts, ers. As the company develops further, the built on consistency and clarity from corporate
non-deal road shows, internal communica- early adopters will take profits, giving way management down to the investor relations
tions and conference presentations. However, to longer-term focused investors who will officer in charge of communicating with the buy
it is important to note that the CEO and CFO gradually embrace the story. Ultimately, this and sell side on a daily basis. Messaging in press
must be actively involved in any successful IR will lead to research and media coverage and releases, investor marketing materials and in all
effort, and usually, the Board of Directors must an efficient market as the company grows. investor focused mediums should be consistent
play a role in driving a successful campaign. The two most common scenarios in a failed as should communications with all buy-side MicroCap Review Magazine 35

investment professionals and sell-side research predictable, there are other ways companies that they no longer have the insight necessary
analysts to ensure compliance with Regulation can help guide investors and provide mile- to provide accurate guidance. While I could
Fair Disclosure. Maintaining a regular dialogue stones for investors to gauge progress. For argue either way in terms of which is better, I
with the capital markets whether through press example, management can provide metrics typically advise my clients to provide guidance
releases, earnings calls or investment confer- about increasing the size or reach of the sales only if they are confident that they have strong
ences is the cornerstone of any successful inves- force, about the number of new products visibility into their business and are committed
tor relations program. Unsuccessful IR efforts launched, about shifts in revenue mix or over the long-term to issuing guidance. Once
normally center around not setting expectations improvements in gross or operating margin. you start providing guidance, it is expected that
with the investment community by setting iden- In this way, you are helping investors under- you maintain this practice. n
tifiable milestones that can be tracked to gauge stand some of the levers that impact and
Jeffrey is a Managing Partner at KCSA who oversees
the progress of a company. An issue that often drive the business. Investors can utilize this
the firm’s integrated communications service offering
arises in the small and micro-cap community information to create models. These data as well as the financial/business services and energy
is overstating the potential effect of a corporate points or milestones also help an investor practice areas. For 21 years Jeffrey has provided strategic
counsel to private and publicly-traded micro/small-cap
development in the hopes of increasing the stock measure management’s ability to perform companies. His experience includes strategic counsel,
price where there is no fundamental value actu- against its stated goals. The more insight proactive institutional outreach and transactional (IPO,
secondary and M&A) communications support. He
ally being created. Over time this misleading an investor can have into your business, the
holds a bachelor’s degree in communications from
information is often discovered and negatively better they can understand it, increasing an the University of Wisconsin-Madison. Jeffrey actively
impacts the value of the company; more often investors’ ability to become a shareholder. participates in triathlons and was a finisher of Ironman
Wisconsin in 2005 and Ironman Switzerland in 2010.
known as a pump and dump and therefore it is He hopes to compete in an Ironman again in 2015 and
important for young companies to partner with MZ: Guidance can be presented in both every five years after that.
Rob Fink is a Partner of Hayden IR and Managing
reputable investor relations firms that have a quantitative and qualitative forms, but before
Director of the firms New York office. Rob has more
positive history with the investment community.   an issuer provides guidance to the street it than 10 years of experience consulting public compa-
should ask several questions: nies on best practice investor relations strategies that
enable executive teams to reach, attract, and retain
KCSA: The worst type of IR strategy is not a) Will the company be able to maintain sophisticated investors and more effectively enhance
having an IR strategy. While this is less of an guidance in the future? value for their shareholders.
Previously, Rob was a small-cap portfolio manager
issue than it was 10 years ago, some compa- b) Will the guidance being considered
at RBC Capital Markets. He also worked as a trader
nies continue to believe that their only job have a material effect on the company? for Goldman Sachs and on the floor of the New York
is to effectively run the company and deliver c) Can the company provide a clear time- Stock Exchange as a market maker for Spear Leeds and
Kellogg Specialists. Rob has spent much of his career
strong results. While true in theory, the reality line to achieve the guidance? focused on the capital markets and has a track record
is that maintaining an active investor relations d) Does the company feel comfortable of identifying undervalued and underfollowed public
program allows a company to control its nar- answering potential questions that the guid-
Rob maintains a strong network of fundamental
rative – what people think about the company. ance might cause? investors at hedge funds, mutual funds, banks and fam-
It has been proven that companies that main- If the answer to any of these questions is ily offices that focus on value and growth investing in
the micro-and small-cap market
tain an active, transparent IR program, tend to “No” then the company should reconsider Ted J. Haberfield is President of MZ North America.
achieve a higher valuation over the long-term, issuing guidance. Ted Haberfield provides strategic management con-
sulting to public companies through integrated inves-
as they are viewed as shareholder friendly.
tor relations by combining finance, marketing, and
KCSA: Starting with the dot-com bust, through compliance. Prior to joining MZ in 2007, Ted spent
4. shoulD CompanIes gIve the recent financial crisis, the trend of compa- over thirteen years as a financial advisor serving the
investment needs of high-net-worth individuals and
guIDanCe? nies, big and small, is to reduce or eliminate institutional investors, including non-profit organiza-
guidance. For those reducing guidance, the tions and sovereign governments. He served as Second
Hayden: Management should strive to provide Vice President of Wealth Management at Smith Barney
trend is to shift from annual guidance (with
and as Second Vice President of Investments at Morgan
transparency, and help the investment commu- quarterly updates) to quarterly guidance. The Stanley Dean Witter. Ted has been a speaker on finan-
nity gauge progress and understand the long- rationale is that being held accountable to quar- cial related topics at the National Congress of American
Indians (NCAI), First Nation’s Development Institute,
term opportunity. If visibility is sufficient to terly guidance is a very difficult way to manage Guatemala Prospera and other national level associa-
provide specific guidance, then guidance makes a business and may cause management to make tions. He graduated from California Polytechnic State
University – San Luis Obispo in 1993 with a B.A. in
sense. However, the punishment for missing business decisions simply to meet guidance. At
Business and major in Financial Management. He cur-
guidance, both immediate and longer term in the other end of the spectrum, many compa- rently resides in San Diego with his wife Danielle and
the form of lost credibility, is significant. nies used the dot-com bust and financial crisis his four children Layla, London, Van, Curren.

However, if revenue and earnings is not to completely eliminate guidance, indicating

36 MicroCap Review Magazine

Contract SEC Quarterly Monthly Board Of Financial
CFO Fillings Closing Reporting Directors Projections



(310) 800-7175
MicroCap Review Magazine

The Buzz in Washington

about Initial Coin Offerings
A s public interest and activity with cryptocurrencies and initial coin offerings
(ICOs) increases around the globe, lawmakers and regulators in Washington
are coming to realize that they need to respond to the booming industry.
Over the past few months, we have seen a as Reps. Bill Foster (D-IL), Patrick McHenry SEC issued an investor Bulletin on ICOs. The
spur of activity in the form of statements (R-NC), and Ed Perlmutter (D-CO), and investigative report issued cautioned market
by lawmakers, hearings on Capitol Hill, and Senator Thom Tillis (R-NC) have asked participants that offers and sales of digital
guidance and statements made by officials questions about ICOs at Congressional hear- assets (such as ICOs) by virtual organiza-
at regulating agencies. This article gives a ings. tions are subject to the requirements of fed-
glimpse of the action that we’re seeing on Some Members of Congress have eral securities laws. A couple months later,
the Hill and at the agencies, and what we can shown strong interest in acting to regulate speaking on risks created, SEC Chairman Jay
expect to see going foward. the industry. On January 9, at a hear- Clayton said that he thinks that ICOS may
ing on money laundering, Senate Banking expose buyers to possible fraud and could be
on CapITol hIll Committee Member Mark Warner (D-VA) susceptible to abuse from “pump and dump”
said that “we are about to be overwhelmed schemes.1
Though most Congressional staff on Capitol by bitcoin, other kinds of cryptocurrencies.” The SEC has also shown its willingness
Hill are still learning what an ICO is, some He continued that he would hope “we would to crack down on industry marketing. In
members have been paying attention to the be able to get ahead of it rather than chasing November, the agency issued a notice to
market and trends. Mainstream media cov- it after the fact.” Many Members are con- celebrities in connection with their use of
erage of ICO activity is helping some staff- cerned about national security and money social media networks to encourage the pub-
ers to understand the industry. Even more laundering, as well as investor fraud. Others, lic to purchase stocks and other investments,
promising, some Members of Congress, such on the other hand, are concerned about over- including ICOs. The SEC stated that “these
regulating and quashing a nascent industry endorsements may be unlawful if they do
with the potential to raise capital. Some not disclose the nature, source, and amount
industry stakeholders are concerned that of any compensation paid, directly or indi-
large enforcement actions by the Securities rectly, by the company in exchange for the
and Exchange Commission may cause an endorsement.
overreaction by Congress and result in regu- A week later, SEC Chairman Jay Clayton
latory overreach. spoke at an event and said that there is a
“distinct lack of information about many
aT The seCurITIes anD online platforms that list and trade virtual
eXChange CommIssIon (seC) coins or tokens offered and sold in Initial
Coin Offerings . . . trading of tokens on these
The SEC started paying attention to ICOs platforms appears to be susceptible to price
last year, with its first major action last July, 1 A “pump and dump” scheme occurs when an
n BY DINA ELLIS ROCHKIND, ESQ. and has been focusing increasing attention individual encourages investors to buy shares in a
company in order to inflate the price artificially,
AND CASEY MILLER, ESQ. on the industry since. On July 25, 2017, the and then sells their own shares while the price is

38 MicroCap Review Magazine

manipulation and other fraudulent trading concerning its authority over retail com- Dina Ellis Rochkind  is Of Counsel in the Paul
Hastings Government Affairs practice www.paul-
practices.” He also said that he has he has modity transactions involving virtual cur- and is based in the firm’s Washington,
“yet to see an ICO that doesn’t have a suf- rency. The Proposed Interpretation sets D.C. office. Her practice focuses on representing cli-
ents before Members of Congress on Capitol Hill and
ficient number of hallmarks of a security.” out the CFTC’s view regarding the “actual
the Executive Branch. Ms. Rochkind represents cli-
Chairman Clayton made further statements delivery” exception that may apply to virtual ents in matters involving regulatory initiatives, poli-
toward the end of the year, saying that he currency transactions. cymaking and legislation, and enforcement actions.
Ms. Rochkind has over 20 years of experience
“caution[s] those who operate systems and on Capitol Hill, lobbying, and working for the
platforms that effect or facilitate transac- lookIng forwarD Executive Branch. Prior to joining Paul Hastings,
she served as Washington Director in the office of
tions in [virtual currencies] that they may be
Rep. Mike Coffman (R-CO). Other Capitol Hill
operating unregistered exchanges or broker- The CFTC and SEC will continue their experience includes serving as senior staff for vari-
dealers that are in violation.” He referred enforcement efforts, along with the Plaintiffs’ ous Congressional Committees and for Senator Pat
Toomey (R-PA). Ms. Rochkind also served in the
interested parties to “closely read” the DAO Bar. The SEC and CFTC don’t want to quash George W. Bush Administration as Deputy Assistant
report released earlier that year, and said that an innovative way to raise capital, but need Secretary at the Treasury Department. She has been
involved in drafting major pieces of legislation over
“excessive touting in thinly traded and vola- to balance that with investor protection. The
the last two decades, including: the 2005 bankruptcy
tile markets can be an indicator of ‘scalping,’ agencies would like to get this issue resolved, reform legislation, the FACT Act, E-Sign, Check 21,
‘pump and dump,’ and other manipulations and more specifically, one of SEC Chairman Federal Deposit Insurance Reform Act, Gramm-
Leach-Bliley Act, and, most recently, the comprehen-
and frauds. Jay Clayton’s first statements was that he sive and bipartisan JOBS Act, for which she was the
The SEC has brought three enforcement wanted to make it easier to raise capital. The lead staffer in the Senate.
Ms. Rochkind has worked across party lines on
actions since issuing the DAO report in July ICO craze that we are seeing today has a lot
both sides of the aisle to achieve key legislative suc-
2017. Some industry stakeholders are con- to do with the fact that we haven’t changed cesses and has a reputation for “getting things done”
cerned that increasing enforcement actions our securities laws since the post-depression in Washington. She is also experienced in crisis
management. During the auto industry crisis, Ms.
and the potential for litigation may have era. The JOBS Act was the first crack at Rochkind led the lobby to rescue Chrysler and han-
chilling effect on offerings. attempting to do that, but there is recogni- dled the consequences and fallout from its bankrupt-
cy. She has led legislative advocacy on behalf of major
tion that more needs to be done to enhance
corporate entities and advised congressional leaders
aT The CommoDITy fuTures capital formation. on issues such as banking, bankruptcy, insurance,
TraDIng CommIssIon (CfTC) The greater danger to ICOs and cryp- other financial services, and economic development.
Prior to leading Rep. Coffman’s office, Ms.
tocurrency comes from the law enforce- Rochkind served as Vice President of Federal
The CFTC has determined that Bitcoin and ment community, which is concerned about Government Affairs for a leading mortgage lending
company. n
other virtual currencies are indeed com- money laundering and terrorist financing.
modities. This is significant because under Secretary Mnuchin and Under Secretary Casey Miller  is an associate in the Corporate
federal law, there are certain activities that Sigal Mandelker have made various com- Department  and is based in the firm’s Washington,
D.C. office Her prac-
are prohibited under commodity trading, ments expressing concern about this indus- tice focuses on  securitization and structured
including: price manipulation of a virtual try. Both the House and Senate are working finance,  with a particular emphasis on  representing
investment banks, asset managers, issuers, and inves-
currency, wash trading in an exchange- on anti-money laundering legislation that
tors in collateralized loan obligation transactions.
traded virtual currency swap or derivatives has a good chance of being signed into law. In addition to her work  in structured finance, Ms.
contract, trades in virtual currency futures Our fear is that this legislation will include Miller works with the Government Affairs practice in
representing clients before Members of Congress on
or options on exchanges that are not prop- provisions that shut down or effectively matters involving regulatory initiatives, policymak-
erly registered with the CFTC, and counter shut down the use of cryptocurrency in the ing and legislation, and enforcement actions.
Previously, Ms. Miller worked on Capitol Hill as
margin trades with entities not registered U.S. Interest groups, including technolo-
a Senior Legislative Assistant to U.S. Representative
with the CFTC. gists, should be engaging with Capitol Hill Marcia L. Fudge. In Congresswoman Fudge’s office,
Early December 2017, the CFTC and the Administration to make sure that Ms. Miller managed important legislative initiatives,
including handling the Congresswoman’s healthcare
announced that three exchanges (CME lawmakers and regulators understand that portfolio. Additionally, Ms. Miller handled all of
Group, Cboe Global Markets, and the Cantor blockchain technology can be used as a tool the Congresswoman’s work with the Committee on
Science, Space, and Technology and related issues.
Exchange) will be allowed to self-certify new to prevent money laundering. Currently,
She has experience navigating the legislative process
bitcoin trading products. Trading began on their approach is to advocate that they be and moving legislation through the U.S. House of
Cboe Global Markets on December 10, and excluded from anti-money laundering laws. Representatives.
Ms. Miller graduated with high honors from The
CME Group started trading on December This is a mistake. They need to participate George Washington University Law School in 2015,
17. Later that month, on December 15, the in the process rather than trying to exclude where she served on the school’s Law Review. She earned
a Bachelor of Science degree in Mechanical Engineering
agency announced a Proposed Interpretation themselves from it.
from The Pennsylvania State University in 2009. MicroCap Review Magazine 39


On the Market
Commentary and Insights
ing metal for a multiplicity of uses.
The next generation space
Notably, Clean TeQ owns one of these
age ‘element’ that will disrupt processes, which is highly efficient in the
the status quo regarding extraction and purification of a range of
valuable strategic metals from slurries, tail-
metals used in the aerospace
ings and solutions with yield recoveries near
and automotive markets 99%. Notably, Clean TeQ has sold one of
these scandium recovery plants to a major Russian MIG-29 Fighter: A faster,
sCanDIum meTal wIll Japanese company. lighter, and a more fuel-efficient
revoluTIonIze The Adding a tiny amount of scandium (0.15% Soviet / Russian military aircraft
using a tiny amount of scandium (Sc
alumInum InDusTry to 0.20%) to aluminum creates this next gen- 21) allows the fuselage to be welded
eration alloyed metal that is corrosion resis- (no rivets), making it 15% lighter.
Clean TeQ* owns the world’s largest and tant, weldable (20 X faster than riveting & with
highest-grade scandium resource. no loss of strength at the weld), 3D printable, * Clean TeQ Holdings Limited (ASX:CLQ)
Scandium is revolutionary in how it will able to significantly enhance castings, ‘super- is the owner of a unique nickel / cobalt /
transform aluminum for the aerospace, auto- plastic’ (can be fabricated to form more com- scandium mineral resource New South Wales,
motive, marine, and rail transport industries. plex shapes), stronger and harder. Thus, the Australia. Prominently, mining mogul Robert
The change is still a bit out in time; however, alloy can be formulated to be much lighter on Friedland is a major investor and Co-Chairman
the major users of aluminum in the world a comparative basis than standard aluminum. of the company and he increased his sharehold-
are now deeply involved in developing appli- Pondering the above one can fairly say ing in the open market last year.
cations for scandium-enhanced aluminum. that, in effect, a new and astonishing metal Last October Clean TeQ updated its
Let’s imagine a world where you get all the has been born. The problem—the produc- scandium resource estimate by 63%, mean-
scandium you want and at a lower cost than tion impasse—has been that there is so very ing that it increases the contained scandium
you’ve been able to get it historically. That day little scandium available. Besides occurring metal in the resource to 19,222 tonnes. As
is near. Scandium is one of the most plentiful naturally in very low concentrations, scan- mentioned, only about 15 tonnes of scan-
yet hard to extract elements there is: it’s ‘held’ dium is very difficult to separate from ore dium is produced globally each year. So
in minute amounts in many substrates, occur- and reduce to its elemental state. These rea- using a minimum scandium price of $1,500
ring in trace quantities in over 800 minerals. sons drive the cost of scandium to US $270 per kilogram, this means that there
Now the ‘no supply / high cost’ dynamic is on per gram—that’s US $122,500 per pound. By could be over $28 billion of the metal
the threshold of change as chemical solutions comparison, gold is US $18,687 per pound. in the ground. In addition, there’s addi-
are developing that will release the astonish- And as mentioned, only about 15 tonnes of tional gobs of way-more $ billions worth of
scandium are produced globally per year. cobalt, nickel, and platinum in the very same
It is claimed that using aluminum-scandi- near-surface resource. Send request for my
um alloys could reduce the weight of a large expanded
aircraft by an enormous 10% to 15%. There
is obviously a clear and direct relationship aIrCrafT applICaTIons
between the weight of an aircraft, the amount
of fuel that it uses, and the efficiency of its In March 2015, CleanTeQ announced a
performance. Simply put, weight is money in collaboration agreement with AIRBUS
aircraft; the heavier a plane is the more fuel APWorks, and later announced additional
it takes to drive it through the air. collaboration agreements with alloy manu-

40 MicroCap Review Magazine

facturer KBM Affilips in March 2015 and auTomoTIve applICaTIons What has been created is an alloy / metal that
December 2016. Link here and here. does not appear on the periodic table, but this
Critically, using scandium-modified alu- Clean TeQ is fast-tracking the development aluminum-scandium alloy has qualities that far
minum as a body skin, the aircraft fuselage of scandium applications for the automotive surpass other metals out there. Titanium is very
may not need to be clad or painted—which industry and is in discussions with key alloy expensive and very heavy compared to alumi-
would further reduce it weight and lead producers currently providing products to num; steel is heavy and has issues with corrosion
to significantly reduced maintenance costs. the industry to establish programs utilizing that need scrupulous and exacting manage-
Aluminum-scandium alloys can also be used scandium-containing alloys for applications ment. The use of scandium-modified alumi-
in the aircraft sector for the production such as high-strength extrusions of body num solves both of these dilemmas. Researchers
of welded gas tanks, structures for dash- frame skeletons, bumpers, etc. Additionally, claim that scandium provides the highest incre-
board panels and compartments, and large casting of automotive parts that require com- ment of tensile strength per atomic percent than
stamped and welded structures. plex geometries, ranging from body nodes to any other alloying element when added to alu-
Analysis by specialty metals experts finds wheels will make possible the reduction of the minum. In addition, scandium exhibits very
that scandium-aluminum alloys can deliver number of parts necessary to assemble a com- good electrical conductivity and excellent heat
in the range of $9 million in net-present value plete vehicle. Clean TeQ has initiated pre- stabilization qualities. n
savings for every mid-body airliner because competitive development work with a North
Dr. John L. Faessel is a seasoned and respected Wall
of the metal’s light weight and ability to reduce American consortium where a successful out-
Street professional with industry-wide recognition
or eliminate the use of rivets, reducing fuel come will open a whole new set of attractive for expertise in market strategy and analysis. He is
consumption. (The weight of rivets in an component markets for aluminum-scandium. widely recognized for his insights in public com-
panies. For over 25-years Dr. Faessel’s ON THE
AirBUS 380 is thought to be about 10 tonnes.) The automotive sector is substantially MARKET reports have been widely distributed to
Incorporating aluminum-scandium alloys will increasing its use of aluminum, with 50% a throughout the world to an extensive list of finan-
cial institutions, brokers, foundations, mutual funds,
allow aircraft manufacturers to boost annu- growth forecasted by 2020. Clearly, a revolu-
hedge funds and private high net worth investors.
al revenue by hundreds of millions of dollars tionary change in the auto industry is at hand. Contact at
per year through lower materials costs, lower
Note: This article is not an attempt to provide invest-
direct manufacturing costs, and higher manu- key eluCIDaTIon re sCanDIum: ment advice. The content is purely the author’s per-
facturing throughput. In addition, I’ve read sonal opinions and should not be considered advice of
any kind. Investors are advised to conduct their own
that casting the scandium-modified aluminum Big picture—scandium is the most industri-
research or seek the advice of a registered investment
can reduce the number of steps for AIRBUS ally disruptive metal there is. It has all the professional. The author has bought shares in the open
to build a plane’s body from 22 down to 9, lightweight characteristics of aluminum and the market and owns shares before or at its publishing. The
author has not been compensated to write this article.
significantly reducing both build time and strength of scale of titanium. Its corrosion resis-
again, cost. tance and weldability are key characteristics. Disclosure: The author has bought shares of Clean
TeQ on the open market.

The image is showing the following: Clean TeQ Sunrise Project Location
• Proposed Clean TeQ Sunrise
Project location and supporting
infrastructure (rail, roads, local
• Forbes, Fifield, Parkes etc are all
local towns
• Sunrise is not in production yet,
but has a resource of : 101Mt
@ 0.59% Ni and 0.13% Co. Ore
Reserve of 96Mt @ 0.65%Ni and
0.10% Co.
• Cadia, Northparkes and Cowal
are other mines in the area (not
owned by Clean TeQ)

Clean TeQ website: http://www.Clean

The company paid consideration to SNN or its affiliates for map placement. MicroCap Review Magazine 41


Seeing the Light, The

Case for Nuclear Power in
the 21st Century
N uclear power is not an option for the future, but an
absolute necessity.
The global threats of climate change and work, and is now fully evident in the cli-
lethal air pollution, killing millions each matic changes that people are witnessing
year, make it clear that nuclear power and, increasingly suffering from in their
together with renewable energy must work own experience, from the poles to the equa-
together as non-carbon sources of ener- tor. Science is conservative in embracing
gy to overcome these most serious threats. new truths. The requirements for evidence
Fortunately, though not yet in the West, a are prodigious and the place of doubt and
nuclear renaissance underway in developing debate central. Climate change, however,
nations, to combat one of the biggest threats has not only moved well past these stages of
of our time. validation. It has repeatedly exceeded every
Seeing the Light explains how, why, and forecast for its advance.
where the new nuclear era is happening. In To achieve what is needed to meet this
addition, this book offers a great deal more: a crisis, a huge reduction in carbon emissions
social and political history of nuclear power must be achieved. This will be a colossal
“Seeing the Light: The Case and concerns and fears about it; a detailed undertaking which will take time, effort,
for Nuclear Power in the 21st discussion of the Chernobyl and Fukushima and enormous amounts of money and will
Century,” by the UW’s Scott accidents and their meaning; an in-depth require every means that nations can employ
L. Montgomery with Thomas
Graham Jr., was published look at the myths about nuclear power; a to produce energy from noncarbon sourc-
in September by Cambridge simple and clear introduction to the basic es. Fortunately modern society has created
University Press. technology of nuclear energy, weapons, and sources of this kind that can now be expand-
reactors; and a pragmatic discussion of radi- ed and advanced to address the challenge.
ation and it effects. Such an array of topics However, simply choosing a few options,
help make this book the best single work on because they seem the “greenest” and are
this key subject yet available for students, the backed by wishful computer models, will
general public and anyone interested in the never be enough. The task is too real, grave,
future of energy production and, thus, the vast, and demanding for diversions that treat
future of humanity on planet Earth. it as an opportunity for ideological prefer-
Human civilization on this planet faces a ences on one side of the political spectrum.
n BY SCOTT L. MONTGOMERY growing existential crisis. This risk is beyond Yet climate change, for all its risks, is only
AND THOMAS GRAHAM JR. denial, confirmed many times by scientific part of the existential crisis today. There is

42 MicroCap Review Magazine

another type of threat, once thought to be energy, which must be moved toward a more on record. In the decades ahead, it is safe to
quelled but that has returned with a ven- noncarbon basis. This means nuclear power say that planet Earth will be fine. It is the life
geance according to new research, which and renewables, the only real options that that lives upon it that will suffer, indeed that
looms over large parts of humanity and exist today. Neither one of these can achieve is already enduring difficulties.
whose impacts are now known to be spec- what is necessary by itself; to choose one and On December 7, 2015, seventy-one Nobel
tacularly lethal. Nearly 18,000 people lose abandon the other is to amputate an arm Laureate scientists spoke in one voice to the
their lives every day due to toxic material from the effort that is needed. One must climate negotiations in Paris. The docu-
in the air they breathe. This amounts to 6.5 recognize, however, that more money has ment they signed, known as the Mainau
million deaths annually, which the World been invested in renewables in the last ten Declaration, was a forceful call to action for
Health Organization (WHO) emphasizes is years then has been expended on all nuclear all the world’s nations. The threat faced by
significantly greater than combined fatali- power plants ever built and currently under humanity from a warming climate, it stated,
ties from HIV/AIDS, tuberculosis, and traf- construction with little effect on decarbon- was greater than any that had ever existed,
fic accidents. As with the climate crisis, ization. Renewables have a difficult time with only one possible exception.
energy production is the main contributor producing power at a nuclear scale. For The Mainau Declaration makes the point
to this global threat by utilizing fossil fuels, example, the Diablo Canyon Reactor, the in terms as clear as we might wish. They are
particularly coal. Above all because of the last remaining nuclear plant in California, terms with a particular resonance, given the
burning of fossil fuels millions of people live which the state intends to close, produces history behind them:
in cities today whose air cannot be called fit 14 times as much power as the Topaz solar “Nearly 60 years ago, here on Mainau,
to breathe. farm, which requires 500 times as much a similar gathering of Nobel Laureates in
A new civilization – modern civilization land. The Topaz facility was completed in science issued a declaration of the dangers
– unlike anything that had gone before has 2011 in San Luis Obispo County, California, inherent in the newly found technology of
been created and built on fossil fuels: coal, and is one of the world’s largest solar farms.1 nuclear weapons ... So far we have avoided
oil, and natural gas, extremely rich sources Importantly, carbon emissions in California nuclear war though the threat remains. We
of energy. And in the twentieth century have increased 35% since the closure of the believe that our world today faces another
these three sources based on carbon spread San Onofre nuclear plant in 2012.2 Thus, threat of comparable magnitude... [T]he
throughout the world. Human life has been nuclear power is an absolutely essential part world must make rapid progress toward
revolutionized because of this, and will con- of the mix if humanity is to prevail against lowering current and future greenhouse gas
tinue to be altered by it, becoming both climate change. emissions to minimize the substantial risks
more prosperous and at the same time more The Paris Climate Agreement of December of climate ... Failure to act will subject future
threatened. 2015 brought 190 nations to a consensus that generations of humanity to unconscionable
It wasn’t until the 1970s that some sci- they would work to reduce carbon emissions and unacceptable risk.”
entists came to understand the Faustian such that the world’s average temperature With these words in mind, it can only be a
bargain. Means were available to hugely would not reach 2°C above preindustrial major step forward that a new age of nuclear
increase the quality of life but if overused norms, the point interpreted by the scien- power has actually begun. It is to help sup-
could eventually make large parts of the tific community as defining when the most port and advance this new era, to quicken
planet much less livable for human beings. severe impacts will begin in force. These an understanding of it and why it is much
This was because the burning of these fuels would not just be droughts, storms and high- needed, that this book Seeing the Light has
releases over time vast amounts of carbon, er seas, but effects in the oceans less often been written. n
largely in the form of CO2 gas, into the described, like more acidic waters reducing
atmosphere, absorbing and reradiating the the abundance of phytoplankton, a form of
sun’s heat, raising the temperature of the life at the base of the marine food chain that
lower atmosphere and the oceans. also produces half of the world’s oxygen. No
Climate change is many threats to many small amount of talk at the Paris meetings
nations – political, social, cultural, econom- was devoted to 2015 being the warmest year
ic, and even military. It is a direct challenge
1 Porter, Eduardo, “Wind and Solar Power
to the world’s stability, not only because of Advance, but Carbon Refuses to Retreat,” New
York Times, November 7, 2017, p. B-1.
its impact, but because of the changes that
2 Nuclear Matters® http://www.nuclearmatters.
it requires to be made by civilization. The com/climate
core of these changes lies in the realm of MicroCap Review Magazine 43


Mastering the Mekong

Region’s MicroCap
F or thousands of years, the word ‘loot’ was used by the people living
in the isolated plains of northern India to describe what plunderers
did when they came into a village.
But in the late 18th century, the private transparency and shaky free market creden- through one of the mighty Mekong’s more
army-corporation known as the East India tials, the region holds promise. turbulent courses.
Company suddenly took the word global. Most firms on the stock exchanges in the So there are a few things to consider before
Bursting into the Mughal King’s territory region would be classified as ‘micro’ or ‘small taking the plunge into the financial markets of
with plunder on their minds, they returned cap’ in the west, with the vast majority of ‘the wild southeast’ and making off like a rich
back to Britain with foreign treasures and them worth far less than a billion USD and bandit on the modern Silk Road (which we’ll
words. And some never made it back at all. operating largely under the radar of most explain how to do at the tail end of this article).
Luckily for both sides, the dangers of doing analysts’ reports. In fact, there are only 23 The first is how capital markets have
business in Asia don’t usually involve violence listed companies that have a cap of over evolved in the area.
and war anymore. But they are still there. US$1 billion in Vietnam, just 1 in Laos, and
And the Mekong Region is still something none in Cambodia. aCD – The seCreT asIan
of a rocky frontier zone for western inves- But a booming manufacturing sector, flir- blueprInT
tors. tations with services and high rates of GDP
growth are providing new spaces for expansion The Asian Capital Development (ACD)
whITe waTer InvesTIng and potential. Getting financially involved here model, also known as state-sponsored capi-
is both risky and rewarding, like taking a raft talism, is a key concept to grasp for under-
Despite a delayed entrance to the wonderful standing the debt cycle to profit off Asian
world of financial markets, less-than-stellar stock markets.
In the ACD model, governments tend to
grow their economies by picking ‘key sectors’
to support through cheap credit and other
benefits. That facilitates big projects that
slowly drive the economy from agriculture
to manufacturing and through to services.
This is not necessarily always a problem,
if the industries manage to become profit-
The East India Company’s ‘forced privati- able and globally competitive. But because
zation’ of the Mughal Kingdom sealed the of a range of different historical and political
n BY PETER PHAM domination of Britain capital over India.
factors, Southeast Asia’s (relatively big) micro
Source: Wikipedia Commons

44 MicroCap Review Magazine

here (legally, of course).
In the graph above, we back-tested an
investment strategy in the Vietnamese stock
market during the time frame of 2011 - 2017.
We screened and invested in the stocks
that witnessed annual debt growth, had
effective borrowing interest rates lower than
their sector average, and demonstrated high
The Khone Falls between Laos and returns on invested capital.
Vietnam is rising. Source: Wikipedia Commons
Cambodia boast the largest volume of We stayed loyal to the strategy during the
water flow in the world. Navigating the
Mekong Region’s micro cap investment specified time by reshuffling the target port- But remember, the marginal productivity
opportunities can be just as beautiful, folio annually. In other words, we removed of debt plays the key role in determining the
and dangerous. Source: Wikipedia Commons
the stocks that didn’t satisfy our listed crite- target stocks, and this can change fast.
ria and then added the stocks that did. Of course, this is only the tip of the iceberg
cap companies are not all able to do that. As a result, we earned a total return of of opportunities in this hot and emerging
more than 600% by the end of 2017 - outper- region. If you want to find out more, get in
The rooTs of DevelopmenT forming the VN Index return of 180% dur- touch with us or check out our site One Road
(anD ITs problems) ing the same time. At this point, an investor Research for Asian investment insights you
can jump back onto their pirate ship and sail won’t find anywhere else. n
The 1960s, 70s and 80s saw war devastate away on the high seas laughing, while the
Peter Pham is an author, researcher and investor.
large parts of the Vietnamese, Laotian and debt-munching banks pick up the bill.
Pham’s book, The Big Trade: Simple Strategies for
Cambodia countryside, severely crippling Maximum Market Returns, was published in 2013 by
these countries’ capacity for agricultural sus- keep ThIngs movIng John Wiley and Sons. Pham has contributed invest-
ment advice on different media platforms, including
tainability, let alone surpluses. Seeking Alpha, CNN Money Trading Markets and
Things are very different now, and invest- So, in summary, a solid investment strategy Forbes. He is the creator and editor of “One Road
Research”, a website focused on decoding Asia for
ments in manufacturing capacity, coupled for making use of the debt cycle to profit off
international investors. He also presents a podcast that
with privatization and land reform, has been micro cap companies in Vietnam or another was launched on iTunes in 2014, which has featured
taking place over the last few decades. But emerging Southeast Asian market would go guest appearances from experts such as Ron Paul, Jim
Rogers, Robert Kiyosaki, Marc Faber, John Perkins,
industry needs infrascture and hard cash in something like this: and Kevin Kelly, to name a few. Pham is currently
order to start working. + Track down the “hot spots” in the debt the managing director and principal fund manager
of the award winning Phoenix Capital Group and
And this has led to a relatively predictable cycle by picking the stocks witnessing an
serves on the board of Wisdom and Founder Girls.
cycle of debt, with governments in the area increased level of cheap credit influxes and Under Pham’s management, Phoenix Capital created
constantly subsidizing or channeling cheap demonstrating high efficiency on invested the VN30 Equal Weight Index, which tracks the total
performance of the top 30 large-cap, liquid stocks
credit to sectors they view as important (but capital use. listed on the Ho Chi Minh City Stock Exchange. All
not necessarily always profitable). + Reshuffle the portfolio annually. Exclude index constituents are equal-weighted, helping inves-
tors with foreign ownership, liquidity, and state-owned
the stocks that no longer satisfy listed crite-
enterprise issues in Vietnam. The index is the first
InvesTIng In vIeTnam usIng ria – especially the stocks that cease showing index in Vietnam to be affiliated with S&P Dow Jones
The DebT CyCle sTraTegy great efficiency on invested capital. Indices for updates and calculations.

Below are the list of stocks that (1) belong Note: This article is not an attempt to provide invest-
Through years of studying this investment to VN30 Equal Weight; (2) demonstrated ment advice. The content is purely the author’s per-
sonal opinions and should not be considered advice of
ecosystem – and using the impressive analyt- debt growth in 2016; (3) owned the effective
any kind. Investors are advised to conduct their own
ics at our disposal at One Road Research – interest rate relatively cheaper than the sec- research or seek the advice of a registered investment
we’ve developed an investment strategy that tor average and (4) had high efficiency on professional. The author does not own shares or any
equity or debt interest in any companies mentioned in
gives our readers the power to ‘rob’ the banks invested capital utilization. this article before or at its publishing. MicroCap Review Magazine 45


Derivatives are 15 Times

World GDP
European Central Bank and the Bank of The Italian referendum which took place
Japan are actively pushing these markets up. on December 4 had a similar significance.
The Brexit vote in which Britain decided
wIll prInTIng half a to divorce from the EU started the breakup
quaDrIllIon Dollars save of the artificial construction of 500 million
us? people being ruled by an unelected and
unaccountable elite in Brussels. Even worse
Stock investors are rejoicing about stock is an artificial paper currency, the Euro,
The biggest percentage of investments today markets making new highs in many coun- which is used by 19 out of the 28 EU coun-
are virtual or derivatives. This means that tries, totally oblivious of the risks or the tries. All paper currencies are of course arti-
there are no underlying real assets but just reasons. It seems that this is an unstoppable ficial constructions that eventually become
pieces of paper that are likely to mature rally in a “new normal” market paradigm. worthless but to have a currency for 19 coun-
worthless in coming years. In addition to No major increase is expected in the infla- tries with different cultures, different growth
most ETFs, which are synthetic, there are tion rate or the historically low interest rates. rates and productivity and vastly different
$1.1 quadrillion to $1.5 quadrillion of deriv- The present rally has lasted 8 years since inflation rates is a total disaster.
atives outstanding. Most of these are only the 2009 low. There is virtually no fear in This is why Italy, Greece, Spain, Portugal
virtual, which means that they have no real markets so investors see no reason why this and many more EU countries are totally
value and are likely to mature worthless. favourable climate would not continue for bankrupt. These countries have been forced
But it is not only ETFs and derivative mar- another 8 years at least. to use a currency which has made them com-
kets that are virtual. Both stock markets and Yes, of course it could. All that is needed pletely uncompetitive and unable to export
bond markets have less and less to do with is that governments worldwide print another or function. At the same time, Germany has
reality  because governments worldwide are $20-50 trillion at least and that global debt benefited from a weak Euro which has made
now issuing unlimited amounts of worth- goes up by another $200-500 trillion. their export industries very successful.
less debt in order to support asset markets,
including stocks and bonds. Whilst investors as europe’s fInanCIal buy a house for 2.6 oz of
in many countries are pulling out of stock sysTem faIls, golD wIll rIse golD
markets, governments are buying increas-
ing amounts of stocks and bonds. Both the An average house in the US costs around
$265,000 today. Not that you get much for
$265,000 but that is the average. Measured
in gold that becomes 7 kilos or 225 ounces.
A 75% fall in house prices is very realistic

“The Die is Cast” for Europe and the EU.

This is what Caesar said when he crossed the
Rubicon in 49 BC marching towards Rome,
leading to a major change in Europe’s history.

46 MicroCap Review Magazine

and a likely minimum fall. At that level with to the World Economic Forum. The biggest to happen quickly. Because when it happens
gold at $10,000 a house doesn’t cost 7 kg or gap is of course the US with $137 trillion. everyone will suffer even if the financial pain
225 oz but 0.2 kg or 7 oz. So in gold the price The 2015 US deficit was “only” $28 trillion is likely to be slightly less if you own gold. n
is now down 97% and costing 3% of what it which is 150% of GDP.
cost in 2016. This sounds totally unrealistic
but it has been the experience in countries PENSION DEFICITS – There will be no ASSET MANAGEMENT
with a hyperinflationary depression like the pensions for anyone
Egon started Matterhorn Asset Management (MAM)
Weimar Republic. The reasons are quite straightforward; an in 1999 as a private investment company. From the
Let’s also look at a fall in house prices of ageing population, inadequate savings and very beginning, wealth preservation was an impor-
tant cornerstone of the company. Already back in
90%. Even more unrealistic many would low expected returns. These calculations
early 2002, we were of the opinion that financial and
say. But let’s just remember that an average don’t take into account the coming collapse economic risk in the world was getting uncomfort-
house in 1916 was under 1% of what it costs of all the assets that pension funds invest ably high. So that year we made substantial invest-
ments in the physical gold market at $300 average.
today at $2,000 against $265,000 now. So in in such as stock, bonds and property.  It is We recommended to our clients/partners to invest
a credit collapse combined with interest rates a virtually certain prediction that there at least 25% and up to 50% of financial assets into
physical gold. With global risk considerably higher
at 15-20%, high unemployment and substan- will be no conventional pensions paid out
today, we believe that an important exposure to
tial economic contraction, a 90% fall could in any country over the next 5 to 10 years physical gold is critical.
easily happen. and longer. The consequences are clearly As gold started to rise in the early 2000s, demand
for physical gold increased and in 2005 we set up
catastrophic.  a regulated company in Zurich - Matterhorn Asset
Management AG. A couple of years later we formed
GoldSwitzerland which is the precious metals divi-
wealTh preservaTIon anD
sion of MAM.
InsuranCe ouTsIDe The
For someone who believes that this sce- bankIng sysTem EARLY LIFE AND EDUCATION
Born with dual Swiss/Swedish citizenship, Egon’s
nario is a possibility, which of course will be education was mainly in Sweden. He started his
very few, he  would be able to buy a house Gold will continue to be the only curren- working life in Geneva as a banker and thereafter
spent 17 years as Finance Director and Executive
for 1%, in say 2021, of what he would cy to survive in history just as it has for
Vice-Chairman of Dixons Group Plc. During that
pay today, if he held his money in gold. It almost 5,000 years. Physical gold and sil- time, Dixons expanded from a small photographic
sounds unreal but the risk is such that ver is the ultimate form of wealth pres- retailer to a FTSE 100 company and the largest con-
sumer electronics retailer in the UK.
buying a house today is likely to be a very ervation as well as insurance against the Since the 1990s Egon has been actively involved
costly and perhaps ruining experience. economic and financial calamities that the with financial investment activities including merg-
ers and acquisitions and asset allocation consultancy
world will experience in coming years.
for private family funds. This led to the creation
physICal golD – The only The time to think of wealth preservation and of MAM an asset management company based on
pensIon funD To survIve to buy insurance is of course today when phys- wealth preservation principles. MAM is now the
World’s leading company for physical gold and silver
ical gold and silver can be found at very low outside the banking system, directly owned by the
Most people in the world don’t have a pen- prices. At some point, the gold and silver price investor. Our four vaults include the biggest and
safest gold vault in the world, located in the Swiss
sion so they won’t be concerned. But for rises will dwarf the current surge of Bitcoin.
Alps. Clients are High Net Worth Individuals, Family
the ones who are covered by pensions, they Thus, the decision is really easy. The risk Offices, Pension Funds, Investment Funds and Trusts
won’t be much better off. Most pension of holding bubble assets like stocks, bonds in over 52 countries.
Egon makes regular media appearances and
funds are massively underfunded and the and property is now at a historical extreme. speaks at investment conferences around the world.
amount they are underfunded by is abso- The easy and correct contrarian investment He also publishes articles on precious metals, the
world economy and wealth preservation.
lutely astounding. We are looking at a stag- is to hold gold (and some silver). This will
gering $400 trillion gap by 2050 according not only save investors from total wealth Note: This article is not an attempt to provide invest-
destruction but also create incredible oppor- ment advice. The content is purely the author’s per-
sonal opinions and should not be considered advice
tunities to buy bombed out assets with the of any kind. Investors are advised to conduct their
gold at 3 cents the dollar. own research or seek the advice of a registered invest-
ment professional.
So I advise investors to buy their insur-
ance and then just be patient. The outcome
of the failed 100 year experiment in money
creation is guaranteed to be catastrophic for
the world. There is no reason to wish for it MicroCap Review Magazine 47


MJ Holdings, Inc. (PINK: MJNE)




MJ Holdings Inc (PINK: MJNE) is a diversified holding
• Construction Services – Sales, company, providing turnkey solutions and services
Design and Project Management to the regulated cannabis industry. Through our
• Cultivation and Production subsidiaries, we provide cultivation, production
Management and management services, and infrastructure
• Distribution, Consulting and sales and development. Our cultivation operations
Operating Services include management within a 37 acre cultivation
• License Acquisition co-operative located in Nye County, Nevada.

MJ Holdings Inc owns a Nevada state issued cul

PRODUCTION CAMPUS tivation license for a 17,000+ sq. ft. agritourism
destination; the Highland Show Grow.

MJ Holdings Inc currently manages a Nevada

state issued cannabis production license and
MJ Holdings, Inc. (PINK: MJNE)

expect to provide manufacturing and MJ Holdings Inc provides management

production facilities and resources to services for distribution and consulting
third party manufacturers as part of our services for access to state licensed dis-
100,000 sq. ft. campus, currently under pensaries. We operate a Nevada licensed
development; where third party brands general contractor, through which we
will be able to develop and market their provide complete turn-key infrastructure
products through our license, and distri and construction services, including green-
bution program. house design, sales, and installation.

MJ Holdings, Inc. MJ Holdings, Inc.: The article may

contain forward-looking statements
about MJ Holdings, Inc. See MJ
3275 South Jones Blvd. Holdings, Inc.’s periodic filings with the
Securities and Exchange Commission
Suite 104, Las Vegas, NV, 89146 for more complete information.

MJ Holdings, Inc. (PINK: MJNE)

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

Can Cord Shaving Save Cable

Companies from Cord Cutting?

T here is a trend that has put fear in every media execu-

tive — cord cutting. According to eMarketer, 22.2
million consumers cut the cord by the end of 2017, up 33%
from the year before.
While there are some viewers are comfort- DIRECTV NOW service to digital services
able with just local channels via an antenna going upstream — PlayStation Vue (Sony),
and a Netflix subscription, over 4 million YouTube TV (Alphabet) and Hulu Live TV
consumers have opted for “cord shaving” (Disney).
(a skinny bundle of a subset of major cable These services include many of the same
channels). live channels like ESPN, HGTV, Bravo that
Since Sling (a Echostar company) first you would get in your cable bundle, but
introduced “the skinny bundle” in 2015, without long-term contracts, an expensive
there has been a wave of companies that cable box to rent, and removes many of the
have introduced similar services. From channels you’ll probably never watch. Best
incumbents like DIRECTV and their of all, if you can get a competitive rate on


50 MicroCap Review Magazine

your internet service, you can save almost Library. Some include an unlimited Cloud to consumer. For instance, ESPN recently
$1,000/year. DVR. But when it comes down to it, they are announced their plans for their ESPN+ ser-
Almost every one of the services are an all fighting the same battle — offering the vice which will launch later this year.  While
offshoot of an existing mega media company largest number of top cable channels, locals, it won’t include ESPN core channels, it will
that is trying to disrupt themselves before and sports for the lowest price. include content not already airing on TV.
they get disrupted. For instance, DIRECTV For most people, DIRECTV NOW wins This could include the out-of-market NHL
had major losses of 207,000 subscribers this battle hands down — including 34 of and MLB games they acquired as part of
just last quarter. Fortunately for them, they the top 35 cable channels for just $35/month. Disney’s acquisition of BAM.
were able to add 368,000 new ones to their While they don’t include Regional Sports In order for the small guys to win, they
streaming alternative — DIRECTV NOW. Network on their entry-level pack, some need to compete where the major companies
have said this aggressive pricing operating at can’t. Instead of owning the entire bundle,
enTer The newbIes single-digit margins is a desperate move to they need to own a niche in areas where
keep people from giving up a live TV sub- people will not give up live TV - like events
If major cable companies are going to sur- scription completely. (news, award ceremonies), sports (major
vive this consumer shift, not only are they networks, league channels, and regional
going to have to get consumers to become how wIll DavID beaT sports networks), and reality TV.  Otherwise,
cord shavers instead of cord cutters — they golIaTh? you’re just stuck being nothing more than a
will have to fend off a new generation of cable company over the internet, compet-
“cable companies” nipping at their heels - If DIRECTV NOW can compete at single- ing with deep pocketed competitors like
ones that they never had to compete with digit gross margins, what does that mean for DIRECTV or ultimately losing to services
before. the newcomers? like Netflix that have broader libraries, bet-
Two of those—Philo (privately owned, Philo has differentiated itself by offering ter content, and at a cheaper price. n
with backing from A+E, AMC, Discovery, the skinniest of bundles - fewer channels, no
Jason Gurwin is currently Co-Founder & CEO of
Scripps, and Viacom) and fuboTV (privately sports, but at the lowest cost package of any
FOMOPOP, a consumer review site that  helps  mil-
owned, with $75.6MM from NorthZone, of services. This will attract the cost-sensitive lennials find the best services online. Previously, he
21st Century Fox, and Sky) are approach- millennial, who is used to their $10 Netflix co-founded a digital grocery coupon company called
Pushpins (acquired by Ebates in 2012) and created
ing this market very differently.   Philo has subscription, or those with an antenna that and led the Ebates mobile business from 2012-2015
focused on creating a low-cost $16/mo ser- want to add a very basic set of cable chan- (acquired by Rakuten in 2014). He holds an MBA
from Harvard Business School and a Bachelor’s from
vice that includes the bare minimum of cable nels.
networks, entertainment only with no sports fuboTV has focused on having sports-
or locals. fuboTV ($45/mo.) is more similar centric bundle while differentiating their Note: This article is not an attempt to provide
investment advice. The content is purely the author’s
to the other services — fully featured, sports bundle with channels targeting soccer fans
personal opinions and should not be considered
heavy, but leaving out expensive networks (beIn and Fox Soccer Plus) and hard to get advice of any kind. Investors are advised to conduct
from Disney and the ESPN-family of net- RSNs (MSG & NESN). While the service their own research or seek the advice of a regis-
tered investment professional. The author does not
works. works as well as any, a sports-centric service own shares or any equity or debt interest in any
Our consumer review company without ESPN just can’t be competitive at companies mentioned in this article before or at its
FOMOPOP tested all the major live stream- any-level — especially at premium prices.
ing services from channel selection to stream Going forward though, this might not
quality to additional features like DVR, On be enough. In our research comparing the
Demand, and access to the different chan- bundles of the different providers, you can
nels apps. What we found is that for the most get a similar package from Sling (Sling Blue
part, the services biggest differentiators are + “Sports Extra”) for $10 less per month or
the channels they offer and their monthly a stronger one from PlayStation Vue for the
price. same price (that includes ESPN and MLB
There are slight variations. Some have Network, without beIn).
better interfaces than others. Some stream It is not going to get any easier, as Telco’s
channels at a higher frame rate. Some give like T-Mobile (with their Layer3 acquisition)
you access to additional content — like begin to offer live TV as part of their wireless
YouTube Originals or Hulu’s Streaming bundle and the content providers go direct MicroCap Review Magazine 51


Giants Back Machine Learning

For Energy Pipelines

T here are 2.7

million miles
of pipelines that
cross the United
Although this energy transportation infra-
structure is considered safer and more effi-
cient than trucks or trains, pipeline failures
are typically more destructive and generate
far more attention due to the deaths, injuries,
and environmental clean-up. In response,



Exhibit 1. Summary of Significant U.S. Pipeline Incidents. Source: PHMSA, Sophic Capital

52 MicroCap Review Magazine

In response, activists want lawmakers to
transition America’s energy consumption
from hydrocarbons to renewables. U.S.
Energy Information Administration (“EIA”)
data shows that demand for renewables
should consume all renewable production
(Exhibits 2 and 3). However, these Exhibits
also show that America won’t be renewable
independent for the foreseeable future, with
natural gas and crude oil filling the void for
at least the next 20 years.
This means that reliance on energy pipe-
lines will continue. And if this is the case, it’s
incumbent upon the industry to ensure that
that pipeline infrastructure is sound, some-
thing that has proven difficult with current
pipeline integrity analysis methods.
Exhibit 2. U.S. Energy Consumption Through 2040. Source:

hIgh-TeCh measuremenT;
slow-TeCh analysIs

Inspecting pipeline exteriors is straight-

forward, but understanding what’s occur-
ring inside the pipes is difficult. Engineers
deploy high-tech devices called PIGs
(“pipeline intervention gadgets”) that move
through the pipeline, “listening” for leaks.

pIpelIne DaTa analysIs

This is where the industry falls flat. PIG data

is stored in spreadsheets. Engineers will print
several years of PIG data from the same section
of pipe and manually compare spreadsheet
Exhibit 3. U.S. Energy Production Through 2040. Source:
cells for anomalies that could indicate weak-
ened sections of pipe. The work is tedious,
America’s pipeline regulatory authority seem to have agreed and have adopted it. expensive, and prone to errors. For example,
PHMSA (“Pipeline and Hazardous Materials an industry expert told us that pipeline opera-
Safety Administration”) and industry orga- oIl anD gas aren’T goIng away tors conduct about 6,500 PIG runs annually
nizations have responded with a goal of with each measuring and costing, on average,
zero pipeline incidents. Although this goal A pipeline incident occurs almost daily in 30 miles of pipe and $250,000. This means
is noble and well-meaning, I believe that the U.S. (Exhibit 1). In 2016, there were 298 that the industry scrutinizes about 200,000 of
current pipeline analysis methods make it incidents in the U.S. – 298 across 2.7 million the 2.7 million miles of pipeline infrastructure
unachievable. However, a machine learn- miles of pipeline, or 1 incident per 9,000 miles. annually with a process laden with human
ing (“ML”) solution introduced at last year’s This means that ruptures are low-probability error. But one company aims to reduce error,
Pipeline Pigging and Integrity Management events but have high visibility: companies costs, and time. The amount of pipe that an
(“PPIM”) industry conference has the poten- suffer intense criticism, reputational dam- operator can analyze is only limited by the
tial to significantly reduce if not eliminate age, and incur clean-up costs and fines that number of PIG logs it wants to process.
pipeline incidents. Two Fortune 500 operators average over $1.3 million per incident. MicroCap Review Magazine 53


Inspection and analysis are critical to pipe-

line safety, and EIA data suggests that
pipelines are here to stay. Safety is a serious
concern across the industry, as ruptures kill
workers, pollute the environment, and create
negative goodwill. And although ruptures
are low-probability events, incidents have
high visibility. Pipeline integrity data con-
tinues to evolve with the latest technology,
but analysis of that data is laborious and
OneSoft Solutions (OSS:TSXV,
OSSIF:OTC) is well positioned with
Microsoft to address the issue of pipe-
line integrity. OneSoft’s CIM™ ML solution
mICrosofT azure’s value tive ML solutions. We spoke with industry reduces operating costs, improves safety and
prop for The pIpelIne experts who claimed that a leading, Fortune potentially eliminates pipeline failures. Two
InDusTry 50 artificial intelligence company tried to major pipeline operators, including Phillips
do what CIM™ achieves. This company has 66, have licensed CIM™, and Phillips is work-
OneSoft Solutions (OSS:TSXV, enormous financial resources and human ing with OneSoft’s subsidiary to develop a
OSSIF:OTC), a Sophic Capital client, has a capital but lacked pipeline knowledge - new cloud solution. With CIM™, I believe
ML solution that analyzes oil and gas pipe- things like modeling valve functionality - the industry’s goal of zero pipeline incidents
line integrity that increases safety, saves and shuttered the project. At PPIM 2017, is no longer a pipe dream. n
time, reduces costs, and provides great- some industry experts shared how they tried
er accuracy. OneSoft’s solution, Cognitive and failed to develop their own ML solu-
Sean Peasgood, Sophic Capital, and Sophic Capital’s
Integrity Management (“CIM™”) can ingest tions – not surprising since ML development employees own common shares of OneSoft Solutions
decades of data and provide accurate, action- is not necessarily the expertise of energy Inc.

able intelligence within hours regarding companies. OneSoft Solutions Inc. has contracted Sophic Capital
where and when pipelines may fail. No more OneSoft’s management has ML and for investor relations services.
human error; no more expensive engineers; energy industry expertise. In fact, man-
Here is a link to Sophic Capital Disclosures and
only accurate actionable information avail- agement, had a prior successful exit in the Disclaimers:
able within minutes instead of months. pipeline industry – they invested $30,000
Microsoft (MSFT:NASDAQ) backs and 18 months later were acquired for $7.6
OneSoft’s vision and is using OneSoft’s million. Insiders currently own almost 41%
CIM™ as the value proposition to transi- of OneSoft.
tion pipeline operators to Azure cloud ser-
vices. At PPIM 2018, Microsoft and OneSoft InDusTry gIanTs aDopTIng
shared a booth to promote how CIM™ can onesofT’s ml soluTIon
help achieve the industry’s zero pipeline
incident goal. OneSoft is also a Microsoft Phillips 66 (PSX:NYSE) licensed OneSoft’s
Accelerator Alumni member and receives CIM™ and so did another Fortune 500
ongoing benefits of Microsoft’s technology, energy operator. OneSoft’s subsidiary
sales and marketing resources, with empha- OneBridge and Phillips 66 also announced
sis and collaboration with Microsoft’s spe- a technology license and joint development
cialized oil and gas teams to sell CIM™ into agreement that will migrate Phillips 66’s
this global industry. internal pipeline data management system to
As far as we know, there are no competi- a new, cloud, SaaS solution.

54 MicroCap Review Magazine

oTCqb: Cvvuf, TsX-v: Cvv

Canalaska uranium ltd.

CanAlaska Exploring for Uranium to Fuel Nuclear Renaissance
Leading Uranium Explorer in World’s Richest Uranium District

C anAlaska Uranium Ltd. (TSX-V:

CVV; OTCQB: CVVUF; Frankfurt:
DH7N) is one of the largest landholders
driven by the world’s rising energy needs.
Global surging energy usage is expected
to create unprecedented growth in nuclear
in the Athabasca Basin (approximately energy, especially in China where nuclear
375,000 acres), dubbed the “Saudi Arabia power is required to not only meet the
of Uranium”, due to the region’s vast, high- country’s rapidly rising energy needs, but to
grade uranium deposits. No place on the reduce pollution which in many urban areas
planet matches the number of mega-rich has become a significant health and environ-
uranium deposits found in the basin, located mental problem.
in mining-friendly Saskatchewan, Canada. basin. West McArthur is just 10 miles west of
CanAlaska’s strategic holdings have Cameco’s McArthur River uranium mine, one key managemenT
attracted joint ventures with major inter- of the world’s richest uranium deposits.
national mining companies including past Following fault structures west of McArthur Peter Dasler
partnerships with Mitsubishi and Korean River, Cameco found high-grade uranium President and CEO
Resources Corporation. CanAlaska is cur- at their Fox Lake project. The structures CanAlaska is led by Peter Dasler. Mr. Dasler
rently working with Cameco and Denison and conductors trend onto CanAlaska’s West possesses a comprehensive mineral exploration
at two of the Company’s properties in the McArthur property that Cameco is now drill- and public company management background,
Eastern Athabasca. The Company also ing to followup their discovery drill holes. having worked for over 30 years in Canada as
holds properties prospective for nickel, cop- an executive and consulting geologist.
per, gold and diamonds – all in Canada. uranIum DemanD foreCasT
CanAlaska is well leveraged to discoveries To soar Dr. Karl Schimann
through strong partnerships on its projects Vice President, Exploration and Director
with major and junior mining companies. Analysts see rising demand amid dwin- Dr. Schimann has participated in significant
dling supplies discoveries for uranium and base metals
maJor uranIum program Increasing demand for uranium in China, during his 40 years as an exploration geolo-
funDeD by CameCo India, Russia and elsewhere, is expected to gist. He was a key member of the team that
create a substantial near-term supply deficit discovered and developed the massive Cigar
18,000 foot drilling program underway to for uranium. Many analysts believe that it’s Lake uranium mine in the Athabasca Basin.
expand discovery only a matter of time until uranium prices
Summer 2017 drilling by Cameco, Canada’s increase significantly, ahead of the looming Dr. Jules Lajoie
largest uranium miner, discovered uranium supply shortfall. Senior Geophysicist
on CanAlaska’s West McArthur project in the The growth in uranium demand is being Dr. Lajoie has over 40 years as a geoscientist.
He previously was Head Geophysicist for major
Canadian mining company Teck Resources.
For further information on CanAlaska
Uranium visit n
CanAlaska Uranium Ltd.: The article may contain
forward-looking statements about CanAlaska Uranium
Ltd. See CanAlaska Uranium Ltd.’s periodic filings with
SEDAR and the Securities and Exchange Commission for
more complete information.
The company paid consideration to SNN or its affiliates for this article. MicroCap Review Magazine 55


Crosswinds for the

Cannabis Industry
D espite some tremendous challenges, the publicly-trad-
ed U.S. cannabis market is thriving.
Excitement over the legalization in California Blumenauer amendment has provided pro-
helped boost prices in Q4 and into the new tections to medical cannabis businesses and
year, though the market was hit with a big patients since the FY15 federal budget, but
surprise on January 4th: Attorney General it’s not clear that they will be extended for the
Jeff Sessions tossed federal guidance from FY18 budget, which at the time of writing
2013, the Cole Memo, which had provided remains in negotiations. At the same time, it’s
states with state-legal cannabis and busi- possible that the language could be amended
nesses operating within them eight prin- to extend protections to all cannabis busi-
ciples to follow such that they would not be ness and consumers rather than just medical
prosecuted for breaking federal laws (the ones. Additionally, there are several pieces of
Controlled Substance Act). The new policy legislation pending in Congress that could
is to allow U.S. attorneys to prosecute at their provide some relief, but these don’t yet have
own discretion, replacing rules with poten- a lot of traction.
tial chaos, which is never good for business. Even with the potential headwinds from
It’s still not clear what the ultimate effects the federal government, which have defi-
of this policy change will be, and, in the nitely chilled private investors, public inves-
near-term, this makes an annual rider in the tors can’t get enough. A new ETF, the first
budget very important. The Rohrabacher- NYSE-listed fund of its nature, the ETFMG


56 MicroCap Review Magazine

onerous federal taxation. So, while the U.S.
Even with the potential headwinds from the federal stocks may look “cheap” relatively speaking,
they have higher risk as well. Over time,
government, which have definitely chilled private federal policies will likely become more con-
structive for cannabis, and those companies
investors, public investors can’t get enough. that are able to build brands and franchises
between now and then despite the challenges
Alternative Harvest ETF (MJX) debuted on adult. In the last edition of this magazine, I will be able to better compete on the global
December 26th with just $6 million in assets was bullish: stage. n
and reported $400 million by the end of The “Big 4” in Canada, Aphria (TSX:
Editor’s Note:  Alan Brochstein, CFA, began his
January. The fund is poorly structured and APH) (OTC: APHQF), Aurora Cannabis
career as a bond trader in NYC in 1986 with Kidder,
actually faces a risk of losing its trustee, (TSXV: ACB) (OTC: ACBFF), Canopy Peabody and worked with CS First Boston and
Wells Fargo, which is in that role solely Growth (TSX: WEED) (OTC: TWMJF) and Criterion investments until transitioning to equi-
ties as an analyst/portfolio manager in 2000.  In
because it served as trustee for the previous MedReleaf (TSX: LEAF) (OTC: MEDFF) 2007, he began AB Analytical Services, where he
incarnation of the fund, the Tierra XP Latin are all particularly well positioned and have provided research and consulting to several invest-
ment advisors while also becoming one of the most
American Real Estate ETF. Ironically, the pulled back as the sector has consolidated
popular contributors at Seeking Alpha.  In 2013, Alan
fund has almost nothing to do with the U.S. big gains. The combined market cap of these launched 420 Investor, an online community focused
cannabis market. companies is about $3.8 billion, and they on publicly-traded companies in the cannabis sec-
tor, and, more recently, he began New Cannabis
Another interesting development is the trade very liquidly. Ventures, a news & information platform that high-
successful NASDAQ IPO of blank-check The performance since then has been lights the most promising companies and influential
investors in the cannabis industry.
company MTech Acquisition (MTECU), nothing short of spectacular. The Canadian
which raised $50 million by selling shares at Cannabis LP Index, which includes not only For disclosure, I own no stocks mentioned. Aurora
$10 with warrants at $11.50. The company these four leading companies but 24 others Cannabis and Canopy Growth are clients of mine at
New Cannabis Ventures
is shopping for an acquisition in the ancil- as well, moved from 350.46 on June 30th to
lary cannabis space, like media or software. 1182.63 on January 31st, representing a gain
Additionally, while Innovative Industrial of 237%. While the fundamentals appear
Properties (IIPR) suffered for a full year strong, the big run-up and high valuations
below its November 2016 NYSE IPO price of suggest a consolidation is likely ahead.
$20, the cannabis REIT was able to sell shares The catalyst for the sharp rise in prices
at $26 in January and has begun to scale up was the announcement on October 30th that
its operations significantly. Finally, we are NYSE-listed Constellation Brands, the alco-
seeing more interest from private companies hol brand warehouse, was acquiring a stake
intending to go public, whether in Canada or in Canopy Growth for C$245 million as part
in the United States on the OTC. of a strategic deal to develop cannabis-based
One thing that encourages me is that we beverages in the future. Constellation Brands
are seeing an increasing number of compa- also acquired warrants that will allow it to
nies generating substantial revenue in the double its stake at the same price.
United States as well as in Canada. We detail Another interesting trend has been the
these at New Cannabis Ventures at the Public pick up in M&A. Aurora Cannabis launched
Cannabis Company Revenue Tracker, which a hostile bid for CanniMed Therapeutics in
includes 15 companies. Ultimately its rev- October, with the two TSX-listed companies
enues, profits and cash flow that will attract battling ferociously until striking a negotiat-
real investment dollars into the industry. ed deal. There have been other deals as well.
While the U.S. market faces some uncer- Anyone who cares to invest in the global
tainty, I want to remind readers that the cannabis industry must pay attention to
Canadian market continues to offer inves- these Canadian companies, which operate
tors fantastic long-term opportunities given in a much better environment than com-
its federally legal medical cannabis that will panies in the United States, which not only
soon be expanded to permit sale to any must contend with federal illegality but also MicroCap Review Magazine 57


Family Offices
What You Need to Know

icrocap companies have a vora- Family offices come in all shapes and sizes
cious appetite for capital. It is ranging from $100M on the low end to several
incumbent upon the manage- billion on the high end. Some follow very
ment teams to know how to raise capital disciplined low-risk investment models, such
efficiently. Yet the fastest growing segment of as multi-family residential housing only, but
the investment community is frequently over- most diversify their risk across strategies rang-
looked. What’s the fastest growing segment ing from venture capital to public markets. I
in terms of assets? If you’re thinking ICOs, was talking to a colleague a few months back,
hedge funds or private equity, you’d be wrong! who told me I’m wasting my time with family
Over the last 10 years, a relatively new class of offices because “they only invest in real estate”.
investor has emerged with an insatiable thirst Nothing is further from the truth.
for deals. If you guessed family offices, you’re Cosimo di Medici Where it is accurate that many Single
correct! Family offices are indeed the fastest Family Offices have real estate strategies,
growing segment of the capital markets. They would put many modern-day institutions to their holdings can be quite diverse. Consider
are very private, so accurate data is hard to shame. The first well-documented example TPG Capital founder David Bonderman’s
obtain. But the latest estimates are that family of the family office in Europe, was the family office, Wildcat Capital Management.
offices controlled between $3 and $4 Trillion Medici family, founded in 1169. Known as According to, AUA
in 2017, according to Bloomberg. And that the Medici Bank, the Medici family were the (assets under administration) of Wildcat,
number is growing significantly as UNHWIs wealthiest family in Europe, and in addition are now more than $2.3B. And according
or ultra high net worth individuals are minted to financing trade, financed whole govern- to public filings, Wildcat has made a signifi-
in fast-growing economies such as China, ments. 19th century Europe produced the cant number of public company investments.
Vietnam, and Indonesia. Rothschild Family, and in the U.S., The The number of family offices is growing fast-
House of Morgan, followed shortly by the est in Asia. This is a result of the tremendous
hIsTory Rockefeller Family and others. Today there economic success in China, Korea, Vietnam,
are over 2500 family offices worldwide. India and Indonesia.
The family office concept dates as far back
as the 8th century in Europe, and even fur-
ther back in China, where dynastic families
controlled vast wealth and property, with
accounting and reporting procedures that


58 MicroCap Review Magazine

sTreamlIneD DeCIsIon

One of the most attractive aspects of the

single-family office is SFOs manage their
own capital. Decisions are usually fast, and
are not laden with the layers of committees
which are often typical of major institutional
investors. SFOs offer many advantages over
other investors such as hedge funds. In most
cases when presenting a deal, you’re sitting
across from not only the decisionmaker, but
the owner. Many companies often make the
mistake of assuming that when presenting to
a manager at a hedge fund or private equity regulatory and administrative services, and family offices at the Planet Microcap confer-
company, they are sitting across from “the leave investment alone. They may refer your ence. I expect their presence to become more
money”, while in reality they are presenting deal to a client as a favor, but it’s unlikely the common as they reach out to more venues
to an analyst designed to evaluate the your client is relying on their recommendation. So in search of deals. There are several regional
deal. You are rarely pitching “the money”, so understanding the type of MFO, a, b or c, can and national family office associations that
SFOs represent one of the few chances. But save a lot of time. hold conferences. The Wilson Family Office
be on your game, you’re sitting in front of the Entering the family office universe can be Club offers services ranging from capital
intellectual horsepower that created the fam- difficult. Where most institutional funds raising boot camps to presentation opportu-
ily office in the first place. They understand have origination platforms that encourage nities. Conferences consolidate buyers and
a thing or two about business. inbound inquiries, and are equipped to man- offer the most efficient way to meet family
In many ways, family offices are nirvana age the process, most SFOs do not have offices. Many of these conferences are full of
for the microcap CEO looking for an anchor this infrastructure. Deals that come in accountants and lawyers offering their ser-
investor. So why aren’t most management “unsolicited” go into a pile. And there’s no vices. Optimize their presence by asking “do
teams focusing efforts on family offices? The guarantee anyone will ever review the deal. you work for any family offices”. If the answer
first reason is the sector is so private that it’s off So the best way to approach an SFO is to is yes, then you may be able to leverage their
the capital raising radar. In fact, most SFOs do approach through a trusted advisor. Usually, relationship. And they’ll be happy to help in
not have people on staff to market the availabil- that’s an accountant or a lawyer for the fam- the interest of getting your business. n
ity of capital like a hedge fund. So SFOs usually ily. Accountants, in particular, are always
see less than 5% of the activity in a sector. willing to review a deal because they have
Secondly, the family office ecosystem has its the skills to understand the fundamentals. If
About the author:
own protocols and language. Understanding they think its sound, they are happy to refer,
Karl B. Douglas is a Managing Director at PPMT
the various terms and protocols is critical to because referring a good deal is considered Capital Advisors, Ltd.., a multi family office advisory
success. For example, there are SFO’s (single “value add” for them. Purchasing a family firm. Mr. Douglas has a career that spans over 30
years investing in private and public companies.
family offices) and MFOs (multi-family offic- office list and cold calling or even worse, PPMT Capital invests in private equity and debt
es). We’ve explained the clear benefit of the mailing unsolicited teasers is a waste of time. investments of $15M to $100M in Energy, Mining,
Industrials and Real Estate.
SFO, but it gets more complicated with the The family office ecosystem is one based on
For further information contact:
multi-family office structure. MFO can mean multi-year trusted relationships. Do your
a lot of things. For example, (a.)are they actu- research and learn who the advisors are for 800-401-9017
Note: This article is not an attempt to pro-
ally managing the SFO funds with discretion the SFO. Look at deals they worked on in the vide investment advice. The content is purely the
to invest? Or (b.) are they recommending past and find a common tangent. That’s dif- author’s personal opinions and should not be con-
sidered advice of any kind. Investors are advised to
deals to the SFO subject to the SFO approval. ficult and time-consuming!
conduct their own research or seek the advice of a
You can achieve closure with either structure, Hack the marketing: Remember that family registered investment professional. The author does
but obviously the discretionary account is offices want great deals! They don’t see enough not own shares or any equity or debt interest in any
companies mentioned in this article before or at its
best. There’s a “c” scenario in which some and routinely go to conferences in search publishing.
MFOs are purely service providers for legal, of transactions. Last year I ran into several MicroCap Review Magazine 59


Reverse Mergers with Crypto Companies–A Craze or Crazy!

T he latest investor fad—which comes short-
ly after the excitement about cannabis
deals—is about cryptocurrencies/blockchain
probably the most important consideration is that
the SEC is carefully reviewing all filings and press
releases related to any company in the blockchain/
be reputable, and have experience with crypto
companies. All public announcements should
be reviewed by outside counsel, and, if appro-
deals. So, should a public company do a crypto business.  So, there needs to be appropriate priate, by the company’s auditor.
reverse merger with a privately-owned “Crypto and continuing disclosure about the company’s One of the main reasons why private com-
Company”? And conversely, should a privately- business, management’s experience, and how panies go public is to have better access to
owned Crypto Company go public via reverse they actually intend to build or have built a viable capital. In my view, it is far more advisable
merging with a U.S. publicly-held company? business.  Another important consideration is the for a private crypto company that wants to
Currently, I am representing one publicly- selection of the PCAOB-registered auditor; many raise capital to do a reverse merger and then
held SEC-reporting issuer whose principal accounting firms are reticent to audit crypto raise capital via a Rule 506(b) or 506(c) offer-
acquired control of the public company before companies, because, among other issues, it may ing, as opposed to attempting an ICO, which
the public company embarked on its crypto be difficult to value the tokens. would—in my opinion—take a very long time
business plan. Also, I am working with other The SEC is especially watching for company’s to be declared effective.
private companies which may elect to go pub- trying to ride the wave and hype with no experi- So, if a crypto company wants to become
lic via a reverse merger.  I am also aware of a ence or viable business plan. The smartest thing publicly traded by reverse merging, is it part
Regulation A offering of an equity token, and to do is to include a lot of risk factors in the of the craze, or is it crazy? For me, the bottom
an S-1 for an Initial Coin Offering (“ICO”), Super 8-K and both quarterly reports on Form line is that if the public company is looking for
as well as several private “SAFT “(Simple 10-Q and the Annual Report on Form 10-K a good private company with which to reverse
Agreement for Future Tokens) offerings.  about the technology and area in general, and merge, and assuming that the private crypto
For purposes of this article, I have assumed to reference them and/or provide links to the company has a viable business—not just an
that almost all ICOs and SAFTs would be risk factors in other public disclosures, such as unsupported story—experienced manage-
considered to be “securities” by the SEC; and press releases, blogs, the company’s website, etc. ment, a reputable PCAOB-registered auditor,
therefore, when the public company reverse Specifically, those risk factors should include the and observes the do’s and don’ts noted in this
merges with a crypto company, its future offer- SEC’s scrutiny of the sector, the risk that then article (and probably others), then the newly-
ings of ICOs and SAFTs, if any, would have to entire cryptocurrency industry could either col- public crypto company should be on the way
be registered with the SEC or legally exempt lapse or be regulated out of existence, potential toward being a successful public company.  n
from registration. I’m also assuming that the problems in opening bank accounts, etc.
Many thanks to Laura Anthony, Esq., for her contri-
crypto company has an ongoing business of its It’s quite conceivable that a reverse-merged bution and insights.
own, as opposed to predominantly investing in crypto company could receive a lot more pub-
John Lowy is the founder (in 1993) and CEO of Olympic
other crypto currencies, which might require licity, sometimes not favorable, and might
Capital Group, Inc. (, and is the
registering under the Investment Company Act trade actively, simply by being in this sector; for principal of his law firm John B. Lowy P.C. (www.
of 1940. However, neither the reverse merger example, look at the trading volume and noto-, founded in 1990, both based in New
York City. John is a highly-respected and acknowledged
itself, nor ordinary trading in shares of the riety about Riot Blockchain, (symbol RIOT). expert in reverse mergers, capital formation, financial
reverse-merged public company, would be So, to state the obvious, (a) publish continual consulting and initial public listings of all types.
As an attorney, an advisor and principal, John has
considered a new offering of securities. and—above all—accurate—information about
led or participated in more than 200 such transactions,
When considering a reverse merger between the company, (b) file all SEC reports on a creating market value in excess of $5 billion. He has
a public company and a private crypto company, timely basis, (c) avoid the “pump” part of pump been instrumental in leading the process by which these
companies have raised capital or reverse merged, and
and dump, and (d) don’t even think about achieved listings on the NASDAQ or the AMEX, or were
being involved with the “dump” part of pump sold to larger companies.
In addition to the U.S., John has completed transac-
and dump—that’s a quick ticket to Camp Fed.
tions for clients based in at least 15 foreign countries.
I also recommend that another way to cope The sectors in which his clients are engaged range from
with any unusual market activity, which is low tech to high tech, cryptocurrency/blockchain, real
estate, pharmaceuticals, medical devices, biotech, oil
likely to occur in the crypto sector, is to hire and gas, mining, renewable energy, entertainment, food,
experienced Investor Relations people, both agriculture, education and retail, among others.
He received his B.A. from Tufts University and gradu-
in-house and outhouse (oops, I mean inde-
ated from the University of Pennsylvania Law School,
n BY JOHN LOWY, ESQ. pendent), to provide and review the ongoing and is a licensed attorney in New York and New Jersey.
IR program. The independent IR firm should He is a frequent contributor to MicroCap Review.

60 MicroCap Review Magazine

The LDMi, a “true” microcap index. Market cap weighted,
$50-300m, North American listed. Rebalanced semi-annually

Biggest Gainers, Biggest Decliners, Most Active Volume,
Largest Change in Volume, and Sector performance

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equities, including Sector and Market Cap filters

Covering North American stocks from $0-400m. Screen by
sector, market cap, p/e, exchange, etc.

234 COMPANIES | 1,000+ ATTENDEES MicroCap Review Magazine 61

Fixed Income
F ixed income investing may sound like something out of the Stone
Age in markets driven by computers and dominated by talk of
cryptocurrencies and self-driving electric cars, but earning a steady
return on your capital is essential to building and preserving wealth
over long periods of time.
The path to riches may lie in venture capital, bonds to changes in interest rates), you will
private equity and other investments that keep your head above water
produce capital gains, but the road to stay- The other important consideration is
ing rich lies in compounding money in low evaluating the risk/reward offering of dif-
risk fixed income investments once you’ve ferent investment alternatives. There are
earned it. Today, that is particularly chal- all kinds of bonds – government bonds
lenging because interest rates are low and (also known as sovereign bonds), corporate
are going to rise, which makes investing in bonds, municipal bonds, mortgage and other
fixed income less appealing than it has been types of asset backed bonds, etc. Each type of
in years. bond offers both credit risk (i.e. the risk that
The first thing to understand is that fixed the borrower will be unable to repay you)
income investing is designed to maintain and interest rate risk (i.e. the risk that the
your spending power. That means it should value of the bond will decline before matu-
at least keep up with inflation if not beat it. rity due to rising interest rates). Successful
That is no easy feat with inflation-adjusted fixed income investment requires a careful
short-term interest rates set below the “offi- evaluation of these risks versus the return
cial” inflation rate but it can be done with a offered by each type of bond. There is always
little sweat and elbow grease. You won’t get a trade-off between risk and reward which
rich, but at least you can prevent your wealth in the fixed income world means a trade-off
from being eroded by inflation. between credit risk and yield; the higher the
In today’s market, the most important yield, the higher the risk and vice versa.
consideration is avoiding buying long-term We can start with a little good news – you
bonds. Long term bonds are the most vul- can actually earn more than zero on your
nerable to rising rates; once you own them, cash for the first time in years. These yields
you will be stuck in them because their value aren’t eye-popping, but in the kingdom of the
will drop as rates rise (unless you want to blind, the one-eyed man is king. There are a
sell them at a loss). If you limit your invest- number of ways you can earn 1.5% or more
ments to short maturities and short dura- on your cash for the first time in years while
tions (duration measures the sensitivity of taking very little risk because they invest

62 MicroCap Review Magazine

in high quality, short-term bonds. One SPDR Barclays Short Term High Yield ETF As you can see, despite the fact that inter-
way is to buy Treasuries with maturities of (SINK) Indicated Yield 5.52%, Option- est rates are still low and likely to rise, there
6-months to 2-years, which pay between 1.6- Adjusted Duration 2.15 years, 85% invested are still many opportunities to earn a decent
2.1%. If you can park your cash for that long, in B+-rated industrial credits return on your cash without taking much
this is the lowest risk way to earn that return risk. All of the recommended funds are very
on your money. There are also a number of iShares 0-5 Year High Yield Corporate Bond well diversified which means that even if
money market ETFs and funds that provide ETF (SHYG) Indicated Yield 5.54% Option- rates rise or borrowers start experiencing
similar returns that you can buy and sell on Adjusted Duration 2.15 Years, Tracks Market credit problems, the risks of losing money
a daily basis: iBoxx USD Liquid High Yield 0-5 Index are very small. And all of these funds are
very liquid and can be sold very quickly if
iShares Floating Rate Bond ETF (FLOT) There are also closed end mutual funds that conditions start deteriorating so you can
Indicated Yield 1.62% provide higher yields that invest in corporate move back into cash or buy short-term
bonds with short durations: Treasuries. It’s going to be a while before we
PIMCO Enchanced Short Maturity return to the old days when bonds provid-
ETF (MINT) Blackrock Defined Opportunity Credit Trust ed strong risk-adjusted, inflation-adjusted
Indicated Yield 1.69% (PHD) Indicated Yield 6.28%, Option- returns on a broad basis. But as you can see,
Adjusted Duration 0.37 Years.B+ Credits, there are still plenty of ways to preserve and
iShares Short Maturity Bond Fund ETF 53% industrial slowly compound your wealth without tak-
(NEAR) ing undue risk. n
Indicated Yield 1.68% Prudential Short Duration High Yield Fund
Michael Lewitt is the Manager of The
(ISD) Indicated Yield 7.51%, Option-
Third  Friday  Total Return Fund, L.P., a top-
SPDR Portfolio Short Term Corporate Bond Adjusted Duration 1.66 years, 72% in B+ performing options hedge fund with a 10+ year
ETF (SPSB) industrial credit track record that has never experienced a losing year
(including during the financial crisis in 2008) (www.
Indicated Yield 1.95%  He is also the editor of The Credit
Prudential Global Short Duration High Strategist  (, a widely
read financial newsletter and of two books,  The
iShares 1-3 Year Credit Bond ETF (CSJ) Yield Fund (GHY) Indicated Yield 7.53%,
Death of Capital  (2010) and  The Committee to
Indicated Yield 1.74% Blackrock Limited Duration Income Trust Destroy the World (2016).  Mr. Lewitt was one of the
(BLW) Indicated Yield 6.02%, Option- few people to predict the 2001-2 credit crisis and the
2008-9 financial crisis.
Vanguard Short Term Bond Fund (BSV) Adjusted Duration 1.76 years, 83% in B+
Indicated Yield 1.68% industrial credit 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
Vanguard Short Term Corporate Bond Blackrock Limited Duration Trust (BLW), advice of any kind. Investors are advised to conduct
Fund (VCSH) Indicated Yield 6.02%, Option-Adjusted their own research or seek the advice of a registered
investment professional. The author does not own
Indicated Yield 2.31% Yield 2.84%, 65% BB- Industrials, 17.5% shares or any equity or debt interest in any companies
BBB- Financial Institutions mentioned in this article before or at its publishing.
For investors willing to take more risk,
there are funds that invest in short-term As an alternative to bond funds, you can
bonds that are rated below investment grade. also invest in floating rate bank loans that
These are familiarly known as junk bonds eliminate the risk of rising interest rates
or high yield bonds. While the high yield because the loans are priced off LIBOR,
bond market is currently priced for perfec- which is adjusted usually every three months
tion, with many highly leveraged companies as interest rates move. One of the best ways
taking advantage of low interest rates to stay to do this is to buy the PowerShares Senior
alive, a widely diversified portfolio of short- Loan Portfolio ETF (BKLN) which yields
term corporate high yield bonds should do 3.5% and invests in the 100 most liquid
relatively well unless the economy enters a loans in the market, which are primarily
severe recession, which is unlikely for the large loans extended to private equity-owned
next 2-3 years. There are two ETFs that companies. LIBOR has been rising so the
invest this way that are worth a look: yield on this ETF should also rise over time. MicroCap Review Magazine 63


Exploration Insights
icroCap Review posed the fol- the major markets continued their ascent. ity to advance its program. Mining and
lowing questions to Brent Cook We think the speculative money is beginning exploration are cost intensive endeavors that
of Exploration Insights: to recognize that there is not only real value continually require cash infusions. A com-
to be had in the exploration and mining pany’s management must not only under-
quesTIon #1: space but that the potential returns on posi- stand the geologic parameters of a project,
tive exploration programs are significant. but also the funding requirements; and then
Precious metals and base metals junior Basically, the risk to reward is much better structure future financings based on positive
exploration companies are gaining popular- in the mining sector than all other high-risk news flow and marketing skills. 
ity with US investors. Why? speculations. Add to that the fact that gold
and base metal prices are rising and are quesTIon #3:
The discovery of an economic mineral forecasted to continue, thereby providing an
deposit is a rare event that can increase a ideal setup for success.    Base metals junior exploration companies
microcap company’s share price over ten- such as zinc, copper, cobalt, lithium and
fold in a matter of weeks. The mining and quesTIon #2: scandium etc. appear to be appreciating in
exploration sector has been languishing for price at an accelerated pace. Is this based on
years now, as the “hot” money played in the As investors search for good companies in the electric vehicle need for raw materials
cannabis and crypto-block chain stocks, and the resource sector what are some basic dos only or is there more to it?
and don’ts?
Certainly the accelerating EV and battery
In microcap mining and exploration compa- markets are impacting copper, cobalt and
nies, management’s relevant experience and lithium pricing. However, there is more to
honesty are key. Once you have established the increase in most metal prices than elec-
the management’s credibility it is all about tric vehicles and green energy. The world is
the exploration project’s ability to produce consuming more metal than it is finding, a
a metal discovery. Therefore, the mineral situation that has been going on for years.
property must demonstrate the geologic Zinc inventory is at extremely low levels and
potential to host an economic gold/copper/ copper is forecast to fall into deficit a few
silver, etc., deposit.  years out.
Too many companies are exploring To put this in perspective, consider that
ground that, even if successful, couldn’t host current copper mine supply is about 19
a mineral deposit that warrants the initial million tonnes a year—the equivalent of
risk. An investor, therefore, must evaluate the massive Bingham Copper mine in Utah
exploration results in the context of the pro- being exhausted every year. Likewise, gold
posed mineral target. When the results don’t production is about 90 million ounces a
meet or exceed expectations it is critical to year, the equivalent of all the gold produced
sell. All too often we see investors continue from Nevada’s Carlin trend since discovery.
to hold, hoping for a better outcome next The industry is not nearly finding and put-
time. We have made good money on proj- ting into production that amount of metal.
ects that eventually failed by selling once the Additionally, large projects typically take 7 to
results don’t confirm our investment thesis.    20 years to move from discovery to produc-
Probably the third leg to the “investment tion; therefore, anything found today does
basics” stool is the company’s financial abil- not solve the current global metal shortage. 

64 MicroCap Review Magazine

quesTIon #4
The world is consuming more metal than it is
Are precious metals junior exploration com-
panies tied to the price of gold, silver, or finding, a situation that has been going on for
platinum or tied to resource, grade, land
years. Zinc inventory is at extremely low levels and
packages, location and whether they are
explorers, developers or producers? copper is forecast to fall into deficit a few years out.
In general, mining and exploration stocks
move with the metal prices almost on a daily can work very well, an example being our Disclaimer
basis. This is patently absurd; when invest- investment in Reservoir Minerals, in joint This letter/article is not intended to meet your specific
individual investment needs, and it is not tailored to
ing in this sector one is speculating on an venture with Freeport, which returned an your personal financial situation. Nothing contained
outcome far in the future. This short sighted- 870% gain on a 25% project interest; and herein constitutes, is intended, or deemed to be--either
implied or otherwise--investment advice. This letter/
ness provides today’s serious investors in the our investment in Mariana Resources, which
article reflects the personal views and opinions of Brent
sector the opportunity to buy at reasonable returned 352% from its 30% interest in a Cook and Joe Mazumdar, and that is all it purports
prices, and then to wait for the sector to turn discovery in Turkey. to be. While the information herein is believed to be
accurate and reliable, it is not guaranteed or implied
or, the market to recognize a discovery. With regards to special situations, due to be so. The information herein may not be complete
Another point many speculators fail to see diligence is key. Joe and I spend an inordi- or correct; it is provided in good faith but without
any legal responsibility or obligation to provide future
is that regardless of the day’s gold or copper nate amount of time researching the com-
updates. Research that was commissioned and paid for
price, major mining companies must replace pany and its project, often traveling to site. by private, institutional clients is deemed to be outside
their mineral reserves with new deposits We build geologic and resource models, the scope of the newsletter, and certain companies that
may be discussed in the newsletter could have been
if they are to stay in business. Mining is a and plug these into rough financial models. the subject of such private research projects done on
depleting business—mining companies rec- More often than not, the project eventually behalf of private institutional clients. Neither Brent
Cook, nor Joe Mazumdar, nor anyone else, accepts
ognize this and are always willing buyers of encounters a fatal flaw; however, by that time
any responsibility, or assumes any liability, whatsoever,
economic deposits regardless of short-term a company’s share price has often appreciat- for any direct, indirect or consequential loss arising
prices.  ed and we can still turn a profit. It’s all about from the use of the information in this letter/article.
The information contained herein is subject to change
knowing what it takes to make a project into without notice, may become outdated, and may not be
quesTIon #5 an economic mineral deposit— ahead of the updated. The opinions are both time and market sensi-
tive. Brent Cook, Joe Mazumdar, and the entities that
they control, family, friends, employees, associates, and
When building a portfolio of junior explo- others, may have positions in securities mentioned, or
ration companies, is it beneficial to own quesTIons #6 discussed, in this letter/article. While every attempt is
made to avoid conflicts of interest, such conflicts do
project generators with many different built arise from time to time. Whenever a conflict of interest
in opportunities or best to pick and choose Brent, I know you have been doing what you arises, every attempt is made to resolve such conflict in
the best possible interest of all parties, but you should
special situations? do a long long time. What’s your sense for
not assume that your interest would be placed ahead of
the metals markets for the rest of 2018? anyone else’s interest in the event of a conflict of inter-
At Exploration Insights Joe Mazumdar and I est. No part of this letter/article may be reproduced,
copied, emailed, faxed, or distributed (in any form)
invest in both project generators and special I think that overall, metal prices have bot- without the express written permission of Brent Cook
situations. The advantages of the project tomed and are on the uptrend. Global growth or Joe Mazumdar. Everything contained herein is sub-
generator business model is that compa- is positive, some metals are in deficit, and ject to international copyright protection.

nies employing this strategy bring in joint most are forecast to be in deficit two to five
venture partners to spend the high risk dol- years out. The junior mining sector has been
lars required to test their conceptual ideas, languishing; it now offers a contrarian play
thereby preserving their own working capital with solid underlying demand fundamen-
and share structure. Given the overall low tals. I expect 2018 will be selectively good to
odds of an individual property ever produc- the mining sector, and 2019, better. n
ing an economic metal deposit this makes
good business sense. It provides the inves-
tor with more kicks at the can, albeit with a
lower percentage of the prize. This strategy MicroCap Review Magazine 65

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66 MicroCap Review Magazine

Continental Stock Transfer

his interview originated as an SNN We also provide the issuer with ancillary ser- have a number of what I would call “mega
Live CEO video interview and then vices including mailing out proxies for annu- accounts”. A mega account is usually over
it was transcribed for inclusion in al meetings, tabulating proxies, and attend- 100,000 shareholders of record up to mil-
this issue. Steven Nelson is President and ing the meeting as Inspector of Election to lions of shareholders of record. What differ-
Chairman of Continental Stock Transfer & support the most important corporate event entiates us from the competition is we have
Trust Company. This interview provides a of the year for public issuers. a singular focus on mid-sized and growth
historical and current perspective on the In addition, we offer dividend paying ser- issuers.
nuances facing companies when navigating vices, administration of reinvestment plans, Even though we’ve been approached by
the intricacies of public company compli- and we manage mergers/acquisition ser- large issuers, it’s my view that you can’t ser-
ance. vices. As the business has evolved over the vice all of your customers with best-in-class
Steven Nelson: Continental Stock Transfer years, we’ve moved away from physical stock service if you’re going to force shareholders
& Trust Company was formed in 1964 by my certificates to issuing book entry stock posi- to stand in queue behind the mega issu-
father to compete with banks that dominated tions. And, we manage electronic transmis- ers. We’ve been a leader for service in the
the stock transfer industry at the time. My sion of shares mostly through DTCC’s auto- industry-wide surveys, and for value, for
father, a tax specialist, never worked in the mated FAST system which allows for almost many years.
business himself. He had the idea and we’ve instantaneous electronic transfer of shares.
been growing ever since. We are a limited RK: Are there niche markets that you also
purpose trust company with a New York RK: What should an issuer look for when target?
State banking charter and we are also a reg- selecting a transfer agent? SN: There is a particular niche in the IPO
istered transfer agent with the SEC. SN: You should be looking for a transfer market called SPACs, which are special-
Continental services 1,100 public and pri- agent that has a history, that has proven purpose acquisition companies which we
vate issuers and 2.5M shareholders. We have management, and that has a cost structure started managing in 2003. SPACs are con-
grown dramatically over the last 50 years that meets your needs. The agent should ceptually large blind pools where sponsor
both organically and through acquisition have all of the services that your company groups raise a certain amount of money, they
as we’ve acquired other stock transfer busi- currently needs but also services that you go look for a target, the shareholders vote at
nesses more than half a dozen times over require throughout your corporate history. the end of the period to approve or disap-
that period. Many of our companies come to us as ini- prove of the acquisition of the target, and
tial public offerings “IPOs” and then grow those shareholders can get their money back
Robert Kraft: What is a stock transfer requiring more complex services. if they choose not to go into the deal. These
company? companies raise millions of dollars and place
SN: We issue stock positions for share- RK: And what differentiates Continental? the funds in trust with the transfer agent
holders and maintain shareholder records. SN: The universe of stock transfer agents, and trustee. Those deals have now matured
when I started in the business out of law so that there have been three $1 billion plus
practice in 1983, was well over a hundred SPACs that we’ve handled and the average
agents, mostly banks. Now, there are five size of the deals that we’re now handling is
major agents of which Continental is one. $200 to $300 million per. We have handled
All of the banks that used to dominate the more than 200 of those deals since 2003 and
industry have gone out of the business. we have a 95% market share as agent/trustee.
This is an industry niche we have dominated
In looking for a stock transfer agent, you based on our expertise and a unique propri-
have to understand the universe. There are etary platform that only we possess. We’re
five major agents of which Continental is pretty happy about our position in the SPAC
“BOBBY” NELSON the fourth largest based on number of cus- market.
KRAFT tomers. In addition, the three larger agents In addition, we handle corporate actions MicroCap Review Magazine 67

for our own customers when they’re being on the criminal side, so I decided to accept surprisingly our building was flooded. We
acquired, or more likely acquiring other an offer I couldn’t refuse from my family were out of our building for ten weeks in
companies. We also handle 200 deals a year business; and I’ve been running Continental our disaster recovery site and we functioned
for companies which are not our ongoing since 1983. perfectly. Our regulators were amazed that
customers. We provide corporate action ser- The business has grown dramatically. We our customers in many cases did not even
vices for large multinational banks clients, have adapted to the times because the trans- know on a day-to-day basis that there was
including Deutsche Bank and Citibank. We fer agent industry has undergone a rapid and any change in the services that we could
have a special expertise in those, whether significant change. This dramatic change perform. There were no other major agents
they’re public-private acquisitions, private- has worked well for our company and we’re that were out as we were, and DTC which
private, public-public, tender offers or Dutch pleased with our progress and our growth. was downtown near us had major problems.
auctions, we can handle anything. We have
more experience in doing those corporate RK: From a regulatory perspective, how RK: What is the future of the transfer agent
actions than our competitors. have things changed? business?
So whether it’s Amazon, Verizon, Intel, SN: I think the biggest change relates to SN: The future is now. The market has
Ebay or Time Inc., many of the largest registered shareholders - that individuals consolidated down amazingly. Three largest
companies that you will have heard of, who holding a stock certificate - represented 80% competitors have been bought by overseas
are not our ongoing customers, they use of the ownership of public company shares. entities, so that Continental is now the larg-
Continental operationally because of our Now it’s completely flipped. Now 20% of est U.S. owned stock transfer agency in
special expertise and our platform. M&A shares are held directly by shareholders and the country, which is something my father
has expanding rapidly and a major part of 80% are held by banks and brokers on behalf would have never imagined when he had the
our business. of those beneficial owners. So that’s been idea and hundreds of banks in the United
a dramatic change. Obviously there have States dominated the industry.
RK: Are there any other business lines that been dramatic technology changes. As an I think for us the future is bright. We’ve
Continental is also looking at? example, transactions used to settle on a just moved into our new best-in-class offices
SN: Reg A+ deals are very interesting. T+5 basis. We recently moved to T+2 turn- at One State Street, overlooking the harbor.
Congress mandated, and the SEC passed around after having moved to T+3 many We’ve updated and refreshed our platform
rules, which allowed for Reg A+ deals to years ago. This is all a function of electronic with a new top-notch software provider. All
raise up to $50 million. This market is still in platforms in our business and the growth of our records are kept on Amazon’s Cloud
its early stages, but we were pleased to close of DTCC, which handles the clearinghouse storage facility. So things have changed,
a recent deal, Chicken Soup for the Soul. duties for all of the beneficial holders held by but for us they’ve changed in an exciting
We have others in the pipeline and this is an banks and brokers. way as we’ve refreshed our offices and we’ve
emerging trend in the IPO market, and we’re As well, the major players have had to refreshed our operations. n
pretty excited about our involvement. adapt to cyber security rules, privacy rules,
And, since Bitcoin is the watchword of the and tax reporting rules for cost basis. There
day, we were the agent for the first Bitcoin are literally significant regulatory changes
trust. Since that time, we’ve been involved every year or two that we’ve been required
in Ethereum and Grayscale that followed to adapt to. This succession of rapid regula-
after Bitcoin. We’re very much involved with tion change I think suggests in part why the
block chain technology and where it’s going, competition has disappeared. There’s a risk/
and we’ve been actively involved on the issu- reward scenario and only players that are
er side for the Bitcoin-Ethereum continuum. truly committed to this industry and have
the know-how and the staying power can
RK: What’s your background? survive in a highly regulated scenario. So
SN: I am what I characterize as a recover- right now, in the news every day is a new
ing lawyer. I started at Simpson Thacher & hack, a new privacy problem, a cyber threat
Bartlett which is a large white-shoe firm on and these are things that regulators require
Wall Street. Then I was a federal prosecutor us to adapt to and plan for.
in the U.S. Attorney’s Office in New York. In In the case of super storm Sandy, we
1983, I had tried enough cases, particularly were at the tip of Manhattan Island and not

68 MicroCap Review Magazine

Tailored to your
unique needs.


Our unmatched expertise and exceptional execution free you to focus on
growing your business.
Continental was founded on a specific vision – to fully support private,
emerging and mid-size companies with superior client responsiveness
and uniquely tailored business solutions. And we will earn your trust
each and every day.
As your partner, we will bring you brilliant innovative solutions.
Our individualized customer service will ease your mind. Corporate
actions, IPOs, public and private recordkeeping, escrows, dividend
disbursement or plan administration – we’re proven leaders in each
of these areas.


Contact Karri Van Dell 212.845.3224

Continental Stock Transfer & Trust | | 1 State Street Plaza, 30th Floor | New York, NY 10004 MicroCap Review Magazine 69

Hong Kong A Top

Market Performer In
Global Bull Market
Technology Companies Changing Hong Kong Exchange

T he Hang Seng Index was the world’s second best performer of the
2017 global bull market rising 36 percent on booming corporate
earnings and southbound flows from China which averaged HK$10 bil-
lion a week. Hong Kong’s rally continues in the new year nated by financial and real estate companies
with the Hang Seng Index up 10 per cent in which together account for over 60% of the
January as it reached a new all-time high of total market value compared to technol-
33,000 led by China’s internet giant, Tencent ogy companies which account for only 2%
Holdings Ltd (HK:0700) and Hong Kong as of the exchange end of 2017. However,
Exchanges and Clearing (HK:0388) as well Hong Kong Exchange is making great stride
as southbound flows almost doubling to towards diversifying its role from being the
HK$19.5 billion. Representing 10% of the preferred listing destination for blue-chips
Hong Kong Exchange market value, Tencent and large Chinese business or state-owned
fueled the exchange’s stellar performance enterprises, to attracting high-growth local
with a 116 percent increase in 2017. By the and international small and medium enter-
end of the year, Tencent joined US giants prises. During the year, Hong Kong saw
Apple, Alphabet, Facebook and Microsoft an emergence of technology and internet
when it became the first Asian company to stock IPOs with five of its 10 largest IPOs by
surpass US$500 billion in market value. companies operating in the new economy.
While Hong Kong equities soared in 2017, ZhongAn Online P&C Insurance (HK:6060),
its IPO market lost its crown as it dropped to was Hong Kong’s first fintech IPO and China
third place in the global IPO ranking raising Literature (HK:0772), China’s largest online
$16.3 billion, as New York took over the top publishing and e-book website, was the hot-
spot and Shanghai surpassed Hong Kong test listing in a decade as it attracted over-
for the first time. Still, Hong Kong had a whelming investor demand. For the year,
record-breaking 174 new listings in 2017, of technology IPOs jumped to 20 per cent
which 80 were Main Board listings, mostly from just 3.4 per cent in 2016 and the
comprised of industrial companies followed momentum for emerging tech companies
by retail, consumer goods & services compa- is poised to continue in 2018. Additionally,
nies, according to PwC. Hong Kong is domi- with new listings up 80% from 2016, the

70 MicroCap Review Magazine

GEM (Growth Enterprise Market) Board Kuaishou, a Chinese live-video streaming Looking forward, China is transforming
broke its record number of listing companies start-up backed by Tencent, plans to list as from being the world’s factory into a new
with a total of 80 companies listed in 2017, soon as the second half of 2018. The com- science and technology powerhouse fueled
according to PwC. PwC also predicts Hong pany is China’s most popular short video by government support and venture capi-
Kong will once again be the world’s largest streaming application with over 20 per- tal funding. China’s technology companies
IPO market in 2018, with an expected total cent market share. The live streaming sector are experiencing a surge in investor inter-
fundraising between HK$200 to 250 billion which barely existed in China three years est as companies break new ground in the
(US$25.6 - $28.14 billion) by 80 IPOs. ago, generated revenues of more than 30 real-world application of facial recognition,
With a growing pipeline of big Chinese billion yuan ($4.74 billion) in 2016 and is mobile payments, electronic commerce and
technology and internet companies, Hong expected to triple by 2020, according to artificial intelligence. Last year, the Chinese
Kong is strengthening its competitiveness China Renaissance Securities. Biel Crystal government stated its goal is to become a
as it battles with New York to attract main- Manufactory, the dominant producer of leader in advanced technologies including
land Chinese high growth companies by touch-sensitive smartphone screens is plan- leading in artificial intelligence (AI) capa-
overhauling its IPO rules. The Hong Kong ning a US$1.5 billion initial public offer for bilities by 2030. Investment in Chinese
Exchange is making the biggest overhaul the third quarter. The company produces artificial intelligence firms reached US$2.76
to its listing rules and procedures in thirty the material for smartphones, smart watches, billion in 2017. One of the leaders among
years which will take effect in mid-2018. tablet computers and notebooks and is used Chinese AI start-ups, SenseTime Group,
The amendments to the Main Board Listing in two of every three of Apple’s iPhones sold valued at more than $2 billion, is planning
Rules include allowing companies with dual- in the world as well as Samsung and Sony an IPO in the next year or two. SenseTime
class share system to issue different types of products. provides applications for facial recognition,
shares that correspond with different voting The momentum for Chinese fintech video analysis and other areas including
rights, pre-revenue biotech companies val- firms  continues with China’s largest online autonomous driving. The company has
ued at more than HK$1.5 billion (US$192 wealth management platform  Shanghai stated its target is to become a ‘platform
million) and overseas listed companies from Lujiazui International Financial Asset company’ that dominates with its original
emerging and innovative sectors that are Exchange, or Lufax, seeking to raise up to core technology like Google and Facebook.n
seeking a secondary listing on the Main US$9 billion for a valuation of $60 billion in a
Ms. Leslie Richardson has over 20 years of invest-
Board. The first companies with dual-class planned Hong Kong IPO in April. Lufax was
ment management and equity research experience.
stock structures are expected to go public in set up by Ping An Insurance Group (HK:2318) She operates a boutique investor relations firm in
the second half of this year. and with a $13 billion valuation could be the Hong Kong for Asian companies listed in the U.S.
and Hong Kong. She also assists private companies
Highly anticipated blockbuster IPOs for second largest fintech offering in Hong Kong. develop investment material and build an inves-
the year includes Tencent’s Music stream- Chinese online lending platform Dianrong is tor following in preparation for a public listing.
Additionally, she is the Asian Correspondent for
ing service which could raise up to US$1 also considering a Hong Kong listing to raise
Micro-Cap Review,, a
billion.   The streaming and downloading least US$500 million. The company is often financial magazine focused on mirco-cap compa-
service has twice as many paying customers called the Lendingclub of China because it’s nies. Previously, she worked for CCG Elite in assist-
ing Asian-based, U.S. listed clients formulate key
as Spotify and is currently valued at $10 founded by Soul Htite, co-founder of U.S.- communication strategies. Ms. Richardson began
billion. Furthermore, digital-music sales in based LendingClub and shares a similar busi- her investment career at U.S. Trust Company then
went on to join Odyssey Advisors as a portfolio
mainland China are expected to increase ness model  with the U.S. company. Hong
manager and Director of Research. Ms. Richardson
88% within four years according to PwC. Kong’s first online finance lending platform specialized in high growth sectors such as bio-tech,
Another high profile Chinese company WeLab, could raise approximately US$500 alternative energy, IT and telecommunications. She
earned her M.B.A. from the University of Southern
expected to list in the second half of the year million. WeLab operates across the Greater California. Ms. Richardson is based in Hong Kong.
is Xiaomi. The privately owned Chinese China region with lending platform Wolaidai
smartphone maker could be valued up to and WeLend services which have 25 million
Note: This article is not an attempt to provide
US$100 billion which if listed in Hong Kong users and have processed $28 billion of loans. investment advice. The content is purely the author’s
would make it the sixth largest company on The startup offers loans through a fully auto- personal opinions and should not be considered
advice of any kind. Investors are advised to conduct
the stock exchange by market capitalization. mated process that takes minutes and can be their own research or seek the advice of a registered
Known as “China’s answer to Apple,” the completed on a mobile device using its abil- investment professional. The author does not own
shares or any equity or debt interest in any companies
company offers the same advanced features ity to analyze unstructured mobile big data
mentioned in this article before or at its publishing.
in its devices as western brands but at a within seconds to make credit decisions for
lower price point and through online stores. individual borrowers. MicroCap Review Magazine 71


Canada at the Table – From Poker and

Sportsbook, to Slots/Casinos, Bingo
and Lotteries – Place Your Bets
W e are initiating coverage on the
Online Gambling/Lotteries sector.
A $75B+ Market by 2025: According to
skill-based, and other games) gross gaming
revenues (“GGR”) has grown from ~US$8.2B
in 2003 to US$44.3B in 2016. GGR is defined
estimates that sales across the four game cat-
egories of draw-based games (55.9%), instant
games (25.2%), sports games (parimutuel,
gaming industry consultants, H2 Gambling as rakes plus bonuses, promotions, overlays 7.2%), and sports games (fixed odds, 11.7%)
Capital (“H2GC”), the global online gam- and loyalty rewards, less prizes or winnings. were US$260.9B, up 2.7% y/y. Global lot-
bling industry’s (including online poker, We estimate that the combined global online tery sales by region were as follows: EMEA
casino, sports betting, bingo, lotteries and gambling GGR could grow to ~US$75B (32.8%), Asia/Pacific (38%), North America/
by 2025 for a compounded annual growth Caribbean (26.2%), Latin America (2.6%),
rate (“CAGR”) of ~6.1%. The overall global and Africa (0.4%).
gambling market (including land-based and A Blockchain / ICO Can Revolutionize
tribal casinos) is expected to exceed $600B the Industry: Evidence has shown that
by 2025. We estimate that online gambling a high number of gaming and gambling
should go from ~8% of overall GGR in 2010 companies have used blockchain technol-
to ~20% by 2025; and that mobile should go ogy to raise money and fund startups. In
from ~12% of online GGR in 2010 to 55%+ total, more than US$4B has been raised
by 2025. via ICOs, according to Autonomous NEXT.
Poker is Sexy, but Sportsbook and Business Insider reported a $500M ICO to
Casino is Where the Money’s at: H2GC build a floating cryptocurrency casino in
estimates that for 2016 alone, the GGR splits Macau. Gambling with cryptocurrencies –
by segment were: sports betting (49%), casi- as opposed to fiat money – can currently
no (26%), state lotteries (9%), poker (6%), be conducted without the need to provide
skill and other gaming and commercial lot- identification documents, or in some cases,
teries (5%), and bingo (4%). without the need to create an account.
Bingo is the Least Volatile: Long-term Free-to-Play Social is Growing Too:
structural growth in online gaming is mainly Online Social Casino gaming is broadly
driven by: (1) increasing mobile penetration; defined as “free-to-play” online Poker, Slots,
(2) demographics/social change; and (3) Bingo, and Table Games on desktop and
the ongoing shift from brick and mortar to mobile devices. Eilers & Krejcik Gaming
online. We believe online bingo has attrac- (“EKG”) estimates that the global social casi-
tive fundamentals compared to sports bet- no gaming market reached $4.3B in 2017
ting and poker, namely, a sticky customer (+11.5% y/y), and should grow at a CAGR of
base with stable margins and a niche focus 5.5% to reach $5.3B by 2021.
on the female demographic. We note that the Valuation: The Canadian Gambling/
UK is the largest market in the Online Bingo Lottery sector trades at a C2018E EV/Sales
segment with ~11% of the global market. of 3.3x and EV/EBITDA of 10.2x versus its
Lotteries Just Scratching the Surface: Global Gaming comparables at an average of
For 2015, the World Lottery Association 3.2x and 11.0x, respectively.

72 MicroCap Review Magazine

Stars Group Inc (TSGI-T/TSG-US, BUY, UIGEA specifically excluded fantasy sports abouT ralph garCea
$40 PT): The Stars Group has a stranglehold that meet certain requirements, skill-games Mr. Garcea joined Echelon in January 2017 and
on the global poker marketplace, which and legal intrastate and intertribal gaming. has more than 21 years’ experience in senior posi-
tions at major domestic and international firms
comprises only 6% of total iGGR, and is con- Currently, out of the 50 states and 5 inhab- (Scotia, Credit Suisse and Cantor Fitzgerald), as well
tinuing to roll out its BetStars product and ited overseas territories, only 8 have legalized as boutiques (Haywood, NCP and GMCI).  He is a
top-ranked research analyst, well regarded for the
PokerStars Casino offering, with the former some form of online gambling – Nevada, depth and breadth of knowledge he brings to bear
in its infancy stage. We expect TSGI to con- New Jersey, Delaware, Pennsylvania, US on his coverage of Canadian technology, gaming and
tinue organically and inorganically investing Virgin Islands, Georgia, Illinois, and New industrial companies across a broad range of market
capitalizations. Over the years, he has received top
in its sportsbook product as it looks for the York. three rankings from Brendan Woods, Greenwich,
right catalyst to grow the business. Sports Betting Update: The U.S. Supreme Starmine and Thomson Reuters surveys.
Before becoming a sell-side analyst, he was a
Jackpotjoy (ITX-T/JPJ-LON, BUY, $20 Court (“SCOTUS”) heard oral arguments in research engineer for Bombardier Aerospace, using
PT): Jackpotjoy should grow to £225M+ early December 2017, and is set to rule by computer-aided engineering (CAE) tools for the
in 2018, with Vera&John adding £75M+. June 2018 on the legality of sports betting optimization of noise and vibration control in aircraft
(worked on the Dash 8-Q Series). Ralph subsequently
Approximately 80% of revenues come from in the US outside of Nevada (and Delaware, joined Belgium-based LMS International (acquired
regulated jurisdictions with the UK and Oregon, Montana). The State of New by Siemens in November 2012 for ~€680M), a
developer of CAE tools, as a business unit manager
Nordics representing ~80% of total revenue. Jersey challenged the validity of the 1992 for Michigan-based LMS North America to manage
JPJ is primarily a bingo focused company, Professional and Amateur Sports Protection sales, marketing, and services efforts.
with ~66% of revenues represented from this Act (“PASPA”) prohibiting betting on sports, Mr. Garcea holds a Bachelor’s degree (Honours) in
Engineering Science (Aerospace) from the University
gaming vertical, with casino representing and the upcoming SCOTUS ruling could of Toronto and an M.B.A. (Honours) from the
28% of its revenues. Growth in mobile has provide the catalyst to introduce sports bet- Schulich School of Business at York University. He is
a member of the Professional Engineers of Ontario
been impressive and now represents roughly ting on a state-by-state basis. (PEO), the American Institute of Aeronautics and
half of total revenue and more than half of Industry Consolidation: We have seen Astronautics (AIAA), and the Society of Automotive
new customer acquisitions. plenty of M&A activity across both the Engineers (SAE).

Pollard Banknote (PBL-T, BUY, $24 online gambling (Paddy Power/Betfair,

PT): According to La Fleur’s, the world- Ladbrokes/Coral, GVC/BWIN) and lot- eChelon wealTh parTners
wide instant ticket sales market comprises tery (IGT (IGT-US, NR)/GTECH, Pollard/ InC.
over 60% of total lottery sales in the US. Innova) sectors. We expect this activity to
Pollard has grown into a leading supplier continue as companies look to fill platform Echelon Wealth Partners Inc. is a Canadian indepen-
dent wealth management and capital markets firm
that competes head-to-head with two large and geographic gaps in their offerings. Most known for its client-centred approach and innovative,
global competitors – IGT and Scientific recently, Ladbrokes agreed to a £4B takeover entrepreneurial spirit. The company has Advisors 
and Portfolio Managers comprising approximately 70
Games. PBL’s revenue is derived from long- by GVC (GVC-LON, NR) – which would teams with over  $4 billion in assets under adminis-
term contracts (typically 3 to 5 years) with yield a fast-growing, diversified, interna- tration and management. Echelon offers a wide range
renewal extensions of several years. Online tional online and retail sports betting led of financial services for individuals, households,
institutions and corporate clients from its offices
lottery offerings (known as “iLottery”) will gaming group with over 90% of net rev- in Toronto, Oakville, Ottawa, London, Montreal,
be an important pillar for future growth, enues generated from locally regulated/taxed Saskatoon, Calgary, Edmonton, Vancouver, Victoria
and Tokyo. Echelon Wealth Partners is a mem-
particularly in the US where only a handful markets. From a Canadian perspective, the ber firm of the Investment Industry Regulatory
of jurisdictions sell lottery products online. notable consolidation in 2017 was that of Organization of Canada (IIROC) and a member of
PBL’s acquisition of Innova Gaming Group NYX Gaming Group by Scientific Games the Canadian Investor Protection Fund (CIPF). www.
closed in August 2017, and PBL recently for $500M. In 2016, NYX acquired the lead-
announced the acquisition of International ing B2B sportsbook operator in OpenBet Note: This article is not an attempt to provide
Gamco. in a deal valued at $383M. Average takeout investment advice. The content is purely the author’s
personal opinions and should not be considered
Online Gambling Status in the US: The multiples in the gaming sector in recent advice of any kind. Investors are advised to conduct
Unlawful Internet Gambling Enforcement years have ranged around ~3x revenue and their own research or seek the advice of a registered
investment professional. The author does not own
Act of 2006 (“UIGEA”) “prohibits gambling ~11x EBITDA. We believe the global gaming shares or any equity or debt interest in any companies
businesses from knowingly accepting pay- industry is still very much fragmented, and mentioned in this article before or at its publishing.
ments in connection with the participation with a challenging regulatory environment,
of another person in a bet or wager that further consolidation is the only logical solu- closures.php
involves the use of the Internet and that is tion forward. n
unlawful under any federal or state law.” MicroCap Review Magazine 73

74 MicroCap Review Magazine

Stock Promotion Commentary From OTC Markets Group

T he increased proliferation of digital
platforms, social media and online
investment newsletters offer today’s public
the risks associated with manipulative stock
promotion. Our Issuer Compliance team
has published a  stock promotion policy  to
and the addition of Caveat Emptor designa-
tions are widely-accepted in the industry, with
many brokers now using our designations as
companies and investor relations profession- describe how we identify potentially fraudu- a basis for making compliance determina-
als more immediate access to engage with lent promotion and outlines the steps taken tions.   Furthering efforts to enhance market
a broader universe of potential investors. to alert the community. We’ve also established transparency and investor protection, OTC
However, this technology-driven environ- best practices for public companies, to help Markets Group will soon implement a new
ment can also create additional channels for mitigate the risk of fraudulent promotion “promotion risk flag” designation to otcmar-
abuse by anonymous market manipulators. and ensure adequate disclosures in company-, as well as our market data feeds, to
Fraudulent stock promotion is an industry- sponsored investor relations materials. publicly identify securities that are the subject
wide problem.  Deceitful promotion cam- Combating manipulative stock promotion of an active stock promotion campaign.
paigns mislead investors, harm market dynam- and preventing disruption of our public mar- OTC Markets Group believes the new policy
ics, impede the capital formation process and kets requires a concerted effort. The stock and best practice guidelines, along with the
tarnish the reputation of small companies.  It promotion policy and best practices provide promotion risk flag and caveat emptor desig-
is incumbent upon regulators and those of us a framework that reinforces OTC Markets nations, are valuable tools that will drive better
who operate financial markets to take a closer Group’s disclosure-based philosophy and the disclosure and appropriately inform investors
look at fraud and manipulation as it relates to OTCQX Rules U.S., International,  Banks) about potential risks.  We support regulators
stock promotion, trading and investments.  and OTCQB  Standards. They clarify the employing a thoughtful, constructive approach
Last year, Regulators took a proactive obligations and responsibilities of reputable to addressing fraudulent promotion that lowers
step when the SEC’s Office of Investor public companies to make adequate current the barriers to small company public offerings,
Education and Advocacy issued an Investor information available and provide timely utilizes the vast amounts of available data to
Alert: Beware of Stock Recommendations disclosure of any news or information that identify bad actors hiding among the private
on Investment Research Websites to “warn might reasonably be expected to materially financing markets, and accelerates real-time
investors that seemingly independent com- affect the market for their securities. enforcement and regulatory intervention. n
mentary on investment research websites Our  policy  discusses the common char-
Lisabeth Heese - Executive Vice President - Issuer
may in fact be part of paid stock promo- acteristics of fraudulent promotion, ways
and Information Services
tion campaigns.”  Perhaps we’ll see the SEC in which death-spiral financings use stock Lisabeth (Liz) Heese joined OTC Markets Group
shift toward increased regulatory interven- promotion campaigns, and more, including: in 2004 and is the Executive Vice President of Issuer
and Information Services. Since then she has built
tion, led by new Chairman Jay Clayton. • Identifying Fraudulent Promotional a team responsible for: collecting and maintaining
In testimony  before the Senate Committee Campaigns market data for over 5,000 issuers; development,
sales and support of issuer-related products and
on Banking, Housing and Urban Affairs, • Responsibilities of Companies with
services; and, monitoring issuer compliance with
Mr. Clayton cited a focus on protecting all Promoted Securities Company policies and procedures. Prior to joining
investors among the SEC’s key initiatives. • Impact on OTCQX or OTCQB OTC Markets, Liz spent 11 years at NASDAQ, serv-
ing as a Product Manager in the Trading and Market
OTC Markets Group recognizes our lead- Designation Services Division. Liz received a BA degree from
ership role in maintaining the integrity of our • Caveat Emptor Policy and Stock American University.
About OTC Markets Group Inc.
public markets, establishing market standards Promotion
OTC Markets Group Inc. (OTCQX: OTCM) oper-
and educating issuers and investors about • Regulatory Referrals ates the OTCQX® Best Market, the OTCQB® Venture
• Best Practices for Issuers Market, and the Pink® Open Market for 10,000 U.S.
and global securities.  Through OTC Link® ATS, we
connect a diverse network of broker-dealers that
OTC Markets Group uses market designa- provide liquidity and execution services.  We enable
investors to easily trade through the broker of their
tions to identify which issuers are making
choice and empower companies to improve the qual-
adequate current disclosures available to the ity of information available for investors.
public.  Our Caveat Emptor flag warns inves- To learn more about how we create better
informed and more efficient markets, visit  www.
tors of public interest concerns, including
fraudulent promotion.   Distinguishing our OTC Link ATS is operated by OTC Link LLC,
member FINRA/SIPC and SEC regulated ATS.
n BY LIZ HEESE issuers through the creation of market tiers
Subscribe to the OTC Markets RSS Feed MicroCap Review Magazine 75

50 70
U.S. States International

76 MicroCap Review Magazine


Investing in Australian Small

and Microcap Companies
N ext time you see a story about the massive profits made by Private
Equity ask yourself why it is so difficult to get into good stocks
on the ground floor.
The answer is that equity investment in early We don’t see the strangulation of small
stage small and microcap stocks in the USA cap equity investing in the USA changing
has been made much more difficult, in fact, soon as the major banks push harder and
it has been made almost impossible without stronger towards getting more money under
the structures put in place by Private Equity management in Exchange Traded Funds and
which effectively keeps out all but the most managed money.
highly qualified investors. Australia represents the New Frontier in
Difficult regulations like Sarbanes Oxley, investing at a time when one US Dollar buys
and Private Equity financing ,has led to a about $1.30 of Australian stock.
dramatic drop in the numbers of stocks listed Australian small caps are always about
on US Exchanges, the availability of stock and equity, not debt, not private equity, nothing
intelligence about small and microcap stocks. fancy just a minimum of 300, at least, ordi-
The opposite is true in Australia where nary shareholders putting their hard earned
there is a flourishing market in genu- cash into a company that is ready to flourish.
ine ground floor equities which are not None of this is to say that small and micro-
swamped by regulations, costs and Private cap investing in Australian stocks, many
Equity, whose role in the financial markets of which have an ADR or OTC listing, is
is to be first in and first out at the expense without its risks. Australian small caps are in
of every other investor who wants to share mining, oil and gas, Pharma or tech. It is not
in the gains. well recognized that there are about 30 listed

n BY JOHN KIMBER MicroCap Review Magazine 77

Australian oil and gas companies with ALL must do which means that prospectuses are unparalleled research that covers listed and
their assets in the USA. half the size and regulatory compliance is unlisted managed investments, listed com-
The opportunity is that assets in the USA half the cost. panies, structured products, and IPO’s. n
are not well understood by Australian share- Shareholders in Australia are used to con-
John Kimber – Executive Director - Americas
holders and are often not recognized by tinuous disclosure and to boards of directors
John Kimber is the Executive Director in North
US Investors because they reside in the who act as a governance check on execu- America of Independent Investment Research.
Australian listed entity. tives. The cult of the CEO does not exist in After graduating in Economics from University
of Sydney John spent several years at Coopers and
So where does the money come from to Australian companies where independent Lybrand (now Pwc) as an accountant and then
get these small caps started and listed in boards tend to exercise much more control changed career and was employed as a financial
journalist and economics correspondent in South
Australia ? over executive decisions.
Africa and London for the Financial Times and
The answer is from the Australian A couple of good examples of US compa- finally with Reuters Economic Services. He then
Superannuation system that mandates ten nies listing in Australia are Boart Longyear changed his career path again and commenced work
as a research analyst and later became a full Member
per cent of pre-tax incomes must be con- and One Page. of the Sydney Futures Exchange. John was employed
tributed towards a retirement account which Australians are looking for more opportu- for many years in Sydney with Prudential Bache
Securities, BT Alex Brown (Bankers Trust) and then
is controlled by the owner. This is in direct nity to invest in overseas markets. Home bias
with Ord Minnett (JP Morgan) where he specialized
contrast with the USA system where Social is just as evident in Australia as in the USA. in offshore investments and the local subsidiaries
Security is controlled by the government. This means that ASX listed companies with of foreign corporations in Australia. He is married
to an American from Denver and located there in
There are hundreds of thousands of Private offshore assets tend to attract a following October 2012 to further pursue his career with IIR
Superannuation Funds that can invest in simply because they have overseas assets and He maintains close links with the Colorado mining
industry and with the biotechnology and medical
Australian listed small caps. And they do. are regulated in Australia.
device industry in Colorado.
Australia is as big as the USA by geograph- The opportunity for US Investors is to John takes an active interest in all aspects of
ical size but with only 25 million people, less identify those companies with US assets Denver business, sporting and cultural life. He is
an active member of the Denver Athletic Club, The
than California alone. that are undervalued and for US small cap Colorado Mining Association, the Society for Mining
Its biggest trading partner is China which companies that would never be able to raise and Exploration, the Denver Petroleum Club and
the Colorado Bio Science Association and attends
is hungry for Australian mineral assets and money in the USA to list on the ASX and tap
most of their meetings. He is an active participant
agricultural products. There is a very strong into the Australian capital markets with graduates from the Colorado School of Mines.
defense connection with the USA with a John is a regular attendee at the PDAC confer-
ence in Toronto and maintains close links with the
marine base near Darwin in the Far north CorporaTe bIo Australian Stock Exchange, Bank of New York, vari-
the closest landfall to Asia. Australia is a ous brokerages and investment institutions, and the
various Exchanges in the United States which provide
popular migration destination for Chinese Independent Investment Research, “IIR”, is
listing facilities for Australian companies.
which has led to some of the most expensive an independent investment research house
residential real estate in the world in the based in Australia and the United States. Note: This article is not an attempt to provide
investment advice. The content is purely the author’s
major capital cities. IIR specializes in the analysis of high quality
personal opinions and should not be considered
The hallmark of Australian small caps commissioned research for Brokers, Family advice of any kind. Investors are advised to conduct
is that they are able to raise money from Offices and Fund Managers. IIR distrib- their own research or seek the advice of a registered
investment professional. The author does not own
ordinary shareholders as straight equity not utes its research in Asia, United States and shares or any equity or debt interest in any companies
debt and without the structures put in place the Americas. IIR does not participate in mentioned in this article before or at its publishing.
by Private Equity. Australian small caps are any corporate or capital raising activity and
regulated by the Australian Stock Exchange therefore it does not have any inherent bias
and the Australian Securities Investment that may result from research that is linked
Commission ( like the SEC) at a much lower to any corporate/ capital raising activity. IIR
regulatory cost than will be incurred under was established in 2004 under Aegis Equities
Sarbanes Oxley. Research Group of companies to provide
The key difference in the regulatory envi- investment research to a select group of retail
ronment is that Australian securities laws and wholesale clients. Since March 2010,
are based on English law which means that IIR (the Aegis Equities business was sold to
the rules are generally non prescriptive. Morningstar) has operated independently
Companies and their promoters are told from Aegis by former Aegis senior execu-
what they cannot do rather than what they tives/shareholders to provide clients with

78 MicroCap Review Magazine

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MicroCap Review Magazine 79

Three Strong Points for

SME Markets
E arlier in 2017, The World Federation of Exchanges (WFE)
released their report highlighting major barriers of entry to
equity market financing for Small and Medium Enterprises (SMEs).
In conjunction with a survey infrastructure plexity and cost for SME listing and
supported by the Milken Institute, the WFE compliance
made three key recommendations to securi- We work hard to make being public
ties market regulators and exchanges: less painful. A  study from the IPO Task
1. The complexity, cost and scale of list- Force cited that the average cost for smaller
ing, and maintaining a listing, should companies to go public on a national exchange
be reduced, to incentivize the use of is $2.5 million. And with ever growing
equity markets by SMEs. management burdens and continually rising
2. The quality, not the quantity, of infor- costs to maintain an exchange listing (legal,
mation available about SMEs should accounting, advisory and compliance costs)
be enhanced. This includes informa- averaging $1.5 million per year, listing
tion that SMEs disclose for regula- has become a big-ticket time and capital
tory compliance as well as that from commitment for any company. Fortunately,
third-parties. a costly exchange IPO isn’t the only means
3. Mechanisms should be introduced to by which small companies can participate in
enhance secondary market liquidity capital creation and access public markets.
in SME stocks and on SME markets, OTC Markets strongly supports alternative
such as: dedicated market makers; methods such as Reverse mergers, Slow PO’s
expanding and diversifying the inves- and Regulation A+ which provide a more
tor base; and exploring alternative efficient, less expensive and less burdensome
secondary market trading models path to the public markets.
such as a quote-driven market. Our “information first” market model
When I read the WFE report, I couldn’t empowers U.S. and Global companies to
help but draw parallels between these find- improve the quality of information available
ings and the unique public market frame- and allows investors to decide on the merits
work we have built at OTC Markets Group of an investment.  We strive to help allevi-
to help smaller public companies succeed. ate the burden of unnecessarily complex
So, what exactly are we doing? and duplicative regulatory and disclosure
1. Require Fewer Resources to requirements.  For example, we recognize
be a Public Company. We several disclosure standards for providing
have  streamlined and simplified adequate current information to the invest-
requirements that lower the com- ing public.

80 MicroCap Review Magazine

2. Empower Investors and Brokers with The tiered market structure incentivizes public
Information. We focus on quality not
quantity of data available to investors companies to provide higher quality disclosure,
We believe that data is key to helping
investors to decide the merits of investments while highlighting less transparent and riskier
and take responsibility as they analyze, value
securities for brokers to restrict access to.
and trade securities.  In our disclosure and
data-driven markets, investors can see real-
time prices, access market data and up-to-
raising, Cromwell is a strong advocate of making
date company information through multiple less complex, scaled listing process with
investor information more accessible and alleviating
channels, including Bloomberg, Thomson improved information quality. the cost and regulatory complexity associated with
Reuters, and other leading market data pro- We understand that a broker-dealer net- being a public company. Cromwell is a champion of
efficient public markets and trading transparency,
viders.   Investors are well serviced by a work is a critical component of market qual- supporting a diverse ecosystem of broker-dealers
wide selection of online and institutional ity for small-cap stocks, which often lack the connecting consumers and suppliers of liquidity. He
has testified before Congress and spoken on these
brokers.  Our OTC Compliance Data File deep order books and natural share liquidity
and other issues at numerous industry conferences.
provides broker-dealers and compliance/risk of larger cap stocks.  While the exchanges Prior to OTC Markets, Cromwell was an institu-
mitigation teams with critical data points on operate high frequency matching engines, tional trader and portfolio manager at Carr Securities
Corporation. He holds an OPM from Harvard
OTCQX, OTCQB, Pink and Grey securi- designed for the largest listed companies, Business School and received his BBA from Southern
ties.  The tiered market structure incentiv- broker-dealer markets on OTC Link® ATS, Methodist University. Cromwell is Chairman of the
FINRA Market Regulation Committee that advises
izes public companies to provide higher our quote-driven, SEC regulated Alternative
FINRA on rulemaking and trading issues. He is
quality disclosure, while highlighting less Trading System, treat liquidity as a resource also a non-Executive Director of the S. W. Mitchell
transparent and riskier securities for brokers that needs to be provided by diverse market European Fund LP, and its feeder funds, managed by
S. W. Mitchell Capital, a specialist European equities
to restrict access to. participants.  This open platform enables investment boutique based in London.
And, as a result, the high-quality market investors to buy and sell securities through
About OTC Markets Group Inc.
data and information we make available the institutional, retail, or online broker-
OTC Markets Group Inc. (OTCQX: OTCM) oper-
on our website,  http://www.otcmarkets. dealer of their choice, enlisting market mak- ates the OTCQX® Best Market, the OTCQB® Venture
com, is helping companies demonstrate ers to provide competitive trading, so public Market, and the Pink® Open Market for 10,000 U.S.
and global securities.  Through OTC Link® ATS, we
timely disclosure and financial standards companies can create a more diversified connect a diverse network of broker-dealers that
for State Blue Sky regulatory compli- investor base. provide liquidity and execution services.  We enable
investors to easily trade through the broker of their
ance. This September, we reached a piv- OTC Markets Group believes in connect-
choice and empower companies to improve the qual-
otal halfway mark with the majority of ed, data-driven and transparent markets. ity of information available for investors.
states that now recognize our OTCQX Best Among the diverse and competitive land- To learn more about how we create better
informed and more efficient markets, visit  www.
Market for the purposes of their “Blue Sky scape, our goal remains the same– continue
Manual Exemption” for secondary trading.  to provide choice markets for the public OTC Link ATS is operated by OTC Link LLC,
member FINRA/SIPC and SEC regulated ATS.
Coupled together, these unique features companies of today on our OTCQX Best
Subscribe to the OTC Markets RSS Feed
increase the level of transparency neces- Market and OTCQB Venture Market who
sary to create more efficient markets, while will support the growth of the public com-
not needlessly wasting resources for public panies of tomorrow. n
3. A Quote Driven Market that Offers R. Cromwell Coulson, President, Chief Executive
Officer and Director
Fair Competition Between Brokers R. Cromwell Coulson is President, Chief Executive
and Dealers.  We deliver mechanisms Officer and Director of OTC Markets Group, Inc.
(OTCQX: OTCM), operator of the OTCQX, OTCQB
to connect secondary market liquid- and Pink markets. Since acquiring OTC Markets’
ity and execution providers, allowing predecessor business, Cromwell has led the trans-
investors to trade through the broker formation of the OTC markets from an opaque and
inefficient phone-based market into a fully modern,
of their choice                                          electronic
                financial market for U.S.
Most gratifying is the reports’ validation and global companies. Today, OTC Markets Group
is a publicly-traded company that operates three
that quote driven markets provide an effec- public markets for 10,000 securities that trade nearly
tive solution that delivers a cost-effective, $200 billion in dollar volume annually. A recognized
proponent of Reg A+ and small company capital MicroCap Review Magazine 81


Trading Cryptocurrencies
Two Sides of the Coin
n 2017 the talk of the town was cryp- there are an estimated 16.9 million in circulation 2013. However, it gradually drifted back into a
tocurrencies and Bitcoin. Unless you’ve and a known maximum of 21 million to be $200 to $300 trading range for the next several
spent the last year on a deserted island, circulated approximately the year 2140. It has an years. In 2017 the market breaks above $1,000.
it’s hard not to hear about crytpocurrencies estimated market cap of 41.9% ($276.13 billion) By December 2017 the arrival of Bitcoin
also known as cryptos. These terms found of the cryptocurrency market’s $442.3 billion. futures arrived as the market briefly peaks
their way into our daily lexicon. This article is The second largest market cap is Ethereum with above $19,000. Since December the market
not intended to endorse cryptocurrencies, but about 18.5%. Followed by Bitcoin Cash at 4.7%. consolidated below $7,000 and is now in a
to discuss what is occurring in the industry. The top 10 cryptos equate to roughly 83% of the trading range of roughly $9,000 to $11,000.
Bitcoin was the first and most successful (to market cap. The market peaked and consolidated over
date) cryptocurrency. Some investors may be February 20th, Venezuela launched a sov- the past year as it found support and resis-
familiar with a few cryptos such as Ethereum, ereign backed crypto called petro, backed tance around the 50 day, 100 day and 200
Ripple or Litecoin. However, would you be by oil. However, Dubai released the first day moving averages as noted in Chart 2.
surprised to know there are over 1,000 cryp- sovereign backed crypto last October. Traders appear to utilize moving averages
tocurrencies? In September 2017, the list of Cambodia, Iran and Turkey are each dis- for Bitcoin, similar to their employment for
cryptos trading just barely reached 1,000. As of cussing possible digital currencies. Russia stocks, futures and currencies. Other tradi-
this writing there are a little over 1,500 cryptos. and the UK have both talked about releasing tional technical trading methods such as can-
Roughly 1/3 of the currently trading cryptos their own digital currency. dlestick charts are also used by crypto traders
have been issued since September 2017. The U.S. regulators appear to be mov- December 2017 was a race for the first
First, a little history on cryptos. Bitcoin ing towards a regulatory environment. The Bitcoin futures contract. December 10th
was created by a person or group in SEC and the CFTC have set up departments Cboe futures exchange began trading Bitcoin
2008 under the name Satoshi Nakamoto within their agencies for crypto and fintech futures (XBT). The anticipation of the con-
and utilizes blockchain technology. related issues. The SEC mentioned ICOs tract caused heavy traffic to Cboe’s website
Nakamoto (2008) discussed a peer-to-peer having the characteristics of securities, thus to crash on the first day of trading as visitors
payment system circumventing the use of a regulation is probably not far behind. ICOs constantly checked for price updates. But
financial intermediary by utilizing cryptog- are initial coin offerings. Many of the cryp- their trading platform was fine. As noted by
raphy technology to verify the transactions. tos are issued by startup tech firms. Some the Cboe: “On the first day of trading at Cboe
Bitcoin began in 2009. crypto traders will say analyzing cryptos is in 1973 911 options traded. First day of VIX
Cryptos are a decentralized currency, meaning similar to analyzing start up tech firms. futures in 2004 saw 461 contracts traded. 3
no country controls it. Cryptos do not have a legal Currently there are hundreds of cryp- hours into the first bitcoin futures session and
tender status in most, if not all countries. It uti- tocurrency exchanges globally. Not all volume is just over 1000 contracts.”
lizes peer-to-peer transactions because the trans- exchanges are created equal. An investor
actions occur between two parties. Currently should research an exchange before decid- below Is a TImelIne for The
ing which one to use. As the excitement for bITCoIn DerIvaTIves markeTs10
cryptos expanded in 2017, it was reported in
January 2018, the major crypto exchanges 1) Sept 2015 the CFTC defined crypto-
were adding more than 100,000 users per day. currencies as a commodity under the
Hedge funds focusing on crypto trading Commodity Exchanges Act.11
increased from 37 at the beginning of 2017 2) November 2016 the CME Group began
to 55 funds in August to 110 in October to CME CF Bitcoin Reference Rate for a once a
226 in February 2018. day Bitcoin to USD price (based on four spot
As found in Chart 1, the market moved Bitcoin exchanges: Bitstamp, GDAX, itBit and
above $1,000 for the first time in November Kraken) and CME CF Bitcoin Real Time Index.

82 MicroCap Review Magazine

3) July 2017 LedgerX announced CFTC
approval to trade Bitcoin swaps and options.
The exchange began trading October 2017.
4) Fall 2017, Cboe Futures, CME Group,
and Nasdaq announced plans to offer Bitcoin
futures. One futures contract = 5 bitcoin.
The Cantor Exchange announced plans to
offer Bitcoin binary options.
5) Nasdaq Stockholm began trading a
Bitcoin ETN in May 2015 and an Ether ETN
in October 2017.12
Chart 1: Bitcoin spot price 7/19/2010 to 3/5/2018
6) December 1, 2017 the CME Group
announced their futures contract (BTC) for Source: Bloomberg data

December 17th start. CME’s contract is based

on the CME CF Bitcoin Reference Rate 13
7) On December 1st, 2017, the CFTC
announced their involvement with the
exchanges to prepare for these new contracts.14
8)December 4th, 2017 Cboe announced
plans to start their Bitcoin futures contract
December 10th.15 One futures contract =
1 bitcoin. The spot price is derived from
the cryptocurrency exchange Gemini Trust
Company, LLC.
Chart 2: Bitcoin spot price 1/2/17 to 3/5/18

Most of Bitcoin’s move occurred in 2017. Source: Bloomberg data

Can the trajectory curve of 2017 happen
html Prior to Coquest Advisors, Mr. Shore founded Shore
again, or will it settle into a more normal 10 December 2017 Coquest Managed Assets Capital Research a research/ consulting firm for alternative
stream of returns found in the capital mar- Newsletter investments. Prior to Shore Capital, Mr. Shore was Head of
11 Risk for Octane Research Inc ($1.1 billion AUM), where
kets? There is an ongoing debate whether documents/file/labcftc_primercurrencies100417. he was responsible for quantitative risk management
cryptos are a bubble or if they are here to pdf analysis and due diligence of Fund of Funds. He chaired
12 the Risk Management Committee and was a voting mem-
stay. If the volatility dampens, will that cause
jonathanponciano/2017/10/11/following-bitcoin- ber of the Investment Committee. Prior to joining Octane,
traders to lose interest in the sector? Time ether-tracking-notes-now-listed-on-nasdaq- he was the COO of VK Capital Inc, a wholly owned
will tell, stay tuned. n stockholm/#2b309cf567a5 Commodity Trading Advisor unit ($300 million AUM)
13 of Morgan Stanley. Mr. Shore provided research and risk
releases/2017/12/01/cme_group_self-certifiesbitc management expertise on portfolio construction, product
(Endnotes) oinfuturestolaunchdec18.html development and business strategy.
1 According to 14 He received his MBA from the University of
2 pr7654-17 Chicago and is currently a doctoral candidate at
documents/file/labcftc_primercurrencies100417. 15 DePaul University.
pdf releases/2017/12-04-2017 Past performance is not necessarily indicative of future
3 “Bitcoin a Peer-to-Peer Electronic Cash System” results. There is risk of loss when investing in futures and Mark Shore, Director of Educational Research options. Futures can be a volatile and risky investment; only
4 as of 1/6/18 at Coquest Advisors LLC, has more than 30 years use appropriate risk capital; this investment is not for every-
5 of experience in alternative investments, publishes one. The opinions expressed are solely those of the author
6 research, consults on alternative investments and con- and are only for educational purposes. Please talk to your
release-state-backed-cryptocurrencies-on-heels- ducts educational workshops. financial advisor before making any investment decisions.
of-venezuelas-petro Mr. Shore is also an Adjunct Professor at DePaul
7 University’s Kellstadt Graduate School of Business Note: This article is not an attempt to provide invest-
by-venezuelan-petro-cambodia-may-issue-a- where he teaches a managed futures / global macro ment advice. The content is purely the author’s personal
national-cryptocurrency course. He is a board member of the Arditti Center opinions and should not be considered advice of any kind.
8 for Risk Management at DePaul University. Mr. Investors are advised to conduct their own research or
growth-cryptocurrency-exchanges-are-adding- Shore is a frequent speaker at alternative invest- seek the advice of a registered investment professional. The
100000-users-per-day ment events. He is a contributing writer for the author does not own shares or any equity or debt interest
9 Eurex Exchange, Cboe, Swiss Derivatives Review, in any companies and does not own cryptocurrencies
crypto-hedge-funds-soars-amid-bitcoin-volatility. MicroCap Review and Seeking Alpha. mentioned in this article before or at its publishing. MicroCap Review Magazine 83


Looking to Catch a New Trend

Early? Follow the Canucks

S ilicon Valley is unmistakably home to some of the world’s largest,

fastest growing, most disruptive technology companies, and the
pools of capital that have built them.
From Tesla’s autonomous, electric vehicles, panies can finance at sequentially higher Qualifying Transaction (“QT”)—the RTO
to PayPal’s continued disruption of the pay- levels through the public markets as they of a Capital Pool Company—has enabled
ments space, to the growth of Alphabet, execute on their business plan. By bringing the development of major global industries,
Facebook, and the area’s numerous social companies public early, retail investors get including mining exploration for precious
media players, the effects of Silicon Valley to participate alongside institutional capital, metals, extraction of battery metals, and
are powerful, and pervasive. management, and the deal makers during development of renewable energy proj-
However, for all the success the Valley- the growth phases across a broad range of ects. Most recently, this has translated in
based unicorns enjoy, they have not grown major industries. the growth of the blockchain, cryptocur-
nearly the breadth of industry as the rency, and cannabis industries north of the
Canadian capital markets. The two-tiered whaT makes CanaDIan American border.
capital markets structure of the TSX and markeTs unIque? Perhaps the most broadly adopted disclo-
TSX Venture Exchange have developed a sure standard implemented in the Canadian
track record of identifying opportunities, The risk appetite of the Canadian capital capital markets is National Instrument
defining success metrics, and listing busi- markets, combined with listing mechanisms 43-101 Standards of Disclosure for Mineral
nesses early in their lifecycle. These com- such as a Reverse Take Over (“RTO”) or Projects which has enabled capital to finance


84 MicroCap Review Magazine

the growth of approximately 5,700 mining Structured for Growth
projects globally through the TSX and TSXV.
Number of CPCs listed (1987 - 2017) 2,490
The 43-101 standards have also been the
template for similar global standards, such Number of successful CPC Qualifying 2,153 (86%)
as JORC compliance.
Nobody believed that there were diamonds Number of TSXV CPCs that have graduated 80 (number
in Canada, until two geologists found evi- and are currently TSX listed excludes any M&A)
dence of diamond bearing kimberlite pipes Number of Reverse Take Overs (2005 - 2017) 264
north of Yellowknife in 1991—one of which
Number of RTOs graduated to TSX 27
was developed into Ekati, Canada’s first
commercial diamond mine. Following this Number of RTOs companies acquired 12
discovery, geologists used kimberlite pipes
and indicator minerals to identify other first companies in the blockchain and cryp- port has ultimately established Canada as a
exploration opportunities across Canada. tocurrency space recently have used this leader in an industry that is now global in
These basic geological structures and met- same RTO structure to list. Since completing nature. Companies listed on the TSX and
rics allowed entrepreneurs to explain their their RTOs, these five companies are now TSXV have the critical mass and access to
stories to the markets, finance their projects, worth over $1bn, and have raised in excess capital to to be active globally, and estab-
and ultimately discover a dozen diamond of $130m. lished processes combined with science to
mines across Canada. By 2016, Canada was For companies, the RTO structure pro- defend their leadership positions.
the third largest diamond producing country vides two key benefits:a higher degree of The combination of investment capital
in the world, recording over 13 million gem confidence in the listing process and an with a risk appetite for early stage compa-
quality stones per year. ability to acquire the vehicle’s intrinsic value. nies, capital markets with a track record of
In more recent years, with the prolif- That may include a supportive investor base, identifying high growth sectors early, and
eration of cell phones, laptops, and elec- strong management and/or directors, or cap- structures that enable young companies to
tric vehicles, the Canadian capital markets ital. Over the past 15 years, the RTO mecha- gain a public listing early has enabled the
have established themselves as leaders in nism has built some of Canada’s largest com- TSX Venture Exchange to develop global
the exploration, development, and produc- panies. Unique to the TSX Venture Exchange leaders in the mining, energy, diversified,
tion of battery inputs. The Canadian capital is the Capital Pool Company structure, a technology, and life sciences sectors—often
markets identified the opportunity to supply publicly listed vehicle with a management before the rest of the world took note. For
these inputs, defined grades and extraction team and pool of capital exclusively looking investors looking to get in on the next big
techniques, and financed the growth of these for an interesting project to purchase using theme, it’s worth taking a look at what the
businesses. its equity, or QT. One of the greatest QT suc- Canucks are listing. n
Through 2017, as the regulatory frame- cess stories is Silver Wheaton, now a $12bn
A Computer Engineer by background, Brady spent
work for medical cannabis became better listed constituent of the TSX 60 index.
almost a decade in investment banking, primarily
understood, the markets again developed The RTO structure, and its familiarity focused on financing and advising technology and
an investment framework, including thresh- within the Canadian capital markets, is one diversified issuers through strategic transactions,
before leaving to found Coastr.
olds for comparing companies, and financed of the reasons that the TSXV has success- With Coastr, Brady successfully took a concept
the growth of industry leaders like Canopy fully defined entire industries. For instance, through ideation, building a development team,
and launching the platform. We successfully sold
Growth, which originally listed on the TSX the first cannabis company listed on the
a network of almost 30 venues locally while using
Venture Exchange through an RTO of a TSX Venture in 2014, and by the end of customer feedback to drive iterative revisions to the
Capital Pool Company. 2017 there were 29 listed cannabis com- app and back-end platform.
Throughout his investment banking career, Brady
panies representing over $20bn in market has advised hundreds of companies on business
The rTo aDvanTage capitalization. The TSXV was the first North strategy, capital raising, public and private markets,
and exit strategies – having successfully executed
American exchange to go through a review
over $500million in growth equity financings, sec-
The RTO mechanism has been used for process that allowed a cannabis company ondary transactions, and sell-side advisory man-
decades by mining companies in Canada. to list. In doing so, it created a unique abil- dates.
Brady joined TMX Group recently and is
However, it is only recently that technol- ity for entrepreneurs to build their business Managing Director of TSX Venture, the world’s
ogy and life sciences companies have really in this growth industry by leveraging retail leading public venture capital marketplace.
started to embrace its benefits. Five of the and institutional investor support. That sup- MicroCap Review Magazine 85

86 MicroCap Review Magazine MicroCap Review Magazine 87

Zinc Could Be Set

to Zoom in Electric
Vehicle Era
T hese are exciting times for the zinc industry. A dramatic cut in
production by the largest worldwide producer, followed by an
equally dramatic run-up in price, have jolted the investment com-
munity over the past two years along with potential stakeholders in
the business world. At the same time, new mining activities Century in Australia and Lisheen in Ireland,
globally are ensuring an available supply in late 2015, as well as Beijing’s desire to tar-
of the 30th element for novel applications. get zinc mining and refining in southwestern
One of the most prominent of these is zinc’s Sichuan province in a drive to clean up the
potential role as the basis of a new generation environment.
of batteries in electric vehicles. Zinc is truly All in all, global zinc stockpiles fell in
in the spotlight in 2018. 2017 and now represent about six days of
global consumption. Yet even in light of this,
zInC’s forTunes surge overall global zinc supply is set to increase
with additional capacity coming online in
In October 2015, Swiss-based Glencore, Australia (MMG’s Dugald River project),
which is the world’s largest zinc producer, South Africa (Vedanta’s Gamsberg mine)—
announced plans to cut a third of its pro- which together are projected to produce
duction—representing 500,000 tons and 3.5 around 775,000 tons of new supply. Glencore
percent of global mine output— in a bold itself is widely expected to return its major
attempt to solve a supply glut and lift prices zinc mines to full production, but the timing
from a six-year low. This strategy has paid remains uncertain.
off handsomely, as the price of the metal By November 2017, the rapid increase in
used to galvanize steel rose 90 percent and spot prices above futures prices had led to
touched its highest level in a decade by the condition known as backwardization,
October 2017, and the gains continued at which signals strong demand and tightening
least through mid-January 2018 at the time supply. Proactive miners such as Zinc One,
of writing. Other factors also drove this Hecla, Southern Copper, Teck and Vedanta
result, including the loss of two big mines, were all taking steps to increase output and

88 MicroCap Review Magazine

take advantage of a favorable market. specific energy as well as energy density. One Max Porterfield is President and CEO of Callinex
Mines Inc., which is advancing its portfolio of zinc-
Some of the highlights of their strategies: drawback has been the tendency of zinc bat- rich deposits located in established Canadian mining
Zinc One announced plans to revive the teries to grow conductive whiskers known jurisdictions.
past-producing Bongará Zinc Mine project, as “dendrites” inside themselves, which can
Callinex Yahoo Finance Profile:  https://finance.
which was discovered in 1973 and mined by grow long enough to cause short-circuits.
a previous owner employing open-pit meth- As such, the batteries typically die after sev-
Company website: 
ods but subsequently shut down. Hecla has eral cycles—as few as 20—of discharging and
also announced an increase in production of recharging. Max Porterfield is the CEO of Vancouver based
the metal; its Greens Creek and Lucky Friday However, researchers at the U.S. Naval Callinex Mines Inc., which is focused on dis-
covering and developing zinc-mines within pro-
mines have reported large proven and prob- Research Laboratory, in tandem with San lific Canadian mining jurisdictions.   Callinex is
able zinc reserves. Teck produced 620,000 Anselmo, CA-based energy technology firm actively exploring its Nash Creek and Superjack
Projects in advance of an updated resource
tons of zinc in 2016 and expected to ramp up EnZinc, have developed a zinc-based bat- estimate and maiden PEA planned for Q2 2018.
production. Vedanta has also already started tery whose internal structure can suppress
to increase output. Additionally, Callinex is advancing its projects in the
dendrite formation. The zinc anode has a
Flin Flon Mining District of Manitoba which include
Meanwhile, some analysts have voiced porous, sponge-like architecture that helps the Pine Bay and Big Island Projects. These projects
confidence that demand for zinc will increase charge move uniformly across the entire are located within 25 km to an operating process-
ing facility that requires additional ore within four
over the coming year in the U.S. and Europe structure when the battery discharges and years. Mr. Porterfield is a seasoned executive with
as industrial activities in both economies recharges. Zinc oxide forms on the outside more than a decade of experience within natural
continue to gather pace. With zinc prices at a resources and financial markets. Also, at age 33, he is
skin of the sponge, but the inside walls of the
considered one of the youngest CEOs working in the
10-year high, investors are awakening to the sponge remain clean and carry current in mining sector today.
growth potential of key industry players. As a continuously wired structure. Pairing the
Previously, Mr. Porterfield managed investor rela-
demand continues to rise in a post-recession zinc anode with a nickel cathode revealed the tions for two well-respected resource compa-
world, zinc seems more than likely to main- battery could withstand more than 50,000 nies, Brazil Resources Inc. and Uranium Energy
tain its luster. Corp. In addition, Mr. Porterfield was previous-
brief cycles of discharging and recharging,
ly Vice President of Institutional Services at U.S.
similar to how lead-acid batteries are used in Global Investors, a boutique investment manage-
zInC baTTerIes on The a start-stop manner in microhybrid vehicles. ment firm with a longstanding history of exper-
tise in precious metals and natural resources.
roaD? The experiments suggested that a
rechargeable zinc battery could meet the 24 He is a graduate of Texas Tech University with a
Among those watching the industry’s for- bachelor’s degree in business administration.
kilowatt-hour demands of the Nissan Leaf
tunes are electric vehicle (EV) manufactur- in a smaller, lighter package. According to Note: Mr. Porterfield is President, CEO and a Director
ers. Morgan Stanley analysts expect global EnZinc, a zinc-sponge battery would hold of Callinex Mines Inc. and a shareholder. The author
does not own shares or equity or debt interest in any
car sales to rise by 50 percent by 2050 to roughly 60 kilowatt-hours, weigh about 500 other companies mentioned in this article before or
more than 130 million units a year, and esti- pounds and provide a range of some 200 at its publishing.
mates that EVs will account for at least 47 miles. Whereas the lithium-ion battery for a
percent of that total. Traditional lithium-ion Tesla Model 3 will cost around $15,000, the
batteries, the current EV industry standard, zinc battery may be priced as low as $10,000.
have become notorious for safety incidents According to The Guardian, this technology
resulting from overheating, at times bursting could be ready for market by about 2019,
into flames, and even exploding. Not only with another year to gear up production. It
could rechargeable zinc-based batteries store is believed that around 600,000 metric tons
as much energy as their lithium-ion coun- of zinc would be required to produce batter-
terparts; they could also be safer, cheaper, ies for a million electric vehicles, an amount
smaller and lighter, research reported in that can be easily accommodated given cur-
IEEE Spectrum finds. The results suggest rent production rates of the metal.
zinc batteries could find use in EVs and For these exciting reasons and more, zinc
hybrids. remains a commodity to watch in 2018 and
Zinc-based batteries do not pose the same beyond. n
fire risk linked to lithium-ion and could in
principle match or surpass them in terms of MicroCap Review Magazine 89


Welcome to Blockchain *
InTroDuCTIon form of a digital-/virtual-/crypto-currency.
While the general public is just starting to
On January 1, 2017, the price of bitcoin, discover bitcoin, it fails to focus on or rec-
a “virtual currency,”1 hovered at $963.66 ognize the true revolutionary value of its
and the total market cap of virtual curren- underlying technology, blockchain.
cies was approximately $17.7 billion. Fast Indeed, blockchain is considered by
forward just one year later and on January many to be the technology likely to have the
1, 2018 the price of bitcoin jumped to greatest impact globally in the near future,
$13,437.20 with a virtual currency market enabling the move from the internet of infor-
cap of $612.9 billion, an annual growth mation to the internet of value. A blockchain
rate of 1294% and 3356%, respectively.2 is essentially a decentralized and distributed
Undoubtedly, the numbers are more than digital ledger that stores a registry of assets
impressive. However, what is even more and transactions across a peer-to-peer net-
impressive is what is behind the numbers work. The technology combines cryptogra-
- blockchain technology (a.k.a. distributed phy, data storage and peer-to-peer networks
ledger technology) and its potential to dis- with consensus mechanisms creating secure,
rupt the global economy as we know it. verifiable and immutable records in a “trust-
To begin with, it is essential to make less” system that has eliminated the need for
the basic distinction between bitcoin and trusted third-party intermediaries.
blockchain. Bitcoin was developed in 2008 The first major example of blockchain dis-
by someone using the pseudonym Satoshi ruption was in the financial sector with the
Nakamoto, in his or her vision to create a development of a new form of crowd-funding
purely peer-to-peer form of electronic cash. for startups, mainly, through their issuance
Although the concept of blockchain tech- and sale of their own virtual or digital tokens,
nology had been proposed and developed allowing for transactions without the pres-
by others before Nakamoto,3 this innovation ence of intermediaries such as banks. The first
was the first application of blockchain in the such token sale or initial coin offering (“ICO”)
took place in 2013, in which the Mastercoin
1 “FATF Report, Virtual Currencies, Key Foundation sold its tokens in exchange for
Definitions and Potential AML/CFT Risks”
Financial Action Task Force. June 2014, http:// 5,120 bitcoin (BTC), valued at $500,000 at the time.4 A year later, the Ethereum Foundation
potentialaml-cft-risks.pdf 4 Buterin, Vitalik, “Mastercoin: A Second-
Generation Protocol on the Bitcoin Blockchain”
Bitcoin Magazine. November 4, 2013, https://
3 Haber, S. & Stornetta, W.S. J. Cryptology (1991) second-generation-protocol-on-the-bitcoin-
3: 99., Bayer blockchain-1383603310/. See also Hajdarbegovic,
D., Haber S., Stornetta W.S. (1993) Improving Nermin. “Mastercoin Foundation Lets Virtual
the Efficiency and Reliability of Digital Time- Currencies use Bitcoin Protocol”. Coindesk.
Stamping. In: Capocelli R., De Santis A., Vaccaro com. December 6, 2013, https://www.coindesk.
U. (eds) Sequences II. Springer, New York, NY com/mastercoin-foundation-virtual-currencies- bitcoin-protocol/

* The content in this article is offered only as a public service to the web community and does not
constitute solicitation or provision of legal advice and does neither create nor constitute an attorney-client
n BY ALEXANDRA LEVIN relationship. This article should not be used as a substitute for obtaining legal advice from an attorney
KRAMER, ESQ. AND MARINA licensed or authorized to practice in your jurisdiction. You should always consult a suitably qualified
attorney regarding any specific legal problem or matter. You should consult your own tax, legal and
accounting advisors before engaging in any transaction. The comments and opinions expressed in this
article are of the individual authors and may not reflect the opinions of CKR Law LLP.

90 MicroCap Review Magazine

issued 7.4 million tokens, called ether (ETH), United States. Blockchain is a technology and securities law provisions for the issuance of
for 3,700 BTC or $2.3 million within the first even if it is a new one, the types of actions, shares must be considered.
12 hours of its presale5 and a total of $18.4 which are performed by using it, are not. As Application of existing laws
million over 42 days6. Alex Tapscott framed it, “blockchain tech- In 2017, the blockchain market and regu-
However, the true disruption took place nology is going to integrate itself into all the lators started to identify and determine, on
in 2017. In fact, during the first half of 2017, technology that we use today.”10 Therefore, a case-by-case basis, what and how existing
blockchain companies raised $327 million while thinking about the regulatory and regulations apply to this nascent technology.
through token sales, exceeding the $295 mil- legal issues of blockchain technology, it is
lion raised though venture capital funding necessary to make a distinction, like the seC - The Dao reporT12
during the same period.7 Recent reports indi- distinction between bitcoin and blockchain,
cate that in 2017, over $5.6 billion was raised between the actions performed and the The Securities and Exchange Commission
through token sales, as well as an additional underlying technology itself. The focus on (the “SEC”) had been relatively silent on vir-
$1 billion invested directly in blockchain start- virtual currencies such as bitcoin and ether, tual currencies and blockchain since 2014.
ups through more traditional methods, com- which have concerned some because of their On July 25, 2017, the SEC issued a “Report
pared with $240 million raised by token sales potential use for criminal activity, much like of Investigation Pursuant to Section 21(a)
in 2016.8 Whether or not this phenomenon any fiat (traditional) currency, has distracted of the Securities Exchange Act of 1934: The
will continue or will slow down thanks to the public from the transformative potential DAO”13 (the “DAO Report”) as well as an
increased regulation is up for debate. However, of the technology. The focus of regulation investor bulletin14 in which the SEC gave
the innovative technology at the heart of this should be those actions, not the technology guidance on its treatment of blockchain
new industry cannot be ignored. Blockchain that is being used when performing those tokens and ICOs under existing securities
technology has the potential to disrupt every actions. In other words, specific actions per- laws.
industry as it can be programmed to record formed on a blockchain should be regulated The DAO Report “raised questions
virtually anything of value.9 Smart contracts, by the rules and laws similarly applicable for regarding the applicability of the U.S. fed-
digital identity, tokenization, finance, health- the identical actions performed off a block- eral securities laws to the offer and sale of
care, music, supply chains, real estate, govern- chain. Conversely, if an activity off the block- DAO Tokens, including the threshold ques-
ment services, and nearly every aspect of daily chain is not currently regulated, it should tion whether DAO Tokens are securities.”
life will be affected. not be regulated just because it is effectuated Ultimately, the SEC found, based on a “facts
through a blockchain.11 Tax evasion, fraud and circumstances” analysis, that tokens
legal Challenge or money-laundering, whether conducted issued by the DAO (decentralized autono-
on a blockchain or not, are still crimes and mous organization) were investment con-
There is a common, misleading impression regulated as such. tracts and thus securities under Section 2(a)
among both investors and developers that Under this functional approach, the legal (1) of the Securities Act of 1933, as amended
the blockchain industry is unregulated in the challenge today is to determine what exist- (the “Securities Act”) and Section 3(a)(10)
ing laws apply to the new technology in each of the Exchange Act of 1934, as amended.
5 Tanzarian, Armand, “Ethereum Raises 3,700
BTC in First 12 Hours of Ether Presale”. practice area and how. For example, block- The SEC stated that the DAO Tokens passed July 23, 2014, https:// chain applications in the healthcare industry the Howey test, namely that “an investment
btc-in-first-12-hours-of-ether-presale would need to look into existing, healthcare contract is an (a) investment of money (b) in
6 “15 insights on how Ethereum did its ICO in regulations, whereas, in cases where block- a common enterprise (c) with a reasonable
2014”. July 7, 2017, https://
chain technology is used for the issuance expectation of profits (d) to be derived from
ethereum-did-its-ico-in-2014 of shares, relevant, existing corporate and the entrepreneurial or managerial efforts of
10 “Quick Guide to Blockchain: All You Need to
8 Williams-Grut, Oscar, “Only 48% of ICOs Know – Expert Interview with Alex Tapscott.” 12 See also, “SEC Investigates the DAO on its Initial
Were Successful Last Year — But Startups Still YouTube, 17 Jan. 2017, Coin Offering on Blockchain,” https://www.ckrlaw.
Managed to Raise $5.6 Billion” businessinsider. watch?v=CsR2livCdAw com/our-voices/2017/08/08/sec-investigates-the-
com. January 31, 2018, http://www.
11 The Disrupter Series: Digital Currency and dao-on-its-initial-coin-offering-on-blockchain/
Blockchain Technology: Hearing before the
tokendata-2017-2018-1 13 “Report of Investigation Pursuant to Section
Subcommittee on Commerce, Manufacturing,
21(a) of the Securities Exchange Act of 1934: The
9 Tapscott, Don and Alex Tapscott, “What’s the and Trade of the Committee on Energy and
DAO,” Release No. 81207/July 25, 2017, https://
Next-Generetion Internet? Surprise: It’s All Commerce, House of Representatives, One
About the Blockchain!” Blockchain Revolution. Hundred Fourteenth Congress, second session,
July 1, 2016, http://blockchain-revolution. 1 (Washington, 2016), found at https://www.gpo. 14
com/2016/07/01/whats-next-generation-internet- gov/fdsys/pkg/CHRG-114hhrg20322/pdf/CHRG- news-alerts/alerts-bulletins/investor-bulletin-
surprise-blockchain-2/ 114hhrg20322.pdf initial-coin-offerings MicroCap Review Magazine 91

others.”15 Accordingly, the SEC advised those rities are regulated and that is the case whether In fact, from December 2017, the CFTC
who are planning to raise capital through conducted traditionally or on a blockchain. approved bitcoin futures trading for CFE
blockchain-enabled means “to take appro- Indeed, as it will be discussed further below, and CME and bitcoin swaps for Cantor
priate steps to ensure compliance with the a number of legal actions were filed based on Exchange indicating the potential and via-
U.S. federal securities laws.”16 Notably, the allegations of unregistered securities offerings. bility of virtual currencies investments.22
SEC chose not to take further enforcement Among others, a noted case is the Munchee Additionally, the CFTC proposed rules con-
action against The DAO or its founders, ICO, which was halted on its second day by the cerning the definition of “actual delivery” In the DAO Report, the SEC found SEC after its determination, based on a “facts with respect to commodity transactions
that specifically the DAO Tokens, not neces- and circumstances” analysis, that the Munchee involving virtual currencies.23 Under the
sarily all tokens, were securities and con- tokens constitute “investment contracts.”19 CEA, retail commodity transactions fall
cluded that federal securities laws “apply to Again, the SEC chose to take no further action under the CFTC’s direct oversight author-
those who offer and sell securities in the after the Munchee founders refunded all capi- ity “as if ” they were commodity futures.
United States, regardless whether the issuing tal raised to the token purchasers. Following An exception exists for contracts that result
entity is a traditional company or a decen- that case, SEC Chairman Clayton issued a in “actual delivery” within 28 days from
tralized autonomous organization, regard- statement clarifying that despite attempts by the transaction.24 Thus, the CFTC set the
less whether those securities are purchased startups to avoid classification of their tokens boundaries of its own authority determin-
using U.S. dollars or virtual currencies, and as securities, “[m]erely calling a token a ‘util- ing when virtual currency transactions fall
regardless whether they are distributed in ity’ token or structuring it to provide some under its oversight and when they don’t,
certificated form or through distributed led- utility does not prevent the token from being thereby confirming that virtual currencies
ger technology.”17 In a later statement in a security.”20 This position illustrates this func- are regulated.
November 2017, SEC Chairman Jay Clayton tional regulatory approach, where tokens that
was quoted as saying “I have yet to see an incorporate functions of a security will be con- fInCen
ICO that doesn’t have a sufficient number of sidered a security and, even if they can offer
hallmarks of a security,”18 though this should some utility as well, they will still be subject to In 2013, The Treasury Department’s
not imply that he has reviewed all ICOs or securities regulations. Financial Crimes Enforcement Network
that all tokens are in fact securities. The (the “FinCEN”) issued interpretive guid-
DAO Report intentionally limited its review CfTC ance clarifying the applicability of the Bank
to the DAO tokens, and did not identify all Secrecy Act (the “BSA”) “to persons creating,
tokens as securities. As a result, many startup As early as 2015, the Commodity Futures obtaining, distributing, exchanging, accept-
founders hoped to fall into the illusive non- Trading Commission (the “CFTC”) found ing, or transmitting virtual currencies.”25 As
security category of “utility” tokens, without that based on the Commodity Exchange it states, “[t]he definition of a money trans-
having a clear vision from the SEC of exactly Act’s (the “CEA”) broad definition of “com- mitter does not differentiate between real
what such a utility token would look like. modity,” bitcoin and other virtual currencies currencies and convertible virtual curren-
Hence, the position taken by the SEC in are properly defined as commodities. As a cies. Accepting and transmitting anything
the DAO Report, in its first investigation of result, the CFTC establishes its jurisdiction of value that substitutes for currency makes
an ICO, as well as in its further enforcement over derivative contracts of virtual curren- a person a money transmitter under the
actions and statements since, clearly indicates cies as well as cases of fraud or manipulation
that the blockchain industry is regulated in the in virtual currency transactions as they are
United States. How could a regulator enforce both regulated under CEA. 21 22 See also, “Blockchain & the Law: 12/01/17
actions based on regulations if the practices blog/2017/12/08/blockchain-and-the-law-
are not regulated? Offerings and sales of secu- 19 See also, “SEC Chairmain Issues Statement
on Cryptocurrencies and SEC Halts Munchee 23 See also, “Blockchain & the Law: 12/15/17
Token Sale,” Update,”
15 SEC v. W.J. Howey Co., 328 U.S. 293, 301 (1946),
voices/2017/12/14/sec-chairman-issues- blog/2017/12/19/law-and-blockchain-update/.
as further developed in United Housing Found.,
Inc. v. Forman, 421 U.S. 837, 852-53 (1975) and 24 “CFTC Issues Proposed Interpretation on
SEC v. Edwards, 540 U.S. 389, 393 (2004). Virtual Currency ‘Actual Delivery’ in Retail
20 “Statement on Cryptocurrencies and Initial Coin Transactions,” Release: pr7664-17/December
16 Supra note 7, at 2.
Offerings,” 15, 2017,
17 Id. at 18. statement/statement-clayton-2017-12-11#_ftn6. PressReleases/pr7664-17.
18 Michaels, Dave and Paul Vigna. “SEC Chief 21 See also, “Virtual Currencies and Token 25 “Application of FinCEN’s Regulations to Persons
Fires Warning Shot Against Coin Offerings”. The Sales In The Eyes Of The Regulators, U.S.A.- Administering, Exchanging, or Using Virutal
Wall Street Journal November 9, 2017, https:// CFTC,” Currencies,” blog/2017/11/21/virtual-currencies-token-sales- statutes-regulations/guidance/application-
shot-against-coin-offerings-1510247148 in-eyes-of-regulators/ fincens-regulations-persons-administering.

92 MicroCap Review Magazine

regulations implementing the BSA.”26 Once
again, this position shows the applicability
of already existing regulations based on the
particular practice performed.
Indeed, following up, on July 26, 2017,
FinCEN assessed civil monetary penalties
of $110,003,314 against Canton Business
Corporation (BTC-e) and of $12,000,000
against Alexander Vinnik, for violations
of the BSA and relevant regulations.27
Additionally, a 21-count indictment was
issued against Vinnik, who was arrested in
Greece.28 The indictment contained allega-
tions of an international money laundering
scheme, operation of an unlicensed money sell, send, or receive) in any one year during oversight for virtual currencies under the
business and related crimes.29 the years 2013-2015. 31 U.S. law, the different bodies work together
and each one has oversight of specific areas
Irs a mulTIfaCeTeD regulaTIon based on the activity being investigated.
Hence, the SEC focuses on ICOs, FinCEN
The tax treatment of virtual currencies There is no uniformity among U.S. regula- on money transmission and laundering, the
is crucial as well. In 2014, the Internal tors as to how to treat virtual currencies or IRS on tax treatment, the CFTC monitoring
Revenue Service (the “IRS”) issued a notice ICO tokens. The SEC might treat, under derivative markets; all accompanied by indi-
specifying that “[f]or federal tax purposes, certain facts and circumstances, some virtual vidual State33 banking and securities regula-
virtual currency is treated as property.”30 currencies as securities, the CFTC considers tors collaborating to frame U.S. regulation of
This implies that if a virtual currency them commodities and the IRS treats them virtual currencies.34 It should be expected,
appreciates from the time of acquisition, as property. It should be noted that, based though, that, as the practices and functions
the gain is taxable. on each specific characterization, a certain performed with virtual currencies expand,
However, despite the development of vir- agency will establish oversight authority. other, relevant regulatory bodies may also
tual currencies and the expansion of their For example, as a commodity, the CFTC join this regulatory scheme.
use, the IRS did not offer more specific has jurisdiction in virtual currency future
guidance but rather suggested its direction markets, but, where it is determined to be rIsks
through its enforcement actions. For exam- a security too, SEC rules will apply as well.
ple, the IRS issued a John Doe summons This could create a conflict amongst differ- In 2017, the industry saw the dramatic rise
against Coinbase, Inc., a major virtual cur- ent government bodies. of ICOs as well as the beginning of enforce-
rency exchange with over 10 million cus- However, the CFTC in its “CFTC ment actions against them. On October
tomers, seeking access to all user records for Backgrounder on Oversight of and Approach 25, 2017, the first class action lawsuit was
the period 2013-2015 in order to investigate to Virtual Currency Futures Markers,”32 pub- filed against Tezos, which is considered to
suspected tax evasion on bitcoin related lished on January 4, 2108, established a be, at the moment, the second largest ICO
gains. Ultimately, the IRS was granted access “multifaceted, multi-regulatory approach.” having raised $232 million. The complaint
to accounts with at least the equivalent of Accordingly, as there is no direct, Federal alleged violations of securities laws by offer-
$20,000 in any one transaction type (buy, 31 See also, “Minor Victory, Minor Defeat: IRS’s ing unregistered securities for sale as well
26 Ibid. Attempt to Seek Identities of Taxpayers Engaged as fraud, misrepresentations and violations
in Cryptocurrency Transactions,” https://
27 of false advertising and unfair competition
enforcement_action/2017-07-27/Assessment%20 seeks-identities-of-taxpayers-cryptocurrency-
for%20BTCeVinnik%20FINAL2.pdf. transactions/.
33 It should be noted that several individual States,
28 32 “CFTC Backgrounder on Oversight of and
such as Wyoming, Delaware, Nevada, Arizona,
fincen-fines-btc-e-virtual-currency-exchange- Approach to Virtual Currency Futures Markets,”
Vermont and New Hampshire have taken
the lead on legislating to support blockchain
29 innovation. It remains to be seen what effect, if
virtualcurrency01.pdf. See also, “U.S.A. –
national-and-bitcoin-exchange-charged-21- any, they shall have on Congress at the Federal
Blockchain & the Law: 01/05/18 Update,” https://
count-indictment-operating-alleged. level.
30 usa-blockchain-law-jan5-2018/. 34 Ibid. MicroCap Review Magazine 93

system36 and were more capable of under-
standing the potential of the technology
were the first who started investing in the
blockchain industry. They flocked to par-
ticipate in the evolution and popularity of
this new model of capital raising bypassing
traditional methods. Indeed, according to a
Blockchain Capital survey in the fall of 2017,
30% of millennials prefer $1,000 of bitcoin
over $1,000 of government bonds and 27%
of them think that bitcoin is more trustwor-
thy than big banks.37 As the industry devel-
oped, eventually high net worth individuals,
family offices and multi-family offices began
to slowly enter the space. Around 2016, the
first hedge funds started including bitcoin
in their portfolios and thus “crypto-funds”
were launched. By the end of October 2017,
laws.35 Since then, a number of private legal speculation and the extreme price volatil- according to the financial research firm
actions have been initiated against com- ity create a greater risk of losing all value Autonomous, more than 120 hedge funds,
panies that have done ICOs alleging, for in the case of investment. Moreover, the which had under their management about
the most part, the unlawful offering and technology itself presents security and pri- $2.3 billion in total assets, were investing in
sale of unregistered securities, fraud and vacy risks. In fact, there have been cases, bitcoin and digital currencies.38 However, the
relevant misconduct. These numerous, and where errors by programmers in the code high volatility and risks as well as the lack of
continuous actions indicate that participants have permitted attackers to hack into ICOs operational history did not meet the strict
in several ICOs may have been harmed by and steal large amounts of assets and funds. requirements of more established institu-
misconduct and intentional fraud. Finally, as claimed in various lawsuits, the tions and, therefore, large mutual funds,
There is no doubt that an investment in industry is vulnerable to fraudulent invest- pension plans, insurance companies and
virtual currencies and ICOs may be highly ment schemes and scams. university endowments have not yet entered
risky. Government officials globally often into crypto-investments.
warn token buyers about the risks and InvesTors’ eCosysTem Currently, digital currency and blockchain
advise caution. While one cannot argue that enthusiasts are growing exponentially every
token sales are unregulated in the United These risks are somewhat ignored in the day. 2018 is predicted to be the year when
States, it is true that there is an uncertainty minds of many token buyers due to the bad institutions enter the industry. In fact, tak-
concerning the regulatory regime and par- aftertaste left behind by many individuals ing into account the appreciation of the
ticularly the way that existing laws will be who suffered in the financial crisis of 2008, virtual currency market and the growing
applied to the new technology. This creates which crippled the confidence of sections of clarify of regulations, the market is becom-
challenges for both startup founders and the public in the financial markets and their ing more mature creating an environment
software developers as well as for investors, regulators as well as by others who feel that in which institutions are more likely to
token buyers as the former do not know they have no real access to financial markets enter. Many institutions are more likely to
exactly what provisions and requirements and investments. It is also possible, that due
36 “Bitcoin latest: Third of millennials will be
they need to fulfil and comply with while to the complexity of this new technology, invested in the cryptocurrency in 2018,” http://
the latter cannot identify the compliant few can actually comprehend and appreciate news/bitcoin-latest-news-millennials-
token sales nor understand their rights as the real risks involved in investing in ICOs cryptocurrency-investment-2018-london-block-
token owners. The complexity of the tech- that are often led by a small team of software
37 “Blockchain Capital Bitcoin Survey Fall 2017,”
nology and the ignorance around it make developers who may not have any experience
this even more difficult. Additionally, the in the underlying industry nor much of a 38 “There are now more than 120 hedge funds
viable business model. focused solely on bitcoin, digital currencies,”
35 See also, “Tezos Faces Legal Action,” https:// Millennials, who felt left behind by the old now-more-than-120-hedge-funds-focused-solely-
tezos-faces-legal-action/. on-bitcoin.html.

94 MicroCap Review Magazine

ent conflict. As has been discussed, securities
Currently, digital currency and blockchain laws will apply in ICOs where, in effect, the
tokens function as securities. However, this
enthusiasts are growing exponentially every day. does not prohibit the enactment of specific

2018 is predicted to be the year when institutions exceptions that would permit, for example, a
larger number of non-accredited investors in
enter the industry. the early stages of a token sale following the
principles of a shared economy. Or Congress
could adopt similar legislation as in the state
of Wyoming where for the first time in the
invest in a market of around $700 billion IPO, would provide. However, in reality, the U.S., a clear definition of, and framework
compared to one with just a few billion tokens are often sold at a discount during the for, true utility tokens was recently signed
market cap. Additionally, the introduction of early stages of the ICO and therefore, by lim- into law.41
futures contracts at the end of 2017 signaled iting the ICO only to accredited investors, Undoubtedly, blockchain technology has
an increasing acceptance of virtual curren- others who do not qualify as such lose the the potential to change the world, creating a
cies making it easier for institutions to start opportunity to participate in the early stage new era of a digital life. However, it is impor-
investing. and benefit from lower prices. Thus the very tant to remember its founding principles
people who the blockchain philosophy is of democratizing the system, distributing
Do noT forgeT The orIgInal meant to include and empower, are actually power and enabling everyone to participate.
purpose left behind because of regulation. Because that is the way the change will work
In this context, the “Fair Investment towards a better world with a true impact on
However, as the market develops, it seems Opportunity for Professional Experts Act” society. n
that the technology has lost its way to a cer- could have been a balanced solution. The
tain degree. The philosophy of blockchain goal of this bill was to require the SEC to Alexandra Levin Kramer is the founding chair of the
Blockchain Technology & Digital Currency practice
and decentralization was intended to democ- amend Section 2(a)(15) of the Securities
group of CKR Law LLP, where Marina Fyrigou-
ratize the internet and empower everyone to Act to revise the definition of “accredited
Koulouri is an associate. CKR Law LLP is a global
participate in the markets. However, today investors”, specifically the criteria of natural firm of experienced lawyers with diverse internation-
the observed trend is quite the opposite. persons as accredited investors, and expand al practices. It has over 50 locations and 300 attor-
Taking for example the case of the ICO; the relevant definition by including per- neys. CKR Law’s Blockchain Technology & Digital
there is an inherent conflict between the sons who are “licensed or registered as a Currency practice group includes over 40 attorneys
world-wide and provides clients with sophisticated
purpose of creating a shared economy for broker or investment adviser” as well as
and knowledgeable legal advice in underlying legal
anyone to join versus the sovereign interest persons who have been determined “to have
specialties such as securities, real estate, intellectual
to protect the public. As has been discussed, demonstrable education or job experience to property, banking, finance, corporate, investment
there is an extremely high risk in participat- qualify such person as having professional funds, employment and litigation. For more informa-
ing in ICOs. In order to comply with US knowledge of a subject related to a particular tion, please visit or email questions
securities law, startups are either exclud- investment, and whose education or job to

ing all US Persons in their ICO or relying experience is verified.”39 The bill was intro- 41 Wolfson, Rachel. “U.S. State Of Wyoming
Defines Cryptocurrency ‘Utility Tokens’ As New
on exemptions from registration such as duced on April 30, 2015 and was passed by Asset Class.” Forbes March 13, 2018, https://www.
Regulations D of the Securities Act where the House of Representatives on February 1, state-of-wyoming-defines-cryptocurrency-utility-
token purchasers are limited to “accredited 2016. However, it died as it was never passed tokens-as-new-asset-class/#1f511bf44816
investors” (whose criteria is usually based by the Senate.40
on income or net worth, i.e. sophistication), Alternatively, introducing some exemp-
thereby excluding individuals with lower tions in securities laws for virtual currencies
incomes (as per the SEC’s agenda to protect or tokens could also help balance this inher-
“unsophisticated” investors), who may be 39 “H.R. 2187 (114th): Fair Investment
Opportunities for Professional Experts Act,”
more likely to make poor investment deci- TEXT,
sions and in turn incur financial losses, and bills/114/hr2187/text.
therefore require the additional disclosure 40 “H.R. 2187 (114th): Fair Investment
Opportunities for Professional Experts Act,”
that full registration with the SEC, like an OVERVIEW,
bills/114/hr2187 MicroCap Review Magazine 95


Oil Market 2018,

What to Look For?
2 017 ended up on a positive note for the overall Oil industry and
as we start the New Year all indexes are showing a continuation
of an upward trend.
Oil prices continued to climb to fresh three- output by 290,000 barrels a day in the first policy tightening. A weaker U.S. currency
year highs these early days of 2018, boosted week of January. Total stockpiles of com- makes dollar-traded oil less expensive for
by declining U.S. crude stockpiles and ongo- mercial crude and petroleum fell 5.5 mil- foreign buyers, and so its price tends to rise
ing geopolitical risk. lion barrels, dropping to the lowest level as the dollar falls.
Still, prices resumed their upward trajec- since June 2015. U.S. crude futures settled at A confluence of events has contributed
tory, as investors focused on a drop in the $64.30 a barrel on the New York Mercantile to the new year rally: a steadily expanding
amount of oil at the main storage hub in Exchange. Brent at $69.87 a barrel on ICE U.S. economy as many countries around
Oklahoma and a decline in U.S. oil produc- Futures Europe. the world are also growing, the expectation
tion. U.S. producers slowed down, cutting Prices have climbed more than 50% since companies will continue to report big gains
June2017, and both benchmarks have post- in earnings and the passage of a broad tax
ed gains for four straight weeks, propelled overhaul that is expected to bolster profits
by geopolitical tensions, supply disruptions even further.
and production cuts by the Organization Shares of energy firms were among the
of the Petroleum Exporting Countries. biggest movers so far with those compa-
More recently, prices have been boosted nies in the S&P 500 climbing 2%. Energy
by extremely cold weather in the U.S. and stocks in the broad index have gained 6.2%—
China, along with questions about whether the best of any other sector—to start 2018,
the Trump administration would reinstate extending a late-year rally that has coincided
some sanctions on Iran. The Administration with a rise in oil prices. The surge is a major
to extend the nuclear deal but impose new reversal for energy stocks, which were the
Sanctions was well received by the Market second-worst-performing sector of the S&P
and Oil continued to go up. 500 last year. Chevron added $3.91, or 3%, to
Analysts who until now predicted a price $132.57, putting it among the Dow’s biggest
in the low to mid $60 per barrel are now sug- point contributors, while Hess rose 1.72, or
gesting that U.S. crude prices could hit $70 a 3.2%, to 54.72.
barrel soon and reach even higher, with few Energy stocks could get an added boost in
willing to stand in the way of relentlessly ris- the coming weeks, as those companies in the
ing prices. S&P 500 are expected to more than double
A weaker U.S. dollar has also helped lift their fourth-quarter earnings from the year-
oil prices. The ICE Dollar Index sank to its earlier period, according to several estimates,
lowest level in more than three years in early the best of any other sector.
January driven by expectations of monetary- In its monthly short-term energy outlook,

96 MicroCap Review Magazine

the EIA increased its estimate for world Energy stocks could get an added boost in the
oil demand growth by 100,000 barrels a
day while it boosted its forecast for supply coming weeks, as those companies in the S&P 500
outside the Organization of the Petroleum
Exporting Countries by 300,000 barrels a are expected to more than double their fourth-
day—mainly the result of U.S. shale produc-
quarter earnings from the year-earlier period,
The agency now expects U.S. crude pro- according to several estimates, the best of any other
duction to increase to 10.3 million barrels a
day this year, up from a previous estimate of sector.
10 million barrels a day.

posITIve polITICal ClImaTe on above $60 per barrel, at a time when US second half of 2018, could generate about $1
shale production is surging, and global crude billion in fees for bankers and in excess of
The Trump administration has proposed inventories are expected to rise, testifies to $100 billion for the Kingdom.
opening up nearly all the country’s offshore Opec’s enduring clout. It has only been able 2018 will certainly bring us a lot of sur-
areas for oil and gas drilling, a move that to be this effective in its strategy of produc- prises, lets watch the month of April & May
would affect every coastal state, and has pro- tion restraint, however, because it has allies, with a new formal Meeting of OPEC and
voked fierce debate in the oil industry. above all Russia. The good understand- the Trump Administration decision on the
Under the plan announced by Interior ing between Khalid al Falih and Alexander Iran deal. n
Secretary Ryan Zinke, the government Novak, energy ministers of Saudi Arabia
I wrote this article myself in reviewing public disclo-
would offer for sale the largest number of and Russia respectively, has been one of the sures, and it expresses my own opinions. I am not
oil and gas leases in U.S. history starting late more unlikely alliances of the year: their receiving compensation for it. I have no business rela-
tionship with any company whose stock is mentioned
next year. The department also proposed countries have long been strategic rivals. in this article. Please be aware of the risks associated in
reversing drilling-safety rules implemented But in the face of the common threat from investing in any of these stocks and this Article should
not be considered as an invitation to purchase any of
after the 2010 Deepwater Horizon accident, low oil prices, i.e US Shale producers, they
these stocks.
which killed 11 workers on the drilling rig have been remarkably effective in maintain-
and caused a massive oil spill. ing a more-or-less united front in assessing Frederic Scheer is CEO of L6NRG, LLC & L6NRG
MONTANA I, LP an oil and gas mineral and roy-
The U.S. government hasn’t sold leases the problem in the market and agreeing alty Delaware limited partnership based in Bozeman,
for oil drilling off of the Atlantic and Pacific the action needed to fix it. The relationship Montana. L6NRG MONTANA I, LP is managed by
L6NRG, LLC. a Montana Limited Liability company,
coasts in more than 33 years, so the proposal can be expected to become more difficult
engaged in the business of oil and gas exploration
is meeting broad opposition, including from this year: Russian oil producers are eager and production of oil and natural gas properties
environmental groups. Opponents fear a to increase production. If the International primarily in the Bakken and Three Forks forma-
tions within the Williston Basin in North Dakota,
threat to economic activity, including tour- Energy Agency is right about world oil Montana and in Wyoming. He is also the CEO of
ism. production exceeding consumption in the Libra6 Management, Corp, a small private equity
company operating in new alternative technology,
In addition, the Tax Reform Act included first half of the year, as US output booms,
media and chemicals. Scheer was the Ceo of several
the famous (or infamous) ANWAR legisla- there will be renewed questions about Opec’s public companies including Cereplast a biomateri-
tion which allow Oil company to drill in strategy. For now, though, the cartel can look al company, the Cannon Group, an entertainment
company and Imperials Hotels a hotel management
the Artic region. Clearly the Administration back on 2017 as an effective year.
has launched a very clear signal that it is Another interesting development to watch
pro-business and especially pro US Oil pro- in 2018 is the mega IPO being prepared Note: This article is not an attempt to provide invest-
ment advice. The content is purely the author’s per-
ducers. by Aramco. It seems that the project is sonal opinions and should not be considered advice
being pursued full speed as Saudi Arabia has of any kind. Investors are advised to conduct their
own research or seek the advice of a registered invest-
overseas, InDICaTors are recently changed the status of its national oil
ment professional.
green giant Saudi Aramco to a joint-stock compa-
ny as of Jan. 1. This is a key step for an initial
OPEC proved in 2017 that it can still exert public offering planned for later this year.
some influence over the oil market, at least Analysts estimate the sale of up to 5 percent
for a while. The fact that Brent is hanging of Saudi Aramco, expected to go ahead in the MicroCap Review Magazine 97


How Macroeconomic News

Impacts MicroCap Stocks
Interview with Charles V. Payne
Robert Kraft: Here we go. This is Robert was interesting. It was tough. It was, but it
Transcription of Kraft and I’m your host on the Planet wasn’t what I thought particularly back then.
MicroCap Podcast. And with me today is the I always sort of romanticized it being, you
interview on the Planet host of “Making Money with Charles Payne.” know, you go home. You do a lot of work.
Charles welcome to the Planet MicroCap You find great investments for your clients.
MicroCap Podcast, Podcast. But instead it was sort of, you know, you go
Charles Payne: Thank you very much. to work and whatever this is the stock does
Episode 62, with Nice to be here. your is that’s what you pitched to your client.
So I was always sort of disenchanted with it.
Robert Kraft Robert Kraft: It’s great to have you on and And at some point I decided to sort of merge
thank you so much for joining me. I know both of them. My knowledge of the faulty
you are incredibly busy so, with that let’s get research and on Wall Street and some of the,
right to it. To start off as I do with all my some of the real serious issues that have been
interviews on here, you know, what is your addressed over the years to a degree, and my
background? love for research and I started Wall Street
Charles Payne: Well how far back you Strategy. So we’re gone in about 30 years
want me go? [00:02:00].
Robert Kraft: As far back as you want. Robert Kraft: So what was it that really got
Charles Payne: Well my background going you into the stock market? Because, you
all the way back is I was an army brat until I know, you think to yourself I’m going to
was 12 years old and then I lived in Harlem, make money and, you know, some people
USA. Which is where I initially got the idea will go and get a job. But, you know, what
I wanted to be in a stock market because we about the stock market really drew you in?
went from having everything to having noth- Charles Payne: Well we went from having
ing. And being the oldest I was motivated to, a lot and living in a two-story house and had
to go out and try to help the family out. So I my own room, ride our bikes all day, never
equated wealth with Wall Street and the stock locked our doors, play all day, come home,
market, started reading a journal about my make a peanut butter and jelly sandwich, and
first mutual fund when I was 17. My mom go back and play again, to moving to per-
co-signed and I bought my first stock when haps one of the most, well certainly was the
I was 18. So you can say I was hooked in an poorest and most violent neighborhood in
early age. I went to the airport so I can go to America in the early 1970s. So I never knew
college and when I got out I started working that you could actually live in a place that
at EF Hutton on the research side which I didn’t have heat or hot water. I didn’t know
love, absolutely loved. The only problem is we could go through a whole winter without
there was no money. So I went to the read that. I didn’t know, I never knew about the
to the brokerage side and the brokerage side kind of poverty that existed out there and

98 MicroCap Review Magazine

we landed smack dab in the middle of it. So
I never thought about money a single day I love the fact that the guy who started was a
in my life and then I became obsessed with
it. And I did whatever I had to do. I would maverick and he was going against one of the
clean windshields and stoplights with paper
biggest companies in the world. One of the most
towel and Windex and shovel storefronts
during wintertime. But that’s when I became established and biggest companies in the world and
intrigued by it. And then I became even
more intrigued by the different individual he was making it happen.
stories, particularly start-up companies. My
first stock I bought in fact was MCI and
it was started by a guy who was using TV
antennas off of people’s house, off the roofs all economy. Once I’ve determined what I broader view [00:06:00] I start at the top of
of people’s houses and as his network. It was, like where I like it for instance a consumer the income statement, work my way down,
he was going to go against AT&T with this discretionary I like a lot I think the death and then I look at valuation, historical valu-
thing. It was an amazing story, and it was an to the consumer was, was certainly exag- ation and where the company is and I look
amazing stock for a long time. gerated. We, we just had a period of 20 at its peers. I love companies that are taking
Robert Kraft: So I take it that your first real, years where we built too many malls and market share. And I love companies that are
you know, step in to the stock market was in while there will be some, you know, some expanding their margin. So I always say if
microcaps then? different things happening with brick-and- margins are expanding, you know, out side-
Charles Payne: It was a low price stock. mortar. This is this sort of notion it was they ways then a stock should go higher.
I’m not sure how much it was but it was cer- were all dead. Created a lot of opportuni-
tainly a startup. It wasn’t, it was a brand new ties. So I looked from that area and then I Robert Kraft: So you brought up a key
company. I love the fact that the guy who drilled down into an industry from there I phrase also that we haven’t really covered yet
started was a maverick and he was going determined the valuation by doing peer to on the podcast and that’s pricing power, you
against one of the biggest companies in the peer reviews. I look at maybe four or five know. I feel like that’s a really key indicator
world. One of the most established and names in that particular space. And what that you’d want to look at, you know, for, for
biggest companies in the world and he was I like more than anything else is pricing those who don’t know what, what exactly is
making it happen. So I said I like this, you power. Without, without giving up any sort that and where would they go and look for
know. And like that was where I put my first of volume. The best example that would be to see if a company has that advantage to it?
thousand dollar investment. Apple. Yeah, Apple, even in the last earnings Charles Payne: Well it’s hard. You got
support that was considered a disappoint- to do a lot of work and you can Google this
Robert Kraft: So you know another ques- ment saw the average price of their iPhones stuff and get an article here, article there,
tion that I had is, is what is your investing go up 100 bucks year-over-year. And while but for me I just do old-fashioned number
strategy, you know, when, when you’re con- they don’t break out which phone sold how crunching calculator, I get it out and like I
sidering a new potential investment? many, you know, units it was pretty obvious said, it’s almost every company will give you
Charles Payne: I usually, I look, I’m usu- that their most expensive phone was selling just a lot that you need with their filings,
ally [00:04:00] I began sort of with a high like hotcakes. And they didn’t lose market with their Securities and Exchange filings.
view you know you could call it 10,000 feet share. That’s the ultimate one-two punch. And you get in there and you just sort of
view of the world. And then I started to From there you look at margins. I want to crunch the numbers and take the available
drill down and when I’m when I’m often make sure companies aren’t scrimping up. information. Now some companies will tell
looking at our conditions, overall economic It’s a tech company or medical company, I you right in there, for instance, when they
conditions and drivers. So I’m researching want to make sure they don’t hit the bottom release their earnings, we took market share
things that a lot of people don’t, you know, line by cheating themselves on research and this quarter, that makes it easier. But, you
like Class VIII truck orders or the, the util- development. It was a retail company I want know, for the most part you got to sort of do
ity rates for, to rent construction equipment, to look at the balance sheet. I want to make the work yourself. So you have four com-
Caterpillars retail sales. And I’m looking at sure inventories I’m building. If it’s a home panies in a certain industry and three are
those kind of things all the time. And, and builder there’s almost every industry has its growing at 20% but one is growing to 30%,
for ideas, not just on investing but the over- own little idiosyncrasies. So from, from a you know, more than likely they are taking MicroCap Review Magazine 99

market share particularly if they haven’t Charles Payne: My handy Espresso Charles Payne: I think the news affects
discounted the product. So those kinds of machine right there. Now I would offer you MicroCaps and I would add that the greater
things are reverse engineered also. a cup but I don’t clean it too often so not a sphere of entrepreneurship in a sense is that
one get accused of you know but I’ve not got it either casts a feeling of optimism or feeling
Robert Kraft: When you have the time to a lot of Espressos and but I’m always excited of pessimism. And unfortunately overall the
do all this number crunching that? to it the work itself is pretty energizing. news really, really goes so far into spreading
Charles Payne: All day long. That’s pessimism. Now I know that they say that
all I do all day. You should see what I did Robert Kraft: So another question I had the, you know, the train wrecks and that’s
today. I did a, I’m working on a piece now too is regarding your work over Wall Street what you put on a cover of a newspaper. But
on Trumponomics – and I’m working, look- Strategies, you know. I think part of one of when a stock market goes up eight trillion
ing at Ronald Reagan’s and Barack Obama. your offerings is that you help individuals dollars when it went into values enhanced 8
Because they both have to use a lot of deficit with their portfolio construction, you know. trillion dollars in a media never talks about
spending to try to correct the economies that Do you have any tips and tricks on the, on, it. But then it has a rough week and it’s num-
they inherited. And in one economy, the one you know, how you would construct your ber one story market and underscores what
on the Reagan grew almost to 4% annually. own portfolio? I mean. So now you’ve scared a whole lot of
The one under Obama only grew 2%. So Charles Payne: Well yeah the bottom line people out of perhaps being investors in the
there’s a distinction as to why this happened is it goes back to sort of the macro view. So market. But never once encouraged them or
and because a big thing is [00:08:00] we’re right now coming into 2018 I love consumer at least pointed to the good things that were
going to have a new budget, I guess, even- discretionary. So I would be overweight happening. Bad news sells, I know that.
tually. Certainly a new form of governing consumer discretionary. Let’s say I had But I think it also does a major disservice to
for the next several years and I’m thinking 10,000 bucks. I would probably have 2000 of these areas where you need smaller, whether
Trumponomics is going to be close to what that in consumer discretionary, 2000 materi- small cap companies, micro cap companies
Reagan did. But with a few twists but will als and 2000 in industrials. And then there or even small would-be investors. Even the
would be successful? Obviously I’m a fiscal and maybe 2000 in technology. So that tinkerer, the person that may have the next
conservative. I would love to see him cut doesn’t leave me a lot of money because I’m great mousetrap you need an environment
spending. The political reality is that’s not going to keep some in cash and then the rest where they feel like okay I feel like it’s okay
going to happen for a long time. No one will might be in some other areas. So I again I for me to quit my job and do this and give it a
touch Social Security, not even amend it or construct a portfolio based on where I think shot for a year. We don’t, we haven’t had that
Medicare. So dealing in that reality, if we the best opportunities in growth will be sort of environment. I’m hoping that we get
do have deficit spending, how can it be most [00:10:00] generally over the next three to six it because I think the media is doing, doing
effective? And, you know, one of the ways, months and try to balance it that way. America disservice overall.
of course, is cutting regulations and things
like that. So but that’s, you know, I’ve got Robert Kraft: So another question I had is, Robert Kraft: What would you say, you
like four pages to go already on I mean I’ve you know, with your show here at Fox you know, also from let’s say the retail microcap
already written four pages and crunched all get to see how the news affects the market perspective. I’ve done a few interviews with,
the numbers on that. So day and night that’s on a day-to-day minute-by-minute basis. with people that say you know I don’t even
all I’m doing is crunching numbers. In your opinion and I know we could do watch the, you know, [00:12:00] what the
one podcast just on this question alone but, Dow Jones does on a daily basis and, you
Robert Kraft: I just want to make sure you know, how does macro news potentially know, I just try and pay attention to the fun-
you’re properly caffeinated that’s all I could... affect the MicroCap space? damentals, you know. What would you tell
a retail investor that focuses in that sense?
Charles Payne: Well that’s good. That’s
I think the news affects MicroCaps and I would add what I focus on the fundamentals. So if you
can do that, good. If you can read the news-
that the greater sphere of entrepreneurship in a papers and, and know that how to eliminate
sense is that it either casts a feeling of optimism or the voice of the author or focus strictly
on the facts that’s okay. Same thing with
feeling of pessimism. watching news. If you say to yourself, Hey
I’ll watch different news and you probably

100 MicroCap Review Magazine

should, you know, look at different things
and, and do a little channel surfing just for I joke around on Elon Musk. Tesla had this new
balance. But, but the fact is is that and you
can do that if you can block out the noise I electronic truck and you know they are starting to
think that’s a great gift to be quite frank with
get some orders. But there was a retail department
you because it’s, it’s just going to have you,
you know, it’s just going to drive you nuts store that ordered three electronic trucks in 1900.
day-to-day. And, and all of it all it does is
create uncertainty and uncertainty is not the So it’s, you know, there’s very few things that are
proper backdrop for the success of anything.
new under the sun, even the emotions of the stock
Robert Kraft: So you know how have you market, certainly that’s not new.
seen the microcap space? Well you know
what, I’m going to take a step back, you know.
Have you seen the stock market change, you
know, over the years since you’ve been doing the best years ever for the stock market. Not you know a lot more than you think you
all this? And, you know, in particular have obviously there were better years in terms of know. Most, this is what I know for a fact.
you, have you ever seen a market like this? I percentage gains but percentage gains juxta- People who listened to this podcast know a
know last week we had thousand, thousand posed to lack of volatility, lack of any kind lot more about investing or at least what’s
down and then back up and then thousand of fear. Almost every single day the market hot. Then they give themselves credit for.
down again, you know. How, how would was up. Now it was somewhat deceiving But they’ve been intimidated by the process
you, how should younger investors be wary because if you looked and saw wow the [00:16:00] and so don’t let these guys spook
or potentially be aware of this volatility, you S&P is up X amount often there were more you out of this market.
know, what they, what should they take from stocks down than up. But you had a handful
this? That’s a pretty loaded question, I know. of names just a half dozen tech names that Robert Kraft: I’d really love that advice. I
Charles Payne: Yeah, yeah. But you got carried the market almost three quarters mean that that’s like kind of the whole point
to know history that’s all. I mean that’s the of the way through. But nevertheless just of everything that we want to talk about here
most important thing. I think most people from a calming point of view, there was no at the podcast that, you know, it’s, it’s a lot
when they’re alive they think that you know volatility. There was no way I could stay that simpler than it may seem, you know. It may
that’s the most important period of time way there was no way the Federal Reserve seem intimidating when you go and open an
and things that they saw is the first time it’s to stay at 0% interest rates. There’s no way SEC filing and look at an inc- or also go and
ever happened right? That never happened yields on a ten-year bond are going to stay at look at an income statement or a balance
before. Well it did, you know. I joke around two-and-a-half percent. There’s no way we sheet and really at the end of the day, you
on Elon Musk. Tesla had this new electronic are going to have to sort of tranquility, just know, it’s very simple math. You just have to
truck and you know they are starting to get idyllic backdrop of no volatility. It’s okay, it’s know exactly more or less what you’re doing.
some orders. But there was a retail depart- fine when it happens, you know. This gets You know what, actually what would your
ment store that ordered three electronic back to that person you talked about who is advice be to those who may be looking at
trucks in 1900. So it’s, you know, there’s very investing fundamentally. You got to go back that SEC filing and those income statements
few things that are new under the sun, even and look at the fundamentals to help you get and be like Oh Geez, I’ve never been good at
the emotions of the stock market, certainly through those periods. You don’t want to be math, what do I do now?
that’s not new. So I have seen these kind of part of the crowd and what offends me and Charles Payne: If the math itself is not
wild you know [00:14:00] gyrations in the what I’ve been talking about it’s not these really that hard, to be honest with you. Yeah,
market. The numbers are just larger if you professionals come on and they talk about listen it could get more complicated. Certain
the Dow’s at 26,000, a 1000 points it’s not the the dumb money. Oh 100 billion came in industries are harder than others, you know.
same as when a Dow is say like at 9000 and January, that’s dumb money. The markets Financials are harder. I mean you have to
it goes down even 300 points. So those are just shaking them out. Yeah, it’s, it’s pretty understand cap ratios and, you know, the
things you have to put in proper perspec- offensive and I and I caution people not to drug industry is tough because no one really
tive, the percentages. And you know also be that dumb money by letting somebody knows what’s going to happen. You’ve got
I think, 2017 honestly in many ways one of spook you out in the market because you, three phases and then you have the new MicroCap Review Magazine 101

think, you know, it could, it’s over when you,
And one of my own personal pet peeves is I try you know, but it’s not. But you have to also
be [00:20:00] willing to take those as learn-
to always be a student of the market. I don’t ever ing experiences and, and implement them.
There’s no perfect approach to this. Because
want to be a market maven/master. I want to be a short-term is emotionally driven and any-

student in the market always. thing can move markets. Long-term I think
it’s always going to be the fundamentals but
those are the most important things I think.
And for me just hard work. I don’t know
drug application and all that kind of stuff. So And not necessarily think that a railroad any shortcuts. I wish I did, you know. But I
certain industries have their own particular is a boring thing to have in their portfolio, just I just know I try to put the same amount
metrics that are, that become more compli- you know. There’s a little bit of excitement of work in. And one of my own personal
cated but the actual math in and of itself isn’t in getting rich overnight thing that probably pet peeves is I try to always be a student of
that hard. It’s really the time to be honest dovetails into their culture. You know the the market. I don’t ever want to be a market
with you and I think people need to set aside. same culture where someone will rent an maven/master. I want to be a student in the
The math part it will come easy and it’s just hour of a private plane not to go anywhere market always.
how much time do you want to set aside but to take pictures in front of it put on an
to protect and grow the money that you’ve Instagram thing or in the same culture where Robert Kraft: Speaking of that I had I have
worked hard for. And unfortunately people Balenciaga crocs sell for 150 bucks and sell to ask because I know you’re an avid reader
put more time into, you know, finding a out in an hour. So there’s some of that ele- what’s your favorite investing book of all
good doghouse than they will for finding a ment too, you know. Some of that get-rich- time?
good investment vehicle for all that money quick element which is okay. But the notion Charles Payne: Oh yeah, yeah. I know,
they’ve worked for. that you can get rich, that your money can I know I’m supposed to say like Benjamin
work for you is the first step. So I’m glad that Graham or Adam Smith. I tell you my favor-
Robert Kraft: You know this is kind of out- millennials are starting to believe that. ite book that it’s not necessary pure investing
side the box question too, I think, you know. book but Against the Gods. It’s a great book
In your opinion why do you feel, because Robert Kraft: Cool. So another question I and it talks about man learning to take risk.
it seems like millennial, I mean part of the had for you is what experience do you draw And it’s really that’s, that’s probably the book
reason I started this podcast is because I upon the most that really helped shape your I that I really liked the most with respect to
felt that there, I wanted more of, you know, investing strategy? the stock market and I like my own book Be
Millennials, people my age to get into the Charles Payne: Really, it’s a couple things. Smart, Act Fast, Get Rich and I think that’s
stock market. There’s a lot of opportunity. One I always found throughout my career something that, its ten years old but I still
That’s a great place to build wealth, make when it was like very dark or I thought think it’s about 95 percent relevant.
money, you know. In your opinion why has things were going to just not work out. They
it been a slow adoption amongst my genera- actually ended up being turning points for Robert Kraft: I’ll definitely put a link to that
tion? the better. In fact I wasn’t a broker long in in this. And another question, you know,
Charles Payne: Well I think in millen- when the 87 crash happened and I’m think- what’s your advice for any new microcap
nial saw back-to-back market stock market ing to myself, God like this is what I wanted investors or any new investors looking at the
crashes in a housing crash. That tends to to do forever. And I’m watching the market stock market as a potential place to put their
sort of [00:18:00] you know spook you a crash and I just left the office and went to a money?
little bit but they have been reinvigorated re- bar, had a couple of beers, and I’m walking Charles Payne: Don’t make it a casino.
energized and things that they feel like they back to the office, I see one of my buddies. How do you make it a casino? You take a
understand marijuana stocks, cryptocurren- I was like how much did we end up down? shot. You buy one stock and see how it goes,
cy, e-trades last earnings report was through And he told me. I’m like, Oh it’s over. And I give it a couple days or a couple of weeks,
the roof and that was because in millennial ended up opening a lot of new accounts that you know. Be committed to a long-term,
investors. And those, those are the main month, open more the next month, more that commitment means that it’s going to
two categories that they are investing in. I the next month. It was just, it was amazing. be something you do from now until let’s
would like to see them brought in it out. So there are a lot of times when, when you say you retire at least, maybe longer. That

102 MicroCap Review Magazine

you are going to commit money to it, and economically for the stock market and the Because it’s one thing to see the headlines, it’s
time to it, and you’ll build and manage average American. another thing to know what’s driving those
[00:22:00] your portfolio. If you are going headlines.
to give it a shot I just say I’d rather see you Robert Kraft: And where can my audience
go to Vegas and have a good time and catch go and find more information about you, go Robert Kraft: Well I think you definitely
a couple of good shows. And unfortunately watch Making Money with Charles Payne, provided a little bit of illumination on that
too many people come into the market and you know let’s do? in this interview. So, Charles, thank you so
buy a stock that they heard about it the water Charles Payne: Making Money with much for your time today and I really do
cooler doesn’t work and they walk away from Charles Payne every night Monday through appreciate it.
the greatest money-making machine ever Friday on Fox Business Network 6:00 PM Charles Payne: Thanks a lot, Bobby, and
known. Eastern, and you can go to my website www. congratulations. I write every single day for that
Robert Kraft: So I have to close out on this and it’s a free commentary. Robert Kraft: Thank you. n
one question because you are, you know,
Charles V. Payne is the Founder & CEO of Wall Street
you, you see the news on a daily basis and Robert Kraft: Can you actually give a
Strategies. His stock selections reap sizable profits for
I know you’re not an oracle by any means little more overview actually on Wall Street his subscribers and viewers. Charles is featured on
but you know what do you see happening in Strategies. I don’t know if anybody knew the Fox Business Network  Monday-Friday  at  6 PM
ET  on «Making Money with Charles Payne». He is
stock market for 2018? that you have the service out there at least in a member and occasional host of «Varney & Co».
Charles Payne: In 2018, I see the Dow my audience [00:24:00]? In addition, he guest-hosts several shows including
«Cavuto on Business» and «Your World». 
getting to 29,000. I see GDP growth about Charles Payne: Yeah, it’s a stock market
Charles is not only widely recognized in the media
three-and-a-half percent for the year. I see research, independent stock market research. sphere as a thought leader on stock markets and poli-
employment and wages going up. I see the Been doing it for 30 years. It’s, after I did the, tics, but is also the best-selling author of «Be Smart,
Act Fast, Get Rich». In his book, he helps the average
Federal Reserve hiking rates three times. I the research side make no money. I did the investor demystify the stock market and profit from
see more volatility. And I’m hoping to see analytical side made money, but was very it, explained in a manner that only he could deliver. 
When Charles is not in the media spotlight, he
and I believe we will, an uptick in entrepre- unhappy. I kind of merged those two and
is routinely sought after for his market and political
neurship, business startups, particularly by started this company. Initially I sold my opinions by prestigious organizations, and is featured
native-born Americans. That number has research only to professionals and later I and available for seminars and speeches.

slumped dramatically in the last ten years. started selling to individuals, a subscription Note: This article is not an attempt to provide invest-
It’s really interesting that people born out- base. And I’ve developed different services ment advice. The content is purely the author’s per-
sonal opinions and should not be considered advice
side this country see the opportunities more over the years. If you’re a trader, if you’re
of any kind. Investors are advised to conduct their
so than people born here. And I’m hoping buying and hold, if you are long-term, and I own research or seek the advice of a registered invest-
that we make a dent in the opioid crisis and take the most pride in my daily commentary. ment professional.

which is also an economic story as well. I’ve put a lot of work into it every single day.
I’d like what I see so far in manufacturing, It’s unique. It’s, you’re not going to read
over 200,000 jobs created since last January. it in the journal or anywhere else. And I
Again that’s middle America stuff. I like really try to educate people. I really try to
it. I think it’s going to continue. So I think go beneath the surface and crunch those
this could be a really, could be a great year numbers for them so that they understand.

In 2018, I see the Dow getting to 29,000. I see

GDP growth about three-and-a-half percent for
the year. I see employment and wages going up. I
see the Federal Reserve hiking rates three times. I
see more volatility. MicroCap Review Magazine 103

Episode 17
Cleaning Up on Wall Street
He’s in the bathroom.
A different kind of Morning constitution.
Where’s Mickey?
business gets done in the
lavatories on Wall Street
but when the business is
the toilets an IPO is the
Hey, can somebody throw me
end result a roll of toilet paper? #$@&%*!

Mickey and Flagowiz Would you believe there was

are coming no toilet paper in the mens room!
So Matt how are things at Flusher?

Richard they couldn’t be better.

We are cleaning toilets across America You know boss this is Wall Street
for some of the largest fast food restaurants. the worst bathrooms on earth!

Okay guys…this is Matt Flusher, Wow you wear gloves.

What does The Flusher You’re kidding me. HaHaHaHa
from The Flusher Company
Company do? Where were you ten minutes ago?

Well Mickey,
Really good to meet you both. we clean America’s Toilets!

Flusher cleans toilets, Great name for a toilet bathroom Matt Flusher is a great salesman, I mean One man’s crap is another man’s
urinals, sinks and floors for cleaning company! who else could convince the Fast Food gold believe me!
the fast food industry. industry to hire Flusher to clean their toilets!

Fast food restaurant bathrooms

don’t compare to Wall Street men’s
Matt, why don’t your Let me answer that like this. rooms on their worst day.
customers clean up their Do you clean the toilets in this office? Right Mickey? Disgusting
own mess?

I noticed our bathroom

has Flusher urinal mats.
Great advertising.

Good point

Glad you were impressed.

Let’s give Flusher the money He’s not like you, Flusher got their money
to grow his business! No chance you need a blueprint to
wipe your ass. and cleaned up on Wall
I hope he doesn’t flush it Street, but not the
down the toilet

104 MicroCap Review Magazine

Created by: Shelly Kraft & Lynda Lou Kraft / Developed by: Shelly Kraft / Written by: Shelly Kraft & Lynda Lou Kraft MicroCap Review Magazine 105
P R O F I L E D C O M PA N Y pInk: spyr

A Mobile Games Publisher with Big Aspirations Fueled by
Licensed Content, Esports and Acquisitions

I n late 2014, the mobile games industry was on the brink of pro-
pelling itself past console gaming to become the electronic games
industry’s most lucrative sector.
Forecasts at the time showed that the mobile at SPYR quickly learned that launching a IP with a mass-market appeal to the game
games segment was primed to do $25 Billion game was easy, but monetizing a game was and prepare it for entry into the burgeoning
of revenue in 2014 and more than $40 Billion a whole other bag of burgers. SPYR’s man- world of esports.
by 2017. agement team, determined to create success
At that time, customers knew SPYR as in the games industry, connected with Lars usIng poCkeT sTarshIps To
“Eat at Joe’s,” a restaurant operator owning Koschin, one of the most prominent early buIlD a general sTraTegy
a single American Diner-themed eatery in players in the German massively multiplayer
the Philadelphia airport. SPYR’s Chairman online (MMO) games industry, and an indi- SPYR spent 2016 and 2017 expanding
of the Board, however, had a vision that the vidual who had also launched 25 MMOs in its team and working with Lars and his
company could take advantage of the insane his career. team doing extensive development work
growth and revenues in the world of technol- Together with Lars and his team in on Pocket Starships, always with an eye
ogy, including the electronic games space. Germany, SPYR published its flagship game, toward creating a game that would take
He also knew that to make it happen, he had Pocket Starships. Unlike SPYR’s previous full advantage of the billions of dollars
to bring in a new management team and get games, Pocket Starships is a real-time, truly being spent by gamers on a yearly basis.
the right pieces in place so that the company cross-platform multiplayer game. It appeals Part of the team expansion included adding
could successfully shift into the 21st century. to a hardcore gaming audience, as opposed Farshid Almassizadeh as a Strategic Advisor
In February of 2015, Jim Thompson took to casual gamers. The multiplayer aspects and Mike Turner as SPYR’s VP of Strategic
over as CEO and President. Jim’s more than of the game encourage competition, which, Partnerships. Farshid has been honing his
28 years of experience as a business attorney in turn, drives players to spend money on skills in video game production and man-
and extensive contacts in a plethora of indus- weapons, ship upgrades, and resources. The agement for the past 30 years with a long
tries gave him all of the tools he needed to cross-platform, real-time aspects of the game line of accolades behind him. Some of his
transform the humble restaurant company, mean that the game is playable on mobile accomplishments include acting as Senior
Eat at Joe’s, into a world-class electronic devices, desktop, and laptop computers, with Director of Product Development for The
games company, SPYR. all players in the same universe. It provides Simpsons and The Sims Console franchises,
SPYR’s transition from hamburgers a unique opportunity to market to players President of Operations at Age of Learning,
to pixels started off slowly. We ventured on all of these types of devices, playing from Inc. and Vice President and Chief Operating
into a website advertising business before anywhere, on the same account, in the same Officer at Electronic Arts Interactive, which
launching three small mobile games: Plucky, game universe, simultaneously. included EA Mobile, Pogo, Playfish and
Plucky Rush and Rune Guardian. SPYR Pocket Starships was a solid game, but it PopCap Studios. He developed the Sims
next published Retro Shot, a casual, retro- needed changes to succeed. The company Console Division in 2003 and was a found-
style game developed by former employees implemented a strategy to make the game ing member of the multiple award winning
of Finnish developer Supercell. The team more appealing to players. SPYR would add Presto Studios in the early 90’s. Mike is also

106 MicroCap Review Magazine

a games industry veteran who previously egory of professional athlete. This growth late leader Rose Quartz and aging aspir-
held leadership positions at companies like is fueling increases in the participation of ing rockstar Mr. Universe. Steven belongs
Wargaming America and FASA Studios at endemic and non-endemic sponsors, in everywhere and nowhere: he has inherited
Microsoft. Mike brought and continues to ever-increasing numbers, and scale. his mother’s Gem and her magical powers,
bring to the table a wealth of knowledge Today, console and PC games dominate but also his father’s humanity and charm. The
about game monetization, advertising, and esports, but mobile games are gaining trac- show is a slice-of-life action comedy that fol-
partnerships for expansion and acquisition tion. From 2012 to 2015 alone, video game lows Steven as he attempts to bridge the gap
opportunities. sales revenue increased by eight billion U.S. between the sci-fi fantasy world of Gems and
Based on guidance from Farshid and dollars. The growth of the gaming market the cozy, funny, simple-yet-extraordinarily-
Mike, we regularly added new features to continues to move aggressively. Statista, a complicated world of human beings.  Steven
the game. We added a player vs. player statistics web portal assimilating data from Universe is created by Emmy and Annie
(PvP) mode which allows players to compete tens of thousands of sources, estimates that Award-nominated writer and New York Times
directly against each other one-on-one (1v1), PC and Massively Multiplayer Online games bestselling author Rebecca Sugar, and pro-
three-on-three (3v3) or five-on-five (5v5). will grow at a compound annual growth rate duced by Cartoon Network Studios.
We added a leaderboard system allowing of 3.6% through 2020, from a 2016 baseline Most exciting for the future of SPYR is
players to see how they stack up against their of 26.7 billion USD. its acquisition strategy. SPYR is diligently
friends and other players. These new fea- Mobile is unquestionably a key growth working to acquire games or companies that
tures were designed to increase competition market for gaming. While PC and console already have a significant footprint in the
in the game. revenues will remain strong, Statista data industry. SPYR is looking for games and
The second prong of the new strategy sources indicate that the worldwide value of companies with substantial user bases and
was to license IP with substantial market mobile gaming will exceed 74 billion USD unfulfilled potential. For example, SPYR’s
power for the game. SPYR engaged with -- twice that reported in 2015. SPYR wants could acquire an established PC game title
CBS Consumer Products and, in mid-2017, Pocket Starships and future games it pub- that does not have a cross-platform or stand-
was able to secure a license to add con- lishes or acquires to be dominant players in alone mobile component and close that gap.
tent from the Star Trek™ television series the growing mobile esports market. Similarly, SPYR could acquire games that
franchise, specifically Star Trek: The Next can be brought to new competitive plat-
Generation, Star Trek: Deep Space Nine and applyIng The sTraTegy To forms, like Steam, and new communities,
Star Trek: Voyager, into Pocket Starships. fuel growTh anD To make such as esports, allowing the company to
Pocket Starships: Star Trek™ Borg Invasion aCquIsITIons realize the product’s fullest value.
is still in production and, when released, Finally, the company will identify unique
should attract an entirely new audience of While still working to perfect the perfor- games with engaging gameplay, the market-
Star Trek fans to the game, where they will mance of Pocket Starships, SPYR is moving ability of which is extensible with the right IP,
be able to earn and buy ships from the Star to incorporate the best elements of its Pocket for discovery by players through their identifi-
Trek universe and add many favorite Star Starships strategy into other games. cation with the associated intellectual property.
Trek crew members to those ships. First, SPYR will release a new game based SPYR is using all of these strategies to
Finally, SPYR focused on using the PvP entirely on a popular television program improve its current game monetization and
system within the game to create a tourna- from Cartoon Network. The game is in one to grow through specific, high-value acqui-
ment mode in preparation for its entry of the fastest growing game genres - the idle sitions, and the executives at the company
to esports. Esports is a rapidly growing tapper genre - in which players tap to defeat think the future looks very bright. It’s a
segment of the game industry, in which enemies and in which a player’s progress in brave new world for the little ex- burger
video games are played competitively for the game can continue even when he or she and cheesesteak restaurant company and the
fans attending live arena events in the tens is not playing. SPYR will also innovate by excitement has only just begun. n
of thousands and watching online on Twitch adding competition with team play, leader-
and YouTube Gaming into the millions. boards, and other exciting features.
Esports has established itself globally. There Cartoon Network’s Emmy-nominated
SPYR: The article may contain forward-looking state-
are professional teams from nearly every Steven Universe revolves around Steven, the
ments about SRYR. See SPYR’s periodic filings with
country. The dramatic increase in fan inter- “little brother” to a team of magical aliens— the Securities and Exchange Commission for more
est in esports is driving massive growth in the Crystal Gems—who defend the planet complete information.

salaries and prize money for this new cat- Earth. Steven is the son of the Crystal Gems’
The company paid consideration to SNN or its affiliates for this article. MicroCap Review Magazine 107

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