35
30
25
20
(#)
15
29
28
27
26
10
19
18
17 17 17 17
16
15
12
11
5 10 10
9
7 7 7 7 7
6 6 6 6
5 5 5 5
4 4 4 4 4
3 3 3
2 2
1 1 1
0
May-06
May-07
May-08
Nov-05
Mar-06
Nov-06
Mar-07
Nov-07
Mar-08
Nov-08
Jul-05
Aug-05
Sep-05
Oct-05
Dec-05
Jan-06
Feb-06
Apr-06
Jun-06
Jul-06
Aug-06
Sep-06
Oct-06
Dec-06
Jan-07
Feb-07
Apr-07
Jun-07
Jul-07
Aug-07
Sep-07
Oct-07
Dec-07
Jan-08
Feb-08
Apr-08
Jun-08
Jul-08
Aug-08
Sep-08
Oct-08
Dec-08
Jan-09
Feb-09
I ND US T R Y NEW S
This section discusses corporate activity such as partnerships, new product launches, and financial results.
This report has been created by Anal ysts that are employed by Research Capital Corporation, a Canadian Investment Dealer.
www.researchcapital.com
Toronto 416.860.7600 Montreal 514.399.1500 Vancouver 604.662.1800 Calgary 403.265.7400 Regina 306.566.7550
Page 2
25.0
20.0
15.0
Feb-09
(US$m)
Jan-09
Dec-08
10.0
5.0
0.0
Mixpo
Motionbox
TextDigger
CoveritLive
Xobni
NewsGator
Go Internet Media
Gbox
Overlay.TV
AdMob
IMVU
FooMojo
SundaySky
Social Median
InsideView
SocialMedia
Kewego
Meez
Playdo
Tvtrip
Tripwolf
VirtuOz
Nurien
Taptu
Yodle
Scribd
Superfish
JibJab
Jackbe
7 Billion People
StockTwits
DotBlu
Geni
Tagged
Snapmylife
Hubdub
Snooth
Identi.ca
Aster Data Systems
DECA
Sportsblogs
ChakPak
AboutUs
Clickpass
Blue Kai
OneSpot
RatePoint
Tumblr
Angie's List
Pulse Entertainment
Travel site Tvtrip raises $9 million: Activity in February so far was led by Tvtrip, a travel-related site, raising about $9
million (Figure 3). Further, single transactions in Search, Aggregation, and Video sectors raised about $4 million each in
the first 10 days of the month.
Page 4
10.0
9.0
8.0
7.0
6.0
(US$m)
5.0
9.0
4.0
3.0
4.3 4.2
2.0 4.0
3.0
1.0
0.0
Travel Search Aggregation Video Analytics
1 1 1 1 1
# companies
Average round size increases slightly: On a trailing 12-month basis, total financing dollars are down for the third month
in the last four. However; average round sizes increased slightly as of February (Figure 4).
LTM Financing
4,000.0 20.0
18.0
3,500.0
16.0
3,000.0
14.0
2,500.0
12.0
(US$m)
(US$m)
2,000.0 10.0
8.0
1,500.0
6.0
1,000.0
4.0
500.0
2.0
0.0 0.0
May-06
May-07
May-08
Nov-05
Mar-06
Nov-06
Mar-07
Nov-07
Mar-08
Nov-08
Jul-05
Sep-05
Jan-06
Jul-06
Sep-06
Jan-07
Jul-07
Sep-07
Jan-08
Jul-08
Sep-08
Jan-09
Total Average
Cumulative total nears $5.3 billion: Overall, on a cumulative basis, Web 2.0 financings have totalled nearly $5.3 billion,
with the majority of the financing coming in late 2007 and the first three quarters of 2008 (Figure 5).
Page 5
1,400.0 6,000.0
1,313.3
1,200.0
5,000.0
1,000.0 944.7
4,000.0
800.0
(US$m)
(US$m)
701.7
3,000.0
600.0
524.9
2,000.0
400.0 338.5
301.8
224.0
1,000.0
200.0 145.7
130.6 116.3 97.0
87.2 73.4
35.5 28.8 20.1 37.5 33.5 18.2 41.9 49.1 29.4
0.0 0.0
Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1
2003 2004 2005 2006 2007 2008 2009
U.S. remains dominant: U.S. companies continue to dominate capital market activity – with almost 73% of
financings/M&A involving U.S. companies (based on dollars) (Figure 6). Canadian companies generated under 1% of
capital market activity based on dollar volume (Figure 6). Based on number of transactions, the U.S. leads with 73.6% of
deals, while Canada is third in number of financings at 5.5% (Figure 7).
Russia ROW
1.7% Israel 9.4%
0.8%
Canada
0.7%
France
0.7%
ROW
2.0%
USA USA
72.8% 73.6%
Larger volume of early-stage funding (by count): Almost half of financings in the last 12 months are for early-stage
companies (Angel/Seed or Series A) (Figure 8). Series B rounds are 28.8% of the total, with later-stage (Series D, E and
PIPE) deals accounting for just 7.3%.
Page 6
Series B Series C
28.8% 13.7%
Series D
4.6%
Angel/Seed
10.0%
Debt financing
2.7%
Series A
37.9% PIPE
2.3%
“D” series remain largest equity rounds (by dollar): In the last 12 months, there have been 10 “D” series rounds,
averaging $23.8 million per financing (Figure 9). Note that we have excluded the $430 million Series C financing of Oak
Pacific Interactive as it skews the results substantially.
45.0
40.0
35.0
30.0
25.0
(US$m)
41.9
20.0
15.0
23.8
10.0
18.5
11.2
5.0 10.0
8.8
6.1
3.5
0.0
Angel/Seed Debt financing PIPE Series A Series B Series C Series D Series E
# rounds
22 6 5 83 63 30 10 1
140
120
100
80
60
40
20
0
2/11/2008
2/25/2008
3/10/2008
3/24/2008
4/21/2008
5/19/2008
6/16/2008
6/30/2008
7/14/2008
7/28/2008
8/11/2008
8/25/2008
9/22/2008
4/7/2008
5/5/2008
6/2/2008
9/8/2008
10/6/2008
10/20/2008
11/3/2008
11/17/2008
12/1/2008
12/15/2008
12/29/2008
1/12/2009
1/26/2009
2/9/2009
NASDAQ COMP Web 2.0 (Market Cap Weighted)
Chinese Gamer leads; NGI falls: NGI Group Inc. (2497-TSE) had the worst performance in the group (for stocks with
prices greater than $1) (Figure 11), falling 20.1% on the week. Chinese Gamer International (3083-GTSM) increased the
most, +22.9 %.
Page 8
-25. 0% -20. 0% -15. 0% -10. 0% -5. 0% 0. 0% 5. 0% 10. 0% 15. 0% 20. 0% 25. 0% 30. 0%
earning product with many additional features being released over the next few months. The product has been in full beta
test for the last four months offering customers a free trial period. During that period over 22,000 networks have been
registered.
United Online Declares Quarterly Dividend Payable on February 27, 2009: United Online Inc. announced that its Board
of Directors has declared a regular quarterly cash dividend of $0.10 per share. The dividend is payable on February 27,
2009 to shareholders of record on February 13, 2009.
Open Text Corp. Extends eDiscovery Offering: Open Text Corp. announced that it has extended its new eDiscovery
solution to its Open Text eDOCS customers. Now organizations, particularly corporate legal departments, will be able to
significantly minimize the need for third-party processing and control the high costs of legal reviews by culling irrelevant
information. Open Text eDiscovery Early Case Assessment is being offered through a strategic relationship with
Recommind, the leader in search-powered information risk management (IRM). The solution combines Recommind's Insite
Legal Hold application with the Open Text ECM Suite. The combination not only addresses the critical need for eDiscovery
in an age of growing regulatory and legal challenges, it also lets customers tightly integrate eDiscovery within their
broader ECM initiatives. Open Text eDOCS customers will gain expanded eDiscovery capabilities woven into their overall
content, records and email management practices.
Wizzard Media to Provide Catalog of Branded and Independent Streaming Video Content to Sevenload: Wizzard
Media announced that it will provide a catalog of branded and independent streaming video content to sevenload. The
sevenload network reaches 15 million users monthly with independent, intelligent and creative content through twelve
international country portals including the USA, Germany, Spain, France, Italy, Turkey, Russia, the UK, India, Australia,
Singapore and Poland. The delivery of video content through sevenload or on sevenload properties/portals/platforms is an
ideal distribution channel for the Wizzard Media Network catalog. Through this partnership, Wizzard will reach a large
audience of fans across Europe and the United States and offer more opportunities for monetization to its network of
video producers.
Shutterfly Inc. Reports Unaudited Consolidated Earnings Results for the Fourth Quarter and Full Year Ended
December 31, 2008; Provides Earnings Guidance for the First Quarter Ending March 31, 2009 and Full Year Ending
December 31, 2009: "Shutterfly Inc. reported unaudited consolidated earnings results for the fourth quarter and full year
ended December 31, 2008. For the fourth quarter, the company reported net income of $14.92 million or $0.59 diluted net
income per share on sales of $107.74 million compared to net income of $16.9 million or $0.63 diluted net income per
share on sales of $97.54 million for the same period last year. For the year, the company reported net income of $4.56
million or $0.18 diluted net income per share on sales of $213.48 million compared to net income of $10.09 million or
$0.38 diluted net income per share on sales of $186.72 million for the same period last year. The company also provided
earnings guidance for the first quarter ending March 31, 2009 and full year ending December 31, 2009. For the first
quarter, the company expects operating loss from $15 million to $13 million. GAAP diluted net loss per share to range
from $0.35 to $0.14. Non-GAAP operating loss to range from $12 million to $10 million. Non-GAAP diluted net loss per
share to range from $0.69 to $0.26. Adjusted EBITDA was from $5.6 million to $3.2 million. Net revenues to range from
$28 million to $32 million, a year-over-year decrease of 7% to 19%. For the full year, the company expects operating loss
from $14 million to $2 million. GAAP diluted net loss per share to range from $0.30 to $0.01. Non-GAAP operating loss to
range from $1 million to $13 million. Non-GAAP diluted net income per share to range from $0.08 to $0.35. Adjusted
EBITDA was from $26 million to $38 million. Net revenues to range from $190 million to $210 million, a year-over-year
decrease of 11% to 2%."
CDC Corp. Reaffirms Earnings Guidance for the Second Half of 2008: CDC Corp. reaffirmed earnings guidance for the
second half of 2008. The company reaffirmed its previously provided guidance for adjusted EBITDA for the second half of
2008, despite announced preliminary plans by China.com Inc., to record an approximately $2.7 million investment
impairment loss in the fourth quarter of 2008, subject to final year-end audit. Based upon preliminary financial results and
estimates, the company expects its Adjusted EBITDA from continuing operations to be in the range of approximately $17.0
million to $19.0 million for the second half of 2008. The Company does not expect that China.com's preliminary planned
fourth quarter 2008 net impairment loss charges of approximately $2.2 million (after the impact of minority interest)
announced by China.com in a filing made to the Growth Enterprise Market of the Stock Exchange of Hong Kong Limited,
or GEM Market, will impact the Company's previously announced second half guidance. The company currently has
significant cash on hand and expect to report strong Adjusted EBITDA from continuing operations for the fourth quarter
2008.
Tree.Com, Inc. (NasdaqGM: TREE) Acquired JustThrive.com.: Tree.Com, Inc. (NasdaqGM: TREE) acquired
JustThrive.com on February 4, 2009. The financial terms of the transaction were not disclosed.
Best of Malayalam TV Chooses NeuLion as End-to-End Service Provider: Best of Malayalam TV (BoMTV) announces
the launch of a new broadcast service throughout the United States and Canada. BoMTV offers a full range of high quality
South Indian entertainment made possible through JumpTV Inc., an iPTV service provider and NeuLion's proprietary set
top box solution. Viewers will be able to watch live Malayalam content directly on the television.
Tree.Com Inc. Reports Earnings Results for the Fourth Quarter and Year of 2008: "Tree.Com Inc. reported earnings
results for the fourth quarter and year of 2008. The company reported a net loss of $7 million, or 75 cents per share, on
revenue of $48.1 million. That was considerably better than the loss of $22.6 million, or $2.41 per share, it reported in the
third quarter. Revenue in the third quarter was $50.3 million. A year ago, the businesses making up Tree.com lost $531.5
million on $50.8 million in revenue, largely because of the write-down and impairment charges. For the full year, Tree.com
Page 10
reports a net loss of $202.3 million, or $21.59 per share. That compares with a net loss of $550.42 million, or $59 per
share in 2007. Again, the year ago figures are skewed by the special charges. Revenue last year dropped to $228.6
million from $346.4 million in 2007."
GeoSentric Oyj Announces Availability of its Mobile Social Networking Application on Nokia and BlackBerry
Devices: GeoSentric Oyj's GyPSii announced that its market leading mobile social networking application is now available
on over 25 more Nokia devices, as well as the BlackBerry Bold, Curve and Pearl devices from Research in Motion - a
move that extends the reach of GyPSii to millions of potential new customers. GyPSii users can uniquely experience a
broad range of location-specific functions and mobile lifestyle services - including sharing user generated content, mobile
geo-location content search, and social networking, as well the ability to view it all on a map - all within a single user
experience. The latest version of the GyPSii software extends these features to even more devices and markets in
particular, China. Supported Nokia phones include: N96, N95-8GB, N95, N93/N931, N92, N85, N82, N81, N80, N79, N78,
N77, N76, N75, N73, N72, N71, E90, E71, E70, E66, E65, E62, E61/E61i, E60, E51, E50, Touch Xpress 5800, 6220
Classic, 6210 Navigator, 6120 Classic, 6110 Navigator, 5700, 5500, 5320XM. Supported Blackberry Smartphones include:
Bold; Pearl series 8110, 8120, 8130; Curve series 8310, 8320, 8330 and 8800, 8820, 8830.
Perfect World Co., Ltd. Partners with HI-WIN Co., Ltd. to License 'Pocketpet Journey West' in Korea: Perfect World
Co., Ltd. signed an agreement with HI-WIN Co., Ltd. to license 'Pocketpet Journey West' in Korea. This is the company's
fifth game licensed in the country.
VALUATION
MMOG companies lead market cap charts: Just five (same as last week) companies in our Web 2.0 universe top US$1
billion in market capitalization (Figure 12). Fifty-eight of the 80 (down from 60 last week) companies have market caps
under US$100 million, with 22 (same as last week) under $10 million. Online gaming companies dominate the top of the
list with five of the top six by market cap.
Market C ap (US D m)
TEV/Revenue (LTM) averages 4.1x: The overall average TEV/Revenue (LTM) multiple for our group is 4.1x (Figure 13).
However, this is skewed by CornerWorld (CWRL-OTCBB) at 33.7x and BoomJ at 31.1x (BOMJ-OTCBB). Excluding those
companies, the average is 2.9x. Note that we exclude multiples greater than 50x. Twenty-four of the companies have
multiples under 1.5x.
40. 0
35. 0 33. 7
31. 1
30. 0
25. 0
20. 0
15. 015. 1
15. 0
12. 5
10. 2
10. 0
7. 7
5. 9
Avera ge, 4. 1 4. 7 4. 8 4. 8 5. 3
5. 0 3. 2 3. 2 3. 8 4. 2 4. 3
2. 5 2. 6 2. 6 2. 7 3. 1
1. 4 1. 5 1. 6 1. 6 1. 7
0. 7 0. 7 0. 7 0. 8 0. 8 0. 8 0. 8 0. 9 0. 9 1. 0 1. 1 1. 1
0. 0 0. 1 0. 1 0. 2 0. 2 0. 2 0. 2 0. 2 0. 3 0. 4 0. 6 0. 6
0. 0
G eoS entric O yj
G oF is h C orporation
UO MO Media, Inc
B right T hings plc
T he P arent C ompa ny
Mixi, Inc.
DigitalF X International, Inc.
NE O W IZ G ames C orporation
B oomJ Inc
DADA S pA
K aboos e Inc.
E olith C o. L td.
S NM G lobal Holdings
Unis erve C ommunications C orp.
X ING AG
G ameO n C o L td.
J umpT V Inc.
T ree. C om, Inc.
TEV/Revenue (LTM) by country/exchange: We have also calculated multiples based on where the companies are listed
or domiciled. Figure 14 shows the average TEV/Revenue multiples by stock exchange. The OTCBB has the largest
number of companies (20), trading at an average multiple of 10.6x (down from 11.3x last week). On a geographic basis,
the United States has the most companies (37), trading at an average of 4.9x revenue (down from 5.7x revenue last week)
(Figure 15). Nine of the companies are Canadian (average 3.8x revenue).
Page 12
16.0 16.0
14.0 14.0
12.0 12.0
10.0 10.0
(x)
8.0
(x)
8.0
15.0 15.0
6.0 6.0
10.6
5.3 5.3
4.9
2.0 2.0
3.3 3.2 3.8
3.0 2.8 3.2
2.3 2.7
1.9 1.8 2.3
1.4 1.1 0.9 0.8 0.8 1.1 0.8
0.2 0.1 0.8
0.0 0.4 0.2
0.0
AMEX
XTRA
TSX
TSXV
ASX
NasdaqGM
AIM
GTSM
CM
OTCBB
HLSE
SEHK
TSE
OTCPK
NasdaqGS
KOSE
OSE
BSE
United Finland China United Canada Germany Taiwan Japan South Korea Australia Italy Hong Kong India
Kingdom States
1 1 8 37 9 2 3 6 9 1 1 1 1
# Companies
# Companies 1 20 1 3 2 2 5 3 8 3 4 10 7 1 1 1 1 5
TEV/EBITDA (LTM) averages 9.4x: The average multiple for the 28 companies with positive EBITDA (and multiples under
100x) is 9.4x LTM EBITDA (9.4x last week), led by SNAP Interactive’s (STVI-OTCBB) 41.2x multiple (Figure 16). Sixteen
of the companies have EBITDA multiples under 7x.
45. 0
41. 2
40. 0
36. 9
35. 0
30. 0
25. 2
25. 0
20. 0
16. 9
15. 0 13. 4
12. 4
11. 5
Average, 9. 4 9. 8 10. 3
9. 5
10. 0 8. 4
6. 4 6. 7 6. 8 7. 0
6. 2
4. 9 5. 2 5. 4
4. 0 4. 0 4. 5
5. 0 3. 2
1. 2 1. 8
0. 1 0. 3 0. 7
0. 0
Northgate T echnologies L imited
Mixi, Inc.
NE OW IZ G ames C orpora tion
DADA S pA
S hutterfly, Inc.
G igaMedia L td.
Y edangOnline C orp.
C DC C orp.
G ameO n C o L td.
TEV/EBITDA (LTM) by country/exchange: Figure 17 shows the average TEV/EBITDA multiples by stock exchange. The
OTCBB has the largest number of companies (20), trading at an average multiple of 16.0x, while companies on the TSXV
have the highest multiples (36.9x). On a geographic basis, the United States has the most companies (37), trading at an
average of 9.1x EBITDA (Figure 18). Nine of the companies are Canadian (average 19.6x EBITDA).
Page 13
40.0 25.0
35.0
20.0
30.0
25.0
15.0
(x)
20.0
36.9
(x)
15.0
10.0 19.6
10.0
16.0
11.7
11.7 11.5 5.0
5.0 9.8 9.8
8.6 8.3 9.1 8.6
8.2 7.3 8.4
6.2 7.8 7.6
4.9 4.0
1.8 1.2 4.9
0.0 0.7
TSXV
TSX
XTRA
AMEX
ASX
NasdaqGM
GTSM
CM
NasdaqGS
OTCBB
SEHK
KOSE
TSE
OSE
BSE
1.8
1.2
0.0
Canada China Germany United States South Korea Hong Kong Taiwan Japan Italy Australia India
4 20 3 3 2 7 5 2 10 1 1 3 1 1 5 9 8 2 37 9 1 3 6 1 1 1
# Companies # Companies
P/E (LTM) averages 13.4x: The average multiple for the 29 companies with positive earnings (and multiples under 100x)
is 14.2x LTM EPS (up from 13.1x LTM EPS), led again by SNAP Interactive’s (STVI-OTCBB) 59.1x multiple (Figure 19).
Fourteen of the companies have P/E multiples under 10x.
P /E L TM (x)
70. 0
59. 1
60. 0
50. 0
50. 0
40. 0 38. 4
33. 4 34. 2
30. 0
20. 5
20. 0 16. 8
Avera ge, 14. 2 14. 5 15. 1
12. 4 12. 8
11. 3 11. 8
9. 0 10. 1 10. 9
10. 0 7. 1 7. 3 7. 9
5. 2 5. 5
3. 4 4. 2
1. 1 1. 3 1. 4 1. 8 1. 9 1. 9
0. 0
Northga te T echnologies Limited
T he9 Limited
Mixi, Inc.
NE O W IZ G a mes C orpora tion
S pa rk Networks , Inc.
S hutterfly, Inc.
X ING AG
Netea s e. com Inc.
G a meO n C o Ltd.
G a ma nia Digita l E nterta inment C o. , L td.
P erfect W orld C o. , Ltd.
P/E (LTM) by country/exchange: Figure 20 shows the average P/E multiples by stock exchange. The OTCBB has the
largest number of companies (20), trading at an average multiple of 31.7x. On a geographic basis, the United States has
the most companies (37), trading at an average of 20.5x earnings (Figure 21). Nine of the companies are Canadian
(average 38.4x EPS).
Page 14
35.0 45.0
40.0
30.0
35.0
25.0
30.0
20.0 25.0
(x)
(x)
31.7 20.0
15.0 38.4
15.0
10.0 20.5
18.8
17.4 10.0 20.5 20.5
18.8
14.2 14.1
11.7 13.3
5.0 11.7
9.0 5.0
7.9 7.1 7.9 7.5 7.1
5.2
1.8
1.8 1.3 0.0
0.0
Canada United States Germany Japan Taiwan South Korea Italy China Australia India
OTCBB XTRA TSE SEHK NasdaqGS GTSM KOSE NasdaqGM CM ASX AMEX BSE NYSE
9 37 2 6 3 9 1 8 1 1
20 2 5 3 10 2 7 5 1 1 3 1 1 # Companies
# Companies
UPCOMING EVENTS
Upc oming E vents
E vent Date L oca tion Webs ite
U s er G ene ra ted C onte nt F ebrua ry 9-10 S an J os e www. ugc xeven t. c om/
W eb 2. 0 C anadian L eade rs hip S erie s - G a ming Ma rc h 3 T oronto http: //web2le aders hips eries .iglooeven ts . net/
E ngage! E xpo Ma rc h 10-11 New Y ork www. enga geex po. c o m
Me sh 200 9 A pril 7-8 T oronto www. mes hc on ferenc e. co m
E arnings C alendar
C ompany Date & Time Qua rter C onf C all Details
T heS tree t. c om, In c. (N as daqG M: T S C M ) T hurs day , F ebru ary 1 9, 2 009 4: 30 P M (E S T ) Q4 200 8 N/A
U nited O nline Inc . (Na sdaqG S : U NT D) T hurs day , F ebru ary 1 9, 2 009 5: 00 P M (E S T ) Q4 200 8 888-58 7-0611
T he9 L imited (Nas daq G S : NC T Y ) Monday , F ebrua ry 2 3, 20 09 8 : 00 P M ( E S T ) Q4 200 8 1-866-54 3-6 405
Gr and T otal 80 Gr and T otal 25,167. 1 Gra nd Tota l 314. 6 G rand T otal 7,347.2 G rand Total 1,959. 3 Gra nd Tota l 16.6%
Gr and T otal 80 Gr and T otal 25,167. 1 Gra nd Tota l 314. 6 G rand T otal 100.6 G rand Total 1,959. 3 Gra nd Tota l 16.6%
Gr and Total 2.2 5.0 22.5 88.6 131.1 74.2 5.0 10.0 338.5
1. None applicable.
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recommendations and opinions expressed in this research report accurately reflect the analyst’s personal views and (ii)
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recommendations expressed in this research report.
Information about Research Capital Corporation’s Rating System, the distribution of our research to clients and the percentage of recommendations which are in each
of our rating categories is available on our web site at www.researchcapital.com.
The information contained in this report has been drawn from sources believed to be reliable but its accuracy or completeness is not guaranteed, nor in providing it
does Research Capital Corporation assume any responsibility or liability. Research Capital Corporation, its directors, officers and other employees may, from time to
time, have positions in the securities mentioned herein. Contents of this report cannot be reproduced in whole or in part witho ut the expressed permission of Research
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