The Bankers Note Notes of Commercial Interest

January 17, 2014

The Trend is your Friend: Until it isnt.

A version of this report was last published as the Caseridge TechSys DealBook in 2010. Since then we have been experiencing a very strange financial climate. Over the last five years, under the weight of stimulus and the imposition of previously unrivaled market intervention and regulation, markets have lost their allure as a mechanism for efficient price discovery. The New York Times noted recently that the S&P 500 never once dropped below its December 31, 2011 closing price throughout all of 2012. This index also didnt drop below its closing price on December 31, 2012 throughout all of 2013. This hasnt happened since 1975-76 in the aftermath of the termination of the Bretton Woods Agreement in 1971. The recurrence of a similar phenomenon after a similar length of time following a monumental market event (the credit crisis in 2008) is certainly worth noting. Will this period of good results continue into 2014? It is exceedingly difficult to predict the future direction of prices given the aggressiveness of national governments in using market intervention to influence prices. We do know however that the trend identified by the New York Times wont be repeated in 2014. The S&P 500 was down in the first week of 2014 for the first time since 2008. If the market is moving from a period of lighterthan-air gains (as the New York Times put it) to a period of more interesting times what does this mean for the corporate clients that are the primary constituency of this report? To track things from a Canadian perspective we developed the EPC Operating Company Index. This is a 250-company equal-weighted index of Canadian (or Canadian-listed) companies that we will use to track activity in the Knowledge, Innovation and Growth sectors. It is a Canadian mid-cap index with an equal-weighted average market capitalization of $275MM. The EPC Operating Company Index has gained 500% since January 2006.

It has increased by over 130% over the last two years. Given the times and the markets, we suggest that corporate executives and their boards should be taking action on three fronts right now:

1. Raising Capital: If you havent gone to the well to raise capital over the last 12 months and you need capital then give your head a shake and get moving on it now. Concerns about dilution should take a back seat to the practical fact that there is an open window for capital markets activity that may shut down without notice at any time. For the executives of the smaller companies in our index missing this market window might be a terminal mistake.

2. Dividends / Buybacks: If your stock has had a nice run over the last several years and if that run was driven by hikes in dividends or stock buybacks, its time to take a look at your payout ratios and to get them back in line. Theres been a lot of leverage to be had over the last 24 months from feeding yield to a yield starved market, however for the time being it appears that stock price performance has become uncoupled from dividend yields and stock buybacks. Maintain what you have but consider slowing down the rate of growth over the next 12 months. If the market and/or your share price declines you may get a natural yield boost. If you wish to increase dividends, a move in the last quarter might make for better timing than in the first two.

3. Mergers / Acquisitions: Theres no signal that a markets hit an interim top more reliable than the sound of American dollars hitting Canadian bank accounts. This trend has gained momentum over the course of 2013 analysts covering the healthcare sectors are beginning to lose significant parts of their coverage universe. If your plan is to sell your business, its a pretty good time to do so as US-based investors continue to troll the Canadian shores for acquisitions. The recent rise in the USD is making our companies look even more appealing.

We hope you enjoy this months The Bankers Note, and I look forward to reconnecting with you over the course of the year.

EPC Operating Company Index (2006-2013)

Adam Adamou CFA Managing Director, Knowledge, Innovation & Growth Investment Banking (647) 497-8816 | adam.adamou@europac.ca | #BringTechBack2Bay

January 17, 2014

The Bankers Note - Notes of Commercial Interest

Adam Adamou CFA Managing Director, Knowledge, Innovation & Growth Investment Banking (647) 497-8816 | adam.adamou@europac.ca | #BringTechBack2Bay

Notes of Commercial Interest:

The Bankers Note is a monthly report from Euro Pacific Canadas Investment Banking Group. This report targets our corporate clients by providing information and market insights to business leaders in the Knowledge, Innovation and Growth (KIG) sectors.

Key to the report is our gross margin based approach to highlighting value in these sectors along with our proprietary market indexes that track business activity. This report will provide a monthly editorial opinion, gauge sector performance, illuminate and follow new deal activity and provide our views, perspectives and ideas to those involved with or monitoring the KIG sectors.

Introducing the Gross Margin Multiple

The gross margin multiple is a rule-of-thumb based valuation technique that we use as an indication of value for companies in the KIG sectors. In this initial report we will discuss at length the core components of this model and contrast it with several other valuation methodologies.

The EPC Operating Company Index

The EPC Operating Company Index (Operating Company Index) is a 250 Company equal weighted index of select mid-to-micro cap operating companies listed on Canadian exchanges.

We believe that this is the most comprehensive index in Canada for tracking the KIG sectors.

The Operating Company Index was established with a base level of 100 as at January 2, 2013 and ended the year at 144.52 for a gain of 44.52%. This compares to a gain of just over 8.6% for the S&P/TSX Composite Index and 26.4% for the S&P 500:

The EPC GMM Model Index

The EPC GMM Model Index (GMM Model Index) is a 25-company equal-weighted subset of the Operating Company Index that favors companies with significantly lower than average gross margin multiples. We believe that a higher gross margin coupled with gross profit growth is the path to creating sustainable shareholder value for mid- to small-cap operating companies. The GMM Model Index tracks this view. The GMM Model Index closed 2013 with a gain of 103.72% vs. 44.5% for the Operating Company Index and a loss of 24.83% for the TSX/Venture Composite:

The tremendous price performance of our two primary indexes was driven for the most part by multiple expansion in the Operating Company Index and through improved business performance in the GMM Model Index:

Over the course of last year Operating Company Index multiples expanded by about 30% and accounted for 70% of the gain in the index during that period. The GMM Model Index multiples expanded by about 18% and accounted for approximately 20% of the gains in the GMM Model Index during 2013.

January 17, 2014

The Bankers Note - Notes of Commercial Interest

Adam Adamou CFA Managing Director, Knowledge, Innovation & Growth Investment Banking (647) 497-8816 | adam.adamou@europac.ca | #BringTechBack2Bay

A Foundation for Creating Shareholder Value

The CFA program teaches that a rigorous valuation approach requires a bottom-up fundamental analysis tied to an extensive due diligence process. This process is used to generate a reliable financial forecast for a period of perhaps five years. In conjunction with this forecast, an appropriate risk adjusted discount rate must be calculated based on the weighted average cost of capital of the business, along with a terminal year cash flow multiple that should be based on an estimate of a sustainable constant cash flow growth rate at the end of the forecast. These factors are then incorporated into a discounted cash flow model to generate the present value of the business.

This type of analysis is expensive, time consuming, difficult and prone to systemic and predictive errors (though we are happy to undertake this approach in our business valuations and fairness opinion practices, and it is common practice for our research department).

Many market participants however have developed rule-of-thumb alternatives to circumvent the complexities of fulsome valuation techniques particularly when dealing with large numbers of companies. These rules-of-thumb are used to derive valuations against trading values in the public markets. Two popular metrics are revenue multiples and operating cash flow (EBITDA) multiples.

Revenue multiples are used to compare relative valuations based on top line revenues. These multiples became popular during the dot-com bubble as a quick rule-of-thumb for determining and comparing valuations of earlier stage growth companies.

To elaborate, let`s consider two imaginary public companies, HardCo Hardware Inc. and SoftCo Software Inc:

EXAMPLE: HardCo Hardware Inc. vs. SoftCo Software Ltd.

($000s) HardCo Hardware SoftCo Software

Stock Market Value $60,000 $60,000

Revenue $60,000 $20,000

Revenue Multiple 1.00x 3.00x

At a valuation of $60MM HardCo Hardware is trading at 1.00x revenue while SoftCo Software is trading at 3.00x revenue. Using this measure it appears that HardCo is less expensive than SoftCo. Digging deeper we discover that taking these multiples at face value is not a good idea:

($000s) HardCo Hardware SoftCo Software Gross Margin 20% 60%

Gross Profit $12,000 $12,000

HardCo realizes a significantly lower gross margin on its revenue than SoftCo in fact both companies generate identical gross profit dollars despite the apparent top line difference. HardCo needs to generate $60MM in revenue to earn $12MM in gross profit, while SoftCo needs to generate only $20MM in revenue to get to the same gross profit. HardCo only looks less expensive because it has a lower gross margin.

This leads investors to overvalue low gross margin companies. A multiple model that rewards lower gross margins with more attractive valuations is not providing an effective basis of comparison. For this reason, we dont like revenue multiples.

EBITDA multiples also offer a problematic basis of comparison as it is often impossible to calculate this multiple for companies that choose to focus on growth over profitability. Since there is a disproportionately larger number of companies in the KIG sectors with negative EBITDA, a multiple that selects only profitable companies leads to selection bias.

EXAMPLE: HardCo Hardware Inc. vs. SoftCo Software Ltd.

($000s) HardCo Hardware SoftCo

Software Stock Market Value $60,000 $60,000

EBITDA $4,000 -$4,000

EBITDA Multiple 15.00x N/A

In our example, there is no way to apply an EBITDA multiple for SoftCo since EBITDA is negative. Further we can only compare HardCos 15.00x EBITDA multiple with those of other profitable companies.

We believe that gross profit multiples are a better indicator of relative value for growth stage companies in the KIG sectors.

Gross profits measure the incremental value that a business adds to its products and it is generally more comparable from industry to industry and from company to company than revenues or EBITDA:

($000s) HardCo Hardware SoftCo Software

Stock Market Value $60,000 $60,000

Gross Profit $12,000 $12,000

Gross Profit Multiple 5.00x 5.00x

In the example above we see that with gross profit as our rule-of-thumb multiple that these two relatively different companies are compared on a relatively similar basis. Gross profit multiples are a simple and easy proxy to use for this purpose, and since almost every company has positive gross profit, they are superior to both revenue and EBITDA multiples:

January 17, 2014

The Bankers Note - Notes of Commercial Interest

Adam Adamou CFA Managing Director, Knowledge, Innovation & Growth Investment Banking (647) 497-8816 | adam.adamou@europac.ca | #BringTechBack2Bay

Deriving Gross Profit Multiples from Gross Margins

Gross margins measure the contribution to value added by a business. A sustainably higher gross margin implies greater competitive advantage relative to a lower gross margin competitor. Companies that generate and sustain higher gross margins are more valuable than those with lower or unsustainable gross margins (all other things being equal). This fact is one of the primary reasons that KIG companies trade at higher multiples than, for example, manufacturing companies, and why software companies tend to trade at higher relative valuations than hardware companies.

Generating the same dollar value of gross profit at a higher gross margin is more valuable than generating that same gross profit at a lower gross margin. This is our core concept.

We developed the concept of a gross margin multiple (GMM) and incorporated it into our approach to reflect this observation. The GMM is a rule-of-thumb that assigns higher gross profit multiples to companies that generate higher gross margins as follows:

Gross Margin of = 60% TEV = 6x Gross Profit

This relationship combines all of the key elements of our model. We measure this relationship as our gross margin multiple and set it at a value of 1.00x when a companys valuation is in accordance with this relationship.

($000s) HardCo

Hardware SoftCo

Software Stock Market Value $60,000 $60,000 Gross Profit $12,000 $12,000 GMM VALUATION Gross Margin 20% 60% Rule-of-Thumb GMM 2.00x 6.00x

GMM Implied Valuation $24,000 $72,000 Actual GMM Multiple 2.50x 0.83x

The stock market is placing a value of $60M on both of these companies and assigning them a multiple of 5x gross profits ($12,000 x 5 = $60,000). Our GMM model indicates that the gross profit multiple for HardCo ought to be 2x gross profit (20% gross margin = 2x gross profit) while for SoftCo with a gross margin of 60% it should be 6x gross profit. This rule places a value of $24M on HardCo and $72M on SoftCo. Relative to the present valuation of $60MM for each company, we consider SoftCo to be significantly undervalued relative to HardCo. This is a materially different outcome than we got from using revenue, EBITDA or gross profit multiples alone. The actual GMM for each company is derived simply by dividing the present stock market value by the GMM Implied Valuation. We can see that HardCos GMM of 2.50x is significantly higher than the SoftCo GMM of 0.83x.

Caveats A few caveats for the GMM model:

1. The GMM model is a rule-of-thumb. It does not, for example, take into account the solvency risk of companies that are unprofitable on an on-going basis. In our example above, SoftCo may very well deserve a significantly lower GMM given its cash burn if the market believes that it will go out of business before it can reach profitability. Often times a low GMM is a signal that a company is in trouble. For this reason we use solvency measures in conjunction with our GMMs;

2. The model is best used on forward estimates for gross profits and gross margins rather than for trailing estimates. Future growth is a big factor in valuations and companies that are growing rapidly deserve higher multiples. Using a forward estimate for gross profit and gross margin is more appropriate than using trailing or historical figures. GMMs on trailing financials are typically greater than 1.00x to reflect the markets consensus view of future growth; and

3. The GMM model does not appear to maintain this relationship for large capitalization companies. As companies grow to sufficient size they are no longer growth companies and are more appropriately measured using other techniques.

January 17, 2014

The Bankers Note - Notes of Commercial Interest

Adam Adamou CFA Managing Director, Knowledge, Innovation & Growth Investment Banking (647) 497-8816 | adam.adamou@europac.ca | #BringTechBack2Bay

The EPC Operating Company Index

The EPC Operating Company Index is an index of 250 small-to mid-cap Canadian listed operating companies. The Index is skewed to favor the Knowledge, Innovation and Growth sectors:

As at January 14, 2014

The Operating Company Index is trading at a trailing GMM of 1.38x. To maintain the 1:1 relationship predicted by our GMM model the market is pricing in gross profit growth of 38% over

the next year. The actual annualized growth run rate of the Operating Company Index is 5.53% as at September 27, 2013 (the average reporting date on the financial statements for the companies in the Operating Company Index). It appears that the market is pricing in more growth than is being generated by the Index at its current run rate. Market Sentiment Market sentiment is a measure of the technical indicators of each of the stocks in the Operating Company Index. We use standard technical analysis techniques to measure the sentiment of each stock in the Operating Company Index on a scale from Very Bearish to Very Bullish. Aggregating these values over the entire universe provides us with an average technical indicator for the Operating Company Index:

We see a modestly positive skew toward the bullish with 43% of the companies in the Operating Company Index rated as Bullish or Very Bullish against only 3% rated as Bearish or Very Bearish. More than 50% of the companies are rated as Neutral. The aggregate technical indicator for the Operating Company Index as a whole is at +1.90 which is considered to be Neutral to Modestly Bullish.

Market sentiment for the Operating Company Index is in the Neutral to Modestly Bullish category. Operating Company Index Winners and Losers: 2013

Top Performing Stocks % Change

Worst Performing Stocks % Change

Northstar Healthcare Inc. (TSX: NHC) 838.46%

ProSep Inc. (TSX: PRP) -96.46%

NTG Clarity Networks Inc. (TSXV: NCI) 722.22%

Times Three Wireless Inc. (TSXV: TTW) -78.95%

Sphere 3D Corporation (TSXV:ANY) 690.24%

Data Group Ltd. (TSX: DGI) -74.53%

International Barrier Technology Inc. (TSXV: IBH) 620.00%

Swisher Hygiene Inc. (SWSH) -70.44%

Kelso Technologies Inc. (TSXV: KLS) 406.25%

MicroPlanet Technology Corp. (TSXV: MP) -70.00%

Very Bearish Bearish Neutral Bullish

Very Bullish

Sentiment Distribution 0% 3% 54% 39% 4%

Operating Company Index Summary of Component Companies

All Data is LTM

Companies in Universe: 250.00 27-Sep-13 Figures are for Last Twelve

Months (LTM)on a Rolling Basis

Avg. Market Cap: $273,258Avg. Cash: 26,569Avg. Debt: 77,419Avg. Enterprise Value: 326,190Avg. Revenue: 176,362Avg. Gross Profit 62,604Avg. Cash Flow: 8,173Avg. Gross Margin %: 44.01%Gross Profit Growth (Run Rate) 5.53%Cash Flow Margin % 4.63%

VALUATIONEV/Revenue (LTM) 2.17 EV/Gross Profit 5.45 Gross Margin Multiple 1.38 Price/Cash Flow: 18.09 Technical Indicator 1.90 Notes: 1 All figures are based on averages,

excluding the high/low outliers.

2 Percentages and Multiples are based on the averages of the individualcomponents and not on the averages of the global numbers.

3 Note that the universe is not static and changes over time.Results may therefore not be comparable over long periods of time,

4 Cash Flow is CGBO before working capital changes.

January 17, 2014

The Bankers Note - Notes of Commercial Interest

Adam Adamou CFA Managing Director, Knowledge, Innovation & Growth Investment Banking (647) 497-8816 | adam.adamou@europac.ca | #BringTechBack2Bay

The EPC GMM Model Index

The GMM Model Index is a subset of the Operating Company Index of 25 stocks that are trading at a relatively low average GMM 0.50x vs. 1.38x for the Operating Company Index. The GMM model favors higher margin businesses so this sub-index is skewed toward IT relative to the Operating Company Index, with 18 of the 25 companies in this Index (72%) operating within the IT sector vs. 41% in the Operating Company Index.

GMM Model Index Constituents

The 25 constituents in the GMM Model Index were selected to balance the size and scope of the Index and include companies ranging in market capitalization from under $10MM to almost $400MM.

The GMM Model Index is specifically constructed with lower GMM companies relative to the Operating Company Index. It DOES NOT contain a fundamental analysis of the businesses or their prospects. Inclusion in the Index does not necessarily constitute a recommendation to buy or to sell the securities of any of these issuers. It simply means that they had low GMM multiples at the end of 2013.

As at January 14, 2014

Relative to the Operating Company Index, the GMM Model Index is trading at a similar revenue multiple (2.18x vs. 2.19x). Gross profit growth run rates for the GMM Model Index however are tracking at an annualized rate of 18.52% while average gross margins are at 63.69% vs. 44% respectively. Note that these aggregate statistics reflect only a point in time and they are not adjusted for seasonal or cyclical factors. GMM Model Index Winners and Losers: 2013

Top Performing Stocks % Change

Worst Performing Stocks

% Change

Northstar Healthcare Inc. (TSX: NHC) 838.46%

Redline Communications Group (TSX: RDL) -52.03%

NTG Clarity Networks Inc. (TSXV: NCI) 722.22%

NexJ Systems Inc. (TSX: NXJ) -44.01%

Wanted Technologies Corporation (TSXV: WAN) 324.24%

Terago Inc. (TSX: TGO) -34.99%

Photon Control Inc. (TSXV: PHO) 323.08%

Symbility Solutions Group (TSXV: SY) -34.78%

C-Com Satellite Systems Inc. (TSXV: CMI) 152.31%

Espial Group (TSX: ESP) -31.43%

Company Name Ticker Last Market Cap LTM Revenue GMMAbsolute Software Corporation TSX: ABT 6.98$ 297,941$ 87,546$ 0.60 C-Com Satellite Systems Inc. TSXV:CMI 1.61$ 56,976 16,741 1.96 D-Box Technologies Inc. TSX:DBO 0.20$ 32,756 14,971 0.67 The Descartes Systems Group TSX:DSG 13.50$ 847,095 151,033 1.16 Espial Group, Inc. TSX:ESP 0.75$ 14,828 11,364 0.14 EXFO Inc TSX:EXF 5.19$ 313,601 252,422 0.33 Halogen Software Inc. TSX:HGN 12.38$ 268,039 46,876 0.82 IWG Technologies Inc. TSXV:IWG 0.24$ 9,053 6,606 0.34 Microbix Biosystems Inc. TSX:MBX 0.15$ 10,003 7,575 0.52 NTG Clarity Networks Inc. TSXV:NCI 0.40$ 12,502 8,736 0.46 Northstar Healthcare Inc. TSX:NHC 1.12$ 41,263 24,788 0.27 NeuLion Incorporated TSX:NLN 0.53$ 89,568 44,752 0.41 NexJ Systems Inc. TSX:NXJ 1.90$ 40,523 26,787 0.31 Photon Control, Inc. TSXV:PHO 0.26$ 26,102 13,120 0.67 Pethealth Inc. TSX:PTZ 1.95$ 59,789 40,555 0.19 Pure Technologies Ltd. TSX:PUR 6.75$ 344,817 59,102 0.88 QHR Corporation TSXV:QHR 1.19$ 57,064 33,344 0.59 Redline Communications Group TSX:RDL 2.77$ 43,086 36,030 0.25 Sandvine Corporation TSX:SVC 2.62$ 363,818 112,839 0.39 Symbility Solutions Inc. TSXV:SY 0.42$ 86,304 21,080 0.55 Terago Inc. TSX:TGO 6.24$ 71,372 51,084 0.58 Titan Logix Corp. TSXV:TLA 1.25$ 31,267 16,493 0.54 TransGaming Inc. TSXV:TNG 0.17$ 14,092 10,590 0.43 Wanted Technologies CorporatioTSXV:WAN 1.16$ 27,853 7,641 0.34 Webtech Wireless Inc. TSX:WEW 0.33$ 34,806 29,975 0.20

Focus Index Summary of Component Companies

All Data is LTM

Companies in Universe: 25.00 2-Oct-13 Figures are for Last Twelve

Months (LTM)on a Rolling Basis

Avg. Market Cap: $101,668Avg. Cash: 18,312Avg. Debt: 9,794Avg. Enterprise Value: 92,411Avg. Revenue: 37,957Avg. Gross Profit 25,490Avg. Cash Flow: 3,078Avg. Gross Margin %: 63.69%Gross Profit Growth (LTM/LFY) 18.52%Cash Flow Margin % 15.92%

VALUATIONEV/Revenue (LTM) 2.19 EV/Gross Profit 3.92 Gross Margin Multiple 0.50 Price/Cash Flow: 15.68 Technical Indicator 2.00 Notes: 1 All figures are based on

averages, excluding the high/low outliers.

2 Percentages and Multiples are based on the averages of the individualcomponents and not on the averages of the global numbers.

3 Note that the universe is not static and changes over time.Results may therefore not be comparable over long periods of time,

4 Cash Flow is CGBO before working capital changes.

January 17, 2014

The Bankers Note - Notes of Commercial Interest

Adam Adamou CFA Managing Director, Knowledge, Innovation & Growth Investment Banking (647) 497-8816 | adam.adamou@europac.ca | #BringTechBack2Bay

2013 Review and Transaction Summary:

OPERATING COMPANY INDEX A total of 146 transactions closed during 2013 as CEOs used the positive market momentum to go to the well and often several times. Transaction values exceeded $ 1 billion for the third consecutive quarter during 4Q13 with 45 transactions closed during the period. This was down from the third quarter, which topped $1.1 billion:

93 private placements closed in 2013 representing 64% of all transactions by quantity during the year. Private placements are generally smaller issues by dollar value with the largest transaction being the ViXS Systems Inc. (TSX: VXS) issue that closed in April for $57.4MM. Rounding out the top five were Redknee Solutions (TSX: RKN April 2, $45MM), Amaya Gaming Group (TSX: AYA June 19, $40MM), Black Diamond Group (TSX: BDI July 3, $40MM) and DHX Media (TSX: DHX October 29, $35MM):

There were 39 Public Offerings in 2013 with the largest being the $595MM JDS Uniphase (TSX: JDSU) issue closed on August 15, followed by two separate issues by Cogeco Cable (TSX: CCA) for $400MM and $300MM closed on April 14 and May 22 respectively, a Manitoba Telecom (TSX: MBT) issue for $249MM that closed on November 19 and a $200MM issue for TransAlta Renewables (TSX: RNW) that closed on September 25.

Of the 10 Mergers & Acquisitions that closed during the year the largest was the sale in August by Geosam Investments Ltd. of General Donlee Canada Inc. (TSX: GDI) to Triumph Aerospace

Systems Group for $114MM followed by the sale by Computershare Limited (ASX: CPU) of Solium Capital Inc. (TSX: SUM) for $29MM in March.

The sectorial breakdown of transactions largely tracks the sector composition of our Operating Company Index: 45% of closed transactions (66 deals) in the Information Technology sector vs. a 41% weighting in the Index, 28% (41 deals) in the Industrials sector vs. a 34% weighting in the Index and 7% (10 deals) in the Consumer Discretionary sector relative to an 8% weighting in the Index. We also saw a nice surge for Healthcare industry financings with 19 deals closed representing 13% of all transactions relative to a 9% weighting in the Index.

We saw some new investors making an impact on the KIG sectors this year with Difference Capital Financial (TSX: DCF) active as an announced buyer in four transactions valued at $37MM followed by Pinetree Capital Ltd. (TSX: PNP) active in three deals valued at $9MM.

The Bankers Note Notes of Commercial Interest

January 17, 2014

EVENTS CALENDAR JANUARY 16 FEBRUARY 14

Date/Time Company Name / Subject Event

Jan-20-2014 10:30 AM Opsens Inc. (TSXV:OPS) Annual General Meeting Jan-22-2014 EXO U Inc (TSXV:EXO) Annual General Meeting Jan-23-2014 The Caldwell Partners International Inc. (TSX:CWL) Annual General Meeting

Jan-24-2014 11:00 AM SENSIO Technologies, Inc. (TSXV:SIO) Annual General Meeting Jan-24-2014 1:00 PM Versatile Systems Inc. (TSXV:VV) Annual General Meeting

Jan-26-2014 Bauer Performance Sports Ltd. (TSX:BAU) End of Lock-Up Period Jan-26-2014 Kohlberg & Company, L.L.C. End of Lock-Up Period Jan-26-2014 Kohlberg Management VI, LLC End of Lock-Up Period Jan-26-2014 Kohlberg Partners VI, L.P. End of Lock-Up Period Jan-27-2014 TransAlta Renewables Inc. End of Lock-Up Period

Jan-27-2014 6:00 PM TIO Networks Corp. (TSXV:TNC) Annual General Meeting Jan-28-2014 Bluedrop Performance Learning Inc. (TSXV:BPL) Board Meeting

Jan-28-2014 11:00 AM Commercial Solutions Inc. (TSX:CSA) Special/Extraordinary Shareholders Meeting

Agenda: To approve definitive agreement for acquisition by Motion Industries (Canada)

Jan-29-2014 Ag Growth International Inc. (TSX:AFN) Ex-Div Date (Regular) Jan-29-2014 HNZ Group Inc. (TSX:HNZ.A) Ex-Div Date (Regular) Jan-29-2014 Student Transportation, Inc. (TSX:STB) Ex-Div Date (Regular) Jan-29-2014 Wajax Corporation (TSX:WJX) Ex-Div Date (Regular)

Jan-29-2014 4:30 PM Exco Technologies Limited (TSX:XTC) Earnings Call Live Audio Details & Webcast URL: http://event.on24.com/r.htm?e=735734&s=1&k=E33709AC3D35024D318C79FC2396F920

Jan-29-2014 4:30 PM Exco Technologies Limited (TSX:XTC) Annual General Meeting Jan-29-2014 4:44 PM Exco Technologies Limited (TSX:XTC) Earnings Release Date

Jan-30-2014 TransAlta Renewables Inc. (TSX:RNW) Ex-Div Date (Regular)

Ex-Div Date: Jan-30-2014 Amount: 0.064 (CAD) Pay Date: Feb-28-2014 Record Date: Feb-03-2014

Feb-04-2014 Westjet Airlines Ltd. (TSX:WJA) Earnings Call Feb-04-2014 Westjet Airlines Ltd. (TSX:WJA) Earnings Release Date Feb-05-2014 Calian Technologies Ltd. (TSX:CTY) Earnings Release Date Feb-05-2014 Sierra Wireless Inc. (TSX:SW) Earnings Release Date

Feb-05-2014 5:30 PM Sierra Wireless Inc. (TSX:SW) Earnings Call

Live Phone: 1-877-201-0168 Replay Phone: 1-855-859-2056 Passcode: 7687072 Passcode: 7687072

Live Audio Details & Webcast URL: http://www.snwebcastcenter.com/webcast/sierrawireless/2013q4/

Feb-07-2014 Craig Wireless Systems Ltd (TSXV:CWG) Annual General Meeting Feb-07-2014 2:00 PM Calian Technologies Ltd. (TSX:CTY) Annual General Meeting

Feb-10-2014 16th Annual BIO CEO & Investor Conference Conference

Sponsor: Biotechnology Industry Organization Location: The Waldorf Astonia, New York, New York, United States

Feb-10-2014 Novik Inc. (TSXV:NVK) Special/Extraordinary Shareholders Meeting

Feb-10-2014 Transition Therapeutics Inc. (TSX:TTH) Company Conference Presentation

Feb-11-2014 Mediagrif Interactive Technologies Inc. (TSX:MDF) Earnings Release Date Feb-12-2014 Cangene Corp. (TSX:CNJ) Special/Extraordinary

Shareholders Meeting Feb-12-2014 Enghouse Systems Limited (TSX:ESL) Ex-Div Date (Regular)

Ex-Div Date: Feb-12-2014 Amount: 0.080 (CAD) Pay Date: Feb-28-2014 Record Date: Feb-14-2014

The information contained in this report represents the view of the author(s) and was developed from sources we believe to be reliable. We do not represent that such information is accurate or complete and it should not be relied on as such. Any opinions expressed herein reflect our judgment at this date and are subject to change. Euro Pacific Canada Inc. and/or employees from time to time may hold shares, options or warrants on any issue included in this report and may buy or sell such securities. This report is not to be construed as an offer to sell or solicitation to buy securities.

Generating the same dollar value of gross profit at a higher gross margin is more valuable than generating that same gross profit at a lower gross margin. This is our core concept.CaveatsA few caveats for the GMM model:1. The GMM model is a rule-of-thumb. It does not, for example, take into account the solvency risk of companies that are unprofitable on an on-going basis. In our example above, SoftCo may very well deserve a significantly lower GMM given its cash burn if 2. The model is best used on forward estimates for gross profits and gross margins rather than for trailing estimates. Future growth is a big factor in valuations and companies that are growing rapidly deserve higher multiples. Using a forward estimate for3. The GMM model does not appear to maintain this relationship for large capitalization companies. As companies grow to sufficient size they are no longer growth companies and are more appropriately measured using other techniques.The EPC Operating Company Index is an index of 250 small-to mid-cap Canadian listed operating companies. The Index is skewed to favor the Knowledge, Innovation and Growth sectors:As at January 14, 2014The Operating Company Index is trading at a trailing GMM of 1.38x. To maintain the 1:1 relationship predicted by our GMM model the market is pricing in gross profit growth of 38% over the next year. The actual annualized growth run rate of the Operati...Market SentimentMarket sentiment is a measure of the technical indicators of each of the stocks in the Operating Company Index. We use standard technical analysis techniques to measure the sentiment of each stock in the Operating Company Index on a scale from Very Be...We see a modestly positive skew toward the bullish with 43% of the companies in the Operating Company Index rated as Bullish or Very Bullish against only 3% rated as Bearish or Very Bearish. More than 50% of the companies are rated as Neutral. The agg...Market sentiment for the Operating Company Index is in the Neutral to Modestly Bullish category.The GMM Model Index is specifically constructed with lower GMM companies relative to the Operating Company Index. It DOES NOT contain a fundamental analysis of the businesses or their prospects. Inclusion in the Index does not necessarily constitute a...As at January 14, 2014Relative to the Operating Company Index, the GMM Model Index is trading at a similar revenue multiple (2.18x vs. 2.19x). Gross profit growth run rates for the GMM Model Index however are tracking at an annualized rate of 18.52% while average gross mar...

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