16
Dear Investor, We’ve all heard the stories — and the statistics — that illustrate the many problems with the legal sys- tem in the United States today. But today I’m writing to tell you about a remarkable company that’s actually doing something to help level the playing field in literally thousands of cases that might never have otherwise been pursued. In fact, not only is this company helping solve this problem — by providing an invaluable service to the legal community — they’ve also created a significant profit oppor- tunity for those investors savvy enough to act quickly. T he truth is, this up-and-coming company — a five-year-old firm based in Nevada — has been one of the mark et’s best-k ept secrets… until now . Now…I know what you’re thinking. Litigation financing is not exactly a “sexy” story. It’s nowhere near as glamorous as the hot new tech stock that will revolutionize the Internet…or the biotech that promises to cure a crippling disease. But that’s part of what makes the opportunity with LitFunding Corporation (OTCBB: LFDG) so great — it’s a story that has not yet been told by the “mainstream” finan- cial press. Once they get wind of this remarkable story, all bets are off. But in the meantime, early investors stand to benefit in a big way. In just a moment, I’ll tell you pre- cisely how this company has built a successful business model…and about their plans to have roughly $25 million worth of potential receivables “on the street” by the end of 2005. (continued on page 3) (continued on page 3) BREAKING NEWS: LITFUNDING CORP. REPORTS YEAR-END RESULTS WITH DRAMATICALLY STRONGER BALANCE SHEET LAS VEGAS LITFUNDING Corp. (OTCBB: LFDG), reported on March 21 net income of $13.2 million for the year ended December 31, 2004, up $21.4 million from the previous year loss of $8.2 million. The $13.2 million in income includes a $615,400 loss from operations. The results for the year ended December 31, 2004, included a Each year in the United States, more than 10 million civil lawsuits are filed at a cost of over $240 billion. Today one company is poised to take advantage of the growing number of cases in the U.S…and deliver outstanding returns to investors. This forward-thinking company — established in 2000 and the first of its kind in an industry poised to explode — is helping level the playing field in the legal community. Over 1,150 Cases Financed to Date…and in Such Great Demand That Nearly $3 Million in Funding – With a Potential Return of More Than $10 Million — is Just Waiting to be Processed… Now YOU Can Get In On… The Company That’s Revolutionizing the “Business of Law” Complimentary Issue Spring 2005

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Page 1: Each year in the United States, more than 10 million civil ...€¦ · Sexual Harassment Racial Discrimination in the Workplace Medical Malpractice Identifying the Right Cases…

Dear Investor,

We’ve all heard the stories — andthe statistics — that illustrate themany problems with the legal sys-tem in the United States today.

But today I’m writing to tell youabout a remarkable company that’sactually doing something to helplevel the playing field in literallythousands of cases that might neverhave otherwise been pursued.

In fact, not only is this companyhelping solve this problem — byproviding an invaluable service tothe legal community — they’ve alsocreated a significant profit oppor-tunity for those investors savvyenough to act quickly.

The truth is, this up-and-comingcompany — a five-year-old firmbased in Nevada — has been oneof the market’s best-keptsecrets… until now.

Now…I know what you’re thinking.Litigation financing is not exactly a“sexy” story. It’s nowhere near asglamorous as the hot new tech stockthat will revolutionize the Internet…orthe biotech that promises to cure acrippling disease.

But that’s part of what makes theopportunity with LitFundingCorporation (OTCBB: LFDG) sogreat — it’s a story that has not yetbeen told by the “mainstream” finan-cial press. Once they get wind of thisremarkable story, all bets are off.But in the meantime, early investorsstand to benefit in a big way.

In just a moment, I’ll tell you pre-cisely how this company has built asuccessful business model…andabout their plans to have roughly$25 million worth of potentialreceivables “on the street” by theend of 2005.

(continued on page 3)(continued on page 3)

BREAKINGNEWS:

LITFUNDING CORP. REPORTS YEAR-END RESULTS WITH

DRAMATICALLY STRONGERBALANCE SHEET

LAS VEGAS — LITFUNDINGCorp. (OTCBB: LFDG), reportedon March 21 net income of $13.2million for the year endedDecember 31, 2004, up $21.4million from the previous year lossof $8.2 million. The $13.2 millionin income includes a $615,400loss from operations.

The results for the year endedDecember 31, 2004, included a

Each year in the United States, more than 10 million civil lawsuitsare filed at a cost of over $240 billion. Today one company is poised to take advantage of the growing number of cases

in the U.S…and deliver outstanding returns to investors.

This forward-thinking company — established in 2000 and the first of its kind in an industry poised to explode — is helping level the playing field in the legal community.

Over 1,150 Cases Financed to Date…and in Such Great Demand That Nearly $3 Million inFunding – With a Potential Return of More Than $10 Million — is Just Waiting to be Processed…

Now YOU Can Get In On… The Company That’s

Revolutionizing the “Business of Law”

Complimentary IssueSpring 2005

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2 For a FREE Investor’s Kit Call Toll-Free 1-800-323-4033

Now YOU Can Get In On... The Company That’s Revolutionizing the “Business Law”

What if you had five stocks in your portfolio that made over 1,000% profits?

That’s how to build a real fortune.Spread your risk over a basket fullof huge winners. I’ve done thismany times in the past, providingmy subscribers with picks thatmade gains* like these:

Of course, not all of these stocksgain at the same time, nor do allof them do this well. As you beginadding these to your portfolio anddropping the disappointments (wehave a clear sell strategy too), thefortunes really pile up. Here’s theimpact that this could have inyour portfolio. Had you investedjust $7,000 in each the stocks list-ed above when I recommendedthe buy, you would watched asthey added a total of $1,107,330 tothe value of your portfolio!

That’s over $1.1 million in profitfrom a portfolio of 5 stocks withonly $35,000 total to start!

If you want to feel good about yourinvesting...then just wait until youstart expressing your gains as“something-point-something” mil-lion dollars! That’s serious profit-making! It’s realistic too, even foran investor who has just a fewthousand in play!

‘‘This is NOT the first time I’vepicked stocks with four-digitprofit-making potential!“

If you want stocks like LFDG in yourportfolio, then let me show you whereto find them.

I call these opportunities “SpecialSituations” that could make you afortune when you learn aboutthem at just the right time...likenow with LFDG.

But you don’t have to go siftingthrough thousands of OTC stocksto find a company with this kind

of ten-bagger plus potential...

I find the holy grail of investing:1,000% growth or greater on the bigexchanges, NASDAQ and the Amex!

My stock picks frequently surpassthis magic number and they comefrom established companies. Hadany one been in your portfolio, theimplications to your wealth wouldstunning to say the least.

It’s not hard to imagine how just afew $7,000 investments, like mypicks shown on page 14, can lead to7-figure, million-dollar-plus wealth.

But why limit yourself to imagin-ing? Let me tell you how I’ve postedthis enviable record through myOTC Growth Stock Watch newslet-ter, and why subscribers eagerlywatch their mailboxes for my buyalerts. Each comes with the samekind of profit making potentialthat I have reported to you here.

Geoffrey Eiten is one of the most respectedand often-referenced newsletters publishersby financial news sources like Barron’s,Fortune, Investment Reporter and others.

Investors made fortunes in profits withGeoffrey Eiten

“I beat every advisor in the running, placingfirst in the CNBC/USA Today InvestmentChallenge.

“Starting with $500,000, I grew my portfolioby 271.2% in just 6 weeks...to a stunning $1,356,102 value!

“Anyone following this plan would have finished with $2,356 forevery $1,000 to start!”

This is the kind of profit performance readers expect from GeoffreyEiten. Learn more about his investment strategies and stock pick-ing newsletter service on pages 13 through 14.

Geoffrey Eiten

(continued on page 13)

** 7,050% on Express Scripts (ESRX)First recommended: 9/92 @ $1.19 –3/15/05 $84.91 current

** 4,217% on Natural MicroSystems (NMSS)

First recommended: 4/94 @ $1.56 – withsubsequent high 9/7/00 of $84.91

** 3,089% on Advance PCS (ADVP)First recommended: 12/96 @ $1.19 –sell recommended 9/15/03 $36.76

** 1,111% to 1,909% on Techne Corporation (TECH)

First recommended: 6/93 @ $3.43 –3/15/05 $41.54 current with subse-quent high of $71.06 on 7/6/00

** 1,085% on Surmodics (SRDX)First recommended: 5/98 @ $4.88 – withsubsequent high 6/28/01 of $66.90

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Or Visit Our Website at www.litfundingusa.com ADVERTISEMENT 3

Litfunding USA ■ Symbol OTC BB: LFDG

But first, since no one else has toldthis story, allow me to take just amoment to tell you…

Why LitFunding Corp. Is Perfectly Positioned For Explosive Growth:

■ LitFunding Corp. is a companywith a business model — toadvance funds to attorneyspursuing potentially lucrativecontingency lawsuits against“deep-pocketed” defendants.

■ LitFunding Corp. is the leaderin this industry. Other litiga-tion financing firms advancemoney primarily to plaintiffs.But LitFunding takes a differ-ent approach — as of todaythey’re the only company in theU.S. that exclusively offersfunding to attorneys.

■ The potential market forLitFunding Corp. is enormous— there are over 10 million law-suits filed in the United Stateseach year…which means themarket for funding these law-suits is virtually unlimited.

■ As a matter of fact, theresponse to LitFunding Corp’sprogram has been so strongthat they currently have abacklog of roughly $3 million.This backlog has been creat-ed primarily through referralsand word-of-mouth advertis-ing — the demand for fundingis that large!

The LitFunding Corp. Story:Helping Level the Playing

Field in the Legal CommunitySo what exactly is it that LitFundingdoes…and how did they jump to the

forefront of what promises to be anenormous industry?

As you already know, it’s verycommon these days for deep-pock-eted defendants to use their enor-mous financial leverage to theirfull advantage in the courtroom.

In many cases, well-financeddefendants take advantage of thefinancial “mismatch” to force pre-mature settlements…most of thetime for far less money than aplaintiff might ordinarily expect.

That’s because some plaintiffs —and some law firms — simply can-not make the same investment ofresources that a deep-pocketeddefendant can.

But that’s where LitFunding Corp.has carved out a rather impressiveniche. LitFunding Corp. has rec-ognized the unique businessopportunity presented by the ris-ing number of contingency casesin the United States. And they’redoing something to help level theplaying field.

LitFunding Corp. is the first com-pany of its kind to specialize inadvancing much-needed fundsdirectly to the law firms pursuingcontingency cases.

This funding helps attorneys getthe help they desperately need —such as expert witnesses and prop-er research — in order to go aboutprosecuting their contingency casewithout any worries aboutmoney…and without pressure tosettle early due to a lack of funds.

Since its inception in 2000,LitFunding Corp. has developedan exemplary reputation for fund-ing large, reputable — and mostimportantly, successful — lawfirms that pursue high profile

(continued from page 1)

(over, please)

BREAKINGNEWS:(continued from page 1)

one-time non-cash gain of $14.1 mil-lion realized on the transfer of certainassets. That transfer of assets allowedthe company to recognize the eco-nomic reality of the event and removenon-recourse debt associated withthese assets totaling $26 million plusinterest from its balance sheet.Additionally, the creditors agreed torelieve the company of a further $1.6million in contingent recourse debt.

This transfer of assets during themonth of December 2004 was con-firmed by the US Bankruptcy Court inJanuary 2005 and was provided for inthe Plan of Reorganization previouslyconfirmed by the US Bankruptcy Courtin June 2004.

On a diluted per share basis net loss forthe year ended December 31, 2004 was9 cents and net income after the gaindiscussed above was $1.33. Net lossper share for the year ended December31, 2003 was 84 cents.

FINANCIAL TRANSFORMATIONALMOST COMPLETE

President and CEO, Morton Reed, said,“LitFunding Corp’s financial transforma-tion was begun in June 2004 when theUS Bankruptcy Court approved its planof reorganization. This allowed the com-pany to put the unnecessarily litigiousand expensive petition for InvoluntaryBankruptcy that forced the companyinto chapter 11 behind itself. We arenow building a strong foundation andonce again funding attorneys after along hiatus during our litigation difficul-ties. We remain dominant in that sectorof the litigation funding business.

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4 For a FREE Investor’s Kit Call Toll-Free 1-800-323-4033

Now YOU Can Get In On... The Company That’s Revolutionizing the “Business Law”

cases. LitFunding Corp. currentlyspecializes in areas such as:

■ Personal Injury

■ Toxic Tort

■ Product Liability

■ Construction Defect

■ Labor Law Violations

■ Sexual Harassment

■ Racial Discrimination in the Workplace

■ Medical Malpractice

Identifying the Right Cases…While Still Delivering Profits For Investors

Before I go any further in describ-ing how LitFunding Corp. goesabout its business, it’s importantthat I take a step back and tell youwhat LitFunding Corp. does not do.

They don’t finance ambulancechasers. Never have and neverwill. As a matter of fact,LitFunding Corp. does not deal

with “soft-tissue” automobileinjury cases — such as whiplash,pulled muscles, back pain, etc. —of any kind.

That’s because LitFunding Corp. isvery careful with the cases theydecide to fund. Their team of expe-rienced underwriters — I’ll tell youmore about them in a moment — notonly looks for those cases most likelyto be resolved successfully…theyalso look to fund those cases thattake the moral high ground.

That’s something that’s veryimportant to LitFunding Corp…and, quite frankly, it’s one of thethings that impressed me mostabout this company early on.

Another thing that impressed meabout LitFunding Corp., obviously,was their business model. It’s a busi-ness model that has worked quitewell for LitFunding in the past fiveyears — to the tune of 1,150 casesand total advances of more than$18.6 million. But the prospects forthe future are even brighter…

The “Secret” Behind LitFunding’s History of Success

The key to success for any companyin a relatively new industry — suchas the litigation finance industry —is a simple, yet effective, businessmodel. And LitFunding Corp.’sbusiness model could not be anyeasier to understand:

Step One:

LitFunding Corp. receives a newcase for review and its experiencedunderwriting team immediately gets

One of the things that makes LitFunding Corp. such an attractive invest-ment opportunity is the simplicity of its business model.

Simply put, LitFunding has developed a successful program for providingfinancial assistance to those attorneys — working hard on a contingency basis— who need it most. If the case is successfully resolved, LitFunding receivesa fee in the amount of 45% of the principal that was advanced for each 30-day period that the principal is outstanding.

Here’s a quick example of how this process works: Let’s say thatLitFunding invests money in a case they feel will likely have a successfuloutcome. If the case settles in the first 90 days after funding, the compa-ny receives its advance back plus a fee of 45% of the advance.

LitFunding’s experience to date has been that a typical case settles in about3 to 18 months. So the fees can be quite substantial. This creates a win-winproposition, as the attorney involved is now able — because of LitFunding’shelp — to pursue a successful resolution to the case. And LitFunding — as wellas its investors — receives a sizable return on their investment.

At the present time, LitFunding Corp. offers three unique financial pro-grams to assist its clients:

1. Non-Recourse Advances — These cash advances are made directlyto a law firm and are contingent upon the favorable settlement of a singlecase that has been carefully evaluated by LitFunding’s experienced under-writing team.

2. Post-Settlement Advances — These are short-term judgment trans-fers of funds — also on a non-recourse basis — that are meant to tide theclient or attorney over while waiting for payment from the defense.

3. The Appeal Advance — This advance is utilized when a client has won acase in court and the defense has appealed the jury decision to a higher court.

How LitFunding Corp’s Business Model Works

U.S. tort costs amounted to $845 perperson in 2003. In 1950, U.S. tortcosts amounted to $12 per person.

(source: Insurance Information Instituteweb site – www.iii.org)

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Litfunding USA ■ Symbol OTC BB: LFDG

to work. The underwriters takegreat care to perform the necessarydue diligence. Factors such as thenature of the claim…the plaintiff’scondition…the history of the attor-ney involved…and the history of thedefendant are all taken into accountbefore a decision is made.

Step Two:

Once a case gets the green light forfunding, LitFunding Corp.advances to the law firm prose-cuting the case the funds neededto help ensure success. A typicalcase may involve an advance ofroughly $25,000 and these fundsare advanced on a non-recoursebasis, meaning LitFunding onlyreceives payment if and when thecase is successfully resolved.

Step Three:

If the case is successfully resolved,LitFunding Corp. receives a fee in

the amount of 15% of the principaladvanced for each month that theprincipal is outstanding.

Step Four:

So if, using our example from above,an advance of $25,000 was madeand the case was resolved success-fully after 180 days, LitFundingwould collect a fee of 90% of theprincipal amount. In this case, thatwould mean LitFunding would getback its original $25,000 invest-ment plus a fee of $22,500…for atotal of $47,500.

Again, it’s worth noting that —unlike firms who advance moneyto individual plaintiffs —LitFunding Corp. is only in thebusiness of advancing funds toattorneys. This means that thesole purpose of these funds is notto enrich the plaintiff, but to helpthe attorney finance expenses

such as fees for investigators, feesfor expert witnesses and the costof discovery and depositions.

What this does is free up theattorney from any potential worryover finances and allows the firmto successfully litigate on behalfof its client.

And — as you can clearly see fromthe example above — when this hap-pens, both the attorney and

(over, please)

■ LitFunding Corp. IS…a strong company with a his-tory of successfully funding attorneys since 2000.LitFunding Corp. has an outstanding client base anda great reputation within the legal community. And –perhaps most importantly – LitFunding’s Board ofDirectors – including Mr. Andrew Scherr, Mr. DavidG. Wallace and Mr. Howard Appel – is as impressiveas you’ll find anywhere.

■ LitFunding Corp. IS…a litigation finance companythat advances money exclusively to attorneys.

■ LitFunding Corp. IS…a company that is very muchin favor of tort reform.

■ LitFunding Corp. IS…a company that attempts totake the moral high ground in each and every case inan attempt to level the playing field for those attor-neys against “deep-pocketed” defendants. Eachcase funded by LitFunding Corp. is carefullyreviewed by the company’s experienced underwrit-ing team.

■ LitFunding Corp. IS NOT…a hastily assembledorganization run by a bunch of “rookies.”LitFunding’s five-year history of success…its out-standing reputation…and its prestigious Board ofDirectors are all signs that this is a company built forthe long haul.

■ LitFunding Corp. IS NOT…in the business ofadvancing money to plaintiffs for any reason.

■ LitFunding Corp. IS NOT…a company that partic-ipates in profits made by attorneys; instead, the com-pany charges flat fees.

■ LitFunding Corp. IS NOT…in the business of fund-ing “soft-tissue” automobile injury cases at all. Thisincludes whiplash, pulled muscles, back pain andother injuries that have traditionally been associatedwith “un-provable” claims. LitFunding’s managementteam believes that the legal community is damagedby those who take advantage of circumstances inmany automobile cases.

What LitFunding Is…and What LitFunding Is NOT

According to the actuarial consult-ing firm Tillinghast, the Americancivil liberty system cost $246 billionin 2003. This figure is up from$233 billion in 2002…$206 billionin 2001…$180 billion in2000…and $168.9 billion in 1999.

(source: Insurance Information Instituteweb site — www.iii.org)

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6 For a FREE Investor’s Kit Call Toll-Free 1-800-323-4033

Now YOU Can Get In On... The Company That’s Revolutionizing the “Business Law”

LitFunding Corp. stand to benefit froma successful financing arrangement.

A Five-Year Head Start Over theCompetition… and a Clear Plan

or the Next Five YearsEarlier in this report I mentioned toyou that this industry is relativelyyoung…and it’s very much posi-tioned to grow dramatically in thenext five years.

But as this industry begins to grow— and more companies jump intothe business of financing attorneys— keep in mind one important point:LitFunding Corp. has had a five-yearhead start on the rest of the group.

And during those five years, they’vecertainly made great strides…andtaken full advantage of the jump on thecompetition. LitFunding has built sev-eral strategic relationships with financ-ing firms throughout the United States.

During the first five yearsLitFunding Corp. has made over1,150 separate advances at a totalof over $18.6 million. But that’s justthe beginning. Take a look at whatLitFunding has accomplished withinthe past twelve months alone…

■ Processed more than $3 millionin requested funds — for 72 cases

■ Achieved an annual return of investment approaching 50 percent

■ Have 59 cases currently in thepipeline as of April 2005…

■ …and a backlog of nearly $3million waiting to be processed.

And looking forward, the picture isalso bright. According toLitFunding’s business plan, the com-pany should have roughly $3 millionin principal “on the street” by June of2005. That translates into $7 to $9

1. The potential market for LitFunding Corp. is unlimited!Statistics published by the Federal Government state that there maybe as many as 10 million personal injury lawsuits filed in the UnitedStates each year. With an average funding amount of roughly$25,000 per case, even if LitFunding Corp. were to fund just oneone-hundredth of one percent of cases each year…that wouldtranslate into 1,000 cases. 1,000 cases funded at $25,000 eachwould mean a potential return of around $50 million on thecompany’s total investment of just half that amount. And, again,that’s if LitFunding Corp. funds even a minisculepercentage of available cases…the market is trulyunlimited for this company!

2. LitFunding Corp. has a simple – and proven – businessmodel. Since the company’s inception in 2000, LitFunding hasmade over 1,150 separate advances of funds…a total of more than$18.6 million in all. LitFunding’s experienced underwriting staff –and the seriousness with which the company does its due diligence– ensure that only the “best of the best” cases are funded.

3. The Only Game in Town! One enormous advantage thatLitFunding Corp. has at the moment is that no other significantcompetitor has yet to emerge on the scene. There are a number ofother companies that are in business to fund plaintiffs, but LitFundingCorp. stands alone – for the time being – in the business of fundingattorneys exclusively. The company has taken full advantage of thefive-year head start they’ve been given to establish its place as theindustry leader and build an outstanding reputation as well as abroad client base.

4. Outstanding Leadership Guiding LitFunding Corp. Into theFuture. LitFunding’s management team is quite simply one of thestrongest you’ll ever see. LitFunding Corp.’s President and CEO, Dr.Morton Reed, has over 40 years experience in business and has beenin litigation funding since 1999. LitFunding Corp’s Board of Directorsalso includes Mr. Howard Appel – CFO of Laffer Associates – Mr.David G. Wallace, the Mayor of Sugarland, Texas…and AndrewScherr, a strategic consultant. Without question, LitFunding’smanagement team has both the experience and the clout to positionthis firm as a leader in what figures to be a rapidly growing industry.

5. The Financial Picture for LitFunding Corp. is Bright! With over1,150 cases – and more than five years – of history to guide thecompany, LitFunding is perfectly positioned financially for the next severalyears. In addition, the company currently has a backlog of roughly $3million worth of cases – the demand for LitFunding Corp.’s assistance isso great that the company can select only the most attractive cases inorder to minimize risk.

Five Great Reasons Why You Should Consider Investing in LitFunding Corp. Today!

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Litfunding USA ■ Symbol OTC BB: LFDG

million in potential receivables.

And by the end of 2005? $10 mil-lion worth of principal should beadvanced…with a potential receiv-able value of roughly $25 million.

LitFunding Corp.’s LLC ProgramHelps Raise Additional Funds

LitFunding Corporation (OTC.BB:LFDG) — with its successful busi-ness model — is well on its way tofinancial self-sufficiency by theend of 2005.

But the company has also puttogether an exceptionally creativeprogram for raising additional fundsthat has been very successful to date.

This additional funding is raisedvia the creation of Limited LiabilityCorporations that allow individualsto participate along withLitFunding in select cases to helpprovide working capital to thoseattorneys in need of assistance.

Here’s how the program works: anindividual interested in the pro-gram would fund the LLC assignedto them through a debt instrumentwith enough dollars to cover boththe principal itself along withadministrative and managementexpenses. (Typically, 85% of fundsare used for principal with 15% setaside for administrative fees.)

Once the case(s) funded have beenfavorably settled, the lender receivesback 100% of his initial principalplus 50% of the fees earned.

So if, for example, an individualadvanced a principal of $25,000through an LLC and the case set-tled favorably 180 days later…theindividual would get back his origi-nal balance of $25,000 plus 50% ofLitFunding’s fee (which in this casewould be $11,250.) That’s a totalreturn of $36,250 on an initialamount of $25,000. Or put anotherway, that’s a six-month return of45% for the individual.

An Industry Leader Poised toDominate The Litigation Finance

Industry For Years to ComeAt the very beginning of thisreport, I mentioned one importantpoint about LitFunding Corp.that I’d like to repeat for you now:up until now, this is a story thatsimply has not been told.

At this very moment, early(continued on page 12)

U.S. tort costs accounted for 2.23percent of gross domestic product(GDP) in 2003, the highest share ofGDP since 1990. (source: Insurance Information Instituteweb site – www.iii.org)

Q: Where does LitFunding get their applications for funding?Does the company have a sales team?

A: LitFunding Corp. does have a small sales team in place to helpgenerate funding requests. But the overwhelming majority of requeststo date have come from referrals. That’s part of the beauty ofLitFunding’s story – to date, they simply haven’t had to do any exten-sive marketing. The relationships they’ve built with attorneys to datehave been solid. Those relationships – along with referrals from otherlitigation finance companies that do not fund attorneys – have helpedcreate a backlog of nearly $3 million worth of cases for the company.

Q: How does LitFunding decide whether or not to fund a case?

A: The company has a very experienced team of underwriters that care-fully analyzes each funding application that comes through the door.Their process involves multiple steps – including background checks onthe attorney involved and research about the firm defending the case –until ultimately the request is approved by LitFunding’s CEO personally.(More information on LitFunding’s underwriting process may be foundon page xx.) Given the current backlog of requests – and anticipatedfuture demand – LitFunding is in the unique position of being able toselect only the most favorable cases in order to minimize risk.

Q: What happens when a case is not successful?

A: LitFunding awards funds to attorneys on a non-recourse basis, sothat means that if a case is lost, the funds advanced by LitFunding donot need to be repaid. Payment of fees and the return of principal iscontingent upon successful resolution of a case…and the potentialfor failure is figured into the LitFunding’s overall fee structure.

Q: What types of funding programs does LitFunding Corp. offer?

A: At the present time, LitFunding offers three primary plans toassist law firms: non-recourse advances, post settlement advancesand appeal advances. More information on these programs can befound on page four.

FAQ’s about LitFunding Corporation

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8 For a FREE Investor’s Kit Call Toll-Free 1-800-323-4033

LitFunding Corp. has gathered together a management teamof five highly skilled professionals who represent more thanone hundred years of business experience. It has recruitedan impressive slate of Directors who have recently beenelected to its board at the last shareholders meeting.

Morton Reed, Ph.D., President and CEO.Dr. Reed served in the United States Marine Corp. during theKorean War. After returning from overseas he attended UCLAfor his undergraduate studies in English and Philosophy. From1960 through 1980 he served as an executive in severalbusiness ventures: CEO of Cathay Studios from 1960 to1968, CEO of Orient Limited of Nevada from 1968 to 1972,and President and Chairman of Aalpha Mortgage andInvestment Company from 1970 to 1982. During this time hecontinued with his education, earning a Masters Degree inPsychology from Antioch University in 1973 and a Doctoratein Philosophy in Clinical Psychology from California GraduateInstitute in 1975. During the early nineties Dr. Reed wrote andpublished three books and wrote several screenplays thatwere produced. In 1996 Dr. Reed joined Magnolia Studios, apost production facility in Burbank, California, and helpedeffect the sale of that company to Millennium Studios, whichappointed him interim CEO.

Dr. Reed left Millennium in 1999 and joined Case Financial,a litigation funding company where he served as VP ofsales. In November 2000, Dr. Reed left Case Financial toform LitFunding Corp., where he remains, as President andChairman of the Board.

David Cohen, Chief Financial Officer,Treasurer, and Corporate Secretary.David Cohen has more than 23 years experience in business.David Cohen received his undergraduate BS degree in bothEconomic and Accounting in South Africa, and received hisCPA credential in California. He does not participate as aCPA. After spending nine years in public accounting, DavidCohen became deeply involved in the founding of a broker-dealer, and a company who specialized in the export of lim-ousines to China. He later became part owner in a coffeeoperation modeled along the lines of Starbucks.

In 1992, David Cohen took a position as CFO, Controllerand Treasurer with RPS and affiliates, a $500 million dollarreal estate conglomerate operating in 38 states and theCommonwealth of Guam. RPS had two public affiliatesand several subsidiaries including a captive broker-dealer,an insurance agency, a chain of 12 nursing homes, and a

high-tech manufacturing company. David Cohen played akey role in streamlining the operations of this 1,500employee company and focused its attention on achievingposition cash flow. David Cohen’s experience also includesseveral start-ups and turnaround situations and he hasraised more than $35 million in private and public offerings.David Cohen has twice been licensed by the NationalAssociation of Securities Dealers (NASD) as a FinancialOperations Principal.

Stanley B. Weiner, Vice President of Finance,LitFunding Corp. Director.Stanley B. Weiner has more than 35 years of experience cre-ating and running businesses. Stanley Weiner was the found-ing officer of Gemini Financial Corporation, a NASDBroker/Dealer from 1970 through 1975, he was then Presidentof A.P.A. Real Estate Syndication Company from 1975 through1978, and later became Managing Partner of Agri-WorldPartnership from 1978 through 1983, an agricultural projectsyndication company with offices throughout Europe and theMiddle East. Stanley Weiner was a Founding Officer/Presidentof Regent Properties from 1985 through 1990, and from 1990through 1993 he was the Chief Executive Officer of WiseIndustries, a company specializing in pollution control devices.In 1978, Stanley Weiner founded Western Pacific InvestmentCorporation, which syndicated thousands of apartment units,office buildings, shopping centers and agricultural properties inaddition to packaging many tax-sheltered investments. As aresult of the foregoing activities, Stanley Weiner has extensiveexperience in marketing, acquiring, financing, negotiatingagreements, packaging transactions, and developing commer-cial and agricultural property. Stanley Weiner received hisBachelor of Arts degrees in both Psychology and Economicsfrom California State University, Long Beach, and did graduatework in both fields at UCLA. Stanley Weiner has in the pastheld a national Association of Securities Dealers Principalslicense and is a licensed Real Estate Broker.

David G. Wallace, LitFunding Corp. Director.Mr. Wallace received his BBA in Real Estate Finance from theUniversity of North Texas. In addition to this schooling, Mr.Wallace attended Union College in Schenectady, New York,and received a scholarship to study International Real Estate,International Finance and International Law at the University ofReading located in Reading, England. Since his graduation,Mr. Wallace has been involved in the acquisition and/or for-mation of over 100 companies and/or partnerships and hassecured over $300 million in equity and debt.

More than 100 Years of Business Experience…

Now YOU Can Get In On... The Company That’s Revolutionizing the “Business Law”

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And One of Most Impressive Management Teams AnywhereMr. Wallace currently serves as the Chairman of Wallace &Associates Investments, Inc., formerly The MarkpointCompany, a venture capital and merchant banking operationthat oversees investment activities for its related investmentfunds. In addition, Mr. Wallace also serves as the Presidentand a director of a Carmel, California-based Small BusinessInvestment Company (SBIC). As a result of the numerousportfolio holdings, Mr. Wallace currently serves on the boardsfor several private and public companies. Mr. Wallace alsoserved as the Chief Executive Officer of The GranthamCompany, a private investment-banking firm. The GranthamCompany specialized in making direct investments with its co-investors in small, but established companies that soughtmedium-term capital to support further expansion. Mr.Wallace was Vice President of Equity ManagementCorporation, a private real estate syndication firm. In thiscapacity, Mr. Wallace was responsible for the acquisitionand/or sale of over $250 million of income producing proper-ties. In connection with such real estate activities, Mr. Wallacewas a charter member of the North Texas Association of RealEstate Professionals, a former member of the Real EstateSecurities and Syndication Institute (RESSI), a former mem-ber of the American Association of Financial Planners, andwas frequently a guest lecturer at the University of NorthTexas’ “Executive on Campus” program. Mr. Wallace is Co-Chairman, United States Conference of mayors - HomelandSecurity task Force, Member, United states Conference ofMayors, Chairman of the Texas Energy Center Task Force andsits on the boards of Directors of several businesses.

Andrew B. Scherr, LitFunding Corp. Director. Mr. Scherr is a strategic consultant advising companies onfinance, strategy and M&A. As an investment banker withSalomon Smith Barney and later with Alex, Brown, Mr. Scherrraised in excess of $15 billion in financings and advised onnumerous mergers, acquisitions and restructurings. Prior tohis work in corporate finance and M&A, Mr. Scherr was amanagement consultant at Accenture where he advised com-panies on strategic issues. In addition, Mr. Scherr has experi-ence in venture capital, asset management, corporate law andentrepreneurship. Mr. Scherr received his B.S. in electricalengineering and computer science from the Johns HopkinsUniversity, his JD from the University of Maryland, and hisMBA from the Yale School of Management.

Howard Appel, LitFunding Corp. Director. Howard Appel is Chief Financial Officer and a Director ofLaffer Associates, an economic research and consulting

firm that provides global investment-research services toinstitutional asset managers, pension funds, financial insti-tutions and corporations. He is also Chief Financial Officerand a Director of Laffer Advisors, an institutional broker-dealer and wholly owned subsidiary of Laffer Associates.Mr. Appel also manages the business and financial affairsof Dr. Arthur B. Laffer - renowned economist and formeradvisor to President Ronald Reagan. His business concen-tration is the areas or financial and operations managementand analysis, business development, formation of joint ven-tures and new business start-ups and various legal under-takings. In addition to his role with LitFunding, Mr. Appelalso advises a number of private companies including U.S.Script and Vizional Technologies. He was a former treasur-er of Yorktown University, an online university offeringundergraduate and graduate programs in Government andBusiness and Economics.

Mr. Appel received his BSc from the California State University.He has been licensed as a Certified Public Accountant with theState of California since 1987 and is registered SecuritiesAgent and Financial Operations Principal licensed with theNational Association of Securities Dealers (NASD).

Robert P. Amira, Executive Vice President.Prior to successful endeavors in marketing and finance, Mr. Amira served in the U.S Army Special Forces Unit as a2nd Lieutenant in the Vietnam War. Mr. Amira now has over25 years experience in all phases of Marketing, the GamingIndustry, Real Estate, Mergers and Acquisitions,International financing, and consulting.

Mr. Amira attended New York College and received hisUndergraduate Degree in Business Administration withminor studies in Finance and Marketing. From 1969through 1974, he held the position of Vice President ofSales for Vivi Color Graphic Arts, overseeing national andinternational accounts. From 1974 through 1983, he wasthe Executive Vice President of the Dunes Hotel andCountry Club in Las Vegas, Nevada, supervising severalthousand employees, and managing all operations of thehotel and casino.

Prior to accepting his position as Executive Vice Presidentof LitFunding USA, Mr. Amira served as CEO of RobarEnterprises, Inc., a company he founded in 1979, specializ-ing in financial investment and consulting. Since the found-ing of Robar Enterprises, Inc., he has been involved inarranging major investment capital for real estate acquisi-tions in California, New York, Florida and Nevada.

Litfunding USA ■ Symbol OTC BB: LFDG

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Editor: Give us a brief overview of LitFundingCorporation and tell us about yourvision for thecompany’s future.

Dr. Morton Reed:What the company does isfinance litigation from the

plaintiff’s point of view to levelthe playing field. So we advance funds to attorneysonly to aid them in getting the expert witnesses theyneed, and prosecuting their case without concernsabout finances. That’s basically what we do.

We’ve done it now since November 2000 and wehave a lot of experience. We’ve refined ourprogram and just within the last six months, we’vemoved to Las Vegas and had a lot of success. Asa matter of fact, we’ve been quite successful sincewe’ve moved to Las Vegas.

We’ve had a lot of response so far; a lot ofattorneys around the country want our services.We’re operating now in 25 states and in the U.S.Virgin Islands.

Editor: Is there any particular specialty or fieldof law that your company focuses on?

Dr. Reed: We like to specialize in personalinjury, but personal injury outside of the automobilearea – fender benders, whiplash. We don’t do anyof that. We finance more serious cases.

One of the things we do is we attempt to take themoral high ground in our cases. We like to alignourselves with an underdog who has a legitimate claim.

We’re very, very careful about our due diligence.We study the claim very carefully; we study therecord of the attorney. We investigate theplaintiff’s condition. We investigate the defensefirm that’s representing whoever is liable.

We’re very careful about that and we don’t involveourselves with small cases nor do we marketdirectly to plaintiffs.

Editor: Can you give us an idea as to the sizeof this market and the company’s intendedmarket share achievement goals over the nextone to two years?

Dr. Reed: A couple of years ago the federalgovernment published a study that indicated therewere 6.1 million contingency lawsuits filed in theUnited States on automobile injury only.Combining all other contingency lawsuits, I wouldroughly say there are 10 million lawsuits per yearfiled in the United States.

If we were to achieve just 1% of that marketplace,it would be so large that we wouldn’t have enoughmoney to fund them all. The average funding isabout $25,000 per case. Sometimes we go alittle higher, but that’s an average.

So if you’re looking at 1,500 or 2,000 cases per yearmultiplied by $25,000…the number is staggering.

Editor: Can you tell us a little about thecompany’s management team and its members’various areas of expertise?

Dr. Reed: I founded the company, and mybackground is as a forensic psychologist so Ispent a lot of time in the halls of courtrooms. Andso I became very familiar not so much with thewritten law, but became very familiar with thebusiness of law – with how things are done in theback room, as an expert witness myself.

So I founded the company and brought on boardtwo attorneys who were burned out as litigators,but who have great expertise. They analyze all ofthe cases that are submitted to us.

We have a staff of about 16 people – that includessome sales people who are out representing uswith law firms and a couple of people who are outrepresenting us with investors.

We have a collections department…we have anaccounting department. We are a publiccompany, so in compliance with Sarbanes-Oxleywe have a staff of accountants who take care of allcompliance issues. And we’re very, very carefuland in very good standing with that.

Geoffrey Eiten

Geoffrey Eiten Interviews Dr. Morton Reed

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Litfunding USA ■ Symbol OTC BB: LFDG

Most of our business comes from brokers who are in thesame industry who finance plaintiff requests. There arecompanies that supply plaintiffs who are hurt with moneyfor rent and for school, etc. We don’t do any of that, butthose companies, when they receive a request from anattorney that they don’t satisfy, they refer that to us.

So most of our business is now coming fromreferrals from firms around the country.

Editor: Is there any one particular geographiclocation that you’re seeing the most amount ofbusiness come out of?

Dr. Reed: Traditionally, because we wereoriginally based in California, the larger amount ofbusiness came from the state of California, but that’sshifted. Now that we’re not there, we’re getting alarger and larger amount from other states. Texas,Missouri, Tennessee, New Jersey, Georgia, Florida.

We’re getting a lot of business from around the countryand we like that it’s coming to us from many places.

Editor: What message would you have for apotential investor?

Dr. Reed: I can tell you what our plan for thecompany is – our plan is a long-term plan. Weexpect to be around for quite a while. Once wesettle in, we will grow, hopefully, at a rate of 5-10%per year. Right now we’re growing at 3% permonth. But that will settle down, eventually.

We hope to be self-sufficient within 36 monthsfrom inception of the reorganization, which waslast September. From that point on, any increasein growth will come from additional investing thatwe won’t be actively seeking – that, hopefully,investors will just reach out to us.

Editor: What do you think gives your platforma competitive edge in the marketplace?

Dr. Reed: We’re very lucky at the moment becausewe don’t have any competition. We had one companythat was competing with us but was primarily fundingplaintiffs, not attorneys. And they have gone out ofbusiness. There may be one other company on the EastCoast that is preparing to fund attorneys’ request.

But right now we don’t seem to have anycompetition because everyone’s coming to us.

Editor: Where do you see the return on theinvestment on funding attorneys?

Dr. Reed: We have a fee structure in place thatworks well for us. We don’t take a percentage and wedon’t take interest, since it’s non-recourse investment.We have a fee structure of 15% per month right now.

We also have an LLC program whereby individualscan join with us, we create an LLC for them. Theirmoney is not commingled – they get to approve thecases in which we invest, and they receive 50% ofthe return on the investment. So if an investment isout for six months and it earns 90% of itself – in ahypothetical where we put out $100,000 – therewould be $90,000 in fees. So the individual wouldget his $100,000 initial investment back plus$45,000 in fees, or 50% of what we collected.Again, that’s a hypothetical situation.

Editor: Do you have any additional closingcomments for potential investors?

Dr. Reed: The individuals we have who are withus seem to be very happy with us. In the first threemonths of business, we received four payoffs thatreturned a large fee and those note holders are quitehappy. They got their money back quickly with a largefee. So the model works, and I think that anyone whoinvests in this LLC program with our company hasfound a good place to put their reserves.

Disclaimer: This publicly distributed report of OTC Special Situations Report, a publication ofOTC Growth Stock Watch, is a sponsored advertisement. The distribution costs of this report tonew subscribers, six hundred fifty thousand dollars, were funded by Nikolas Capital Corp. in aneffort to create investor awareness of Litfunding Corp. It is anticipated that this report will gen-erate new subscriptions for Growth Stock Watch. Neither OTC Growth Stock Watch nor GeoffreyEiten, the reviewer [or analyst], received any compensation for this report, but both expect toreceive an unknown amount of revenue from new subscriptions from the subscription offer con-tained herein. Neither OTC Growth Stock Watch nor Geoffrey Eiten is a broker-dealer, though theyare investment advisers. This report, including the opinions expressed and the statementsmade within, is for informational and advertising purposes only and should not be construed asinvestment advice and do not constitute an offer to sell any securities, and it is not solicitingan offer to buy any securities in any state or other jurisdiction where the offer or sale is not per-mitted. The information used to prepare this report is believed to be from reliable sources, butno representation is made as to the accuracy or completeness of such information. Investmentin securities carries a high degree of risk and involves risks and uncertainties which may resultin investors’ losing all of their invested capital. Past performance does not guarantee futureresults. The information contained herein contains “forward-looking statements,” within themeaning of Section 27A of the Securities Act of 1933 and Section 21E of the SecuritiesExchange Act of 1934. Forward-looking statements are based upon expectations, estimates andprojections at the time the statements are made and involve risks and uncertainties that couldcause actual events to differ materially from those anticipated. Forward-looking statements maybe identified through the use of words such as expects, will, anticipates, estimates, believes,or by statements indicating certain actions may, could, should, or might occur. Any statementsthat express or involve predictions, expectations, beliefs, plans, projections, objectives, goalsor future events or performance may be forward-looking statements. Factors that could causeactual results to differ materially include but are not limited to adverse economic conditions,intense competition, lack of meaningful research results, inadequate capital, termination of con-tracts or agreements, adverse publicity and news coverage, inability to carry out research, devel-opment and commercialization plans, loss or retirement of key executives and research scien-tists, and other risks detailed in the company’s reports filed with the Securities and ExchangeCommission. Readers should consult with their own professional investment, tax and portfolioadvisors before making any investment decision and should independently verify all informationherein. More complete information about Litfunding Corp. is available from the website of theSecurities and Exchange Commission, at http://www.sec.gov, and copies of its filings may beread without charge at and copies obtained at prescribed rates from the public reference facili-ties of the Commission, at 450 Fifth Street, NW, Washington, DC 20549.

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investors — like you — have anextraordinary opportunity to real-ize enormous potential profitsfrom a company set to dominate itsindustry for many years to come.

By getting in early on this oppor-tunity with LitFunding Corp.(OTC.BB: LFDG) you’ll be invest-ing in a company with…

■ A great idea – LitFunding Corpwas the first company to suc-cessfully build a business basedon the idea of advancing fundsexclusively to attorneys involvedin cases against “deep-pocket-ed” defendants.

■ Virtually no competition –LitFunding Corp. is theunquestioned leader in thisindustry. As of today, LFDG isthe only public company in theUnited States that exclusivelyoffers funding to attorneys.

■ Enormous market potential –As I outlined earlier, the poten-tial market for LitFundingCorp. is enormous there areover 10 million lawsuits filedin the United States eachyear…that means the marketfor funding these lawsuits isvirtually unlimited.

■ Overwhelming demand for itsservices – The response to

LitFunding Corp’s programhas been so overwhelming todate that they currently have abacklog of roughly $3 million.

Shares of LitFunding Corp. (OTC.BB: LFDG) are currentlytrading for approximately $1.00,with slightly more than 13 millionshares outstanding.

I strongly urge you to consideradding LitFunding Corp. (OTC.BB:LFDG) to your portfolio today…before the “mainstream” financialpress gets a hold of this story.

When you do so, you’ll be getting inon the ground floor of one of themost exciting opportunities I’veseen in years. This is a companywith outstanding management…enormous market potential… solidfinancial footing… and a provenbusiness model. Potential returnsfor early investors could be stag-gering… so I urge you not to delay.

Sincerely,

Geoffrey Eiten, EditorSpecial Situations Report

LAS VEGAS — Feb. 17, 2005 — LITFUNDING Corp. (OTCBB: LFDG),a holding company specializing in the funding of litigation primarilythrough plaintiffs’ attorneys, announced today that the company hasalready achieved certain key financial milestones in the last quarter of2004 and the beginning of the first quarter of 2005. The company’s abil-ity to achieve these milestones, well in advance of initial projections, sig-nifies its competence and confidence in executing its business strategy.

Key milestones include:

■ Putting $750,000 in funding on the street — Processing $3 million inrequested funds for 72 cases

■ $183,125 has been received in principal and fees

■ $248,000 is owed in fees based on $562,500 remaining invested

■ Annual return on investment approaching 50 percent

■ Two Letters of Intent (LOI) of two LLCs for $5 million, with almost $1million already put out on the street, with an available $4 millionbased on letters of intent

■ 59 cases currently in the pipeline, with funding estimated tocommence next quarter

“I am very pleased with our progress thus far,” said Morton Reed, Ph.D.,the company’s chief executive officer. “Management is confident in ourstrategy moving forward. We believe that our unique approach to the bil-lion-dollar litigation-funding marketplace is both practical and profitable.Since relocating to Las Vegas, we have enjoyed an unprecedented amountof success, and are beginning to garner attention from brokers and attor-neys across the country. We think we have a bright future, and manage-ment is committed to building shareholder value through establishing anexpansive network of industry professionals and high-profile cases.”

LFDG Achieves Key Financial Milestones

Ticker: ..................OTCBB: LFDGCurrent:......................................$.80Target Price: ............................$4.80

600% growth/12 months

Recommend:....Aggressive Buy NowWebsite:

http://www.litfundingusa.com

U.S. tort costs grew 66 percentfrom $148.0 billion in 1994 to$245.7 billion in 2003. (source: Insurance Information Instituteweb site – www.iii.org)

(continued from page 7)

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Litfunding USA ■ Symbol OTC BB: LFDG

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(over, please)

(continued from page 2)

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The simple matter is, the bestinvestor can be a patient investor.In fact, Warren Buffet has beenattributed as saying:

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Or Visit Our Website at www.litfundingusa.com ADVERTISEMENT 15

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OTC Research Corporation300 Chestnut Street, Suite 200Needham, MA 02492

This Five-Year-Old Company is Quietly Revolutionizing

the “Business of Law”INSIDE:

Find out the inside story behind this forward-thinking company and learn how they are already leveling the

playing field in the legal community. All while delivering eye-opening profits for early investors!

Over 1,150 Cases Financed to Date…and in Such Great Demand That Nearly $3 Million in Funding —

With a Potential Return of More Than $6 Million — is Just Waiting to be Processed…

Litfunding USA ■ Symbol OTC BB: LFDG