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UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF NEW YORK ----------------------------------x

IN THE MATTER OF THE APPLICATION OF THE UNITED STATES FOR A SEARCH WARRANT FOR THE PREMISES KNOWN AND DESCRIBED AS SKY CAPITAL ENTERPRISES, INC., SKY CAPITAL LLC, AND SKY CAPITAL HOLDINGS, LOCATED AT 110 WALL STREET, 8TH FLOOR, NEW YORK, NEW YORK, AND ANY CLOSED CONTAINERS THEREIN

To Be Filed Under Seal

AFFIDAVIT IN SUPPORT OF A SEARCH WARRANT

----------------------------------x

STATE OF NEW YORK

)

COUNTY OF NEW YORK

)

ss.:

NORTHERN DISTRICT OF NEW YORK

)

KURT F. DENGLER, being duly sworn, deposes and says:

BACKGROUND

1. I am a Special Agent with the Federal Bureau of

Investigation ("FBl”) assigned to the FBI's New York Field

Office. I have been employed by the FBI for approximately 7 1/2

years and have been a member of the FBI's Securities Fraud Squad

since Fall 2000. In my capacity as a Special Agent of the FBI, I

have been involved in numerous investigations involving

financial fraud, including investigations of schemes involving

securities fraud, false statements, and wire and mail fraud.

2. The information contained in this affidavit is based,

in part, upon personal knowledge arising from my participation

in this investigation, and, in part, upon information and

belief. The sources of my information and belief include, among

other things, my debriefings of cooperating witnesses and of an

individual who has provided information to the Government in

hopes of receiving a cooperation agreement, two undercover

agents, and other federal agents; my review of recordings and

summaries of consensually recorded conversations, public,

regulatory and other filings; and my review of documents

relevant to the investigation. Where the statements of others or

the contents of documents and records are related herein, they

are related in substance and in part, and not verbatim.

Similarly, all assertions concerning dates, numbers and dollar

figures are approximate, based upon information and evidence

gathered to date. Since this affidavit is submitted for the

limited purpose of obtaining a search warrant, I have not set

forth each and every fact that I know concerning this

investigation.

3. This affidavit is submitted in support of an

application for a warrant to search the premises known and

described as the offices of Sky Capital Enterprises, Inc., Sky

Capital LLC, and Sky Capital Holdings (collectively "Sky

Capital"), located at 110 Wall Street, 8th Floor, New York, New

York, and any closed containers therein, as more fully described

below (the "PREMISES"), and to seize the items set forth in

paragraph 58 below.

4. This is the second affidavit that I have submitted

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in support of an application for a search warrant of the

PREMISES. On or about August 24, 2006, I submitted an affidavit

in connection with a prior application for the issuance of a

search warrant for the PREMISES. Based on that affidavit, on

August 24, 2006, United States Magistrate Judge Gabriel W.

Gorenstein signed a search warrant authorizing the FBI to

execute a search of the PREMISES. See 06 Mag. 1237. Following

the issuance of the search warrant, a broker at Sky Capital (the

"Broker") agreed to cooperate with the Government, as described

in more detail below. In light of this development, the

Government decided not to proceed with a search at that time in

order to allow the FBI to gain more information prior to any

search. Accordingly, the prior search warrant was never

executed.

5. For the reasons explained herein, there is probable

cause to believe that individuals associated with Sky Capital

have engaged in and are continuing to engage in criminal

activities, including securities, mail, and wire fraud through,

among other things, the use of materially false and fraudulent

representations, and omissions of material facts in connection

with the purchase and sale of securities, in violation of Title

15, United States Code, Sections 78j (b) and 78ff, and Title 17,

Code of Federal Regulations, Section 240.10b-5 (Securities

Fraud), and Title 18, United States Code, Sections 1341 (mail

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fraud) and 1343 (wire fraud).

6. In particular, there is probable cause to believe

that individuals associated with Sky Capital, including Ross

Mandell, the Chief Executive Officer (CEO) of Sky Capital

Holdings, have been and are continuing to disseminate and cause

to be disseminated materially false and misleading statements

about securities traded through Sky Capital in order to induce

investors to purchase such securities. Individuals associated

with Sky Capital also have participated in what is commonly

referred to as a ponzischeme, a scheme to use various

purported investment opportunities, including private placement

offerings, to payoff prior investors, to keep Sky Capital afloat

as an ongoing business, and to personally enrich Ross Mandell

and others. In addition, there is probable cause to believe that

individuals associated with Sky Capital have engaged in

practices to unlawfully manipulate the market for publicly-

traded securities of companies related to Sky Capital.

THE SKY COMPANIES

7. According to publicly-available databases and filings,

Sky Capital LLC is a brokerage firm with its main office

at 110 Wall Street, 8th Floor, New York, New York. Sky Capital

LLC's parent company, Sky Capital Holdings Ltd., is a publicly-

traded company whose shares are traded on the London Stock

Exchange. Sky Capital LLC and Sky Capital Holdings Ltd. are

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affiliated with, and share the 110 Wall Street offices with, Sky

Capital Enterprises, Inc. (“Sky Capital Enterprises"), a venture

capital firm whose shares are also traded on the London Stock

Exchange.

8. Recent public records and filings have listed Ross

Mandell as Chairman and Chief Executive Officer of Sky Capital

Holdings, Sky Capital LLC and Sky Capital Enterprises. Mandell

has an office at the PREMISES. Prior to becoming involved with

the Sky Companies, Mandell was associated with a venture capital

firm called The Thornwater Company, L.P. (“Thornwater").

HISTORICAL INFORMATION RELATED TO ROSS MANDELL

9. I and other agents have conducted extensive

debriefings of a cooperating witness (“CW-1"). CW-1 has been

convicted of securities fraud in an unrelated case, and is

cooperating with the Government in the hope of receiving

leniency at sentencing. CW-1 has provided reliable information

concerning the unlawful activities of others that I and other

agents have been able to corroborate through independent

investigation, including the insertion of undercover agents,

review of pertinent records, and review of recorded

conversations.

10. CW-1 worked for Mandell at Thornwater from in or

about 1999 through in or about 2001. CW-1 has informed me that

while at Thornwater, CW-1 participated in the sale of private

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placements in at least five separate entities: St. James

Holdings LLC, Ticketplanet, Lanesborough Holdings LLC,

Chipcards, and Raleigh Holdings. CW-l stated that on Mandell's

instructions, CW-l sold several five million dollar private

placements of shares in these companies. CW-1 stated that

Mandell instructed Thornwater brokers, including CW-1, that they

were to represent to prospective private placement investors

that the invested funds were to be used to make initial public

offerings in the companies' stock - representations that the

brokers, including CW-1, conveyed to investors - but that

Mandell and Thornwater made no effort to initiate such

offerings, and instead used the money to pay the brokers

excessive undisclosed commissions and to use the proceeds for

their own benefit.

11. CW-1 informed me that Mandell then instructed

Thornwater brokers, including CW-1, to inform the larger private

placement investors that the private placements went "belly up,"

but that the investors would be made whole by being given shares

in other Thornwater private placements free of charge. These

private placements also failed to result in public offerings,

contrary to the representations of Thornwater brokers, and the

private placement stock ultimately proved to be worthless.

12. During the course of this investigation, I have

learned that the involvement of Mandell and Thornwater in the

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misuse of proceeds of private placements was the subject of

investigations by the United States Securities and Exchange

Commission ("SEC") and the National Association of Securities

Dealers ("NASD"). 1 CW-1 has informed me that three of his former

Thornwater clients 2 each informed CW-1 that after the last

Thornwater private placement failed to produce any returns, Ross

Mandell, who by this time had begun Sky Capital Holdings,

promised these investors that they would receive shares in Sky

Capital Holdings, and other private placements being sold

through Sky Capital Holdings. The investors told CW-1 that they

had been promised these shares in return for not complaining

about the Thornwater private placements.

13.

On November 2, 2006, I spoke to an investor in

Great Britain (the "UK Investor") who had previously dealt with

Ross Mandell. UK Investor's information corroborated the

1 According to a prospectus of Sky Capital Enterprises that I have reviewed, as part of Sky Capital LLC's NASD approval to act as a securities dealer, the NASD place prospectus, these restrictions were removed in March 2004. The prospectus also discusses a 1995 New York Stock Exchange ("NYSE") disciplinary action against Mandell alleging that he had effected transactions in customer accounts without the customers' knowledge or approval, as a result of which the NYSE found Mandell guilty of the charged misconduct and imposed a censure of six weeks suspension from employment or association with any NYSE member. The prospectus also notes that Mandell was the defendant in 10 customer complaints that resulted in awards in favor of the complainant, all for conduct prior to 1992.

2 After CW-1 left Thornwater in 2001, CW-1 worked at a firm called "Clover Capital," which offered the same type of bogus private placements that were being offered at Thornwater. The three investors referenced above were clients of CW-1's at Clover Capital, who were defrauded by CW-1 in private placements at Clover.

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information provided by CW-1. UK Investor stated that in or

about the mid-1990s Ross Mandell contacted UK Investor and asked

him if he was interested in investing in U.S. stocks. At the

time, Mandell represented that he was a broker with Thornwater.

UK Investor agreed to invest through Thornwater and made several

trades through Mandell. In or about Fall 1999, Mandell solicited

UK Investor to invest in a private placement in Ticketplanet,

one of the entities described by CW-1. Mandell gave UK Investor

assurances that Ticketplanet would go public and that UK

Investor would at least double his investment. Based on

Mandell's representations, UK Investor invested approximately

$100,000 in Ticketplanet. Subsequently, in or about 2000,

Mandell approached UK Investor about making an investment in

another private placement, this time with Raleigh Holdings,

another entity described by CW-1. Mandell again represented that

Raleigh Holdings would go public and that UK Investor would make

a large profit on his investment. Based on Mandell's

representations, UK Investor invested approximately $125,000 in

Raleigh Holdings. To date neither Ticketplanet nor Raleigh

Holdings has gone public.

14. In or about 2001, UK Investor began to have concerns

about his investments in Ticketplanet and Raleigh Holdings and

made inquiries with Mandell and others about those investments.

When UK Investor did not receive a satisfactory response, he

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contacted the NASD. In or about February 2002, Mandell traveled

to Great Britain to meet with UK Investor to discuss his

concerns. During this meeting, Mandell promised to "make good"

on UK Investor's investments, and offered to give him

150,000 shares each in Chipcards (another entity described by

CW1)and Sky Capital Holdings ("SKH") as compensation for UK

Investor's prior investments. Approximately one week later, in

or about March 2002, Robert Grabowski, an associate of Mandell

from Thornwater, traveled to Great Britain to meet with UK

Investor and memorialize UK Investor's agreement with Mandell.

Grabowski presented UK Investor with a written agreement, under

which UK Investor agreed to forego any claim with the NASD and

to trade in his rights to shares in Ticketplanet and Raleigh

Holdings in return for 150,000 shares each in Chipcards and SKH.

UK Investor and Grabowski each signed the agreement, with

Grabowski signing as President of Raleigh Holdings. UK Investor

had previously been told by Mandell that Raleigh Holdings had

purchased Thornwater.

15. Sky Capital Holdings subsequently went public, but

UK Investor was never given any stock in either Chipcards (which

has not gone public) or SKH. When UK Investor attempted to

contact Mandell to complain about the situation, Mandell told UK

Investor that he should talk to Mandell's attorney. To date, UK

Investor has received no compensation or value for his original

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investments of approximately $225,000.

MISREPRESENTATIONS AND UNDISCLOSED COMMISSIONS IN CONNECTION WITH THE SALE OF SKY CAPITAL ENTERPRISES STOCK

16. As part of this investigation, between in or about

December 2005 and in or about August 2006, the FBI recorded a

series of in-person and telephonic conversations between CW-1

and a broker at Sky Capital LLC (the "Broker"). The Broker has

an office at the PREMISES and is a long-time associate of Ross

Mandell dating back to their days working together at

Thornwater. (As explained in more detail below, since August

2006, the Broker has been providing information to the

Government and assisting in the investigation of Mandell and

others at Sky Capital in the hopes of receiving a cooperation

agreement.)

17. According to CW-1, in or about November 2005, the

Broker offered CW-1 the opportunity to broker sales of a private

placement of Sky Capital Enterprises stock to persons whom CW-1

knew. On December 8, 2005, at the direction of the FBI, CW-1

placed a consensually-recorded and monitored telephone call to

the Broker. During the call, CW-1 and the Broker discussed CW-1

locating investors for the Broker, to whom the Broker could sell

shares of Sky Capital Enterprises stock in private placements.

18. At approximately 4:10 PM on December 8, 2005, CW-1

met with the Broker. Prior to the meeting, CW-1 had been

equipped by the FBI with a body recording device. During this

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meeting, the Broker told CW-1 that he wanted CW-1 to provide the

Broker with his ten biggest former clients, so that the Broker

could attempt to sell these individuals private placements of

shares in Sky Capital Enterprises, or Global Secure, a company

that the Broker stated was owned by Sky Capital Enterprises. The

Broker stated that the Sky Capital LLC brokers' commission on

sales of shares of Global Secure was 7%, and that the Broker's

commission on any shares in Sky Capital Enterprises that he sold

was 50%. The Broker further stated that he would give CW-l 40%

of the Broker's 50% commission for any investors in Sky Capital

Enterprises stock provided by CW-l.

19. During December 2005, and January and February 2006,

CW-l and the Broker had several other discussions, some in

person and some over the telephone, regarding the Broker's

request to CW-l to introduce potential private placement

investors to the Broker. During a recorded meeting on February

10, 2006, the Broker stated, in sum and substance, that if CW-l

introduced him to an investor, the Broker would "start giving

you a monthly paycheck, a monthly cash deposit."

20. On February 27, 2006, CW-l placed a consensually

recorded and monitored telephone call to the Broker. During this

call, CW-l stated that he had a "whale in Florida," meaning a

potential high-volume investor, with whom CW-l had just spoken.

CW-l stated that this potential investor's name was "Reed

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Walker," and provided Walker's cellular and office telephone

numbers. In fact, "Reed Walker" was an identity that had been

assumed by an undercover agent of the FBI ("UC-1" or "Walker")

for the purposes of this investigation, and the telephone

numbers provided to the Broker by CW-1 were undercover numbers.

21. On February 28, 2006, "Walker" received a call

from the Broker, which was recorded. During the call, the Broker

offered "Walker" the opportunity to invest in shares of Sky

Capital Enterprises. "Walker" provided the Broker an address in

Coral Gables, Florida, at which "Walker" was willing to receive

prospectus information regarding Sky Capital Enterprises. In

fact, the Coral Gables address was that of an undercover mail

drop, established by the FBI for the purposes of this

investigation.

22. On or about March 1, 2006, the undercover mail

drop in Coral Gables, Florida received, via DHL Express

overnight courier service, a package from the offices of Sky

Capital, LLC, 8th Floor, 110 Wall Street, New York, New York.

The package, addressed to "Reed Walker," contained account

opening documents and various Sky Capital Enterprises prospectus

information, relating to the private placement that the Broker

had discussed with DC-1. UC-1 subsequently received the

documents, filled out the account opening documents and returned

them via First Class U.S. Mail to Sky Capital Enterprises's

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offices at 110 Wall Street. All of these documents appear to

have been created using a computer.

23. On March 3, 2006, UC-1 (a/k/a "Walker") spoke to

the Broker on the telephone. This call was recorded. During the

call, the Broker stated, in substance and in part, that the

"rule on Wall Street," is that "no one is allowed to charge more

than 5%" in commissions "per trade." The Broker further stated

that the "rule at Sky Capital" is that "no one is allowed to

charge more than 3% per trade," and "my rule, at Sky Capital, is

I will only charge 3% when I am making that person a decent

amount of money." The Broker further stated that "in this

particular case, to sort of welcome you on board, on any buying

transactions, let's say 1 and 3/4 percent on the buy," and "2%

if you make money." The Broker reiterated, "you'll never be

charged more than 3% to buy on anything."

24. On March 14, 2006, UC-1 (a/k/a "Walker") engaged

in a telephone call with the Broker, which was recorded. During

the call, the Broker discussed Global Secure and stated, "our

company and our clients own this firm outright." The Broker also

discussed Sky Capital Enterprises's ownership interest in a

company called "Advanced Spinal," which was marketing a device

to treat back pain. UC-1 (posing as "Reed Walker") asked, "do

you have the U.S. patents" for the device? The Broker stated,

"dozens, we have all the patents on the device."

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25.

On March 22, 2006, at the direction of the FBI,

CW-1 engaged in a consensually-recorded and monitored telephone

conversation with the Broker. During this call, the Broker asked

CW-l if he had spoken to "Reed Walker." CW-l stated that he had,

and "Walker" wanted to know CW-l's opinion on the investment.

The Broker instructed CW-l to tell "Walker" that Sky Capital

Enterprises owned a homeland security company for which Sky

Capital Enterprises paid $27 million, and that the homeland

security company would be sold shortly (a matter of weeks) for

double or triple that amount; and that Sky Capital Enterprises

owns the patents for, and had started a company to market, a

treatment to relieve back pain. The Broker further stated that

CW-l should tell "Walker" that Sky Capital Enterprises owns 70%

of the medical treatment company, and the other 30% is owned by

the management of Sky Capital Enterprises and the inventor of

the device. The Broker also instructed CW-l to tell "Walker"

that Sky Capital Enterprises stock was undervalued, and was

about to "explode."

26. On March 23, 2006, UC-l (a/k/a "Walker") engaged

in a telephone call with the Broker, which was recorded. During

the call, the Broker told UC-l that Sky Capital Enterprises's

investment in Global Secure would probably double or triple. The

Broker also told UC-l that "we own that company outright."

27. My research of publicly-available and law enforcement

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databases reveals that Global Secure is a company that markets

security-related training and equipment. I have reviewed

shareholder records of Global Secure, and public filings

and press releases of Sky Capital Enterprises, which indicate

that Sky Capital Enterprises in fact owns no more than 20% of

Global Secure. A Global Secure filing with the SEC indicates

that Ross Mandell owns 30% of Global Secure, making him the

company's largest shareholder. A review of Global Secure's SEC

filings does not indicate that shares of the company are owned

by either Sky Capital LLC or Sky Capital Holdings.

28. On March 28, 2006, UC-l (a/k/a "Walker") engaged

in a telephone call with the Broker, which was recorded. During

the call, the Broker reiterated that Sky Capital Enterprises

owns all of the patents on the back pain treatment device that

the Broker and UC-l had previously discussed.

29. An internet search revealed that a company called

"Advanced Spinal Technologies" ("AST") markets a device known as

an "Advanced Spinal Mobilization Instrument." The company's

website indicates that Sky Capital Enterprises owns only 40% of

the company, not the 70% stated by the Broker on March 22, 2006.

I have run several queries of the patent database of the United

States Patent and Trademark Office, which revealed no patents

for "Advanced Spinal Technologies," "Advanced Spinal

Mobilization Instrument," "Advanced Spinal Mobilization Device,"

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"Advanced Spinal Device," "Spinal Mobilization Instrument,"

"Advanced Spinal Mobilization," or "Sky Capital."

30. On or about April 3, 2006, at my direction, $30,000

was wired from an FBI undercover account to Sky Capital

Enterprises, with instructions from "Reed Walker" to invest the

money in shares of Sky Capital Enterprises stock.

31. On April 6, 2006, the Broker met with CW-1 at a

restaurant in Manhattan. CW-1 was equipped with a body recording

device. During this meeting, the Broker told CW-1 not to tell

anyone about their business together. 3 Later during the meeting,

the Broker reduced the amount he would pay CW-1, stating that he

would pay CW-1, in cash, $3,000 (which is 10% of $30,000) of the

money received from the "Walker" investment. Subsequently, the

Broker reduced the amount of the payment again, stating he would

pay CW-1 $1,500 in cash. Later on April 6, 2006, the Broker did

not pay the amount promised, but instead provided CW-1 with a

check for $1,000, made out to "cash."

32. On April 4, 2006, the undercover mail drop in

Coral Gables received, via First Class U.S. Mail, a package

addressed to "Reed Walker," with a return address of Sky Capital

3 The Broker, as indicated, was aware that CW-1 had been arrested by federal authorities and had been providing information to the FBI in relation to his (CW-1's) case. CW-1 has informed me, however, that he understands that the Broker does not believe that CW-1's cooperation with the FBI extends beyond providing historical information about crimes for which CW-1 was arrested.

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LLC, 110 Wall Street, 8th Floor, New York, New York 10005, and a

postmark of March 16, 2006. Included in the package were an

account opening confirmation letter addressed to "Reed Walker"

from Sky Capital LLC; a document entitled "Account Profile,"

regarding "Reed Walker": a document entitled "Investment

Objective Definitions"; a brochure from National Financial

Services LLC, dated January 2006; and a brochure from National

Financial Services LLC, dated March 2005. All of these documents

appear to have been created using a computer.

33. On April 27, 2006, at the direction of the FBI,

CW-1 engaged in a consensually-recorded and monitored telephone

conversation with the Broker. During this call, the Broker asked

CW-1 if he had heard from "Reed Walker." The Broker stated that

he wanted CW-1 to advise "Walker" to buy more shares of Sky

Capital Enterprises. The Broker told CW-1 to tell "Walker" that

his investment had already appreciated by 30%. In fact, between

April 6, 2006, the date on which "Walker" made the investment in

shares of Sky Capital Enterprises, and April 27, 2006, the date

of this call, the stock of Sky Capital Enterprises fell from

approximately 1.25 pounds per share on April 3, 2006, to 1.10

pounds per share on April 27, 2006.

34. On May 1, 2006, an undercover facsimile machine in

Florida, the number of which had been provided to the Broker by

DC-1, received a facsimile communication addressed to "Mr. Reed

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Walker" from Sky Capital Enterprises's offices at 110 Wall

Street, New York, New York. The facsimile stated, in substance

and in part, that it was "confirmation that you have invested

$30,000 into Sky Capital Enterprises (15,789 shares). An

official confirmation in the form of a share certificate will be

issued in your name shortly upon closing of this share

offering." Other facsimile communications regarding the

investments the Broker and UC-1 had discussed were sent to the

Florida undercover facsimile machine from Sky Capital

Enterprises's Wall Street offices on April 24, 2006 and June 14,

2006. The two latter facsimile communications identified the

sender as "Rose/Assistant to [the Broker]." The May 1, 2006

facsimile identified the sender - ostensibly in error - as

"Rose/Assistant to Reed Walker." All of the facsimile

communications contain cover sheets that appear to have been

prepared on a word-processor.

35.

On May 11, 2006, at the direction of the FBI, CW-1

engaged in a consensually-recorded and monitored telephone

conversation with the Broker. During this call, the Broker asked

CW-1 if he could convince "Walker" to invest another $500,000 in

Sky Capital Enterprises stock. The Broker offered to pay CW~l

$25,000 if CW-l could accomplish it, and then stated he would

pay CW-1 $20,000 cash the following Monday if he could

accomplish it. Also during this call, the Broker told CW-1 to

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"guarantee" "Walker" that he would be able to sell at least half

of his stock in six months; the Broker stated that he had 700

accounts of other clients that he controlled, that the Broker

could use to buy ~Walker's" stock. Based on my training and

experience, I believe that the Broker was describing an illegal

form of securities trading, sometimes referred to as "crossing

stock," a practice whereby a broker manipulates the market for a

security by suppressing or discouraging sell orders until they

can be paired off with buy orders from other investors within

the same firm. Typically, the customer buying the stock is not

informed that the broker is soliciting the transaction not

because it is beneficial to the buyer, but instead solely to

offset sell orders from another customer. As explained below, in

subsequent meetings with the Government, the Broker admitted

that he "crossed stock" while working at Sky Capital and that he

did so at the direction of his superiors at Sky Capital in order

to prevent the share price of Sky Capital stock from falling.

The Broker advised the Government that other brokers at Sky

Capital also engaged in this conduct at the direction of Sky

Capital's principals.

36.

On June 8, 2006, at the invitation of the Broker,

UC-l and a second undercover agent posing as a prospective

investor ("UC-2") visited the Broker at Sky Capital

Enterprises's offices at 110 Wall Street, on the 8th Floor. UC-1

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was equipped with a recording device and covert video camera.

UC-l and UC-2 met the Broker, who gave UC-1 and UC-2 a tour of

the PREMISES. The Broker discussed with UC-1 and UC-2 the

business of Advanced Spinal and Global Secure. The Broker

provided UC-1 with a brochure for Global Secure, which indicates

that the company was formerly known as "Virtual Alert." The

Broker also confirmed that Sky Capital Enterprises had secured

all of the patents for the Advanced Spinal Mobilization Device

through a Washington, D.C. law firm. The Broker stated that Sky

Capital Enterprises owned 40% of Advanced Spinal, Sky Capital

Holdings owned 20%, and Sky Capital Enterprises's management

owned 12%. Also during the June 8 meeting, UC-2 observed brokers

using what appeared to be sales scripts to conduct what UC-2

believed to be marketing calls. UC-1 and UC-2 did not observe

any distinction between the employees, office space and file

space assigned to the different Sky Companies. The Broker

subsequently confirmed that there currently is no separation

between the different Sky Companies within the PREMISES.

37. During the June 8, 2006 meeting, UC-1 and UC-2

observed that 110 Wall Street is a 14-story building with a

black stone facade and the number "110" in raised silver over a

revolving door. The PREMISES, consisting .of the offices of Sky

Capital Enterprises, Sky Capital LLC and Sky Capital Holdings,

occupies the entire 8th floor, which is accessible by elevator

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and fire stairs. The elevators open onto the reception area,

which contains a reception desk, behind which is a sign marked,

"Sky Capital Holdings" and "Sky Capital LLC." The reception area

opens into a trading room, which contains three banks of

cubicles, and is surrounded on three sides by offices with

windows. The office of the Broker, which UC-1 and UC-2 were

shown on June 8, is located across the floor from the entrance

to the trading room, and contained a desk where a "cold call"

salesperson was working, and a desk where another employee was

working. The Broker's office also contained a desk where the

Broker sat, and a desktop computer. Just outside the Broker's

office was a cubicle where an individual named "Rose," whom the

Broker identified as his assistant, sat. "Rose's" cubicle also

contained a desktop computer. Ross Mandell's office was located

in the corner of the floor, to the left if the person is facing

the Broker's office. Other offices for brokers, analysts and

principals line the outside of the floor.

ONGOING CONDUCT AT SKY CAPITAL BY MANDELL AND OTHERS

38. On or about August 24, 2006, federal agents approached

the Broker and advised him that he was the subject of a federal

investigation. After retaining and meeting with counsel, the

Broker agreed to cooperate with the Government in the hope of

receiving a cooperation agreement and the possibility of a

reduced sentence. Since then, the Broker has met with the

21

Government on numerous occasions and assisted the Government in

recording conversations with Mandell and others at Sky Capital.

The Broker's information has proven reliable and has been

corroborated by, among other things, recorded conversations

between the Broker and others at Sky Capital, including Mandell.

39. The Broker stated that he first worked for Mandell

at Thornwater. While at Thornwater, the Broker participated in

soliciting investors for private placement deals, including St.

James Holdings (one of the private placements described by CW-1)

In or about late 2002, the Broker went to work at Sky Capital.

While at Sky Capital, the Broker participated in private

placements for Sky Capital Holdings and Sky Capital Enterprises

before either of those companies went public.

40. According to the Broker, Mandell has been receiving

salaries from several of the Sky Capital companies and has given

himself large bonuses and payments for personal expenses at a

time when Sky Capital has been losing money. As a result, the

Broker and others at Sky Capital are under constant pressure to

raise more money to keep Sky Capital afloat. Mandell and others

at Sky Capital also have pressured the Sky brokers to induce

clients to take large positions in Sky Capital stock. According

to the Broker, Mandell has instructed others at Sky Capital to

give Sky Capital stock to investors who lost money in

failed private placements from Thornwater. (This is consistent

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with information provided by both CW-1 and the UK Investor.)

41. The Broker stated that Mandell has made numerous

promises to investors over the years that did not come true. He

has made these promises himself and through brokers at Sky

Capital. For example, in the last year Mandell has made

misrepresentations about both the likelihood that Global Secure

will go public and the price of Global Secure shares if the

company does go public. In fact, Global Secure has not gone

public and even if did it would not trade at the prices Mandell

has predicted to investors.

42. The Broker is aware of other practices at Sky Capital

that based on my training and experience appear to be unlawful.

For example, the Broker told me that Sky Capital would purchase

stock of the publicly-traded Sky Capital companies into the

firm's proprietary account in order to prevent the stock from

reaching the open market and decreasing in value. When this

happened, senior employees at Sky Capital would instruct the

brokers that Sky Capital had just taken in stock and that the

brokers needed to place the stock with Sky Capital clients. The

brokers were told that they would receive large, undisclosed

commissions for placing the stock in this manner, but that the

commissions would be disguised as bonus payments for attendance

or other unrelated achievements.

23

43. According to the Broker, brokers at Sky Capital were

also instructed by Mandell and others to discourage investors

from selling their stock in Sky Capital Holdings ("SKH") or Sky

Capital Enterprises ("SKE"). If investors insisted on selling

their shares, Sky Capital brokers were told that they had to

"cross" the stock out with another Sky Capital client. The

Broker stated that Sky Capital had a "no net sales" policy,

meaning that if brokers were unable to talk a client out

of selling Sky Capital stock, they had to find- a buyer within

the firm to purchase those shares. According to the Broker, this

was done to keep up the share price of the stock and to prevent

sales of the stock from leaving the firm where they might cause

the price to drop. The brokers were given excessive commissions

as a reward for completing these types of transactions. If

brokers were unable to find a purchaser, Sky Capital itself

would buy the stock and keep it in its inventory until it could

be sold to a Sky Capital client. The brokers did not disclose

their commissions to investors. Nor did they disclose the fact

that they were soliciting investors to buy the stock because

they needed to offset a sell order from another client.

44. The Broker also stated that brokers were pressured

by Mandell and others at Sky Capital to induce Sky Capital

clients to take large positions in SKH and SKE stocks.

Oftentimes clients were induced to liquidate their positions in

24

other stocks so that they could increase their holdings of SKH

and SKE stocks. Mandell and others at Sky Capital encouraged Sky

brokers to induce their clients to take large positions in SKE

and SKH even when that was not in the clients' interests. The

brokers did not disclose to investors that they were inducing

clients to purchase SKE and SKH stock for the benefit of Sky

Capital as opposed to the benefit of the clients.

45. The Broker advised the Government that Sky Capital

is currently involved in soliciting investors in the United

Kingdom for a new private placement in Sky Capital Holdings (the

"Current Raise" or "Raise"). According to the Broker, Mandell

has said on numerous occasions that Sky Capital will go out of

business - possibly as early as this Thanksgiving - unless this

Raise is successful. Mandell has promised the brokers that they

will receive a 10% commission on any money that they raise in

connection with this deal. Mandell has further instructed the

brokers that they do not need to disclose this commission to

potential investors.

46. I have reviewed documents prepared by Sky Capital

in connection with the Current Raise. These are documents that

appear to have been computer generated. The documents are

addressed to potential investors and set forth the terms of the

Current Raise. Contrary to what Mandell has promised the Broker,

these documents represent that "No commission will be payable to

25

you [the investor] or by you in respect of your participation in

the Placing." Accordingly, there is probable cause to believe

that Mandell and others associated with Sky Capital are making

misrepresentations and misleading omissions concerning excessive

commissions to Sky Capital brokers and how the raised funds will

be used.

RECENTLY RECORDED CONVERSATIONS

47. Since the end of August 2006, the Broker has assisted

the Government in recording numerous conversations between

himself and others at Sky Capital, including Mandell. I have

reviewed recordings of these conversations and draft

transcripts. These recordings corroborate the information

provided by CW-l and the Broker and show probable cause to

believe that Mandell and others are using Sky Capital to commit

securities, wire and mail fraud through material

misrepresentations and misleading omissions to potential

investors and through the diversion of Sky Capital funds for

their personal enrichment.

48. For example, on August 28, 2006, the Broker met

with another employee ("CC-l") of Sky Capital at the PREMISES.

The Broker was wearing a recording device. During this

conversation, the Broker and CC-l discussed the fact that

Mandell uses Sky Capital as his "personal piggy bank." CC-l told

the Broker that Advanced Spinal - the company previously used by

26

the Broker and others to solicit investors to purchase Sky

Capital related stock - is a "joke." Later the same day, the

Broker met with Mandell. During this conversation, Mandell told

the Broker that Advanced Spinal had received FDA approval and

that they had "all the rights" to the "patents" Mandell

instructed the Broker to tell a client that "Advanced Spinal is

going very well."

49. On August 29, 2006, the Broker met with others at

the PREMISES The Broker was wearing a recording device. During

a private meeting with Mandell, the Broker and Mandell spoke

about SKH and SKE, and Mandell referred to customer complaints.

Mandell talked about the fact that the Broker had just received'

"an expense check," and said "where does that come from? It

certainly does not come from

If we can get

people to get in there and buy." Shortly after this meeting, the

Broker spoke to a colleague who said that Mandell uses Sky

Capital as his own "personal piggy bank." Later in the day, the

Broker spoke to another employee of Sky Capital ("CC-2"). During

this conversation, CC-2 referred to the practice at Sky Capital

of crossing stock. CC-2 asked "how many times did [another Sky

Capital employee] come to us and say there's stock at the desk,

we have to clean it up?" Based on my training and experience, I

believe that this latter reference is to the "no net sales"

policy at Sky Capital and the practice of crossing stock.

27

50. Later on August 29, 2006, the Broker met with Mandell

again. Once again, this conversation was recorded. Mandell

referred to a client who was angry about an investment in Global

Secure. Mandell said "some guys are very rich, if they lose

money, no big deal." Mandell then joked that it would be a good

idea to hire a deaf person to handle client complaints.

51. On September 5, 2006, the Broker met with several

other employees of Sky Capital at the PREMISES. This

conversation was recorded. During the meeting, the Broker and

the others talked about Sky Capital's financial situation.

Another broker ("CC-3") said "if Sky goes down, we will be

talking to lawyers for the next three years, just on customer

complaints alone, not even talking about other things like

misappropriation of funds, none of those fantasy stories, just

customer complaints." CC-l then said misappropriation is a

"management issue."

52. Later on September 5, 2006, the Broker spoke to

Steven Shea. This conversation was recorded. Shea told the

Broker that "if Sky goes out of business" they will "all be in

court for the rest of their lives." Shea mentioned that CC-3

"has unauthorized trades and numerous current complaints and

regulatory problems from Sky." Shea and the Broker then spoke

about a "big guy" that CC-3 was trying to "get out of" 300,000

shares of SKE. Shea told the Broker, "that's all done, I'm still

28

trying to clean up

I need a little." Based on my training

and experience, and my subsequent conversations with the Broker,

I believe that Shea was talking about "crossing stock" during

this discussion.

53. On September 11, 2006, the Broker met with Mandell and

others at the PREMISES. Their conversation was recorded. During

this meeting, Mandell spoke about the Current Raise. Mandell

mentioned that things were getting worse and that Sky Capital

was almost out of money. Mandell then asked if anyone was taping

him and said that they just got a "monster” break. Mandell

explained that Sky Capital had found 30 million shares that

could be offered. Mandell said they would sell 24 million shares

at "20p” (20 pence per share). Mandell promised the brokers that

they could make "10% on this.

54. On September 12, 2006, the Broker met with Mandell

at the PREMISES to discuss the Current Raise. This conversation

was recorded. During this meeting, the Broker asked Mandell

whether they had to disclose the 10% commission to investors.

Mandell said he did not know, but did not think it was any of

"their business.” Later the same day, the Broker met with

Michael Recca, the President of Sky Capital LLC and Sky Capital

Holdings. The Broker asked Recca how Mandell could legally pay

the brokers a 10% commission on investments received for the

Current Raise, and Recca said he did not know. Recca also told

29

the Broker that the client must know what the commission will

be.

55. On September 14, 2006, the Broker met with another

employee ("CC-4") at the PREMISES. During this meeting, the

Broker and CC-4 discussed the Current Raise and the large

commission. CC-4 noted that the commission was "an egregious

rate off the topand that if they raised $8 million, the

company would be left with only $7 million. CC-4 asked what the

company planned to do with the money that was raised, and the

Broker said to ask Mandell.

56. On September 20, 2006, the Broker again met with

Mandell at the PREMISES to discuss the Current Raise. This

conversation was recorded. During the meeting, Mandell again

told the Broker that he did not have to disclose the 10%

commission to investors. When the Broker asked about the

information in the prospectus, which says that the investor will

pay no commission, Mandell said "[i]t just says that they don't

have to pay. You see, what

these guys are going to think

is they'll read this document and they're paying 20p plus a

commission, in England it's customary to pay a commission on a

deal like this." Mandell told the Broker to tell investors that

Sky Capital would not take their money unless "we know we'll be

open for at least another year.” Mandell further instructed the

Broker to tell investors that there was a "lot of interest n in

30

Global Secure and that the company might get a "good break with

Valuation.” Mandell told the Broker that he would handle the

details about the "financials.” Later in the day, the Broker

met with Recca. Once again, Recca mentioned the undisclosed

commission, noting that the client is really buying stock at

"18p, the company is getting 10% of the money, the client is

getting 90%."

57. According to the Broker, in or about late September

2006, Mandell and others from Sky Capital traveled to England to

solicit investors for the Current Raise. According to what

Mandell reported to the Broker, in connection with this trip

Mandell met with several investors, including the Broker's

clients. On or about October 3, 2006, the Broker received a call

from one of these clients who told him that his meeting with

Mandell was a "complete disaster" and that he felt that Mandell

was lying to him about the true state of Sky Capital. According

to the Broker, in or about late October 2006, Mandell again

traveled to the United Kingdom to solicit investors for the

Current Raise.

CONCLUSION

58. Based on the foregoing information, I respectfully

submit that there is probable cause to believe that the PREMISES

contain evidence, fruits and instrumentalities of violations of

31

Title 15, United States Code, Sections 78j (b) and 78ff, and

Title 17, Code of Federal Regulations, Section 240.10b-5

(Securities Fraud), and Title 18, United States Code, Sections

1341 (mail fraud) and 1343 (wire fraud), specifically:

(a) Documents 4 concerning the Current Raise

involving the placement of 24 million shares of SKH at 20p/share

in the United Kingdom, Global Secure, Virtual Alert, Advanced

Spinal or Advanced Spinal Technologies, the Advanced Spinal

Mobilization System, Reed Walker, Joe Brennan (the name by which

the Broker knows UC-2), Thornwater Capital, St. James Holdings

LLC, Ticketplanet, Lanesborough Holdings LLC, Raleigh Holdings,

and Chipcards, including but not limited to share certificates,

private placement prospectuses, contracts, DTC sheets, position

reports, subscription agreements, correspondence (by letter or

email), facsimile confirmations and records, investment

agreements, patents, FDA approvals or correspondence, financial

4 As used herein, the term "documents" means any and all tangible forms of expression, in any language or format, including drafts or finished versions, originals, copies, or annotated copies, however created, produced or stored (manually, mechanically, electronically, electromagnetically, or otherwise), including without limitation: books, papers, files, writings, handwritten notes, typewritten notes, letters, correspondence, memoranda, notebooks, ledgers, term sheets, telexes, telefaxes, telephone message slips, tape recordings, magnetic tapes, digital recordings, electronic recordings, photographs, computerized records stored on computer hard- drives, computer disks, computer hard-drives, recorded telephone messages, recorded fax transmissions, electronic mail messages, voice mail messages, microform, and microfiche.

As used herein, “concerning" means relating to, referring to, describing, evidencing, or constituting.

32

statements, business plans, stock issuance opinion letters,

press releases, banking and brokerage firm account records, tax

records, transaction records, wire transfer instructions and

records, receipts, notes, ledgers, checks, cash receipt

journals, Federal Reserve routing numbers, and similar documents

land items concerning the receipt, transfer, or disposition of

funds;

(b) Documents concerning private placements of shares

of Sky Capital Enterprises or Sky Capital Holdings, including

prospectuses, public and regulatory filings, subscription

agreements, share certificates, correspondence, press releases,

financial statements, business plans, stock issuance opinion

letters, transaction records, drafts of the foregoing, and wire

transfer instructions and records, receipts, notes, ledgers,

checks, cash receipt journals, Federal Reserve routing numbers,

and similar documents and items concerning the receipt,

transfer, or disposition of funds;

(c) Documents concerning clients of Sky Capital,

including but not limited to share certificates, private

placement prospectuses, contracts, DTC sheets, position reports,

correspondence (by letter or email), facsimile confirmations and

records, subscription agreements, investment agreements, stock

issuance opinion letters, banking and brokerage firm account

records, tax records, transaction records, wire transfer

33

instructions and records, receipts, notes, ledgers, checks, cash

receipt journals, Federal Reserve routing numbers, and similar

documents and items concerning the receipt, transfer, or

disposition of funds;

(d) Documents concerning the corporate

relationship(s) among any of the following corporate entities,

and documents reflecting the ownership of the entities: Sky

Capital LLC, Sky Capital Holdings, Sky Capital Enterprises,

Inc., Global Secure, Virtual Alert, Advanced Spinal or Advanced

Spinal Technologies, Thornwater Capital, St. James Holdings LLC,

Ticketplanet, Lanesborough Holdings LLC, Chipcards, and Raleigh

Holdings;

(e)

Any sales scripts or similar documents;

(f)

Documents concerning compensation, bonuses and

commissions paid or promised to or by Ross Mandell or any other

employee under the supervision of Ross Mandell, or acting at his

direction, including commissions and other payments made to the

Broker;

(g) Computers, hard drives, computer diskettes and

other magnetic storage media, and files, data and information

contained thereon, including email files, used to store any of

the documents referred to in clauses (a) through (f) above.

59. Based upon my training and experience, I also know

that individuals frequently maintain custody of documents and

34

records of the sort described in paragraph 58 above, within

closed and/or locked containers, briefcases, safes, boxes,

filing cabinets, desk drawers, and other containers kept within

their offices.

Procedures for Seizure of Computers and Computer Disks

60. Based on my training and experience and information

provided to me by CW-l, the Broker, and UC-l and UC-2, and from

the fact that word-processed documents were used in furtherance

of the scheme described above, I believe that the computers at

the PREMISES are used to facilitate the scheme. In order to

search the computers in the PREMISES for relevant documents,

certain computer equipment, including input/output peripheral

devices, keyboards, magnetic storage devices, related

instructions in the form of manuals and notes, as well as the

software used to operate such computers, may need to be seized

and subsequently processed by a qualified computer specialist in

a laboratory setting. This is true for the following reasons:

a. The volume of evidence. Computer storage devices (such

as hard disks, diskettes, compact disks, tapes, etc.) can store

the equivalent of thousands of pages of information. In

addition, a user may seek to conceal evidence of criminal

activity by storing it in random order with deceptive file

names.

35

Searching authorities are thus required to examine all the

stored data to determine which particular files are evidence or

instrumentalities of criminal activity. This sorting process can

take weeks or months, depending upon the volume of data stored,

and it would be impractical to attempt this kind of data

analysis on-site."

b. Technical requirements. Analyzing computer systems for

criminal evidence is a highly technical process requiring expert

skill and a properly controlled environment.

The vast array of computer hardware and software available

requires even computer experts to specialize in some systems and

applications. Thus, it is difficult to know prior to the search

which expert possesses sufficient specialized skills to best

analyze the system and its data. No matter which system is used,

however, data analysis protocols are exacting scientific

procedures, designed to protect the integrity of the evidence

and to recover even "hidden," erased, compressed, password-

protected, or encrypted files. Since computer evidence is

extremely vulnerable to tampering or destruction (both from

external sources or from destructive codes embedded in the

system as a "booby trap"), a controlled environment is essential

to its complete and accurate analysis. Accordingly, as stated

above, it is usually necessary that the above-referenced

equipment, software, data, and related instructions be seized

36

and subsequently processed by a qualified computer specialist in

a laboratory setting. It may be the case, however, under

appropriate circumstances, that some types of computer equipment

can be more readily analyzed and pertinent data seized on-site,

thus eliminating the need for its removal from the premises.

61. The analysis of electronically stored data, whether

performed on-site or in a laboratory or other controlled

environment, may entail any or all of several different

techniques. Such techniques may include, but shall not be

limited to, surveying various file "directories" and the

individual files they contain (analogous to looking at the

outside of a file cabinet for the markings it contains and

opening a drawer believed to contain pertinent files); "opening"

or reading the first few "pages" of such files in order to

determine their precise contents; "scanning" storage areas to

discover and possibly recover recently deleted data; scanning

storage areas for deliberately hidden files; and performing

electronic "key-word" searches through all electronic storage

areas to determine whether occurrences of language contained in

such storage areas exist that are related to the subject matter

of the investigation. If possible, mirror image copies of the

computer drives and disks will be created at the PREMISES, and

the copies removed intact for later review.

62. If, after inspecting the input/output peripheral

37

devices, system software, and pertinent computer related

documentation, it becomes apparent that these items are no

longer necessary to retrieve and preserve the evidence, such

materials and/or equipment will be returned within a reasonable

time.

WHEREFORE, I pray that a warrant be issued, pursuant to

Rule 41 of the Federal Rules of Criminal Procedure, to search

the PREMISES and to seize the items set forth in paragraph 58,

above, including such items in closed containers within the

PREMISES.

Due to the ongoing nature of this confidential

investigation, I respectfully request that this Affidavit and

any search warrant issued thereon remain under seal, except as

required by Fed. R. Crim. P. 41.

I declare under penalty of perjury that the foregoing

is true and correct. 28 U.S.C. § 1746.

Dated: New York, New York November 2, 2006

Sworn to before me this day of November, 2006

KURT F. DENGLER Special Agent Federal Bureau of Investigation

Attachment A - Items To Be Seized

38

(a) Documents 5 concerning the Current Raise involving

the placement of 24 million shares of SKH at 20p/share in the

United Kingdom, Global Secure, Virtual Alert, Advanced Spinal or

Advanced Spinal Technologies, the Advanced Spinal Mobilization

System, Reed Walker, Joe Brennan (the name by which the Broker

knows UC-2), Thornwater Capital, St. James Holdings LLC,

Ticketplanet, Lanesborough Holdings LLC, Raleigh Holdings,

and Chipcards, including but not limited to share certificates,

prLvate placement prospectuses, contracts, DTC sheets, position

reports, subscription agreements, correspondence (by letter or

email), facsimile confirmations and records, investment

agreements, patents, FDA approvals or correspondence, financial

statements, business plans, stock issuance opinion letters,

press releases, banking and brokerage firm account records, tax

records, transaction records, wire transfer instructions and

records, receipts, notes, ledgers, checks, cash receipt

journals, Federal Reserve routing numbers, and similar documents

5 As used herein, the term "documents" means any and all tangible forms of expression, in any language or format, including drafts or finished versions, originals, copies, or annotated copies, however created, produced or stored (manually, mechanically, electronically, electromagnetically, or otherwise), including without limitation: books, papers, files, writings, handwritten notes, typewritten notes, letters, correspondence, memoranda, notebooks, ledgers, term sheets, telexes, telefaxes, telephone message slips, tape recordings, magnetic tapes, digital recordings, electronic recordings, photographs, computerized records stored on computer hard-drives, computer disks, computer hard-drives, recorded telephone messages, recorded fax transmissions, electronic mail messages, voice mail messages, microform, and microfiche.

As used herein, "concerning" means relating to, referring to, describing, evidencing, or constituting.

39

and items concerning the receipt, transfer, or disposition of

funds;

(b) Documents concerning private placements of

shares of Sky Capital Enterprises or Sky Capital Holdings,

including prospectuses, public and regulatory filings,

subscription agreements, share certificates, correspondence,

press releases, financial statements, business plans, stock

issuance opinion letters, transaction records, drafts of the

foregoing, and wire transfer instructions and records, receipts,

notes, ledgers, checks, cash receipt journals, Federal Reserve

routing numbers, and similar documents and items concerning the

receipt, transfer, or disposition of funds;

(c) Documents concerning clients of Sky Capital,

including but not limited to share certificates, private

placement prospectuses, contracts, DTC sheets, position reports,

correspondence (by letter or email), facsimile confirmations and

records, subscription agreements, investment agreements, stock

issuance opinion letters, banking and brokerage firm account

records, tax records, transaction records, wire transfer

instructions and records, receipts, notes, ledgers, checks, cash

receipt journals, Federal Reserve routing numbers, and similar

documents and items concerning the receipt, transfer, or

disposition of funds;

40

(d)

Documents concerning the corporate relationship(s)

among any of the following corporate entities, and documents

reflecting the ownership of the entities: Sky Capital LLC, Sky

Capital Holdings, Sky Capital Enterprises, Inc., Global Secure

Virtual Alert, Advanced Spinal or Advanced Spinal Technologies,

Thornwater Capital, St. James Holdings LLC, Ticketplanet,

Lanesborough Holdings LLC, Chipcards, and Raleigh Holdings;

(e)

Any sales scripts or similar documents;

(f)

Documents concerning compensation, bonuses and

commissions paid or promised to or by Ross Mandell or any other

employee under the supervision of Ross Mandell, or acting at his

direction, including commissions and other payments made to the

Broker;

(g) Computers, hard drives, computer diskettes and

other magnetic storage media, and files, data and information

contained thereon, including email files, used to store any of

the documents referred to in clauses (a) through (f) above.

NOTE: The analysis of electronically stored data, whether

performed on-site or in a laboratory or other controlled

environment, may entail any or all of several different

techniques. Such techniques may include, but shall not be

limited to, surveying various file "directories" and the

individual files they contain; "opening" or reading the first

few "pages" of such files in order to determine their precise

41

contents; "scanning" storage areas to discover and possibly

recover recently deleted data; scanning storage areas for

deliberately hidden files; and performing electronic "key-word"

searches through all electronic storage areas to determine

whether occurrences of language contained in such storage areas

exist that are related to the subject matter of the

investigation. If possible, mirror image copies of the computer

drives and disks will be created at the premises to be searched,

and the copies removed intact for later review.

42