1. Midtown Partners Corporate Finance Practice October 2010 – New York Team Provided by: John R. Clarke Ari J. FuchsCEO, Managing Director Senior Vice President+212.972.8391 +212.972.8394JClarke@midtownpartners.com AFuchs@midtownpartners.com New York, NYTampa, FLBoca Raton380 Lexington Avenue 4218 W. Linebaugh Ave 7491 Estrella CircleSuite 1007 Tampa, FL 33624 Boca Raton, FL 33433New York, NY 10168Tel: +212-972-8390 Tel: +813-885-5744 Tel: +561-483-6129
2. Table of Contents Page Number Letter from the CEO………………………………………………………………… 3 Firm Rankings……………………………………………………......................... 4Firm Profile ………………………………………………………......................... 6 Capital Markets Practice PIPEs vs. Secondaries …………………………………………………. 7 Private vs. Hybrid …………………………………………………………8 PIPEs ……………………………………………………………………... 9 Reverse Mergers and APOs ……………………………………………. 10 Follow-Ons and Registered Directs ………………………………….... 11 ATM Offerings & CMPOs ………………………………………………. 12 Strategic Advisory ……………………………………………………….. 13 Advisory – Exchange Listing ………………………………………….... 14 Advisory – Path to Liquidity ……………………………………………...15 Tombstones ………………………………………………………………………… 16 Biographies ………………………………………………………………………….. 17 2
3. Letter from CEO 3 Dear Issuer Executive, I’d like to personally thank you for reviewing and considering Midtown Partners as a Investment Banking partner and/or Financial Advisor for your company. Our capabilities are evidenced with our senior bankers’ track records and experience in funding micro- and small-cap companies, as well as with our consistent rankings among the league tables, tracking placement activity among U.S. Investment Banks of all sizes. There are many paths to growth, and the best companies pursue multiple strategies as market conditions change and opportunities arise. Our motto is: “Helping Companies Grow.” And we do just that. On every client assignment, we assign a senior executive in the firm that has extensive experience serving lower middle market public companies. Throughout the past few decades, we have seen the changes and tackled challenges that the smaller public companies face, and can offer this expertise to the management team of issuers like yourself. This is evidenced with our creativity and delivery of both “outside the box” and “inside the box” thinking as we use our experience to better meet your company’s needs and desires. We will strive to demonstrate, both in our words and actions, that Midtown Partners is responsive to the needs of those we serve. Whether you are looking for a partner to procure immediate funding or to build your company’s capital markets strategy, Midtown Partners is the right choice to not just meet your needs, but to exceed them. We are excited to learn more about your company, and to introduce our team to you in order to see if we can bring value to the table in helping your company exceed your goals. We work hard to deliver results – the proof is in the rankings. Sincerely yours, John R. ClarkeCEO & Managing Director, Investment BankingMidtown Partners & Co., LLC
5. 2009 PIPE Placement Agent Rankings * Based on data from PlacementTracker.com** Based on total Issuance Amount of Placements (not Agent allocation) 5
6. Firm Profile 6 Founded in 2004 by a small group of entrepreneural corporate finance professionals, Midtown Partners & Co., LLC is one of the fastest growing PIPE placement agents in the country. The group prides itself on fostering strong relationships with clients by providing creative and unique financial solutions to high growth companies within the lower middle market (enterprise values less than $300 million) and emerging market sectors. The Investment Banking Group at Midtown Partners & Co., LLC believes that client relationships and industry focus are keys to the success of emerging growth companies. Such companies can greatly benefit from the investment banking services of a firm with a unique understanding of the nature of smaller transactions, and the respective marketplace. Our senior investment bankers have raised in excess of $1 billion in capital across multiple transactions in both public and private debt and equity financings. The team has experience executing transactions and advising companies across a variety of industries including Healthcare, Oil & Gas, Consumer Products and Services, Information Technology, Telecom and Internet, and Defense. The group has gained broad experience, considerable industry knowledge and extensive structuring expertise at some of Wall Street's most prestigious firms, thereby becoming a valuable resource to our clients. Every client engagement is led by a senior level professional who works closely with the company's management to ensure that the size and parameter of each financing meets the needs of the business. We strive to deliver creative and customized solutions that address our clients’ critical business needs. By listening to our clients’ needs, speaking with customers, business leaders, and anticipating their needs, Midtown Partners has provided service to clients in a vast array of industries. Our bankers are known for their extensive experience in the industries with which they interact regularly. This experience enables our professionals to provide unique insight into potential advisory engagements and capital markets transactions, ultimately offering our clients strategic solutions that will best benefit their business. We pride ourselves in the way we do business. After taking the time to understand our clients’ businesses and strategic objectives, we leverage our wide network of contacts in order to build a concise plan, clear agenda, and assessable goals. To put it simply: We put our clients’ needs first.
7. The Emergence of PIPE Financings vs. Secondary Offerings 7 In years past, the acronym “PIPE” was much less known – and often, carried a negative connotation among those who were familiar with such instruments, much like that of the high yield bond market in its early years. High yield bonds were often dismissed as “junk” since mainstream investors and investment dealers didn’t deal in these bonds. Today, high yield is a highly relevant financing market that is broadly embraced by issuers, investors, and bankers. The advent of modern portfolio theory meant that financial researchers soon began to observe that the risk-adjusted returns for portfolios of junk bonds were quite high, meaning that the increased credit risk of these bonds was often more than exceeded by the higher interest payments. The PIPEs market has undergone a similar evolution; as more institutional investors became familiar with the risks and advantages, more and more capital flowed into these financings. In 2008, the private placement in public equity and registered-direct markets exceeded more than $120 billion* in capital raised, an amount that represents more than half the size of the public follow-on market. PIPEs are quickly becoming a preferred, mainstream financing technique for small cap, mid cap, and large cap companies alike. There are many key differences between PIPE financings and secondary offerings. A PIPE transaction is the privately negotiated sale of a public issuer’s unregistered equity or equity-linked securities to investors, where the sale is conditioned upon a subsequent resale registration statement being filed with, and declared effective by, the U.S. Securities and Exchange Commission (SEC). There is also another major difference that is of particular interest to company management teams – the process of how capital is raised. Private placements are marketed on a confidential basis, and only to institutional or qualified individual investors. The quick-and-quiet process is in contrast to the marketing of a public offering, where prospectuses are distributed to the universe of potential investors. Speed and confidentiality are key reasons why an increasing number of companies have been attracted to private placements. In addition, because a PIPE is not a public offering, the disclosure of any information that may be considered material and nonpublic needs to be handled with caution. Perhaps one of the most important reasons a company would wish to raise capital through a PIPE financing is that secondary offerings cause price erosion throughout the process of marketing the transaction. Many companies can raise capital at less dilutive terms using private placements, which is a benefit to shareholders and to the company. Source: Dresner, Steven. The Issuer's Guide to PIPEs. New York: Bloomberg Press, 2009.* Based on data from PlacementTracker.com
9. PIPEs 9 “A universally accepted definition of a PIPE has always been hard to come by. A general definition would be any privately negotiated equity or equity-linked instrument in a public company. But because of the increasing complexity of transactions, this description does not cover – and certainly does not explain – the abundance of investment structures that fall under the broad heading of a PIPE.” – an excerpt from PIPEs: A Guide to Private Investments in Public Equity (Revised and Updated Edition). In the past ten years, the emergence of such financing vehicles has altered the capital markets and corporate finance landscape for small and midsize public companies. Issuers seeking quick and competitively priced capital from institutional investors have made PIPEs a preferred choice. PIPEs and Registered Directs provide an alternative capital-raising medium for issuers who for some reason or another, would like to preserve confidentiality during the capital-raising transaction. Midtown Partners’ Investment Banking Team is extremely active in advising and procuring capital for clients in sophisticated capital-raising transactions. The company has consistently placed among the top 5 for most active placement agents** in providing capital to emerging growth companies. Strong ties with institutional investors allow Midtown to provide the capital availability and flexibility that is necessary for seamless transactions aimed at providing needed growth capital for the company in a responsible, more shareholder-friendly way. As a result, Midtown Partners has been a leader in PIPE transactions for the past 4 years. Midtown’s experience in helping small- and micro-cap companies to quickly and efficiently meet their capital needs is superb. Since 2005, the team at Midtown Partners has completed 75 transactions, raising over $290 million for public companies. ** Based on total Issuance Amount of Placements (not Agent allocation)
10. Reverse Mergers and Alternative Public Offerings 10 In an era of few IPOs and greater expenses and risks associated with becoming a publicly-traded company, chief financial officers are taking a close look at the merits of going public via reverse mergers instead of through IPO. Among them include: Speed and ease of completion Radically reduced expenses in becoming public Elimination of need for favorable market conditions IPOs generally require much greater attention from top management Lack of need for relatively long and stable earning history Maintain control of the company Less dilution of insiders’ holdings Reduced stigma due to more SEC regulation In a reverse merger, a private company merges with a public listed company with no assets or liabilities (also called a “shell” corporation). The private company merges into a public company and obtains the majority of its stock. The private company normally will change the name of the public corporation (often to its own name) and will appoint and elect its management team and Board of Directors. However, there is a large amount of work that needs to be done for all the wheels to be set into motion for a company to go public via reverse merger. Midtown Partners professionals have expertise in helping your company go public via reverse merger, and can coach you on the many steps you should take in order to bring your company public smoothly.
11. Follow-on Offerings & Registered Directs 11 The registered direct offering is a hybrid combining a public follow-on offering and a (private) equity placement, one in which the transactions are structured and marketed as if they were private placements but the investor receives registered, immediately transferable securities. Given the turbulence in today’s capital markets, many public issuers have been searching for practical methods of raising capital. Traditional public offerings are generally more time-consuming and expensive, not to mention harder to complete, especially in this environment. In addition, traditional PIPE offerings have become less and less attractive to most funds that have moved towards more liquid investments. Registered Direct offerings can be very attractive to public companies by allowing them to quickly raise capital, often without significant warrant coverage / derivatives, from a select group of investors. Our platform allows us to lead or co-manage underwritten follow-on offerings and registered direct transactions. We make it a priority to keep close to our small-cap institutional investors, which provides us with a continuous pulse on the capital markets and current investing climate. The past two decades have brought about many new, flexible alternatives for attaining capital. The team at Midtown Partners & Co. believes that issuers and their shareholders benefit most when company management teams work to attain the best funding structure for its unique situation. Whether the company needs a large chunk of capital to fund growth plans in the near future, or if the company simply wants to make sure the company is able to raise capital quickly and efficiently should situations arise, or if issuers are concerned about who owns the stock, it is extremely important for companies to “have all their ducks in a row” so that the company can better execute its growth plan without worrying about cash ongoing concerns. There are many requirements that a public company needs to satisfy in order to become S-3 eligible; Midtown Partners is able to advise your company on the entire process.
12. ATM Offerings & CMPOs 12 An “At-The-Market” (ATM) offering is an offering of securities into an existing trading market for outstanding shares of the same class at other than a fixed price on, or through the facilities of, a national securities exchange, or to or through a market maker otherwise than on an exchange. Therefore, the price at which securities are sold in an at-the-market offering will vary because it is based on the price of the securities in the trading market. There are many advantages of ATM Offerings: Minimal price impact – issuers can quickly raise capital by selling newly-issued shares into the natural trading flow of the market, without having to market and/or announce the offering Flexibility – sales can be effected on an agency or principal basis – terms of each sale are agreed upon between the issuer and the agent, including timing and size, at the issuer’s discretion Low cost – Distribution costs for at-the-market offerings are typically less than for traditional follow-on offerings Minimal management involvement – requires no “roadshows” and involve only limited prospectus preparation and delivery requirements Doesn’t apply to the 20% rule Disadvantages of ATM Offerings: Tend to be substantially smaller than traditional follow-on offerings Price of ATM offering also depends on market pricing; cost of capital fluctuates Not as stealthy as private placements since the securities are still registered offerings Eiger, Ze'- ev D.. Frequently Asked Questions About At-The-Market Offerings. Morrison & Foerster LLP, 2009. A CMPO (Confidentially Marketed Public Offering) is also known as an Unregistered Direct Offering (URDO) – essentially a public share offering that is announced after private investors have already been (confidentially) lined up for the new investment offering. The end result is a positive message sent to the market: you have investor demand and confidence in your stock issuance. The CMPO often increases the investor base, increases float, and generally increases sell-side research coverage Works best in robust markets or when you have just released blockbuster data Thomas, David. "NOTES FROM THE FINANCING PANELS AT BIO CEO 2010". Bio Industry Analysis Blog. April 19, 2010 <http://insidebioia.com/conferences/notes-from-the-financing-panels/>.
13. Strategic Advisory 13 When it comes to helping companies reach milestones in the capital markets, it is never one-size-fits-all. Public companies can benefit from our firm’s diligence in working with each client’s unique situations and opportunities, as well as from our success in helping clients reach their objectives. Experienced guidance through each stage of the offering process and assistance in assessing market potential, preparing offering documents, building placement syndicates, presenting to sophisticated institutions & accredited investors, coordinating effective distribution process, and reaching out to potential partners in the offering process (legal counsel, investor relations for building a shareholder base, strategic consulting, debt management, etc). Midtown has experience advising management of private and public companies relating to their securities and/or acquisition targets. We conduct due diligence and advise clients on all the facets of raising public and private offerings of equity and debt securities and private placements. This includes choosing what type of structure to go out with, to coaching the client about numerous rules and regulations, to advising which exchange would be practical for the company to uplist on, to what size the deal should be, and which investors to choose, as well as providing follow-on support. Midtown Partners created a comprehensive program that addresses the critical corporate finance needs faced by public companies not listed on a senior exchange – shareholder visibility and capital formation. With extensive experience and industry success, the professionals at Midtown Partners understand the needs of emerging growth public companies. Our Capital Advisory Program is designed to leverage our experience in maximizing the efficiency and effectiveness of public company executives in addressing critical corporate finance challenges. Specific Areas of Advisory Timeline & detailed planning for major Exchange Listing Year over Year shareholder growth Selection of public company professionals and vendors
15. Advisory: Path to Liquidity 15 There is generally a correlation between the daily volume of shares traded of a public security and the ability of the issuer to raise equity capital via the capital markets. Many funds in the investment community are shying away from restricted securities in case they need to get out of these positions. $ Liquidity = Volume (total shares traded) * Weighted Average Share Price In general, the number of trades in a day for a security is estimated to fall between 1% - 2%, on average, of the number of shareholders. Therefore, in order to effect a lasting, meaningful increase in a stock’s trading volume, it is important to increase your shareholder base.
17. Biographies 17 John R. ClarkeCEO & Managing Director, Investment Banking380 Lexington Avenue • New York, NY 10168Direct: 212-972-8392Fax: 212-972-8395JClarke@midtownpartners.com Prior to joining Midtown, Mr. Clarke was President and Managing Director of Investment Banking for H.C. Wainwright & Co. During Mr. Clarke’s tenure at Wainwright, the firm became the 3rd and 4th leading U.S. placement agent in number of closed PIPE transactions for the years 2004 and 2005 respectively (source Placementtracker.com). From early 2004, Mr. Clarke served as both the General Securities Principal and the Financial Operations Principal for the firm as well.Prior to H.C.Wainwright, Mr. Clarke held the position of producing Branch Manager for several NYSE member firms. Since entering the securities industry in 1984, Mr. Clarke has worked with over 100 public companies and assisted in raising in excess of $500 Million in directly placed private capital. In addition, Mr. Clarke has advised private companies in going public via IPO’s and reverse merger process. Mr. Clarke holds a bachelor’s degree in Finance from the E. Claiborne Robbins School of Finance at the University of Richmond. William A. RelyeaDirector of Research, Investment Banking380 Lexington Avenue • New York, NY 10168Direct: 212-972-8393Fax: 212-972-8395BRelyea@midtownpartners.com Mr. Relyea joined the firm in 2008. Previously he held the position of Director of Research at H.C. Wainwright & Co. As an analyst he was named to the Institutional Investor Magazine All-American Research Team twelve times, in the area of imaging technology. Mr. Relyea has investment banking experience with public and private companies in a variety of industries including: clean tech and alternate energy, (initiated $117mm IPO), imaging technologies, electronics, medical devices and medical technology His international experience includes heading an electricals group for Jardine Fleming in Tokyo, research on Japanese companies, Korean companies and Israeli companies. He published research in a variety of industry sectors including: imaging technologies, alternate energy and clean tech, electronics and composite materials. Mr. Relyea is a member of the PR Newswire-Disclosure Advisory Board. He received his MBA in finance from Cornell University and has a bachelor’s of science in physics, also from Cornell.
18. Biographies 18 Ari J. FuchsSenior Vice President, Investment Banking380 Lexington Avenue • New York, NY 10168Direct: 212-972-8394Fax: 212-972-8395AFuchs@midtownpartners.com Mr. Fuchs joined Midtown Partners in May, 2008. Mr. Fuchs previously worked as a Senior Associate with H.C. Wainwright & Co.. At H.C. Wainwright, Mr. Fuchs executed over $300 million in public and private financings for middle market companies across a variety of sectors, including technology, healthcare and natural resources. While at H.C. Wainwright, the firm was ranked the 3rd and 4th most active placement agents in 2004 and 2005 respectively. Prior to joining H.C. Wainwright, Mr. Fuchs served as Controller for Yofi Textile Printing, a $10 million textile company. Prior to his position at Yofi Textiles, he was employed by PricewaterhouseCoopers where he analyzed and managed 401(k) plans for Fortune 500 clients. In addition, Mr. Fuchs was employed in the Private Client Groups of UBS PaineWebber and Salomon Smith Barney. Mr. Fuchs graduated with a BS degree in Finance from Yeshiva University in New York City. Mr. Fuchs is fluent in French and Hebrew. Victor P. GreeneSenior Vice President, Investment Banking380 Lexington Avenue • New York, NY 10168Direct: 646-695-9301Fax: 212-972-8395VGreene@midtownpartners.com Prior to joining Midtown Partners, Mr. Greene was Managing Director of National Securities’ Investment Banking Division. Mr. Greene was also Managing Director of vFinance when it merged with National Securities. Mr. Greene has been in the securities industry for over 30 years; first as an institutional equity salesman and then as an investment banker starting with Solomon Brothers, working his way up to the head of the firm’s institutional and banking operations. Mr. Greene has been responsible for IPOs, private placements, PIPEs, bridges, and fairness opinions. His clients are institutions ranging from $3M to $25M, both public and private. Mr. Greene has a B.S. in Economics from the Wharton School at the University of Pennsylvania, as well as a J.D. from its law school.
19. Biographies 19 Prakash MandgiVice President, Investment Banking380 Lexington Avenue • New York, NY 10168Direct: 212-972-8396Fax: 212-972-8395PMandgi@midtownpartners.com Mr. Mandgi has strong interests in medical devices especially cardiac electrophysiology, biological materials, medical imaging and biotechnology. He graduated with a masters of science in biomedical engineering from Case Western Reserve in 1995 and completed his master's thesis in the field of cardiac electrophysiology at the Heart & Vascular Research Center. He also graduated with a bachelor’s degree in biomedical engineering from Bombay University in 1990. Mr. Mandgi modeled the firing sequence for an ultrasound digital scan converter at Bhabha Atomic Research Center (BARC) for his bachelor’s thesis. Graduated with an MBA from the University of Chicago (Finance, Analytical Finance, Accounting) in Dec 2004. Mr. Mandgi obtained the Professional Risk Manager (PRM) designation in 2007 and is a Level III candidate for CFA program. Rory McAdamVice President, Investment Banking380 Lexington Avenue • New York, NY 10168Direct: 212-972-8397Fax: 212-972-8395RMcAdam@midtownpartners.com Mr. McAdam joined the firm in 2007. He has been involved in many areas of the finance industry including syndicate trading, investment advisory and investment banking and has been employed by Oppenheimer, Merrill Lynch and Ryan Beck. Prior to joining Midtown Partners Mr. McAdam was a Managing Director at Magna Securities in charge of their syndicate trading desk and originating transactions. Mr. McAdam received a M.B.A from American International College and a B.A from State University of New York at Geneseo.
20. Biographies 20 Sean GatelyVice President, Investment Banking380 Lexington Avenue • New York, NY 10168Direct: 212-972-8398Fax: 212-972-8395SGately@midtownpartners.com Mr. Gately joined Midtown Partners in December 2009. He previously worked as a Senior Associate with Newbridge Securities. At Newbridge Securities, Mr. Gately focused primarily on Alternative Public Offerings in emerging markets. Prior to his position at Newbridge Securities, Mr. Gately was an Analyst at H.C. Wainwright & Co. Inc. While at H.C. Wainwright, the firm was ranked as one of the most active placement agents in private placements. Mr. Gately participated in transactions to raise over $100 million over a variety of sectors including technology, healthcare, and natural resources. Mr. Gately is a graduate of Providence College in Providence, RI. Patrick ChenAssociate, Investment Banking380 Lexington Avenue • New York, NY 10168Direct: 212-972-8392Fax: 212-972-8395PChen@midtownpartners.com Mr. Chen joined Midtown Partners in June 2008. He graduated Babson College with a BS degree in Finance, with a minor in Economics. Prior to joining the firm, Mr. Chen was employed by Ameriprise Financial where he analyzed mutual funds and aided senior advisors with creating allocations for clients. Mr. Chen is licensed as a Registered Representative and as a Registered Investment Adviser. He is a Level I candidate for the CFA Program. Mr. Chen also volunteers for various organizations, including the Institute for the Development of Earth Awareness (IDEA), a 501(c)(3) non-profit thinktank and educational organization whose mission synthesizes human, animal and environmental issues, and also Dare2B, a non-profit organization to raise awareness about helping those in need in the New York area.
