the ‘holy grail’ for micro cap ceos & cfos: knowing the financing terms—long before the...

Monthly Webinar Series

presents

The “Holy Grail” for Micro-‐Cap CEOs & CFOs: Knowing the Financing Terms—Long Before the Term Sheet Arrives

October 10, 2013

Panelist Adam J. Epstein

Founding Principal Third Creek Advisors, LLC

Moderator Brett Goetschius

Editor and Publisher Growth Capital Investor

Thank you for participating in “The ‘Holy Grail’ for Micro-‐Cap CEOs & CFOs: Knowing the Financing Terms—

Long Before the Term Sheet Arrives.” This manual contains information you will need for this webinar.

CONFERENCE MANUAL

This manual contains:

•Dial-‐in/log-‐on instructions.

Speaker bio and contact information. •Tips for submitting questions. •Pertinent information from the pages of Growth Capital Investor.

CONFERENCE DETAILS

The webinar is scheduled for Thursday, October 10, 2013 at 2:00 p.m. EDT, 1:00 p.m. CDT, 12:00 p.m. MDT, and 11:00 a.m. PDT. It will last 60 minutes.

HOW TO JOIN THE WEBINAR

Online With Streaming Audio •Go to http://web.beaconlive.com •On the “Join a Meeting” side of the login page, enter meeting room: mnm2

•Enter your unique PIN (sent in your email confirmation).

•Click on “Join Meeting” to access the presentation.

•Make sure your computer speakers are turned on and at the correct volume. You can adjust the volume by using the up and down arrows above the presenter’s box.

Optional Telephone Access If you have trouble streaming the sound through your computer, please follow these instructions to listen by phone:

•Dial 1-‐877-‐533-‐4964 about 5-‐10 minutes before the start of the conference.

•Enter your unique PIN (sent in your e-‐mail confirmation).

•You will hear music on hold until the conference has started or be connected directly if it has already begun.

•If you have trouble with your PIN stay on the line and an operator will assist you.

•If you are using a speakerphone, put the phone on MUTE for best sound quality.

•If you are disconnected at any point, just repeat the processes above.

PLEASE NOTE: Only one dial in and one log on per PIN are allowed.

If you have problems accessing the webinar, please call 877-‐297-‐2901. HOW TO SUBMIT QUESTIONS

Questions may be submitted at any time during the call using the chat function on the web interface in the lower left corner of your screen. Just type in your question and send it to “Q&A session” in the drop-‐down menu.

Conference Manual Page 1

The ‘Holy Grail’ for Micro-‐Cap CEOs & CFOs: Knowing The Financing Terms… Long Before the Term Sheet Arrives

Growth Capital Investor Webcast October 10, 2013 Adam J. Epstein

© 2013 Third Creek Advisors, LLC

STREET


Micro-‐Cap Corporate Finance Conundrum: A Perfect Storm of Unnecessary Dilu�on

v  80% of U.S.-‐listed public companies have market caps < $500M; 40% of

companies listed on Nasdaq, NYSE, NYSE MKT are micro-‐cap companies

v  Micro-‐ and small-‐cap companies raise $30B -‐ $50B of growth capital annually v  Size of the market notwithstanding, the micro-‐cap funding ecosystem is

inefficient and o�en penal to issuers v  “Perfect Storm” of unnecessary dilu�on:

ü  Many small pubco’s lack in-‐house capital markets/corporate finance experts ü  Capital-‐raising guidance/logis�cs are predominantly outsourced ü  Marketplace is beset by conflicts of interest ü  Challenging for issuers to analyze reasonableness of terms ü  Weak balance sheets thwart comparison shopping



The Remedy: Data… Through a Buy-‐Side Lens v  The same deal data relied upon by sell-‐side/buy-‐side is available to every micro-‐

cap company – virtually none use it

v  Without deal data, issuers have no idea what financing terms other similarly situated companies are receiving

v  Without deal data, issuers are at a material disadvantage in hiring the right investment bank

v  Without deal data, issuers/BODs have no objec�ve basis upon which to approve or reject poten�al financing terms

v  But, deal data, like any sta�s�cs, are of limited value without context

v  To op�mize deal data for issuer use it needs to be interpreted through a buy-‐side lens – StreetCheck makes deal data indispensable



StreetCheck™: What, How, Who, When & Why v  What: StreetCheck is a consul�ng service that provides CEOs/CFOs for the first

�me with an unbiased assessment of how much capital a company can likely raise in the equity capital markets, using what financing structure, and on what financial terms

v  How: StreetCheck is based upon a proprietary weighted analysis of SEC filings,

corporate history, and recent financings undertaken by similarly situated companies (deal data); simple fixed fee unrelated to financings

v  Who: StreetCheck was developed by TCAs founder, Adam J. Epstein, who co-‐managed a hedge fund that invested in more than 500 micro-‐ and small-‐cap financings; TCA isn’t IB or investor, so no conflicts of interest

v  When: StreetCheck is best used in advance of a capital raise, or to assess exis�ng

funding terms

v  Why: StreetCheck facilitates smarter, less-‐dilu�ve financings



StreetCheck™: Sample Fact Pa�ern v  Nasdaq-‐listed, market cap < $200M, effec�ve shelf, daily trading vol. < $500K

v  Company requires $5-‐7M near term; 180˚ scenarios depicted by 2 IBs ü  Good: products gaining trac�on, gross margins increasing ü  Bad: poor execu�on track record, warrant overhang

v  StreetCheck capital needs/�meframe unlikely with shelf offering; more likely with unregistered conv. preferred (likely terms provided)

v  Morals of this Story

ü  Wrong corp. counsel = wrong S-‐3 filed ü  IBs that do lots of shelf offerings tend to prefer/recommend them ü  Fairly typical fact pa�ern can devolve quickly into close brush w/insolvency ü  Being realis�c + data + buy-‐side lens = saved �me/money



StreetCheck™: Takeaways v  Post-‐2008 funding environment is challenging, but too many micro-‐cap officers

and directors exacerbate difficul�es by outsourcing/flying blind

v  Deal data is powerful knowledge, especially when interpreted through a buy-‐side lens

v  Knowing the likely terms before capital-‐raising begins facilitates: ü  Wiser investment banking choices ü  More accurate AOPs/budge�ng ü  Timely legal/regulatory/structural troubleshoo�ng ü  Be�er corporate governance ü  Smarter, less-‐dilu�ve financings



Contact

Adam J. Epstein, Founding Principal

[email protected] 415.730.1915

For more informa�on about TCA:

h�p://www.thirdcreekadvisors.com



SPEAKER BIO AND CONTACT INFORMATION

Adam Epstein is a corporate director and a special advisor to small-‐cap boards and investment funds through his firm, Third Creek Advisors, LLC (“TCA”). He is the author of The Perfect Corporate Board: A Handbook for Mastering the Unique Challenges of Small-‐Cap Companies (New York: McGraw Hill, December 2012). Mr. Epstein is lead director of OCZ Technology Group, Inc. and a member of the National Association of Corporate Directors (“NACD”). He is an NACD Board Leadership Fellow, the highest level of credentialing for corporate directors and corporate governance professionals. Mr. Epstein is a regularly featured speaker at national corporate governance forums and investor conferences, and is a small-‐cap features contributor to Directorship magazine. Prior to founding TCA, Mr. Epstein co-‐founded and was a principal of Enable Capital Management, LLC (“ECM”). During his tenure, ECM’s special situation hedge funds invested in more than 500 small-‐cap financings in the United States, the European Union, and Australasia.

CONTACT Adam Epstein Founding Principal Third Creek Advisors, LLC 415-‐730-‐1915 [email protected]


the ‘holy grail’ for micro cap ceos & cfos: knowing the financing terms—long before the...

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