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Growth Capital Investor Vol. II Issue 5

The Journal of Emerging Growth Company Finance

IN THIS ISSUE Addressing the Unique Challenges of Small Cap Corporate Governance

New book focuses on emerging growth company boards................................................................2

SEC Says Corrupt Touter Raked in $16M

Regulators accused a stock promoter of fraudulently touting stocks backed by PIPE funds in bogus research publications........................................4

Venture-backed Baxano Goes Public in $23M APO with TransS1

Venture capital and PIPE financing joined forces as two spinal therapy companies agreed to merge in a deal that made privately held Baxano the successor of publicly traded TranS1.........................5

ALSO INSIDE PhotoMedex Rises as Reverse Merger Phoenix; Virgin Islands Advisor Faces Fraud Charges in Microcap Finance Scheme; Ironwood Closes $307M Mezzanine Fund; Perella Weinberg Gets into Growth Equity; other stories and deals of note............................................................... 5

EPP, PIPE & APO MARKET DATA Aggregate Year-to-Date Market Activity............. 14 Deal Performance – Growth Capital EPPs.......... 15 Growth Capital EPP Candidates........................ 17

Growth Equity Private Placement Activity $2.0 billion 50

47

$1.5

26

$0.5

Oct.

Nov. 2012

Dec.

Investment ($B)

Jan.

by Joe Gose

B

usiness development companies that provide debt and equity to emerging growth companies have turned to the private placement, debt and follow-on markets to stuff their war chests and expand portfolios. As voracious users of capital, BDCs generally keep an eye peeled to opportunities to raise funds in favorable market windows. But the easing of credit markets and an appetite for yield over the past few years have amplified their ability to add leverage and attract cash, and mature BDCs with market capitalizations exceeding $1 billion as well as newer firms with lower valuations are milking the bullish environment. In the private placement market alone, BDCs raised more than $1.2 billion last year in 15 transactions, according to data from Sagient Research’s PlacementTracker database of equity private placement deals. In 2011, the issuers attracted more than $1.6 billion in 14 deals. Prior to 2011, BDC activity in the private placement market had been virtually nonexistent, particularly during and immediately following the financial crisis. In 2008, for example, the investment companies raised only $85 million in three deals, and in 2009 the issuers collected $94 million in five transactions. Dollar volume began taking off in 2010, however, as issuers raised $637 million in eight placements. See BDC on page 18

Connecticut Investigators Looking at Busted New Stream Deal by Teri Buhl

31

19

0

BDC Fundraising Efforts Lead to Private Placement Market

Alleged Scheme Involved Sale of Inflated Assets to SPAC

41

$1.0

March 18, 2013

Feb. 2013

Mar.*

Deals

Source: PlacementTracker, a service of Sagient Research. March data thru 3/15/13.

A

Stamford, Conn.-based hedge fund manager, Greg Imbruce, tried to use a SPAC vehicle to buy overvalued oil and gas assets from a former partner at a bankrupt hedge fund who was arrested two weeks ago for securities fraud. The deal being negotiated between Imbruce and Bart Gutekunst, co-founder of New Stream Capital, would have used money from SCG Financial Acquisition Corp. (SCGQ), a blank-check company that raised $80 million in 2011, and is currently awaiting shareholder approval on a proposed merger with two unrelated companies. The complicated structure of the deal designed by Imbruce, which involved possibly paying kickbacks, is See Investigation on page 19


Growth Capital Investor VIEWS

Addressing the Unique Challenges of Small Cap Governance

Editor & Publisher Brett Goetschius Contributing Editors Joe Gose Paul Springer Teri Buhl

New Book Focuses on Emerging Growth Company Boards

Production Editor Gary Newman

by Brett Goetschius

Growth Capital Investor is published twice monthly by

P.O. Box 7172 Petaluma, CA 94955 Phone: 707-861-1005 Fax: 360-364-2752

Growth Capital Investor is published on the first and third Mondays of each month, except the first Mondays of August and January. Subscription rate: $1,695 per year for 22 print issues, delivered electronically, and full online access to all articles. Available in hardcopy at additional charge. All rights reserved. Copyright © 2013 MarketNexus Media, Inc. Photocopy permission is available solely through MarketNexus Media. Copying, distributing electronically by email, or duplicating this publication in any manner other than one permitted by agreement with MarketNexus Media is prohibited. Such actions may constitute copyright infringement and leave perpetrators subject to liability of up to $150,000 per infringement (Title 17, U.S. code). Growth Capital Investor is a trademark of MarketNexus Media.

Growth Capital Investor is a general-circulation publication. No data herein should be construed to be recommendations to purchase, retain, or sell securities, or to provide investment advice of the companies mentioned or advertised. No fees are accepted for publishing any editorial information. MarketNexus Media, its subsidiaries, and its employees may, from time to time, purchase, own, or sell securities or other investment products of the companies discussed or advertised in this publication.

March 18, 2013

Over the course of the decade I have spent writing about the financing of emerging growth companies I have been contacted regularly by mainstream financial news reporters working on stories involving this or that small cap management team that they suspect has engaged in accounting fraud, stock manipulation, self-dealing, or worse. Inevitably, they are looking for some confirmation of their suspicions and validation of their sense that the activities they are investigating are beyond the pale of acceptable behavior for the senior management of small public companies. I try to be helpful, to place the situations they present in context, but often I disappoint them. “Look,” I find myself saying, “finding a small or microcap company with accounting irregularities, conflicted directors, promotional senior management, or unscrupulous investors is like shooting fish in a barrel. It’s a dog-bites-man story,” I tell them, meaning there is little that’s newsworthy in one more tale of a young public company practicing poor corporate governance, even if they’ve broken a few securities laws in the process. “If you want to really break some news,” I tell them, “go find the small company that has resisted the temptation to cook the books, stack the board with cronies, use the treasury to feather management’s nests, or take the money from the investor who promises to bring some action to the company’s stock. One that has artfully executed on it business plan, grown and sustained the value of its shareholder equity, earned the praise of analysts and the admiration of institutional investors. Now that would be a story.” I tell these mostly young reporters, who no doubt have never shot anything, especially fish, or covered a local news beat where they might be presented with a dog-bites-man incident to consider writing up for the police blotter, that small cap management incompetence, malfeasance, and chicanery is so common as to be unremarkable. I tell them this not to excuse or dismiss the behavior, but because I’ve come to believe that the small- and microcap ecosystem in which these companies must dwell is so bereft of support for good governance practices, shareholder-aligned capital formation, and disciplined management that underperformance is the norm, and failure, in terms of sustained growth of shareholder equity, is to be expected. So it was with some trepidation that I picked up “The Perfect Corporate Board: A Handbook for Mastering the Unique Challenges of Small-Cap Companies” by Adam Epstein, published in December by McGraw Hill. Treatises on good corporate governance, I have come to understand, are generally the province of business school professors and Fortune 500 directors who like to write off their golf retreats by mixing in a seminar or two with their tee times. Lots of high-minded ideas offered with the presumption that management teams have the time, money and professional support available to implement them, and the assumption that good governance practices are one-size-fits-all

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Growth Capital Investor prescriptions for righteous corporate growth. All of it dispensed with the alacrity of a doctor recommending a high-fiber diet. Mr. Epstein immediately dispels these notions, noting in the introduction, “The national corporate governance dialogue has been fixated on issues faced by large public companies…. notwithstanding the fact that small companies are routinely stymied by unique governance issues for which there is no objective, practical guidance.” Epstein then proceeds, in a crisply written 266 pages, to offer just that. Epstein suggests that small cap companies are, “in a sense, immune-suppressed versions of their larger counterparts…. Small-cap directors frequently operate in environments in which alternatives and flexibility [presumed at large-cap companies] are replaced by a cognizance that even the most innocuous decision making can have business-ending consequences.” “The Perfect Corporate Board” argues eloquently that good governance is not merely an ideal for an emerging growth company to strive for as it develops and matures, it is a prerequisite for survival. Epstein, a former hedge fund manager that advises small company boards, writes with the authority of an experienced investor in scores of microcap and small-cap companies, who has seen what can happen to companies with talented leadership and promising products,

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March 18, 2013

but which lack the kind of support from their boards that is uniquely needed by them. Written specifically for emerging growth company officers and directors, “The Perfect Corporate Board” addresses three broad areas of corporate activities where best governance practices impact small company growth most disproportionately: corporate finance, capital markets, and the selection and reliance on service providers. In plain language, Epstein breaks down the pitfalls that await inexperienced management and boards as they acquire and deploy capital, and nurture shareholder value. The book focuses on the activities all CEOs and CFOs must navigate whether they make software or soft drinks, and that by their nature are ill-prepared for due to the enormous experience deficit they typically bring to the table: “When it comes to negotiating small-cap financings, it is not a level playing field for many companies – not even close. While most companies have experience transacting a handful of financings, there are institutional investors (and their hyper-specialized attorneys) who have undertaken hundreds.” Epstein, drawing on his background as just such an institutional investor, goes on the lay out explicit advice for directors and officers considering a financing, from preparing the company to enter the capital markets, to the proper comportment of executives during investor presentations, to how to vet finance offers with varying structures and terms, and what to be vigilant about post-financing to insure that often complex compliance requirements are met and harsh penalties avoided. Each chapter is peppered with juicy tips for negotiating with investors, communicating with shareholders, responding to critics and short-sellers, and navigating the gauntlet of investment bankers, investor relations firms, legal advisors and news media that hover around high-growth companies like groupies at a rock concert, looking for their piece of the action. The book’s straightforward organization, which thoughtfully relegates practice tips to sidebars and comments to footnotes, keeps the pace moving, and the wisdom offered often has the whiff of secrets revealed between the investor and the invested. In one example, company managers are cautioned from offering up that tidbit of forward-looking information during an investor presentation that is not quite public but suggests a significant value-creation event in the offing: the event and its expected impact may get baked into the finance terms as the new hurdle to meet to avoid triggering penalties and defaults. This insider’s perspective on the mind and motivations of the typical institutional investor in emerging growth companies is the true strength behind “The Perfect Corporate Board.” It is also perhaps it’s one weakness, in that investor behavior, including that of the bad, value-destroying and

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Growth Capital Investor predatory kind all too prevalent in emerging growth company finance, is accepted at face value or given short-shrift. Any microcap company board that has watched its share price plummet while the percentage of its float in fail-to-delivers soared after it closed a no-short convertible PIPE would beg to differ with the book’s presumption that illegal and unethical behavior by investors is a nominal threat. But this is a small omission in an otherwise thoughtful and badly needed guide for emerging growth company directors and officers seeking to successfully navigate their company through the capital markets. “The Perfect Corporate Board” is a welcome addition to the knowledge base of small cap company directors and officers seeking to improve the odds of success in building and sustaining shareholder value.

SEC Says Corrupt Touter Raked in $16M Accused of Pumping Company Backed by PIPE Funds by Paul Springer

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egulators accused a stock promoter of fraudulently touting stocks in bogus research publications, according to a civil suit that alleges Canadian promoter Colin McCabe made baseless claims about ten companies including Guinness Exploration and PIPE-financed Global Health Ventures (GHLV). Global Health is now Kedem Pharmaceuticals (KDMP). The allegedly improper touting of Global Health shares took place in a period when the company engaged in several equity-linked financings that took its share price up to a reverse split-adjusted $208, only to fall to less than a penny once the pump ended. McCabe allegedly received $16 million in payments from issuers for extolling their stocks in publications that did not disclose that he was being paid to prepare the “research” marketed from 2008 through 2011, according to a suit filed by the Securities and Exchange Commission. The action was filed in the Salt Lake City U.S. District Court. McCabe has not yet responded. In a climate where analyst coverage is scarce for small companies, paying for research has become more common. And it’s perfectly legal, so long as the paid relationship between the issuer and the research company is disclosed to investors. In the case of McCabe’s publications, the commission March 18, 2013

alleges, the recommendations were neither disclosed nor real research in any meaningful sense. “McCabe, among other things, falsely claimed that the recommendations in his newsletters and promotional mailings were based on extensive research, a research team, experience and contacts, when in fact they were not; he failed to disclose to his newsletter subscribers that he was being paid substantial sums to recommend at least ten of the same stocks in his other publications; and he made false and misleading statements about the assets of one of the issuers he recommended, Guinness Exploration,” the complaint claims. Recommendations McCabe publicized in his Elite Stock Report, The Stock Profiteer and Resource Stock Advisor allegedly drove stock prices up in the short term, after which they collapsed. “Gains were fleeting,” the SEC claims, “and investors who bought stocks recommended by McCabe often suffered substantial losses when the market for these shares collapsed.” McCabe’s inquiries into the issuers went no further than reviewing websites and regulatory filings, the complaint says. McCabe also based recommendations on the purported acumen of fictional financial experts, such as McCabe’s non-existent “good friend Joe Marino” and “highly-trained economist Roger Gaines.” Global Health paid McCabe $3.45 million to promote its stock from October 2009 through May 2010, according to the SEC’s complaint. The promotions coincided with a flurry of PIPE financings with investment funds in the Chicago area. In December 2009, regulatory filings indicate, the company issued a $1 million PIPE to undisclosed investors. In March 2010, the company issued a $4.2 million convertible debenture to St. George Investments LLC, a PIPE fund managed by Chicago Venture Partners. Then again at the end of May 2010 the company entered into a $20 million structured equity line with Lincoln Park Capital. Global Health issued 600,000 shares of stock to Lincoln Park as a commitment fee, worth $312,000 at the time, regulatory filings say. There is no indication Global Health drew upon the credit line, which was terminated a few months later. A registration statement for Lincoln Park’s commitment shares was never filed by the company. During the period it allegedly paid McCabe to tout its stock, regulatory filings also show that Global Health also issued common stock and warrants to undisclosed offshore investors under Regulation S. The company also acquired Posh Pharmaceuticals for 4 million shares of stock in December 2009. At the end of May 2010, when the alleged touting ended and Lincoln Park committed to the equity line, Global Health

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Growth Capital Investor shares closed at a split-adjusted price of $208. By the end of the year, share prices had fallen over 90%. A Form 10-K filed on May 31, 2010 included a going concern warning and noted an accumulated deficit of $2.4 million. Global Health issued a $4.34 million discounted convertible note and warrants to an undisclosed investor in June 2011 and a $2.5 million convertible note in October, about a month after the company had reverse-merged with Vancouver-based Kedem Pharmaceuticals. Kedem subsequently defaulted on the note. Kedem’s share prices slid from 15 cents in October 2011 to less than a penny this year.

PhotoMedex Rises as Reverse Merger Phoenix

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he reverse merger market is littered with the remains of companies that were ill-prepared to go public, but the 16-month old union of PhotoMedex (PHMD) and Radiancy tells a different story, a story of success for both parties to the reverse merger – at least so far. The merger between serial PIPE issuer PhotoMedex and Radiancy created a profitable business, which PhotoMedex had not been able to achieve on its own even after ten PIPE financings dating back to 1999, when the company was known as Laser Photonics. While reverse mergers often involve a shell with no operations, the 2011 reverse merger of PhotoMedex and Radiancy combined two active skin treatment companies. The survivor of the transaction markets products including PhotoMedex’s Xtrac laser treatment systems and Radiancy’s no!no! hair removal products. Prior to the merger, which closed in December 2011, PhotoMedex had been in business for well over a decade. Product sales were increasing since the company issued its tenth pre-merger PIPE financing in 2010, a $2.5 million offering of 12% convertible notes purchased by ClutterBuck Funds. In June 2011 the company recorded increased revenues for Xtrac and other laser-based technologies. For the first half of 2011, PhotoMedex recorded revenues of $12.76 million, up from $9.9 million for the same period in 2010. At the same time, however, net losses increased from $5 million to $7 million. When the new company reported its full-year 2012 numbers on Wednesday markets reacted wildly to what PhotoMedex called a 91% revenue increase to $54.8 million, March 18, 2013

along with net income of $5.9 million in 2011 versus a $3 million loss for 2010. These increases, which investors responded to by scooping up PhotoMedex shares, reflected the revenue gains from the merger rather than organic growth of the original PhotoMedex. Still, the company’s revenue numbers beat analysts’ Q4 expectations by 6 cents according to CapitalIQ. While this out performance may not sound as dramatic as the raw revenue figures, healthy growth is clearly developing out of the reverse merger. In April of last year, the post-merger company returned to the PIPE market, where it raised $50 million in registered direct offerings placed by lead agent Canaccord Genuity and co-agent Maxim Group. —PS

Venture-backed Baxano Goes Public in $23M APO with TransS1

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enture capital and PIPE financing joined forces as two spinal therapy companies agreed to merge in a deal that made privately held Baxano the successor of publicly traded TranS1(TSON). TranS1 paid for the merger with $550,000 in cash and 10.4 million shares of stock worth about $23 million. The deal also calls for the refinancing of $3 million in Baxano debt. The transaction was approved by shareholders on March 3 and is expected close early in the second quarter. The transaction is the largest reverse merger and PIPE combination, referred to as an alternative public offering or “APO”, since BioCryst Pharmaceuticals (BCRX) became public in a $25 million APO in October 2012. Raleigh, N.C.-based TranS1 makes products for treating lower back conditions. Baxano sells a system used in spinal decompression surgery and is developing a device for facetectomy, a spinal compression technique used to treat a variety of back problems. TranS1 concurrently issued a $17.2 million PIPE to undisclosed investors. The PIPE shares were priced at $2.28. Some $15 million of the PIPE capital came from Baxano shareholders, according to a news release from TranS1. In 2011, TranS1 raised another $20.2 million in a CMPO/Overnight transaction with investors including T. Rowe Price Associates, Diamondback Capital Management and Wellington Management.

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Growth Capital Investor San Jose-based Baxano has been in business since 2005 and began commercializing its iO-Flex system in 2009. The company has drawn the interest of a variety of venture capital investors. In 2012, the company announced a $30 million C round of funding from investors including new investors Kaiser Permanente Ventures and Affinity Capital along with existing investorsKearny Venture Partners, Prospect Venture Partners and Three Arch Partners. The transaction is structured between the companies, RacerX Acquisition Corp., and security holder representatives CMEA Capital partner Sumeet Jain and Kaiser Permanente Ventures managing director David Schulte. In its most recent regulatory filing, TranS1 reported revenues of $14.6 million for 2012, down from $19.2 million. The company remains unprofitable and has amassed a $138.8 million cumulative loss. Year-over-year losses are the result of factors including physician reimbursement limitations and insurance denials. Ken Reali continues in his role as president and CEO, along with executive vice president and CFO Joseph Slattery. Two Baxano designees will join the board of directors. —PS

Virgin Islands Advisor Faces Fraud Charges in Microcap Finance Scheme

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egulators initiated proceedings against investment advisor James Tagliaferri on Feb. 21, and he was soon arrested on criminal charges involving claims that he defrauded investors through several types of financial chicanery. Tagliaferri stands accused of manipulating his two TAG Virgin Island funds in a manner that was both detrimental to their investors and beneficial to him and an associate who was sanctioned in 2007 for engaging in an alleged scheme to inflate the revenues of Penthouse Inc. The indictments seek the forfeiture of $4.3 million in fees paid directly by clients and another $3.35 in undisclosed compensation. Tagliaferri entered a not guilty plea to the criminal charges on Feb. 27 in a U.S. District Court in New York. From 2007 into 2001, the indictment alleges, Tagliaferri defrauded his clients by using their funds to make investments that benefited him and an associate prosecutors identified indirectly as the president of Equities Media Acquisition Corp., a shareholder in publicly traded Fund.com(FNDM). That individual, according to Nevada Secretary of State

March 18, 2013

documents, is Southern California resident Jason W. Galanis. Galanis has yet to be charged. Tagliaferri ‘s scheme involved the alleged transfer of some $120 million in client funds to companies controlled by Galanis, including at least one publicly traded company. “In order to deceptively obtain client funds for this purpose,” the indictment says, “Tagliaferri executed a complex series of trades among and between his clients’ accounts to generate cash.” Tagliaferri purportedly had some clients purchase securities from other clients and disguised his use of the proceeds to pay expenses of companies he controlled and to pay back investors who were demanding the return of their funds. In some cases, according to the indictment, client statements were doctored to show the purchase of promissory notes which were actually non-existent, and some client funds transferred to pay for transactions actually went into TAG accounts. Some funds were allegedly used for Tagliaferri’s benefit and were used to pay personal credit card bills. In one case, the indictment says, Tagliaferri sold client securities to come up with the cash to pay an insurance bill of over $250,000 for one of Galanis’ companies. The indictment outlines several instances in which Tagliaferri allegedly skimmed 10% from transfers that should have gone entirely to pay for securities bought in client accounts. In one case, prosecutors claim, he also created a phony paper trail to validate transfers after learning that the Securities and Exchange Commission was investigating a company that had paid him kickbacks to direct client investments into it. “After learning of the inquiry,” the indictment says, “Tagliaferri caused to be sent backdated invoices to [the company] relating to many of the payments that TAG had received in exchange for placing company client investments in the company.” The invoices were allegedly used to disguise the improper transfers to Tagliaferri as consulting or advising fees, according to the indictment. Tagliaferri allegedly received undisclosed cash and stock compensation for investing client funds in companies controlled by Galanis and Galanis’ brother, including a holding company that owned Jason Galanis’ house in Beverly Hills. In several instances, the indictment claims, Tagliaferri used client accounts to purchase promissory notes issued by Galanis-controlled companies and then diverted some of the purchase price into his TAG accounts. The indictment describes several instances of misleading related-party transactions that were not disclosed as such. In one instance, the indictment says, Tagliaferri needed to pay back an investor who held a $463,000 note in a Galanis company. “In order to generate sufficient funds to repay this client,” the indictment alleges, “Tagliaferri caused various other TAG clients to purchase shares in [a company] from an

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Growth Capital Investor intermediary account for a total of approximately $469,000. Tagliaferri then used these TAG client funds… to repay the client for the outstanding note.” During this time, prosecutors say, Galanis controlled at least one public company even though he was banned from doing so by a 2007 settlement with the SEC over alleged improprieties in accounting and reporting at Penthouse Inc. In settling with the commission, Penthouse shareholder Galanis and a company executive did not deny allegations that they schemed to artificially inflate Penthouse revenues and file a misleading Form 10-Q with the commission. The quarterly report allegedly “bore an unauthorized electronic signature of Robert Guccione, Penthouse’s principal executive officer and principal financial officer, and thus represented that Guccione had reviewed and signed it, and the accompanying Sarbanes-Oxley certification.” Galanis also served as president of Gerova Advisors, a subsidiary of doomed SPAC Gerova Financial Group, until he was fired in 2010. Gerova formed as a reinsurer in 2008 but collapsed in 2011. Gerova had not obtained a registration statement for shares investors received in the SPAC deal, so many investors found themselves stuck with shares that could not be sold. Galanis was named in one suit from which he was dismissed, while another action noted ties between another Gerova associate and Westmoore Capital, which folded after the SEC accused the firm of running a $50 million Ponzi scheme. A Wall Street Journal analysis of SEC settlements banning involvement with public companies described a “gray area” where individuals like Galanis could work for private subsidiaries of public companies after being banned from executive or board roles in public entities. The indictment of Tagliaferri contains fifteen counts, including securities fraud and wire fraud. —PS

Growth Capital News in Brief Ironwood Closes $307M Mezzanine Fund Ironwood Capital has closed Ironwood Mezzanine Fund III, the firm’s third mezzanine fund and fifth overall, with $307 million of capital commitments. The fund will continue to pursue the investment strategy of its two predecessor funds, providing growth and transition capital to growing companies with revenues of $20 million or more. Headquartered in Connecticut, Ironwood’s geographical focus is on the Eastern United States, typically in companies in the manufacturing, environmental services, logistics and business services sectors, among others. PitchBook

March 18, 2013

Perella Weinberg Gets into Growth Equity Boutique investment bank Perella Weinberg Partners is looking to raise $400 million for a new fund focused on growth equity investment opportunities.The new effort is being called PWP Growth Equity, and is led by former Weston Presidio partners Chip Baird and David Ferguson. It plans to invest between $15 million and $50 million into growth-stage companies within the retail, restaurant, consumer, manufacturing and distribution sectors. Fortune

Domain Associates Partners with Elite Consulting U.S. venture firm Domain Associates has partnered with Elite Consulting, an advisory to the Chinese pharmaceutical and medical device industry, have partnered in a new venture called Domain Elite. The partnership will work to establish new companies in China that will provide Western companies the “financing, regulatory, medical, and marketing support and infrastructure needed to bring their products to China,” the firms said. peHUB

Abacus Backs Sverica’s Dexmet Acquisition Abacus Finance Group, a lower middle-market specialty finance company, has announced that it served as administrative agent and sole lead arranger for $16 million in senior secured credit facilities to support Sverica International’s recent acquisition of Dexmet. Additionally, Abacus made an equity co-investment in Dexmet. Based in Wallingford, CT, Dexmet makes expanded foils and polymeric materials and serves the aerospace, battery and filtration/industrial markets. Goulston & Storrs provided legal advice to Abacus for the transaction. PitchBook

WhaleShark Media Plans IPO After several rounds of venture funding, including a $150 million round in November 2011, WhaleShark Media is reportedly planning to go public, possible later this year. Based in Austin, TX, the company offers an online marketplace for coupons and deals. Morgan Stanley, Goldman Sachs and Credit Suisse are set to lead the IPO as underwriters. Investors in the company have included Adams Street Partners, Austin Ventures, Google Ventures, Institutional Venture Partners, J.P. Morgan Asset Management and Norwest Venture Partners. PitchBook

Marin Software Sets IPO Terms VC-backed Marin Software has set a price range for its IPO. The San Francisco-based software company expects

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Growth Capital Investor to price the offering between $11 and $13 and trade on the NYSE under the symbol MRIN. Marin is selling all of the shares in the offering, with VC investors Benchmark Capital Partners, DAG Ventures, Temasek Capital, Focus Ventures and Crosslink Ventures continuing to back the company. Goldman Sachs and Deutsche Bank are slated as lead underwriters for the offering. PitchBook

Fugitive Fund Manager Stuffed Underwear with Cash, Fled According to an SEC lawsuit filed in February 2011, Homm and the other co-owner of Beverly Hills, California-based Hunter World Markets, the broker-dealer through which funds controlled by Homm bought the microcap companies’ shares, engaged in “portfolio pumping.” Homm and his co-defendants in the lawsuit brought microcap companies public through reverse mergers and manipulated the companies’ share prices upward before selling the shares to eight Absolute Capital funds, according to the SEC. Homm ran the alleged scheme from September 2005 to September 2007, the agency said. Bloomberg

Broken Small-Cap Market Undermines Recovery Here’s the rub: Multiple years into an economic recovery characterized by anemic job growth, the small public company market is fundamentally broken. Since 2000 the number of companies that have disappeared from U.S. stock markets is double the number of IPOs that took place during the same period. Almost 30 percent of senior exchange-listed companies today have no equity research coverage. Bloomberg Businessweek

Avoid Those Urging Startups to “Get Ready for Investment Crowdfunding Now” In May of last year, the month following passage of the JOBS Act, I warned startups to watch the hypsters who were urging startups to sign up on portals and get ready for investment crowdfunding. I pointed out that these would-be investment portals were far more interested in what they could do for themselves than what they could do for your startup. At the time, portals were trying to show potential investors that they had deal flow and they were trying to establish their own brands. The problem is that this was being done at the expense of startup companies that were being misled about the fact that they could count on investment crowdfunding to solve their near-term capital needs. The reality was that anyone who knew enough about the issues that remained before investment crowdfunding could be effectively and economically used to raise capital were March 18, 2013

far too speculative and far too distant for cash-starved startups to wait. Fast forward to now and absolutely nothing has changed. In fact, there seems to be an even greater number of advisors, event promoters, service providers and potential portals pushing the “act now” or lose out mantra. This is simply garbage. Crowdfunding Law

NVCA’s Heesen Talks About Decision to Leave and Venture’s New Era Longtime head of the National Venture Capital Association Mark Heesen announced that he will step down from his post when a successor is found.After 22 years with the association and 14 as its president, Heesen said it was time for new blood. He says he remains optimistic about the industry’s future even as challenges remain and a new era for venture begins to unfold.The NVCA said a search for a replacement has begun and that no deadline has been set for a decision. peHUB

Highland Capital Names New Director Highland Capital Management, L.P. (“Highland”), a Dallas-based investment management firm, which together with its affiliates has approximately $18 billion in assets under management, announced the appointments of Nikki Aquino Gill as Director of Business Development and David Lyon as Director of Client Services. Both Gill and Lyon report to Clay Shumway, Managing Director, Head of Business Development and are based in the firm’s Dallas office. Mrs. Gill is responsible for developing and executing the firm’s global growth initiatives related to new products, fund formation, strategic growth and asset gathering. Mr. Lyon is responsible for the guidance of prospective investors through due diligence and funding processes and overseeing ongoing client service and communication. peHUB

Macquarie Group Adds Brian Sauvigne as MD Macquarie Group (Macquarie) (ASX: MQG; ADR: MQBKY) announced that Brian Sauvigne joined Macquarie Capital as a Managing Director in its Financial Sponsors Group, based in New York. Mr. Sauvigne joins Macquarie with a unique scope of experience working with financial sponsors. He was most recently Head of Corporate Development at Morgan Stanley and was responsible for its global corporate mergers and acquisitions activities. He also worked in the firm’s Financial Sponsors Group, where he was involved in a number of equity, debt, and mergers and acquisition transactions. He was previously a consultant at McKinsey, where he provided senior-level strategic advice to a number of financial sponsors and corporate clients. peHUB

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Growth Capital Investor

Growth Equity Deals of Note Cardica Closes $15M CMPO at 25% Discount via Wedbush PacGrow Cardica, Inc. (CRDC) announced that it has raised $14,963,936 in a CMPO/Overnight transaction. The common stock was sold at $1.05 per share, an approximate 25% discount to the market price ($1.40) of CRDC at deal announcement. Wedbush PacGrow Life Sciences acted as Sole Manager on the transaction. Underwriter counsel was Ropes & Gray and issuer counsel wasCooley. The transaction is expected to close on March 20.

AMP Holding Raises $3.6M at 17% Discount to Fund Acquisition AMP Holding Inc. (AMPD) announced that it has raised $3,585,000 in a Common Stock transaction. The common stock was sold at $0.20 per share, an approximate 17% discount to the market price ($0.24) of AMPD at deal announcement. A series of 8,962,500 36-Month Warrants with an exercise price of $0.40 per share (66.67% premium) was issued to the investors in this transaction. The transaction closed on March 13, 2013. Concurrently with this Placement, a subsidiary of the Company closed on the acquisition of certain assets of Workhorse Custom Chassis, LLC for a purchase price of $5,000,000 of which $2,750,000 was paid in cash and the delivery of a Secured Debenture.

White Mountain Titanium Raises $3M in PIPE White Mountain Titanium Corporation (WMTM) announced that it has raised $3,013,093 in a Units (Common Stock + Warrants) transaction. The common stock was sold at $0.70 per share, an approximate 3% discount to the market price ($0.72) of WMTM at deal announcement. A series of 2,152,209 16-Month Warrants with an exercise price of $0.90 per share (25% premium) was issued to the investors in this transaction. Seminario & Cia Sociedad Agente de Bolsa acted as Lead Placement Agent on the transaction. The transaction is expected to close on March 31 .

Cerus Closes $35M CMPO via Cowen, et al. Cerus Corporation (CERS) announced that it has raised $34,999,999 in a CMPO/Overnight transaction. Cowen and Companyacted as Sole Book-Running Manager and Robert W. Baird, Wedbush PacGrow Life Sciences, and Lazard acted as Co-Managers on the transaction. Blueprint Life Science Group and MLV acted as Financial Advisors on the March 18, 2013

transaction. Underwriter counsel wasGoodwin Procter and issuer counsel was Cooley. The transaction is expected to close on March 19.

ANADIGICS Closes $20M CMPO at 10% Discount via Needham, Craig-Hallum ANADIGICS, Inc. (ANAD) announced that it has raised $20,000,000 in a CMPO/Overnight transaction. The common stock was sold at $2.00 per share, an approximate 10% discount to the market price ($2.21) of ANAD at deal announcement. Needham & Company acted as Sole Book-Runner and Craig-Hallum Capital Group acted as Co-Manager on the transaction. Underwriter counsel was Lowenstein Sandler and issuer counsel was Cahill, Gordon & Reindel. The transaction is expected to close by March 19.

Delcath Systems Announces $50M ATM Program via Cowen Delcath Systems Inc. (DCTH) announced that it has secured up to $50,000,000 in an ATM (At the Market) transaction with Cowen and Company. The purchase price is the prevailing market price at the time of the Draw Down Notice. Placement Agent counsel was LeClairRyan and issuer counsel was Skadden, Arps, Slate, Meagher & Flom.

Sorrento Therapeutics Raises $6.4M at 18% Discount Sorrento Therapeutics, Inc. (SRNE) announced that it has raised $6,418,495 in a Common Stock transaction. The common stock was sold at $0.18 per share, an approximate 18% discount to the market price ($0.22) of SRNE at deal announcement. The investors include IVC Investors and officers of the Company and members of the board of directors. Issuer counsel was Latham & Watkins. The transaction closed on March 13.

Scorpio Tankers Closes $235M RDO via RS Platou, DnB NOR Markets Scorpio Tankers Inc. (STNG) announced that it has raised $234,997,200 in a Registered Direct transaction. The common stock was sold at $8.10 per share, an approximate 5% discount to the market price ($8.53) of STNG at deal announcement. RS Platou Markets AS acted as Manager, DnB NOR Markets acted as Lead Agent, and Clarkson Capital Markets, Evercore Partners, and SEB Enskilda AS acted as Co-Agents on the transaction. The transaction was expected to close by March 18.

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Growth Capital Investor OvaScience Raises $35M at 33% Discount via Leerink Swann

Wave Systems Raises $1M at 12% Discount via Dawson James

OvaScience, Inc. (OVSC) announced that it will raise $34,999,920 in a Common Stock transaction. The common stock will be sold at $9.00 per share, an approximate 33% discount to the market price ($13.50) of OVSC at deal announcement. Leerink Swann acted as Lead Placement Agent on the transaction. The investors include funds managed by Adage Capital Partners, Deerfield Management, EcoR1 Capital Fund, and Jennison Associates. The transaction was expected to close on March 18.

Wave Systems Corporation (WAVX) announced that it has raised $1,000,001 in a Common Stock transaction. The common stock was sold at $0.83 per share, an approximate 12% discount to the market price ($0.94) of WAVX at deal announcement. A series of 602,410 60-Month Warrants with an exercise price of $0.83 per share (11.7% discount) was issued to the investors in this transaction. Dawson James Securities, Inc. acted as the exclusive agent on the transaction. The Placement was expected to close by March 15.

Box Ships Completes $21M CMPO via Global Hunter

Park City Group Raises $2.1M at 15% Discount via Dawson James

Box Ships Inc. (TEU) announced that it has raised $21,000,000 in a CMPO/Overnight transaction. The common stock was sold at $5.25 per share, an approximate 8% discount to the market price ($5.73) of TEU at deal announcement. Global Hunter Securities acted as Sole Book-Running Manager and Maxim Group and National Securities Corporation acted as Co-Managers on the transaction. Underwriter counsel was Morgan, Lewis & Bockius and issuer counsel was Seward & Kissel. The transaction was expected to close on March 18.

Park City Group, Inc (PCYG) announced that it has raised $2,100,000 in a Common Stock transaction. The common stock was sold at $3.50 per share, an approximate 15% discount to the market price ($4.11) of PCYG at deal announcement. A series of 200,000 Warrants with an exercise price of $3.50 per share (14.84% discount) was issued to the investors in this transaction. Dawson James Securities, Inc. acted as the exclusive agent on the transaction.

IMRIS Completes $20.1M CMPO at 2% Discount via Canaccord Genuity IMRIS, Inc. (IMRS) announced that it completed the raise $20,125,000 in a CMPO/Overnight transaction. The common stock was sold at $3.50 per share, an approximate 2% discount to the market price ($3.58) of IMRS at deal announcement. Canaccord Genuity acted as Sole Book-Running Manager and Cowen and Company acted as Co-Manager on the transaction. Underwriter counsels were Choate, Hall & Stewart and Stikeman Elliott, issuer counsel was Dorsey & Whitney, and LaBarge Weinstein. The transaction was expected to close on March 18.

Comstock MIning Completes $10M CMPO via International Assets Advisory Comstock Mining Inc. (LODE) announced that it has raised $10,000,000 in a CMPO/Overnight transaction. The common stock was sold at $2.00 per share, an approximate 9% discount to the market price ($2.19) of LODE at deal announcement. International Assets Advisory acted as the exclusive agent on the transaction. Issuer counsel was McDonald Carano Wilson. The transaction was expected to close by March 15. March 18, 2013

OCZ Technology Group Raises $10M from Hercules Technology Growth Capital OCZ Technology Group, Inc. (OCZ) announced that it has raised $10,000,000 in a Non-Convertible Term Notes transaction. A series of 344,037 60-Month Warrants with an exercise price of $2.18 per share (25.29% premium) was issued to the investor in this transaction. The investor was Hercules Technology Growth Capital. This Placement is part of a $20 million financing. The other $10 million was funded in the form of a revolving loan facility.

OpinionLab Inks $15m Growth Funding from SSM Partners OpinionLab, the pioneer and global leader in Omnichannel Voice of Customer (VoC) feedback, today announced that it has received $15 million in growth capital financing from SSM Partners. OpinionLab will use the new funding to drive continued global expansion, as well as accelerate VoC innovation in support of its rapidly-growing client base.

Abacus Backs Sverica’s Dexmet Acquisition Abacus Finance Group, a lower middle-market specialty finance company, has announced that it served as administrative agent and sole lead arranger for $16 million in senior

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Growth Capital Investor secured credit facilities to support SvericaInternational’s recent acquisition of Dexmet. Additionally, Abacus made an equity co-investment in Dexmet. Based in Wallingford, CT, Dexmet makes expanded foils and polymeric materials and serves the aerospace, battery and filtration/industrial markets. Goulston & Storrs provided legal advice to Abacus for the transaction.

ARI Network Services Raises $4.8 at 17% Discount via Ascendiant Capital ARI Network Services, Inc. (ARIS) announced that it has raised $4,800,000 in a Common Stock transaction. The common stock was sold at $1.50 per share, an approximate 17% discount to the market price ($1.81) of ARIS at deal announcement. A series of 1,066,667 60-Month Warrants with an exercise price of $2.00 per share (10.5% premium) was issued to the investors in this transaction. Ascendiant Capital Markets, LLC acted as the exclusive agent on the transaction. The transaction was expected to close by March 18.

PE-backed Artisan Partners Asset Management Completes $332M IPO Artisan Partners Asset Management, an investment management firm based in Milwaukee, priced its IPO at $30 per share. The company offered over 11 million shares on the New York Stock Exchange under the symbol APAM, raising approximately $332 million. Private equity firm Hellman & Friedman has backed the company, using its HFCP V fund to make an investment in 2006. In addition to its Milwaukee headquarters, Artisan operates offices in New York, San Francisco, Atlanta and London.

PE-backed Total Quality Acquired by Forward Air Total Quality, an HCI Equity Partners-backed logistics company, has been acquired by Forward Air (FWRD). Based in Grand Haven, MI, TQI is a cold chain logistics company dedicated to the pharmaceutical and biotechnology sectors, providing temperature-controlled transportation, 24-hour real-time monitoring and maximum security services. It had been a portfolio company of HCI Equity since March 2008.

Revolution Lighting Technologies Raises $5M in Discounted PIPE Revolution Lighting Technologies, Inc. (RVLT) announced that it has raised $5,000,000 in a Common Stock transaction. The common stock was sold at $1.17 per share, an approximate 6% discount to the market price ($1.25) March 18, 2013

of RVLT at deal announcement. The transaction closed on March 8.

Spectral Capital Corp. Raises $1.1M at 15% Premium Spectral Capital Corporation (FCCN) announced that it has raised $1,072,500 in a Common Stock transaction. The common stock was sold at $0.65 per share, an approximate 15% premium to the market price ($0.57) of FCCN at deal announcement. A series of 1,650,000 24-Month Warrants with an exercise price of $0.80 per share (41.59% premium) was issued to the investors in this transaction. This transaction was completed without an agent. The transaction closed on March 7.

Sycamore Partners to Acquire Hot Topic, Inc. for $14.00 per Share in Cash Hot Topic, Inc. (HOTT) and Sycamore Partners announced that they have entered into a definitive agreement pursuant to which Sycamore Partners will acquire Hot Topic for $14.00 per share in cash, or a total of approximately $600 million. The agreement, which has been unanimously approved by Hot Topic’s Board of Directors, represents a premium of approximately 30% over Hot Topic’s closing stock price on March 6.

Hercules Technology Growth Capital Prices Public Offering of Common Stock Hercules Technology Growth Capital (HTGC) announced that it has priced its public offering of 7,000,000 shares of its common stock. Hercules has also granted the underwriters an option to purchase up to 1,050,000 additional shares of common stock. The offering is subject to customary closing conditions and was expected to close on March 13. The last reported sales price of Hercules’ common stock on March 7, 2013 was $12.52 per share. Citigroup and Wells Fargo Securities are acting as joint book-running managers in this offering. Aegis Capital Corp, BB&T Capital Markets, Maxim Group LLC and National Securities Corporation are acting as co-managers in this offering.

Wellington Financial Provides $2M Growth Capital to PHD Virtual Technologies Wellington Financial LP, a privately-held specialty finance firm, announced a US$2 million venture debt financing for Philadelphia-based PHD Virtual Technologies Inc. PHD Virtual provides virtualization backup and monitoring software for physical, virtual and cloud environments.

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Growth Capital Investor Mill City Ventures III Raises $9.5M Mill City Ventures III Limited (MCVT) announced that it has raised $9,450,000 in a Common Stock transaction. The common stock was sold at $1.00 per share, an approximate 39% discount to the market price ($1.65) of MCVT at deal announcement. The Placement Agent and the Investors were not disclosed. Mill City Ventures, formerly Poker Magic, Inc., is a development-stage company focused on promoting and placing its Winner’s Pot Poker game online, into casinos and entertainment facilities, including those located in Native American tribal lands. The company is also seeking in expanding the number of products or services that it offers in the gaming industry.

Globalwise Investments Raises $2.65M at 35% Discount via Taglich Brothers Globalwise Investments, Inc. (GWIV) announced that it has raised $2,650,000 in a Common Stock transaction. The common stock was sold at $0.20 per share, an approximate 35% discount to the market price ($0.31) of GWIV at deal announcement. Taglich Brothers, Inc. acted as the exclusive agent on the transaction. Placement Agent counsel was Sichenzia Ross Friedman Ference and issuer counsel was Kegler, Brown, Hill & Ritter. The transaction closed in tranches on 02/28/2013 and 03/06/2013. A total of $3,000,000 was originally sold in this Placement, $350,000 of which was funded through the conversion of outstanding debt.

Inovio Pharmaceuticals Closes $15M CMPO via Cowen, Brean and Maxim

The common stock was sold at $0.145 per share, the market price of the Company’s common stock at announcement. MTS Health Partners acted as the exclusive agent on the transaction. The investors include funds managed by OPKO Health,Frost Group, Tang Capital Management, and RTW Investments. The transaction was expected to close on March 12.

Oculus Completes $3M CMPO via Aegis, Dawson James Oculus Innovative Sciences, Inc. (OCLS) announced that it has raised $3,000,000 in a CMPO/Overnight transaction. The common stock was sold at $0.40 per share, an approximate 26% discount to the market price ($0.54) of OCLS at deal announcement. Aegis Capital Corporation acted as Sole Book-Runner and Dawson James Securities acted as Co-Manager on the transaction. Underwriter counsel was Sichenzia Ross Friedman Ference and issuer counsel was Trombly Business Law. The transaction was expected to close by March 12.

Israel’s OurCrowd Backs Lucid Energy Lucid Energy, a developer of renewable energy systems, has raised an undisclosed amount from Israel’s OurCrowd, a hybrid venture and crowdfunding platform. Terms were not disclosed. Lucid Energy is based in Portland, Ore.

Avedro Completes $43m Series D Avedro has completed a $43 million Series D financing led by Abingworth along with a significant investment by Third Point. Avedro’s other investors include Prism Venture Works, De Novo Ventures, Flagship Ventures, Aperture Ventures, SCP Vitalife Partners, Borealis Ventures and Echelon Ventures. As part of the transaction, David Mayer from Abingworth and Jason Hong, PhD from Third Point will be joining the board of directors.

Inovio Pharmaceuticals, Inc. (INO) announced that it has raised $15,057,496 in a CMPO/Overnight transaction. The common stock was sold at $0.55 per share, an approximate 20% discount to the market price ($0.69) of INO at deal announcement. A series of 13,688,633 60-Month Warrants with an exercise price of $0.79 per share (15% premium) was issued to the investors in this transaction. Cowen and Company acted as Sole Book-Runner, Brean Capital acted as Co-Lead Manager, and Maxim Group acted as Co-Manager on the transaction. Underwriter counsel was LeClairRyan and issuer counsel was Duane Morris. The transaction was expected to close by March 12.

Square 1 Bank has provided a $2.25 million debt facility to Carolus Therapeutics, a biopharmaceutical company. The financing will support future growth. The company is backed by Avalon Ventures.

RXi Pharmaceuticals Raises $16.4M from OPKO Health, Frost Group, Tang and RTW

Wireless Ronin Raises $1.56M in RDO at 34% Discount via Roth

RXi Pharmaceuticals Corporation (RXII) announced that it has raised $16,385,000 in a Common Stock transaction.

Wireless Ronin Technologies, Inc. (RNIN) announced that it has raised $1,562,400 in a Registered Direct

March 18, 2013

Square 1 Bank Provides $2.25m Debt Facility to Carolus Therapeutics

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Growth Capital Investor transaction. The common stock was sold at $1.80 per share, an approximate 34% discount to the market price ($2.73) of RNIN at deal announcement. A series of 434,000 60-Month Warrants with an exercise price of $2.73 per share was issued to the investors in this transaction. Roth Capital Partners acted as the exclusive agent on the transaction. Issuer counsel was Briggs & Morgan. The transaction was expected to close on March 8.

$0.40 per share, an approximate 8% premium to the market price ($0.37) of TBUFF at deal announcement. A series of 4,250,000 24-Month Warrants with an exercise price of $0.50 per share (35.14% premium) were issued to the investors in this transaction. An additional series of 4,250,000 60-Month Warrants with an exercise price of $0.60 per share (62.16% premium) were issued to the investors in this transaction. The transaction closed on March 4.

Pacific Mercantile Raises $15M at 13% Premium

GeoPetro Issues $1.9M in Stock/Warrants to Close Merger

Pacific Mercantile Bancorp (PMBC)announced that it has raised $14,999,999 in a Common Stock transaction. The common stock was sold at $6.75 per share, an approximate 13% premium to the market price ($6.00) of PMBC at deal announcement. The investors were funds managed by Carpenter & Company. Issuer counsel was Stradling, Yocca, Carlson & Rauth. The transaction is expected to close on April 15.

GeoPetro Resources Company (GPR) announced a $1,900,000 Units (Common Stock + Warrants) transaction. The common stock will be sold at $0.10 per share, an approximate 11% premium to the market price ($0.09) of GPR at deal announcement. A series of 9,500,000 Warrants will be issued to the investors in this transaction. The Placement is required to close by 03/29/2013 in order for the Company to consummate the merger with MCW Energy Group Limited.

TranS1 Raises $17.2M via Stifel to Fund APO with Surgical Device Maker TranS1 Inc. (TSON) announced that it has raised $17,200,179 in a Common Stock transaction. The common stock was sold at $2.28 per share, an approximate 3% premium to the market price ($2.22) of TSON at deal announcement. Stifel Nicolaus Weisel acted as Financial Advisor on the transaction and the Investors include officers of the Company and members of the board of directors. Issuer counsel was Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan. Concurrently with this Placement, the Company completed a reverse merger with Baxano, Inc.

Ballard Power Places $4M in Conv Notes with Anglo American Platinum Ballard Power Systems Inc. (BLDP) announced that it has raised $4,000,000 in a Convertible Promissory Notes transaction. The fixed conversion price of the Convertible Promissory Notes will be a 20% discount to the closing price of the Company’s Common Stock. The investor was Anglo American Platinum. The transaction is expected to close on March 29.

Triangle Petroleum Raises $55.8M at 8% Discount Triangle Petroleum Corporation (TPLM) announced that it has raised $55,800,000 in a Common Stock transaction. The common stock was sold at $6.00 per share, an approximate 6% discount to the market price ($6.41) of TPLM at deal announcement. The investor was NGP Triangle Holdings. Issuer counsel was Skadden, Arps, Slate, Meagher & Flom and investor counsel was Vinson & Elkins.

CNS Reponse Closes First Tranche of $2.5M PIPE at 81% Discount CNS Response Inc. (CNSO) announced that it intends to raise $2,500,000 in a Common Stock transaction. The common stock will be sold at $0.25 per share, an approximate 81% discount to the market price ($1.30) of CNSO at deal announcement. This placement will fund in tranches. From 02/21/2013 to 02/28/2013, the Company sold $295,000 of a total of $2,500,000 available under the financing.

Tribute Pharmaceuticals Raises $3.4M at 8% Premium Tribute Pharmaceuticals Canada Inc. (TBUFF) announced that it has raised $3,400,000 in a Units (Common Stock + Warrants) transaction. The common stock was sold at March 18, 2013

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Growth Capital Investor Aggregate Year-to-Date Market Activity (through March 15) Unregistered Equity Private Placements - PIPEs and Reg S Structure Type Common Stock Convertible - Fixed Non-Convertible Debt/Preferred Stock Unknown Structure Convertible - Reset Convertible - Floating Convertible - Company Installment (Self-Amortizing) Totals

Deals

$ Raised

67 31 7 4 3 2 1 115

$3,726,022,710 $417,072,004 $174,192,491 $87,900,000 $6,400,000 $6,500,000 $3,000,000 $4,421,087,205

Top Deals YTD

Industry

OPKO Health Natural Resource Partners Far East Energy Corp Rose Rock Midstream Triangle Petroleum Corp Navios Maritime Acquisition Corp Emerald Oil Preferred Apartment Communities OvaScience ModusLink Global Solutions

Pharmaceuticals Coal Oil & Gas Pipelines Oil & Gas Transportation Oil & Gas REITS Biotechnology Internet

$ Raised $175,000,000 $75,000,000 $60,000,000 $59,260,000 $55,800,000 $50,452,099 $50,000,000 $40,000,000 $34,999,920 $30,000,000

Registered Equity Private Placements - Registered Directs, CMPOs and ATMs Structure Type

Deals

Common Stock - CMPO/Overnight Offering ATM (At the Market) Offering Common Stock - Shelf Sale (Registered Direct) Structured Equity Line Common Stock - Rights Offering Totals

28 24 19 12 6 89

$ Raised $702,202,760 $37,722,280 $980,670,000 $795,000 $76,700,000 $1,798,090,040

Top Deals YTD

Industry

Cheniere Energy Partners Scorpio Tankers Scorpio Tankers Aegerion Pharmaceuticals Aveo Pharmaceuticals NewLink Genetics Corp Navios Maritime Acquisition Corp Anthera Pharmaceuticals Crosstex Energy Pacific Premier BanCorp

Pipelines Transportation Transportation Biotechnology Commercial Services Biotechnology Transportation Pharmaceuticals Pipelines Savings & Loan

$ Raised $364,999,970 $234,997,200 $230,040,000 $72,054,247 $57,502,875 $52,440,000 $50,001,255 $46,000,000 $39,285,000 $37,950,000

International Equity Private Placements Structure Type Common Stock Common Stock - Rights Offering Convertible - Fixed Convertible - Floating Structured Equity Line Convertible - Reset Non-Convertible Debt/Preferred Stock Total

Deals

$ Raised

197 25 22 2 2 1 1 250

$3,935,597,149 $1,407,014,036 $962,465,417 $4,330,102 $0 $30,178,746 $1,191,048 $6,340,776,498

Top Deals YTD

Industry

Evergrande Real Estate Group Shanghai Industrial Holdings Sky Deutschland AG Phoenix Group Holdings Talvivaara Mining Company PLC Sunac China Holdings Paul Y. Engineering Group Sevan Drilling AS Jaiprakash Power Ventures Paul Y. Engineering Group

Real Estate Real Estate Media Insurance Mining Real Estate Building Materials Oil & Gas Electric Building Materials

$ Raised $561,128,250 $502,959,600 $461,109,578 $372,618,770 $340,989,176 $259,263,870 $257,666,138 $178,875,750 $175,351,000 $155,012,324

Source: PlacementTracker, a service of Sagient Research, Inc. EPP market activity data excludes all placements of less than $1 million, placements via 144-A Offerings or Equity Lines of Credit, and transactions conducted by foreign issuers that trade in the U.S. on the Pink Sheets. Data is for closed and definitive agreement transactions reported as of 3/15/13.

March 18, 2013

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Growth Capital Investor Best Deal Performance - Unregistered Growth Capital EPPs Gross Proceeds

Stock Price Change Post-Closing

1-day Perf. PostAnnounce

1-week Perf. PostAnnounce Placement Agent

Company

Closing Symbol Date

S&W Seed Company Sequential Brands Group Ventrus Biosciences Muscle Pharm Corporation ARI Network Services Emerald Oil Preferred Apartment Communities

SANW SQBG VTUS MSLP ARIS EOX APTS

1/16 1/9 2/4 1/28 3/11 2/1 1/16

$10,500,000 $22,350,002 $5,500,000 $12,000,000 $4,800,000 $50,000,000 $40,000,000

35% 33% 31% 26% 24% 21% 20%

1% 0% 20% 38% 5% -1% 2%

-4% 0% -6% 31% 11% 6% 1%

OCZ Technology Group Desert Gateway Rose Rock Midstream LP Discovery Laboratories United Community Financial Cor. United Community Financial Corp.n SouthCrest Financial Group Triangle Petroleum Corporation Revolution Lighting Technologies Revolution Lighting Technologies Navios Maritime Acquisition Corp.

OCZ RTRX RRMS DSCO UCFC UCFC SCSG TPLM RVLT RVLT NNA

3/11 2/14 1/8 2/13 1/11 1/11 1/22 3/2 3/8 2/21 2/26

$10,000,000 $9,183,336 $59,260,000 $10,000,000 $21,800,000 $20,200,000 $5,300,000 $55,800,000 $5,000,000 $5,000,000 $50,452,099

18% 12% 12% 11% 10% 10% 10% 9% 9% 5% 4%

1% 9% 0% -5% 1% 1% N/A 0% 12% 11% 2%

21% 17% -2% 18% -2% -2% N/A 1% 10% 1% 0%

Sunshine Heart Pacific Mercantile Bancorp

SSH PMBC

1/15 2/27

$1,000,000 $14,999,999

3% 2%

0% -1%

0% -1%

Wm. Smith Securities, Piper Jaffray & Co Threadstone Partners William Blair & Company GVC Capital Ascendiant Capital Markets Johnson Rice & Company, L.L.C. Compass Point Research & Trading, Wunderlich Securities, National Securities Corp. Not Disclosed Roth Capital Partners, Citigroup Global Markets Limited Not Disclosed Sandler O'Neill & Partners, L.P. Sandler O'Neill & Partners, L.P. FIG Partners None None None S. Goldman Capital , RS Platou Markets AS, DVB Capital Markets, Global Hunter Securities Not Disclosed None

Worst Deal Performance - Unregistered Growth Capital EPPs Company

Closing Symbol Date

Gross Proceeds

Stock Price Change Post-Closing

1-day Perf. PostAnnounce

1-week Perf. PostAnnounce Placement Agent

Methes Energies International Limited

MEIL

2/19

$1,700,000

-25%

-18%

-18%

IntelliPharmaCeutics International OvaScience

IPCI OVSC

1/10 3/12

$1,500,000 $34,999,920

-20% -18%

1% -18%

-1% -18%

DynaResource Two Rivers Water Company LDK Solar Co. Limited HealthWarehouse.com Celsion Corporation MRI Interventions Pacific Biosciences of California BioTime Core Resource Management Park City Group, Inc 22nd Century Group MetaStat Crailar Technologies

DYNR TURV LDK HEWA CLSN MRIC PACB BTX CRMI PCYG XXII MTST CRLRF

1/9 1/31 2/28 2/1 2/22 1/25 2/5 1/31 1/30 3/13 1/11 2/28 2/26

$2,348,250 $5,000,000 $9,150,000 $3,501,975 $15,000,004 $11,042,021 $20,500,000 $2,000,002 $2,850,000 $2,100,000 $2,500,000 $1,337,000 $5,000,000

-18% -17% -15% -8% -8% -5% -5% -4% -2% -2% -1% 0% 1%

0% 3% 8% 3% -3% -11% 0% 2% N/A -12% -5% 0% 0%

-5% 4% 2% 0% -18% -10% -6% 21% N/A -14% 0% N/A -2%

Rick's Cabaret International TranS1 ModusLink Global Solutions Pacific Mercantile Bancorp

RICK TSON MLNK PMBC

1/24 3/3 3/12 2/27

$3,000,000 $17,200,179 $30,000,000 $14,999,999

1% 1% 1% 2%

1% -1% 14% -1%

1% 5% 13% -1%

Paulson Investment Company, Barrett & Company, Finance 500, View Trade Securities None Leerink Swann, Ladenburg Thalmann & Co., Oppenheimer & Co., Roth Capital Partners,Wedbush PacGrow Life Sciences Not Disclosed Dawson James Securities Not Disclosed Not Disclosed Dawson James Securities William Blair & Co., First Analysis Securities, Brookline Group None Not Disclosed Not Disclosed Dawson James Securities Chardan Capital Markets Noble Financial Group, Rockwell Global Capital Cormark Securities, Difference Capital Funding, Global Securities Corporation, Macquarie Capital Markets Canada Brean Capital Stifel Nicolaus Weisel Goldman, Sachs & Co. None

Source: PlacementTracker, a service of Sagient Research, Inc. EPP market activity data excludes all placements of less than $1 million, placements via 144-A Offerings or Equity Lines of Credit, and transactions conducted by foreign issuers that trade in the U.S. on the Pink Sheets. Growth Capital EPPs include offerings of at least $1 million of stock or equity-linked debt under SEC Regulations D and S at fixed purchase, conversion and warrant exercise price terms by U.S. publicly traded emerging growth companies from $10 million to $1 billion in market capitalization at the time of offering. Data is for closed and definitive agreement transactions reported as of 3/15/13.

March 18, 2013

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Growth Capital Investor Best Deal Performance - Registered Growth Capital EPPs Company

Closing Symbol Date

Gross Proceeds

Stock Price 1-day Perf. 1-week Change PostPerf. PostPost-Closing Announce Announce Placement Agent

AEGR

1/11

$72,054,247

36%

-3%

-1%

VTUS TSRX CACH HTA PPBI MERU ARWR IMMU UCFC

2/4 1/17 2/5 1/7 1/9 2/27 1/30 2/27 1/11

$16,675,000 $34,053,391 $8,000,000 $0 $37,950,000 $12,000,000 $3,604,000 $16,100,000 $5,000,000

31% 29% 21% 18% 17% 15% 12% 11% 10%

20% -3% 2% 0% 0% -3% -3% -4% 1%

-6% -9% 8% 0% -2% 6% -9% -18% -2%

NMRX INN ATRC KGJI DSCO NNA STNG TEU

1/28 $29,950,312 2/27 $0 1/16 $25,193,750 1/10 $12,600,000 2/11 $0 2/21 $50,001,255 1/30 $230,040,000 3/13 $21,000,000

9% 9% 8% 7% 6% 5% 5% 3%

0% 1% 0% 18% -5% 2% 2% -4%

-14% 5% 5% -4% 18% 0% 3% -12%

Scorpio Tankers

STNG

3/13 $234,997,200

2%

-4%

-2%

Cerus Corporation

CERS

3/14

1%

1%

N/A

Aegerion Pharmaceuticals Ventrus Biosciences Trius Therapeutics Cache Healthcare Trust America Pacific Premier Bancorp Meru Networks Arrowhead Research Immunomedics United Community Financial Corporation Numerex Corporation Summit Hotel Properties AtriCure Kingold Jewelry Discovery Laboratories Navios Maritime Acq. Scorpio Tankers Box Ships

$34,999,999

J.P. Morgan Chase & Co. 38.00%, Jefferies & Company 38.00%, Canaccord Genuity (US) 7.50%, Cowen and Company, 4.00%, Leerink Swann, 12.00% William Blair & Company Citigroup Global Markets 50.00%, Leerink Swann, 30.00%, Robert W. Baird & Co. 20.00% None Wells Fargo Securities Raymond James & Associates 70.00%, D.A. Davidson & Co. 30.00% William Blair & Company Dawson James Securities Cowen and Company, 50.00%, Oppenheimer & Co. 50.00% Sandler O'Neill & Partners, L.P. Northland Securities, Needham & Company, 85.00%, Craig-Hallum Capital Group 15.00% Deutsche Bank Sec., JMP Securities , MLV & Co. , RBC Capital Markets, Robert W. Baird Piper Jaffray & Co. None Stifel Nicolaus Weisel S. Goldman Capital , RS Platou Markets, DVB Capital Markets, Global Hunter Securities Clarkson Capital Markets, DnB NOR Markets, Evercore Partners, RS Platou Markets Global Hunter Securities, 70.00%, Maxim Group 15.00%, National Securities Corp. 15.00% DnB NOR Markets, Clarkson Capital Markets, Evercore Partners, SEB Enskilda AS, RS Platou Markets AS Blueprint Life Science Group, MLV & Co., Cowen and Co., 60.00%, Lazard 10.00%, Robert W. Baird & Co. 17.00%, Wedbush PacGrow Life Sciences 13.00%

Worst Deal Performance YTD - Registered Growth Capital EPPs Stock Price 1-day Perf. 1-week PostPerf. PostChange Post-Closing Announce Announce -24% -8% -12% -24% 0% -16% -22% 1% 6% -20% -13% -19% -16% -9% -14% -14% 2% 8% -14% 1% -13% -11% -10% -14% -11% 8% -9% -9% -1% -7% -8% -2% -1% -7% -6% -7% -6% 6% -2% -5% -4% -12% -3% -27% -30% -3% -1% 1% -2% -5% -12%

Closing Company Symbol Date MELA Sciences MELA 2/12 Oncolytics Biotech ONCY 2/25 Anacor Pharmaceuticals ANAC 1/18 Celsion Corporation CLSN 2/1 Opexa Therapeutics OPXA 2/11 Navidea Biopharmaceuticals NAVB 1/29 Delcath Systems DCTH 3/13 EntreMed ENMD 3/1 BG Medicine BGMD 1/30 Magnum Hunter Resources MHR 1/23 BioLineRx Limited BLRX 2/13 Sequans Communications SA SQNS 2/15 Comstock Mining LODE 3/13 Towerstream Corporation TWER 2/5 Wireless Ronin Technologies RNIN 3/8 Applied Minerals AMNL 1/18 IMRIS IMRS 3/13

Gross Proceeds $7,930,000 $32,000,000 $0 $0 $3,250,002 $4,781,406 $0 $10,789,987 $13,800,000 $0 $8,000,001 $15,000,000 $10,000,000 $30,000,000 $1,562,400 $5,560,000 $20,125,000

Aveo Pharmaceuticals

AVEO

1/17

$57,502,875

-2%

-4%

-8%

Cardica Uranium Resources

CRDC URRE

3/15 3/1

$14,963,936 $8,700,000

0% 0%

2% 24%

N/A 3%

Placement Agent Cowen and Company Piper Jaffray 40.00%,Wedbush PacGrow Life Sciences 30.00%,Paradigm Capital 30.00% Wedbush PacGrow Life Sciences Cantor Fitzgerald & Company Dawson James Securities, Trout Capital Ladenburg Thalmann & Co. Cowen and Company Burrill & Company Lazard MLV & Co. None Needham & Company International Assets Advisory Lazard 80.00%, Canaccord Genuity (US) 10.00%, D.A. Davidson & Co. 10.00% Roth Capital Partners None Canaccord Genuity Corporation (CAN) 40.00%, Canaccord Genuity (US) 40.00%, Cowen and Company, 20.00% J.P. Morgan Chase 60.00%, Canaccord Genuity (US) 20.00%, RBC Capital Mkts 20.00% Wedbush PacGrow Life Sciences100.00% Not Disclosed

Source: PlacementTracker, a service of Sagient Research, Inc. EPP market activity data excludes all placements of less than $1 million, placements via 144-A Offerings or Equity Lines of Credit, and transactions conducted by foreign issuers that trade in the U.S. on the Pink Sheets. Growth Capital EPPs include offerings of at least $1 million of stock or equity-linked debt under SEC Regulations D and S at fixed purchase, conversion and warrant exercise price terms by U.S. publicly traded emerging growth companies from $10 million to $1 billion in market capitalization at the time of offering. Data is for closed and definitive agreement transactions reported as of 3/15/13.

March 18, 2013

Copyright Š 2013 MarketNexus Media, Inc.

16


Growth Capital Investor Growth Capital EPP Candidates < $500M Market Cap Company

Current Symbol Industry

Cash Burn Rate ($)

Last EPP Current Volume Last Gross Market (3-Mo. Market Placement Proceeds Price Avg) Cap ($)

Est. Future EPP Size

Shelf Filing Date 5/31/12

Affymetrix

AFFX

Biotechnology

-$63,800,500

12/15/03

$120,000,000

$3.22

936,812

331.8M

$22,762,606

Monarch Financial Holdings

MNRK

Holding Companies

-$61,904,005

6/6/08

$6,514,858

$7.64

4,538

85.6M

$4,546,288

12/24/12

$37,249,990

Amyris

AMRS

Chemical

-$51,963,750

H&E Equipment Services

HEES

Commercial Services

-$42,991,750

Ladenburg Thalmann Financial Services

LTS

Diversified Financial Services

-$40,813,000

11/4/11

$160,700,000

$2.66

333,187

185.5M

$15,808,412

$13.29

137,409

717.8M

$46,630,004

$2.51

379,232

284.6M

$45,919,688

Angiodynamics

ANGO

Healthcare Products

-$40,691,250

$15.46

93,801

390.8M

$37,766,011

Journal Communications

JRN

Media

-$40,663,500

$4.62

114,216

326.0M

$20,433,434

4/3/09

Zep

ZEP

Household Products

-$32,577,250

$14.54

66,909

355.8M

$31,452,710

1/18/13

Nci Building Systems

NCS

Metal Fabricate/ Hardware

-$31,930,250

10/20/09

$250,000,000

$13.99

139,801

339.9M

$27,370,438

12/24/08

American Realty Capital Properties

ARCP

REITS

-$29,708,250

1/22/13

$60,000,000

$12.87

80,608

154.4M

$14,367,575

3/14/13

Quality Distribution

QLTY

Transportation

-$28,670,250

$9.87

104,039

250.3M

$23,562,651

6/23/11

Gastar Exploration Ltd

GST

Oil & Gas

-$27,796,000

5/9/07

$23,514,390

$2.86

280,652

86.6M

$18,503,465

7/24/09

Audiovox Corp

VOXX

Distribution/ Wholesale

-$27,447,000

$7.68

227,846

239.9M

$15,984,388

Whitestone Reit

WSR

REITS

-$26,841,750

$11.85

38,370

253.1M

$8,900,854

Gladstone Commercial Corp

GOODP

Real Estate

-$21,016,809

$25.46

1,326

307.4M

$27,866,935

Gladstone Commercial Corp

GOODO Real Estate

-$21,016,809

$25.40

1,539

284.6M

$27,801,263

7/13/12

Assisted Living Concepts

ALC

Healthcare Services

-$19,515,250

$9.15

189,262

214.5M

$18,365,834

Callon Petroleum Co

CPE

Oil & Gas

-$19,126,500

$5.92

314,370

174.2M

$17,015,812

9/13/11

American Midstream Partners

AMID

Gas

-$18,221,500

$15.04

15,325

155.8M

$6,953,648

9/11/12

Monmouth Real Estate Investment Corp

MNR

REITS

-$17,977,254

172,050

466.0M

$33,102,033

8/10/12

Perfumania Holdings

PERF

Retail

-$17,848,500

Gladstone Commercial Corp

GOOD

Real Estate

-$17,144,750

Umh Properties

UMH

REITS

-$15,168,147

Nash Finch Co

NAFC

Food Service

-$15,161,750

Shiloh Industries

SHLO

Metal Fabricate/ Hardware

-$15,024,750

12/5/11

$16,780,000

$9.00 $19.95

17,620

90.6M

$17,888,668

3/25/11

$45,000,000

$17.91

36,073

217.0M

$19,603,174

9/9/10

$8.94

30,357

177.8M

$13,267,622

1/18/13

3/15/05

$150,000,000

$28.69

49,218

245.2M

$34,818,184

$8.49

13,385

163.7M

$14,224,652

Bois D Arc Energy

BDE

Oil & Gas

-$14,808,250

2/22/12

$66,843,750

$8.13

50,568

279.8M

$25,489,989

Bluelinx Holdings

BXC

Distribution/ Wholesale

-$14,470,250

7/28/11

$60,000,001

$2.50

31,444

170.9M

$15,926,788

Crimson Exploration

CXPO

Oil & Gas

-$13,893,304

10/27/10

$21,250,000

$2.50

94,421

141.0M

$11,517,805

12/15/10

6/13/12

Source: PlacementTracker, a service of Sagient Research, Inc. Growth Capital EPP candidates include U.S. publicly traded emerging growth companies from $10 million to $500 million in market capitalization, with a minimum share price of $1.00 and less than one quarter of cash liquidity, which have previously closed an EPP financing, ranked by quarterly cash burn rate. Estimated EPP amounts based upon 10% market cap dilution at 10% of daily trading volume. Data as of 3/15/13.

March 18, 2013

Copyright Š 2013 MarketNexus Media, Inc.

17


Growth Capital Investor BDC continued from front page

According to BDC executives and presentations during various earnings calls with analysts over the past few weeks, deal making ramped up at the end of 2012 following the presidential election, a trend that propelled many BDC investment portfolios to record levels. Most company executives also predicted strong deal flow in 2013. Manuel Henriquez, chairman and CEO of Palo Alto, Calif.-based Hercules Technology Growth Capital (HTGC), a venture debt provider that typically co-invests alongside equity sponsors, told analysts during the firm’s fourth quarter earnings call last month that the company was aware of $1.4 billion in potential investment opportunities. It’s a welcome but challenging prospect, he suggested. Among equity and debt maneuvers that provided the BDC with $250 million in 2012, Hercules Technology early this month sold 8 million shares for $11.90 a share in a follow-on offering that netted the issuer some $95.3 million. “Our pipeline is one of the strongest I’ve seen in the last three years,” said Henriquez, whose firm focuses on the life science, cleantech and technology sectors in addition to special opportunities in the lower middle market. “We are seeing unprecedented demand for capital, and because of that unprecedented demand, we have gotten more guarded and more jaded as we sort through the investment opportunities.”

Dual Demand Like real estate investment trusts, BDCs have gained a lot of attention over the past few years because they are passthrough vehicles which don’t pay corporate taxes if they pay out at least 90% of their income in dividends, among other requirements. In this low interest rate environment, investors have been attracted to BDC dividend yields that today are typically around 10% or more. A UBS exchange-traded fund linked to the Wells Fargo Business Development Company Index (BDCS), which tracks 28 BDCs, is currently throwing off an annual yield of 9.8%. “We believe 2012 was a pivotal year for the BDC sector despite periods of market volatility caused by political events, positive economic indicators and continued monetary easing and volatile liquid capital markets,” said Michael Gross, CEO of New York-based Solar Capital Ltd. (SLRC) during the company’s fourth quarter conference call last month. Solar Capital, a closed-end BDC provides senior and mezzanine debt and equity primarily to leveraged middle-market companies and thinly-traded public issuers, has taken full advantage of the “heated conditions in the liquid capital markets” to reset its capital structure, he added. Last year the company renegotiated and expanded its borrowing capacity to $800 million, for example, and raised $45 million March 18, 2013

in a registered direct transaction. Early this year, Solar Capital sold 6 million shares for $24.40 each in a $146 million follow-on deal. It’s first public offering for the company since conducting an IPO in early 2010. Full Circle Capital (FULL), a Rye Brook, N.Y.-based BDC that also went public in 2010, raised $10.5 million in a November CMPO priced at $8.12 a share, representing a 2.7% discount at announcement. Full Circle typically provides $3 million to $10 million in secured debt to lowerand middle-market media, communications and business services firms to foster growth, acquisition and refinance strategies. Among other deals, in its fiscal second quarter ended Dec. 31 the BDC loaned $3.9 million to New York-based specialty food supplier Solex Fine Foods. Full Circle is charging Solex interest of LIBOR plus 12.25% and also made an equity investment of $250,000 and received warrants to purchase additional equity. All told, the company had funded $5.5 million in deals from the beginning of the quarter to the date of its earnings conference call last month. During Full Circle’s call, CEO John Stuart said that the firm had provided $276 million to 54 companies since its inception in 2005, and he expects to enlarge the portfolio given the strong pipeline of companies with attractive collateral and debt-to-cash flow ratios. “With the additional capital we raised last November, we have the flexibility to selectively go after these opportunities,” he said. Stuart later noted that despite reports of an uptick in lending to small businesses, the company hadn’t experienced the same competitive pricing pressures taking place at the upper end of the middle market segment, a theme echoed by other BDC executives during their conference calls.

New Routes The capital expansion pursued by BDCs has coincided with more fundraising options, including establishing at-the-market offerings and raising proceeds through convertible debt in the Rule 144-A market. In fact, an officer with New York-based Prospect Capital (PSEC) during last month’s conference call boasted that the company was the first BDC to avail itself of those vehicles – it set up its first ATM in 2012 and issued its initial Rule 144-A transaction in late 2010. Prospect Capital, which provides equity and debt to middle-market companies in the U.S. and Canada, established the maiden BDC ATM with exclusive agent KeyBanc Capital Markets in June, and it eventually tapped $33 million of the $100.3 million commitment. The issuer then inked a $192.5 million ATM agreement with the same agent in December, and between Jan. 7 and Feb. 5 this year the BDC

Copyright © 2013 MarketNexus Media, Inc.

18


Growth Capital Investor raised $115.3 million through the program at an average share price of $11.25. Additionally, on Feb. 11 Prospect Capital launched yet one more ATM effort with KeyBanc that could raise up to $517 million. Prospect Capital didn’t last long as the lone ATM issuer in the industry. Chicago-based middle-market lender Golub Capital BDC (GBDC) set up a $50 million ATM program in August with UBS Investment Bank and Wells Fargo Securities. In mid-January the BDC raised $71.4 million in a follow-on offering priced at $15.87 a share. Meanwhile, Prospect Capital’s status as the only BDC to issue a Rule 144-A deal didn’t last long, either. Since the company’s $150 million transaction in December 2010, it and a handful of other BDCs with market capitalizations ranging from $175 million to $3.8 billion have used the vehicle to attract some $3.5 billion in funding. Last year alone, three BDCs pocketed more than $1 billion by issuing senior unsecured convertible debt in the deals, which featured an average conversion premium of 12.5% and an interest rate of 5.7%. Prospect Capital raised $530 million in three transactions, New York-based debt provider Ares Capital Corp. (ARCC) took in more than $430 million in two deals and TICC Capital Corp. (TICC) raised $115 million in one transaction. Ares Capital, Prospect Capital, Kohlberg Capital Corp. (KCAP), Fifth Street Finance Corp. (FSC) and Apollo Investment Corp. (AINV) raised $1.4 billion in 2011 in six Rule 144-A issuances.

Froth Caution The bullish climate fueling the capital raising frenzy has pitfalls. BDCs risk overleveraging with low-cost financing to beef up portfolios of illiquid assets, which could ultimately punish shareholders. In January, the Financial Industry Regulatory Authority notified broker-dealers that it would focus on examining BDCs and other high-yield instruments this year citing those concerns and more general “sales practice abuses, yield-chasing behaviors and the potential impact” of a market correction or similar event. What’s more, equity offerings could dilute shareholders and slow the rate of dividend growth if a BDC fails to increase its investment income and earnings. A rule of thumb suggests that companies have specific uses for the capital in mind in advance of a raise. In addition to its Rule 144-A raise, TICC Capital raised $33.3 million in a CMPO in October and last month raised $66 million in a follow-on offering. In response to an analyst’s question at the company’s fourth quarter earnings call in early March, CEO Jonathan Cohen acknowledged that the lag time in investing that capital put a drag on net operating income per share. “I think we’ve done a generally good job of minimizing that lag by raising discrete amounts of capital that have been generally earmarked for specific investment strategies or even specific investment opportunities as a goal,” Cohen said. “But certainly, there has been some drag.”

Investigation continued from front page

just one part of an ongoing Connecticut Banking Commission investigation into Imbruce and his hedge fund ASYM Energy. In the fall of 2011 New Stream Capital was trying to sell oil and gas leases the company had valued on its 2008 audited financial statements at around $77 million as part of its bankruptcy liquidation. The assets had been stuffed inside a Bermuda-based insurance subsidiary called Northstar Financial Services. Imbruce, who had burned through most of his fund’s capital, sought out Greg Sachs of Chicago-based SCG Financial Holdings, the sponsor of the SPAC, to fund the purchase of the mature oil and gas assets, located in Texas and Kentucky. Growth Capital Investor reviewed emails and term sheets written by Imbruce to New Stream and SCG in October and November 2011. We also interviewed some of the players in the deal. New Stream was demanding $70 million for the March 18, 2013

energy assets. ASYM’s term sheet shows they offered $25 million in cash and $45 million of stock in SCG Acquisition Corp. – the SPAC. It was intended that Starboard Resources, an oil and gas company owned by ASYM, would consummate a merger through a share exchange with the SPAC, simultaneous with the purchase of the New Stream assets. According to the ASYM plan, a pro-forma value would then make the SPAC worth around $350 million: $70 million for the New Stream assets, $200 million for Starboard Resources, and $80 million in cash in the SPAC. (For related coverage, see “Oil Exploration Company Weighs Debt Offering Over IPO,” Growth Capital Investor, Oct. 1, 2012.) Investors in the SCG SPAC include active hedge funds Pine River, Bulldog Investors, Fir Tree, Polar Securities, and Archer Capital Management. ASYM’s Imbruce came up with an idea to create ‘backstop’ investors who they would be paid a fee of up to $2.2 million to buy the SPAC shares from the

Copyright © 2013 MarketNexus Media, Inc.

19


Growth Capital Investor hedge funds that initially invested in case one of them wanted to tender their shares when the deal was announced. ASYM created a term sheet that claimed the fund had relationships with top hedge funds including Harbinger Capital, Moore Capital, Farallon Capital, Wellington Management and others who it thought could be recruited as backstop investors. The idea was to pay a backstop investor to make it look like there was interest in staying in the deal and to ensure there was enough cash to get the deal done. (SPAC shareholders generally have the right to redeem their shares at the initial offering price if they oppose the SPAC’s acquisition plans.) The deal would restrict the backstop investors from selling their shares for 12 months. SCG’s management thought the $70 million price tag was high for the New Stream assets, and some people inside of Imbruce’s hedge fund agreed. A former New Stream consultant and a person at ASYM told Growth Capital Investor they thought the assets were really worth $40-50 million in the fall of 2011. According to a person who worked at ASYM, Imbruce offered Bart Gutekunst, co-founder of New Stream, a kickback of around $1 million if he got the price lowered. Accepting a kickback for a lower price for the oil and gas assets could have been a breach of fiduciary duty since Gutekunst was in charge of getting the best price possible for creditors of his hedge fund’s bankruptcy. Bart Gutekunst denied the kickback allegations through his attorney, Stanley Twardy of Day Pitney, telling Growth Capital Investor, “I never took a kickback from Imbruce nor was offered one.” Last month David Bryson and Gutekunst, the two New Stream founders, were arrested by federal authorities and sued by the SEC for securities fraud. The oil and gas assets are still part of the New Stream bankruptcy and have not been sold. Emails in the DOJ’s case against Gutekunst allege to show a pattern of the fund’s founders lying to investors to raise more capital. Gutekunst has pleaded not guilty to the DOJ’s 19 counts of conspiracy, wire and securities fraud charges. When Imbruce’s attorney was reached for comment asking about the Connecticut Banking Commission investigation, Rick Slavin of Cohen and Wolf confirmed the existence of the investigation but claimed the information was “confidential.” Slavin, Imbruce’s third lawyer, used to work as an enforcement lawyer for the Connecticut Banking Commission and the SEC. Imbruce did not return a request for comment on the investigation or his dealings with New Stream.

March 18, 2013

Imbruce was never able to finalize the New Stream deal and lost interest from the SPAC group. Mike Sachs of SCG told Growth Capital Investor they denied the funding to ASYM after their initial due diligence. People involved in the deal said Sachs team found out about Imbruce’s FINRA violations while working for Madoff Energy, an oil and gas exploration company launched in 2008 by two sons of convicted investment fraudster Bernie Madoff. Sachs said he couldn’t remember if this was the deciding factor but said his company “works with people who work inside the lines of the law.” An investor in ASYM who asked not to be named because of current litigation told Growth Capital Investor, “We thought the New Stream deal was paying a lot of cash for expensive assets that might not perform and would end up only benefiting the manager in fees paid.” Growth Capital Investor previously reported on the civil investor fraud suit Imbruce is currently litigating with his investors in Connecticut state court. Jon Whitcomb of Stamford-based Diserio Martin O’Connor & Castiglioni, the attorney for the ASMY investors, was able to get Imbruce’s carried interest in Starboard Resources frozen by the court until their litigation is resolved. Starboard Resources is still working on getting sold or going public one day. Whitcomb would not comment on the ASYM / New Stream transaction. Sachs eventually was able to find two companies to merge into the SGC Acquisition Corp. The announcement was made this quarter and the SPAC investors have until March 26 to tender their shares or accept the deals. The companies being bought are in the digital communications space. One builds digital TV walls, the other sells inflight digital advertising. The SPAC plans to close the deal in April. SEC filings show Don Wilson Jr. via the Don Wilson Trust is the backstop investor in the deal, providing a credit facility to the SPAC in case initial hedge fund investors tender. Wilson received 100,000 shares plus other conditional fees and will earn 15% interest in the first year and 20% interest in the second year on any capital the SPAC borrows to buy shares from the tendering SPAC investors. Sachs says he’s excited about the road show and the companies he’s investing in. At press time the SPAC is trading near $10. Cliff Asness of AQR Capital recently became a major investor in the SPAC, joining Bulldog Investors’ 8.3% stake, Pine River’s 8.5%, Polar Securities’ 9.9%, Fir Tree’s 6.6%, SCG Financial Holdings’ 13.8%, and Donald Wilson Jr.’s 33.6% stake.

Copyright © 2013 MarketNexus Media, Inc.

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Growth Capital Investor