SMH Market & Liquidity Services


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This is a capabilities overview for SMH Market & Liquidity Services. We provide Strategic Shareholder Communication, Trading Support and Equity Spotlight Reports. Visit our website at for more information.

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SMH Market & Liquidity Services

  1. 1. OVERVIEW
  2. 2. Executive Summary • Facing the liquidity “black hole,” most small cap companies today do not have the kind of attention from Wall Street that has historically financed emerging, high-growth companies. • By taking on only high-quality, high-growth companies under our MLS service, we intend to become the “go- to” name for information and investment ideas for the small-cap and micro-cap market. • The right combination of issuer-paid research, trading support and analysis and strategic investor communication is tailored for each specific situation to maximize the value of your public entity. Visibility. Transparency. Opportunity. 2
  3. 3. Illiquidity can trump strong fundamentals • Despite having strong fundamentals, illiquidity can act as a gatekeeper to capital even for the most promising small companies. • Public markets are driven by trading liquidity. Companies with little or no trading activity cannot attract institutional-investor interest. • The lack of informational liquidity is the other part of the problem. About 53% of all public companies have market capitalization of less than $125 million and 83% of those lack any research coverage. During the last five years, more than 700 companies have lost research coverage as Wall Street has slowly abandoned small cap companies. 3
  4. 4. SMH Market & Liquidity Services – Client Performance Since Engagement Cubic Energy Inc. (AMEX: QBC) ZBB Energy Corp (AMEX: ZBB) Stock Price & Volume Stock Price & Volume 419,800 1,142,500 1,870,500 1,089,600 260,200 1,027,000 803,300 1,771,300 1,170,000 1,021,800 200 $5.00 1,000 $5.00 Volume (in thousands) SMH Initiation Report Biggest Gainer on the AMEX Volume (in thousands) $4.00 800 $4.00 150 SMH Initiation Report Price Price $3.00 600 $3.00 100 Retained by SMH $2.00 400 $2.00 SMH Initiation Report Retained by SMH 50 $1.00 $1.00 200 $- 0 $0.00 0 8 7 8 07 7 M 8 8 08 08 8 07 07 t‐0 ‐0 c‐0 0 l‐0 ‐0 r‐0 p‐ b‐ g‐ v‐ 8 n‐ 07 8 M 8 8 7 08 n‐ 07 7 8 08 ay 7 ar Ju 0 l‐ 0 ‐0 Oc 0 r‐0 c‐0 De ‐0 ‐0 Ap Se Fe No Au Ju Ja v‐ p‐ g‐ n‐ b‐ n‐ M ay ct ar Ju No Ap De Se Au Ja Fe Ju O M Cubic Energy Inc. retained SMH Market & Liquidity Services on 1/22/08 ZBB Energy Corp. retained SMH Market & Liquidity Services on 2/26/08 Stock Price $1.67 Stock Price $2.20 Volume 14,400 shares Volume 28,700 shares As of 7/31/08 As of 7/31/08 Stock Price $4.68 Stock Price $3.50 Volume 374,900 shares Volume 26,400 shares Stock Price Increase 180% since 1/22/08 Stock Price Increase 60% since 2/26/08 Volume Increase 253% 3 month Average Trading Volume Volume Increase 80% 3 month Average Trading Volume 4
  5. 5. Our Services Designed for Increased Exposure and Visibility Strategic Investor Communication Trading Support & Analysis Equity Spotlight Reports 12 month investor relations plan Assisting in matching buyers and sellers Initiating coverage report consisting of in- depth launch piece Shareholder monitoring Constant monitoring of industry news Quarterly updates on coverage earnings Peer investor analysis reports Analysis of selling/buying pressure on stock Investor road show services Monthly technical and liquidity analyses Online monitoring of stock bulletin board discussion Direct and constant conversations with Market notes and response to industry institutional buy-side news Constant information to retail broker SMH Associates with direct dialogue with network the company Partner with existing IR firms 5
  6. 6. Leverage SMH Capital’s Broad Distribution Capabilities SMH Capital has powerful equity distribution capabilities. With extensive institutional relationships and retail brokerage offices across the nation, SMH has the ability to effectively place equity offerings in the right hands. Institutional Investors SMH Retail Experienced institutional sales group Retail focuses on providing unique investment covers the traditional institutional opportunities to a core group of affluent investment community by leveraging individual investors. seasoned relationships. Distribution Network Middle Markets Don Sanders Funds Dedicated middle market group covers Don Sanders manages $1.0 billion in assets. the burgeoning hedge fund community, For over 30 years, Don Sanders has tapping into the large liquid pools of successfully been one of the leading retail capital with flexible investment strategies. investment managers. 6
  7. 7. SMH Advantage – Retail Distribution “We see the ability to leverage MLS’s platform on behalf of our clients. It provides us with unique access to management, in-depth information, which gives us good, smart investment ideas. It’s a win-win situation.” - Stephen Goodman, Middle Market Sales & Trading New York, NY Office Humbert Powell – Head of NY Office Cleveland, OH 8 brokers Paul Blackman – Head of Cleveland Office Las Vegas, NV 15 brokers Wayne Bieniasz – Head of Las Vegas Office 6 brokers Tulsa, OK Bill Mildren – Head of Tulsa Office Los Angeles, CA 8 brokers Dean Oakey – Head of LA Office 5 brokers Dallas, TX Jim Moeller – Head of Dallas Office 5 brokers Houston, TX Boca Raton, FL Stephen Cordill – Head of Retail John Egan – Head of Boca Office 10 brokers 15 brokers 72 brokers + 42 SMH Partners (located in PA, NC, VA, GA, MD, IL, NM, CO) 7
  8. 8. Launching Internet Platform 8
  9. 9. Plan for First 3 Months 1st Month 2nd Month 3rd Month • IR plan strategy with management • Decide on schedule of non-deal roadshow • Schedule non deal roadshows and retail visits • Perform financial and legal due diligence at Company • Schedule meetings for non-deal roadshow •Continue to monitor trading for selling pressures headquarters • Distribute Progress Report •Distribution of any news releases • Draft and post company overview to MLS website • Distribute Trading and Shareholder Activity Report •Equity Spotlight quarterly update reports • Review management presentation and provide feedback • Continue to monitor shareholder activity •Monitor message boards for news on stock • Conference Call with SMH Associate for Equity Spotlight • Distribute analysis of trading and shareholder activity •Incorporate feedback from institutional and retail on initiation report how to improve story (if needed) • Schedule conference calls with existing and potential • Conference Call with SMH Traders to introduce story investors •Conference call updates with Management for SMH Sales to begin the trading monitoring process and investors • Discuss option of Google and Yahoo internet campaign • Review of timing of initiating coverage report • Discuss potential conferences company could present • Conference call with SMH Sales Team • Release Equity Spotlight Report • Conference call with specialists and sales force to review feedback/answer questions • Record video interview for MLS website • Discuss timing of earnings releases and conference call 9
  10. 10. Proactive Client-Specific Agenda MONTHS UNDER RETAINER 1st Month 2nd Month 3rd Month 4th Month 5th Month 6th Month Ongoing Due Diligence Site Visit Request List - Documentation Background Checks Legal Write-Up Ongoing monitoring Research Initial analyst meeting Draft/write initial report Distribute Quarterly updates Major news notes Strategic Investor Management Prepare plan 12 months Prepare quot;tearsheetquot; for internal distribution Non deal roadsshows (2x per year) Investor conferences (continuous monitoring) Shareholder Analysis Investor discussions Continuous Monitoring Share pirce fluctuations Selling pressure Message board monitoring Discussions with management 10
  11. 11. Equity Spotlight Reports OVERVIEW • Publish Equity Spotlight reports designed to provide investors with insightful, qualitative and quantitative data on both the client company’s business model and growth prospects, but on the industry parameters as a whole as well. SPECIFIC DELIVERABLES • In-depth initiating coverage report, consisting of 20 – 30 pages. See ZBB Energy’s report as example (attached). • Quarterly updates to correspond to earnings releases, with initiating coverage report included for completeness • Market notes or other updates to respond to major news events as they unfold DISTRIBUTION • Provided to client to verify facts before distributed • Press release by client • Pushed through SMH sales force and affiliated retail relationships • Published on SMH website and other electronic outlets 11
  12. 12. Equity Spotlight Team Located in Houston, our MLS Equity Spotlight Team is comprised currently of three individuals that work in tandem with SMH Capital’s Institutional Research Group, which cover over 50 companies in 9 sectors. Karen D.B. Kane – Assistant Director of Research Karen Kane serves as the department’s assistant director of research and is a research principal. Karen joined Lovett Underwood Neuhaus & Webb in 1984 as a research coordinator and retail sales liasion. She later became part of Lovett Underwood’s Energy Team and provided analytical support before joining Williams MacKay Jordan & Co., which was acquired by SMH in 1996, as an assistant analyst. Karen earned an Economics degree from Cornell University. John Keeton - Associate John Keeton joins SMH Capital from Koch Supply and Trade, where he was a senior natural gas trading accountant. Prior to Koch, John was an accountant at Burlington Resources/Conoco Phillips and a gas accountant at Superior Natural Gas. John holds an undergraduate degree in Business Administration from Texas State University, where he graduated Summa Cum Laude. John is currently in his final year of the Masters of Finance program at the University of Houston. At U of H, John is a Senior Portfolio Manager/Security Analyst for the University’s Cougar Fund, which manages over $9 million of privately invested money. John currently covers Cubic Energy (AMEX: QBC) and ZBB Energy (AMEX: ZBB). Anthony Valdivia – Associate Anthony Valdivia joins SMH Capital from Wells Fargo, where he was a financial analyst for that bank’s Regional Commercial Banking division. Prior to Wells Fargo, and while attaining his B.B.A degree in finance from the Bauer College of Business at the University of Houston, Tony gained experience as a financial analyst intern at Spring Street Capital Management and as a finance and accounting intern at Superior Natural Gas. Tony is a CFA Level II Candidate. Anthony currently covers Atrinsic (Nasdaq: NWMO) and Frontera Resources Corp. (OTCQX: FRTE). 12
  13. 13. Trading Support & Analysis OVERVIEW • Provide insight into the relative bid/ask pressures on the stock, the sector changes and broad economic influences while tracking the trading on a daily basis SPECIFIC DELIVERABLES • Monitor daily movements in stock, paying close attention to broad sector pressures, specific company news, etc. • Email weekly qualitative and quantitative update to management • Prepare monthly comprehensive trading and ownership analysis that will have key metrics such as shareholder ownership changes, top institutional ownership in the peer group, technical analysis, valuation versus peer group, volume metrics, short interest changes, etc. See exhibit for example report. PROCESS • Perform block trades as needed • Monitor selling pressure; provide liquidity and trades when needed 13
  14. 14. Strategic Investor Communication OVERVIEW • Providing key strategic investor communication to ultimately increase shareholder base with quality institutions and retail accounts. SPECIFIC DELIVERABLES • Preparation of a 12-month IR plan within first 30 days of engagement to specify non- deal roadshows, conference attendance, earnings release conference calls, etc. • Scheduling non-deal roadshows - minimum of 2x per year (more if major news release). • Shareholder tracking and monitoring • Assistance with improving management presentation • Negotiating and scheduling conferences • Work with media outlets to correspond with news releases or other events as deemed possible (Equities Magazine, Small Cap Advisor, etc.) • Initiate directed calling effort to accounts to provide research and other information • Specific reports back to client on calling effort and feedback received (see Sample Progress Report] PROCESS • SMH Capital Markets will communicate with buy-side to schedule non-deal roadshows,etc. • Utilize partner IR firm. 14
  15. 15. OTC QX Listing Option • SMH Capital Is an OTC QX approved DAD/PAL • The OTC QX is the place for reputable issuers to designate themselves from the rest of the over-the-counter market. • Modeled after the highly successful NOMAD/AIM model, the selection of a DAD should be carefully considered as they can become your partner in establishing credibility and providing professional guidance. SMH is that partner. • In conjunction with our MLS platform, listing on the QX will serve to enhance your company’s liquidity and exposure to a large U.S. investor base. The company you keep on the QX } 15
  16. 16. Media Attention 16
  17. 17. Current Clients ZBB Energy Corporation (AMEX: ZBB) Renewable Energy – Energy Storage Solutions $20 million market cap Frontera Resources Corporation Independent Oil & Gas – Exploration & Production $78 million market cap Cubic Energy Inc. (AMEX: QBC) Independent Oil & Gas – Exploration & Production $125 million market cap Atrinisic (Nasdaq: NWMO) Digital Media – Mobile Content $50 million market cap 17
  18. 18. MLS Team Core Team Joanne Verkuilen Head of Market & Liquidity Services Kathleen Unger Director Equity Reports Karen Kane Assistant Director John Keeton Associate Anthony Valdivia Associate Randy Billhardt Trading Trader 18
  19. 19. Contact Joanne Verkuilen Head of Market & Liquidity Services (212) 893-1122 Kathleen Unger Director (212) 893-1119 527 Madison Avenue New York, NY 10022 (212) 317-2700