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New Generation Biofuels August 30, 2010

(NGBF: NNM; $0.25) Carter Driscoll, CFA / 973-821-4330 /


carter@capstoneinvestments.com
Buy | Target: $1.25

Company Statistics NGBF: FINANCIALLY STRAPPED


12-month Price Target: $1.25
Current Price: $0.25 BUT STILL MOVING FORWARD
Shares Outstanding (M): 36.3
Institutional Holdings: 5%
• Financially strapped but lower bankruptcy risk
Market Cap (M): $9.1
EV (M): $22.0
after recent capital raise. 2Q10 sales were non-existent as
52-wk Range: $0.19-$1.25 NGBF did not want to burn through its recently acquired
Avg. Daily Vol. (000): 239 capital (sales carry negative gross margins); NGBF raised
Dividend: NA $915K from the sale of 500K shares of stock and warrants
Debt/Total cap: 45% on July 20. Questions regarding potential bankruptcy
were pushed out after the raise but NASDAQ de-listing
Financials remains a possibility.
FYE Dec 2009A 2010E 2011E • Restructuring reduces monthly burn. On August
27, NGBF took steps to cut its monthly burn by
Revenue (M): Q1 $0.0 $0.006 --
Q2 $0.0 $0.000 -- renegotiating the expensive lease at its Baltimore plant,
Q3 $0.0 $0.004 -- as NGBF prepaid rent through November, which in total
Q4 $0.1 $0.024 -- reduces future liabilities by $2.9M. NGBF could still
Total $0.2 $0.034 $0.63 reduce headcount and lower other professional fees to
further cut the burn rate. We estimate NGBF still needs
Operating
Income (M): Q1 ($2.3) ($3.0) -- $3-4M to achieve sufficient working capital to expand its
Q2 ($3.3) ($2.7) -- production facility, secure feedstocks and for other
Q3 ($2.9) ($2.5) -- working capital needs.
Q4 ($3.9) ($2.4) --
• Shortly to begin shipping City of Baltimore school
Total ($12.4) ($10.6) ($9.8)
system. The Baltimore City Board of School approved a
EPS: Q1 ($0.31) ($0.09)A -- long term boiler test and evaluation of NGBF’s biofuel
Q2 ($0.21) ($0.09)A -- over a one-year period up to 1M gallons; NGBF should
Q3 ($0.09) ($0.07)E -- begin to ship in small quantities this week. The contract
Q4 ($0.16) ($0.07)E --
could be extended to other city-owned boilers (e.g. other
Total ($0.73) ($0.32)E ($0.24)
municipal buildings) if NGBF can satisfy a minority
ownership rule.
Company Description • Potential new environmental partner could add
leverage for Chinese investment fund. NGBF is
New Generation Biofuels provides renewable biofuels.
The company holds an exclusive license for North conducting a test burn with a financially strong
America, Central America and the Caribbean to environmental company that may become a potential
commercialize proprietary technology to manufacture partner. This could help NGBF accelerate the discussions
alternative biofuels from vegetable oils and animal fats for
power generation, heavy equipment and marine use. It is
with the Chinese investment fund that has been slow to
a patent-pending process that produces a renewable complete its due diligence.
biofuel, which can be used as a replacement for diesel, • Still not out of the woods. NGBF took material steps
#2 heating oil, kerosene, or fuel oils or for co-firing with
fuels such as coal and that substantially lower Nitrous
to cut its burn rate and continues to attract potential
Oxide (NOx) emissions than standard diesel or most partners. We maintain our BUY because the potential to
other biofuels. fund the business to operating breakeven could send the
shares far higher although a significant risk of bankruptcy
and/or de-listing remains. We recommend only highly
risk tolerant investors own shares.

FOR INSTITUTIONAL CONSIDERATION ONLY.


FOR REQUIRED DISCLOSURES, INCLUDING ANALYST CERTIFICATION, PLEASE REFER TO THE IMPORTANT
DISCLOSURES STARTING ON PAGE 6 OF THIS REPORT.
Restructuring Lowers Cash Burn; Buys Some
Time
Reduced monthly lease payments at production facility. NGBF took
some material steps to reduce its cash burn rate by renegotiating the lease at
its Baltimore production facility. NGBF paid $290K in cash and also issued
300K shares of restricted common stock to the landlord. In return, the
landlord agreed to forfeit past due amounts under the lease agreement,
terminate and forfeit minimum payments due for terminaling services under
a separate agreement, and reduce the monthly lease rate to $25K for the
remaining lease term of three years (vs. $40K). NGBF prepaid three months
of rent as part of the $290K payment. The company will book a one-time
gain in 3Q10 and, more importantly, will reduce future liabilities by ~$2.9M.

Cash burn lowered to ~ $700K (ex–cost of sales). Management has


lowered cash burn from ~$1M per month to under $250K per month. They
did not rule out additional headcount reductions and the potential to lower
professional fees (recently changed law firms).

Shipping to Baltimore schools this week. NGBF has an extended test


burn in place with the city of Baltimore School Board to supply up to 1M
gallons of biofuel for use in school boilers. The test burn could reach as high
as 2M gallons if both parties agree. The original contract was split earlier
this year into two parts. The second part of the contract applies to other
Baltimore municipal boilers (e.g. police stations, office buildings, etc.), which
is currently held up as the city requires minority ownership of some portion
of the contract, which NGBF is not sure how to satisfy.

$915K capital raise demonstrates they still have access to capital


but more is needed. While the $915K raised last month reduced the risk
of bankruptcy, it was not enough to expand its production facility nor keep
them out of the capital market for long. We believe the company still needs
an additional $3-4M to sufficiently fund working capital and expand the
Baltimore plant to 5M gallon capacity.

No NASDAQ de-listing just yet. NGBF has been struggling with


remaining on the NASDAQ primary market. Its stock price has been below
$1 for several months. Additionally, the company ended 2Q10 with negative
equity. The company had a hearing in early August to address these
deficiencies. We believe no news is good news and the company may receive
a waiver to regain compliance if they can satisfy the negative equity
requirement in a short time frame.

Filed new patent application for a new pyrolysis oil based biofuel.
On July 21, NBF field a patent application for a new type of biofuel based on
pyrolysis oil. Pyrolysis is a thermo-chemical decomposition of organic
material at high temperatures in the absence of oxygen. It is most commonly
used for organic materials. The chemical process is heavily used in the
chemical industry (e.g. to produce charcoal, methanol and other chemicals
from wood, to produce coke from coal and to convert biomass into syngas.

CapStone Investments Trading Desk: 1-858-875-4550 2


Conclusion – Not for the faint of heart
NGBF took material steps to cut its burn rate and continues to attract
potential partners. We maintain our BUY because the potential to fund the
business to operating breakeven could send the shares far higher although a
significant risk of bankruptcy and/or de-listing remains. We recommend
only highly risk tolerant investors own shares.

INVESTMENT RISK
Investment risks include difficulty sourcing adequate and economical
feedstocks, rate of customer acceptance, lack of profitability, adequate
funding and the ability to achieve economies of scale.

VALUATION METHODOLOGY
We use a 5-year discounted cash flow analysis to value NGBF. Our $1.25
target utilizes a 10x terminal EBITDA multiple and 17% discount rate. Our
sensitivity analysis yields a range of $0.95-$1.52.

CapStone Investments Trading Desk: 1-858-875-4550 3


Figure 1: New Generation Biofuels, Inc.: HISTORICAL AND PROJECTED INCOME STATEMENT
In USD 2008 2009 2010E
1Q 2Q 3Q 4Q 2008 1Q 2Q 3Q 4Q 2009 1QA 2QA 3QE 4QE 2010E 2011E
Mar-08 Jun-08 Sep-08 Dec-08 YEAR Mar-09 Jun-09 Sep-09 Dec-09 YEAR Mar-10 Jun-10 Sep-10 Dec-10 YEAR YEAR

Fuel Sales 0 0 0 22,943 0 0 42,637 21,252 73,644 137,533 6,477 0 4,373 17,639 28,490 307,253
Blending / Tax Credit 0 0 0 0 0 0 0 13,160 28,246 41,406 0 0 0 6,000 6,000 102,691
Tolling Fees & Other 0 0 0 0 22,943 0 0 0 0 0 0 0 0 0 0 175,000

Total Revenues $0 $0 $0 $22,943 $22,943 $0 $42,637 $34,412 $101,890 $178,939 $6,477 $0 $4,373 $23,639 $34,490 $626,021
Y.o.Y. Growth NM NM NM NM NM NM NM NM 344% NM NM -100% -87% -77% NM 17.1%
Q.o.Q. Growth NM NM NM NM NM NM -19% 196% -94% -100% NM 441%

Cost of Sales 0 0 0 307,541 307,541 208,655 597,840 584,745 920,336 2,311,576 580,948 526,404 539,168 566,985 2,213,504 2,584,253
Gross Profit 0 0 0 (284,598) (284,598) (208,655) (555,203) (550,333) (818,446) (2,132,637) (574,470) (526,404) (534,795) (543,346) (2,179,014) (1,958,232)

R&D 196,841 145,931 497,773 246,178 1,086,723 194,266 95,769 73,126 111,853 475,014 80,858 72,302 50,294 70,918 274,372 697,808
G&A 1,899,427 2,149,451 1,739,009 3,865,493 9,653,380 1,894,599 2,601,685 2,279,523 2,975,258 9,751,065 2,344,998 2,088,705 1,909,834 1,775,851 8,119,388 7,176,239
Other Expenses 0 359,595 0 1,600,369 1,959,964 0 0 0 0 0 0 0 0 0 0 0

Total Operating Expenses 2,096,268 2,654,977 2,236,782 5,712,040 12,700,067 2,088,865 2,697,454 2,352,649 3,087,111 10,226,079 2,425,856 2,161,007 1,960,129 1,846,769 8,393,760 7,874,047

EBIT (2,096,268) (2,654,977) (2,236,782) (5,996,638) (12,984,665) (2,297,520) (3,252,657) (2,902,982) (3,905,557) (12,358,716) (3,000,326) (2,687,411) (2,494,923) (2,390,114) (10,572,775) (9,832,279)
Operating Margin NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM

EBITDA ($1,941,826) ($2,522,799) ($2,099,454) ($5,683,151) ($12,247,230) ($2,021,185) ($2,964,282) ($2,595,901) ($3,531,264) ($11,112,632) ($2,715,854) ($2,354,301) ($2,128,586) ($2,033,985) ($9,232,727) ($8,679,523)
Operating Margin NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM

Interest Expense 154,442 132,178 136,138 113,823 536,581 109,084 110,579 119,029 198,969 537,661 101,985 280,297 227,132 202,703 812,118 371,656
Interest Income 5,269 11,320 10,525 2,304 29,418 719 937 1,294 507 3,457 314 71 1,310 986 2,681 232,880
Other Income - Includes Blending Tax Credit 0 0 0 7,208 7,208 0 0 0 0 0 161,106 0 0 0 161,106 0

Pretax Income (2,245,441) (2,775,835) (2,362,395) (6,100,949) (13,484,620) (2,405,885) (3,362,299) (3,020,717) (4,104,019) (12,892,920) (2,940,891) (2,967,637) (2,720,746) (2,591,832) (11,221,106) (9,971,055)
Pretax Margin NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM

Taxes 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Tax Rate 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

Earnings Before Adjustments (2,245,441) (2,775,835) (2,362,395) (6,100,949) (13,484,620) (2,405,885) (3,362,299) (3,020,717) (4,104,019) (12,892,920) (2,940,891) (2,967,637) (2,720,746) (2,591,832) (11,221,106) (9,971,055)
Net Margin NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM

Nonrecurring Gains / (Charges) 0 (9,765) 0 9,048 (717) 138,300 (1,762,288) 736,211 (616,106) (1,503,883) 0 (12,102) (12,102) (12,102) (36,306) (48,408)
Preferred Dividends (1,477,750) (1,772,475) (225,976) (213,116) (3,689,317) (4,211,804) (170,017) (167,919) (141,639) (4,691,379) (148,692) (125,787) (126,416) (127,048) (527,943) (509,192)

GAAP Net Income ($3,723,191) ($4,558,075) ($2,588,371) ($6,305,017) ($17,174,654) ($6,479,389) ($5,294,604) ($2,452,425) ($4,861,764) ($19,088,182) ($3,089,583) ($3,105,526) ($2,859,264) ($2,730,982) ($11,785,355) ($10,528,655)
Net Margin NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM -1682%

EPS before Adjustments / Dividends ($0.12) ($0.15) ($0.13) ($0.32) ($0.72) ($0.12) ($0.13) ($0.11) ($0.14) ($0.49) ($0.09) ($0.08) ($0.07) ($0.07) ($0.30) ($0.21)
Adjustments / Pfd Dividends per Share ($0.08) ($0.10) ($0.01) ($0.01) ($0.20) ($0.19) ($0.08) $0.02 ($0.03) ($0.24) ($0.00) ($0.00) ($0.00) ($0.00) ($0.02) ($0.01)

GAAP EPS ($0.20) ($0.24) ($0.14) ($0.33) ($0.92) ($0.31) ($0.21) ($0.09) ($0.16) ($0.73) ($0.09) ($0.09) ($0.07) ($0.07) ($0.32) ($0.24)
Y.o.Y. Growth -260% -12% 7% -42% -39% -52% -16% -37% -50% -21% 70% 58% 15% 58% 56% NM
Q.o.Q. Growth 69% -20% 44% -140% 6% 34% 58% -90% 44% 7% 14% 7%

Fully Diluted Shares Outstanding 18,227,292 18,639,757 18,882,266 19,151,931 18,725,312 20,900,675 25,726,050 28,465,378 29,732,892 26,236,636 33,614,160 36,337,173 38,837,173 39,837,173 37,156,420 47,375,000

Percent of Revenue
Cost of Sales NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM 413%
Gross Profit NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM (313%)
R&D NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM 111%
G&A NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM 1,146%
Other Expenses NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM 0%
Total Operating Expenses NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM 1,258%

Source: Company reports and CapStone Investments estimates

CapStone Investments Trading Desk: 1-858-875-4550 4


Figure 2: New Generation Biofuels, Inc.: HISTORICAL AND PROJECTED CASH FLOWS AND BALANCE SHEET
2008 2009 2010E
(in USD) 1Q 2Q 3Q 4Q 2008 1Q 2Q 3Q 4Q 2009 1QA 2QA 3QE 4QE 2010E
Mar-08 Jun-08 Sep-08 Dec-08 YEAR Mar-09 Jun-09 Sep-09 Dec-09 YEAR Mar-10 Jun-10 Sep-10 Dec-10 YEAR

Operating Sources:
Net Income ($2,245,441) ($2,775,835) ($2,362,395) ($6,100,949) ($13,485,337) ($2,405,885) ($3,362,299) ($3,020,717) ($4,104,019) ($12,892,920) ($2,940,891) ($2,967,637) ($2,720,746) ($2,591,832) ($11,221,106)
Depreciation and Amortization 154,442 132,178 137,328 313,487 737,435 276,335 288,375 307,081 374,293 1,246,084 284,472 333,110 366,337 356,129 1,340,048
Total (2,090,999) (2,643,657) (2,225,067) (5,787,462) (12,747,902) (2,129,550) (3,073,924) (2,713,636) (3,729,726) (11,646,836) (2,656,419) (2,634,527) (2,354,409) (2,235,702) (9,881,058)

Change in Working Capital


Accounts & Other Receivables 0 0 0 (22,943) (22,943) 22,943 (39,784) 21,547 (45,663) (40,957) 40,792 17,499 24,631 10,298 93,221
Inventories 0 0 0 0 0 0 0 (11,708) 0 (11,708) 0 0 4,519 (1,883) 2,636
Other Current Assets 6,409 (6,862) (75,330) (298,754) (374,537) 32,761 157,601 (182,923) (4,545) 2,894 53,042 (107,073) 0 0 (54,031)
Non-Debt Current Liabilities (101,216) 96,653 (57,081) 687,640 625,996 175,915 (7,075) (36,871) 404,381 536,350 859,495 691,326 50,208 (2,205,273) (604,244)
Total (94,807) 89,791 (132,411) 365,943 228,516 231,619 110,742 (209,955) 354,173 486,579 953,329 601,752 79,358 (2,196,857) (562,418)
Capital Expenditures 0 0 133,157 253,172 386,329 440,549 174,660 42,229 223,752 881,190 13,198 38,850 39,821 40,817 132,686
Free Cash Flow ($2,185,806) ($2,553,866) ($2,490,635) ($5,674,691) ($12,905,715) ($2,338,480) ($3,137,842) ($2,965,820) ($3,599,305) ($12,041,447) ($1,716,288) ($2,071,625) ($2,314,872) ($4,473,377) ($10,576,162)
FCF per Share ($0.12) ($0.14) ($0.13) ($0.30) ($0.69) ($0.11) ($0.12) ($0.10) ($0.12) ($0.46) ($0.05) ($0.06) ($0.06) ($0.11) ($0.28)

Non-Operating Activities: 5,035,235 3,538,375 791,625 3,371,864 12,737,816 3,462,622 1,075,311 3,728,691 2,866,224 11,132,848 1,388,301 2,093,996 2,250,000 20,000,000 25,732,297

Beginning Cash and Invest. (a) $1,644,145 $4,493,574 $5,478,083 $3,779,073 $1,644,145 $1,476,246 $2,600,388 $537,857 $1,300,728 $1,476,246 $567,647 $239,660 $262,031 $197,159 $567,647
Net Cash Flow 2,849,429 984,509 (1,699,010) (2,302,827) (167,899) 1,124,142 (2,062,531) 762,871 (733,081) (908,599) (327,987) 22,371 (64,872) 15,526,623 15,156,136
Ending Cash and Invest. (a) $4,493,574 $5,478,083 $3,779,073 $1,476,246 $1,476,246 $2,600,388 $537,857 $1,300,728 $567,647 $567,647 $239,660 $262,031 $197,159 $15,723,783 $15,723,783
(a) Includes short-term marketable securities
Assets
Cash & Equivalents $4,493,574 $5,478,083 $3,779,073 $1,476,246 $2,600,388 $537,857 $1,300,728 $567,647 $239,660 $262,031 $197,159 $15,723,783
Accounts & Other Receivables 78,559 85,421 160,751 22,943 0 39,784 18,237 63,900 23,108 41,406 16,775 6,476
Inventories 0 0 0 0 0 0 11,708 11,708 11,708 11,708 7,189 9,072
Prepaid Assets 0 0 0 195,369 703,970 478,780 373,064 237,635 118,950 59,230 59,230 59,230
Other Current Assets 0 0 0 0 0 0 77,820 41,406 56,106 48,354 48,354 48,354
Total Current Assets $4,572,133 $5,563,504 $3,939,824 $1,694,558 $3,304,358 $1,056,421 $1,781,557 $922,296 $449,532 $422,729 $328,707 $15,846,915

Net PP&E 0 0 131,967 378,946 809,263 963,197 914,150 1,120,911 1,113,278 1,131,212 1,057,912 992,938
Other Assets 0 0 82,031 392,208 424,361 388,543 390,452 346,073 343,525 385,184 385,184 385,184
License Agreement 8,061,300 8,061,300 8,061,300 6,267,460 6,112,068 5,956,676 5,805,106 5,650,988 5,496,871 5,282,487 5,127,095 4,971,703
Total Assets $12,633,433 $13,624,804 $12,215,122 $8,733,172 $10,650,050 $8,364,837 $8,891,265 $8,040,268 $7,403,206 $7,221,612 $6,898,898 $22,196,740
Liabilities
Acct Payable & Accrued Liabilities $533,371 $630,025 $658,565 $1,385,311 $1,436,494 $1,429,419 $1,393,546 $1,472,519 $2,352,150 $3,113,612 $2,962,462 $623,060
Loan Payable - Related Party 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000
License Agreement Payable - CP 1,396,590 671,598 807,736 928,730 573,792 683,501 794,416 624,533 640,039 662,647 846,481 944,305
Accrued Dividends 290,813 496,505 722,480 765,369 812,020 945,579 1,068,388 1,078,003 1,226,695 864,148 990,564 1,117,612
Other CL 149,038 82,500 43,986 0 0 0 0 110,874 85,319 97,421 97,421 97,421
Current Liabilities $2,419,812 $1,930,628 $2,282,767 $3,129,410 $2,872,306 $3,108,499 $3,306,350 $3,335,929 $4,354,203 $5,441,177 $5,491,385 $3,286,112

License Agreement Payable, net 3,535,869 3,543,039 3,543,039 3,535,868 2,999,890 3,000,760 3,008,874 3,377,726 2,464,204 2,532,026 2,464,204 2,464,204
Common Stock Warrant Liability 0 0 0 0 1,545,913 1,606,822 0 0 0 0 0 0
Other Long Term Liabilities 0 0 0 0 0 0 0 324,409 304,273 284,137 284,137 284,137
Total Liabilities $5,955,681 $5,473,667 $5,825,806 $6,665,278 $7,418,109 $7,716,081 $6,315,224 $7,038,064 $7,122,680 $8,257,340 $8,239,726 $6,034,453

Shareholders' Equity $6,677,752 $8,151,137 $6,389,316 $2,067,894 $3,231,941 $648,756 $2,576,041 $1,002,204 $280,526 ($1,035,728) ($1,340,828) $16,162,287

Total Liabilities and Equity $12,633,433 $13,624,804 $12,215,122 $8,733,172 $10,650,050 $8,364,837 $8,891,265 $8,040,268 $7,403,206 $7,221,612 $6,898,898 $22,196,740

Key Financial Ratios


Days Receivable Outstanding 0.0 0.0 0.0 91.3 0.0 85.1 48.4 57.2 325.5 NM 350.0 25.0
Days Payable 0.0 0.0 0.0 411.0 628.2 218.2 217.5 146.0 369.5 539.7 500.0 100.0
Book Value per share $0.37 $0.44 $0.34 $0.11 $0.15 $0.02 $0.09 $0.03 $0.01 ($0.02) ($0.03) $0.35
Cash per Share $0.25 $0.29 $0.20 $0.08 $0.12 $0.02 $0.04 $0.02 $0.01 $0.01 $0.00 $0.34
Quick Ratio 1.9x 2.9x 1.7x 0.5x 1.2x 0.3x 0.5x 0.3x 0.1x 0.1x 0.1x 4.8x
Current Ratio 1.9x 2.9x 1.7x 0.5x 1.2x 0.3x 0.5x 0.3x 0.1x 0.1x 0.1x 4.8x
Long-Term Debt/Total Cap. 34.6% 30.3% 35.7% 63.1% 48.1% 82.2% 53.9% 77.1% 89.8% 169.2% 219.4% 13.2%

Source: Company reports and CapStone Investments estimates

CapStone Investments Trading Desk: 1-858-875-4550 5


IMPORTANT DISCLOSURES
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CapStone Rating Distribution (as of June 30, 2010):


Strong Buy: 8% of stocks have this rating (40% were investment banking clients within the last 12 months)
Buy: 65% of stocks have this rating (5% were investment banking clients within the last 12 months)
Hold: 21% of stocks have this rating (0% were investment banking clients within the last 12 months)
Sell: 6% of stocks have this rating (0% were investment banking clients within the last 12 months)
No Rating: 0% of stocks have this rating (0% were investment banking clients within the last 12 months)

Explanation of Ratings
Strong Buy: Describes stocks we believe have the potential to appreciate by 30% or more over the next twelve
months.
Buy: Describes stocks we believe have the potential to appreciate by 15% to 30% over the next twelve months.
Hold: Describes stocks we believe could change plus or minus 15% over the next twelve months.
Sell: Describes stocks we believe could decline by more than 15% over the next twelve months.
No Rating: Describes stocks we cover on which adequate information to make a recommendation is not available.

CapStone Equity Research Disclosures as of August 30, 2010


Company Disclosure
New Generation Biofuels Holding (NGBF) 4, 5, 6

ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST

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or e) Futures, g) Put options or h) Call options).
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from the subject company in the last 12 months.
6. CapStone Investments expects to receive or intends to seek compensation for investment banking services from the subject
company in the next three months.

CapStone Investments Trading Desk: 1-858-875-4550 6


7. CapStone Investments or its affiliates beneficially own 1% or more of the common stock of the subject company as
calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934.
8. The subject company is, or during the past 12 months was, a client of CapStone Investments, which provided non-
investment banking, securities-related services to, and received compensation from, the subject company for such services.
The analyst or employees of CapStone Investments with the ability to influence the substance of this report knows the
foregoing facts.
9. An affiliate of CapStone Investments received compensation from the subject company for products or services other than
investment banking services during the past 12 months. The analyst or employees of CapStone Investments with the ability
to influence the substance of this report know or have reason to know the foregoing facts.

The analyst(s) principally responsible for preparation of this report received compensation that is based upon many factors,
including the firm’s overall investment banking revenue.

Analyst Certification
I, Carter Driscoll, CFA, was principally responsible for the preparation of this research report certify that the views expressed in
this research report accurately reflect his/her (their) personal views about the subject security(ies) or issuer(s) and that his/her
(their) compensation was not, is not, or will not be directly or indirectly related to the specific recommendations or views contained
in this research report.

OTHER DISCLOSURES

CapStone Investments research, advisory and other services are provided to institutional investors with the explicit understanding
that payment is required under customary industry commission rates. Continued usage of our research by you constitutes your
assent to these terms.

CapStone Investments prepared the information and opinions in this report. CapStone Investments has no obligation to inform you
when opinions or information in this report change.

FINRA Regulation has adopted rules that will prohibit research analysts from trading in securities of covered companies during
specified time periods before and after the publication of research.

This report is for information purposes only. Under no circumstances is it to be used or considered as a solicitation to buy or sell
any securities. While the information contained herein has been obtained from sources we believe to be reliable, CapStone
Investments, a FINRA Member Firm and a Member of SIPC, does not represent that it is accurate or complete, and accordingly,
should not be relied upon as such. Notwithstanding this, CapStone Investments verifies that the information provided regarding its
registration status and other material facts, including disclosures made on behalf of its relevant persons and entities are in fact
accurate. Risk factors and actual results may differ significantly from the information contained herein. This report or any portion
hereof may not be reprinted, sold, or redistributed without the written consent of CapStone Investments.

This report is prepared for Institutional Consideration Only. Estimates of future performance are based on assumptions that may
not be realized. Past performance is not necessarily a guide to future performance.

CapStone Investments will effect agency transactions in the securities mentioned, on behalf of its clients submitting orders to buy
or sell.

CapStone Investments makes its research reports available in real-time to institutional investors through Bloomberg, Thomson
Reuters, TheMarkets.com, FactSet, Capital IQ and Zack’s Investment Research.

Copyright © Capstone Investments 2010

Research: Institutional Sales: Trading: Corporate:


Barry M. Sine, CFA, CMT Thomas A. Dillon III, CFA Craig Warner Steve Capozza
Director of Research Director of Institutional Director of Trading President
CapStone Investments Equity Sales CapStone Investments CapStone Investments
4201 Collins Avenue 12760 High Bluff Drive, 12760 High Bluff Drive 12760 High Bluff Drive
Suite 402 Suite 120 Suite 120 Suite 120
Miami Beach, FL 33140 San Diego, CA 92130 San Diego, CA 92130 San Diego, CA 92130
646-422-1333 941-685-3789 858-875-4550 800-327-5566

CapStone Investments Trading Desk: 1-858-875-4550 7