Drum Beats Grow Louder for EcoSynthetix Bio-Adhesive Commercialization

EcoSynthetix PlantWe continue to believe Ecosynthetix (ECO.TO or US OTC: ECSNF) is VERY close to an inflection point for the commercial adoption of its DuraBind bio-adhesive for the wood panel market which consumes $Bs in adhesive per year. Their eco-friendly adhesive is intended to replace the industry standard  which contains formaldehyde and has come under increasing critique for its health dangers, starting with regulations in California.

Yet investors are currently paying only a modest premium to ECO’s US $57M in net cash to participate in this long term growth opportunity. ECO is not a client of our investor relations consultancy, but we would love to represent them, and given the compelling nature of the story – this author established a position starting about a year ago (too early it now seems, but happy to be Long Term!)

These recent developments support our view:

1) July 27th the EPA finalized a rule to reduce exposure to formaldehyde vapors from certain wood products EPA Formaldehyde Rule Summary

2) Cannacord Genuity recently launched a Sustainability & Special Situations Watch List that highlighted Ecosynthetix – the report should help to expand awareness of this very compelling special situation. (To its credit, ECO has neglected its IR outreach – other than good quarterly update – in favor of focusing all resources on the one thing that really matters: commercialization, and therein lies the valuation discrepancy relative to its rapid potential revenue ramp).

3) Ecosynthetix reported excellent progress in its commercialization efforts, which involve industrial testing, in its Q2 reporting:
ECO is currently live with 10 customers, representing over 50 manufacturing lines. ECO estimates each line could account for US $500k – $3M in annual revenue. Further, to put this in perspective, there are more than 1,100 wood composite lines in the world. Canaccord estimates ECO’s current production capacity of 235M pounds per year as equating to approximately  C$190M in revenue, or less than 2% of the total global adhesives market.

ECO’s longest trial has been proceeding over a year or more and accounts for 5 million square feet of produced and sold. One of the company’s customers started its process to be formaldehyde free two years ago and looked at 217 chemistries, eventually short-listing three solutions and performed industrial testing on their products and is currently evaluating only EcoSynthetix. ECO stated on its Q2 call that 10M square feet of board have now been produced using its adhesive.

ECO is very active in raising awareness and driving adoption of its bio-based polymer. Its products are being evaluated by 7 of the top-15 global wood-based panel manufacturers, resin technology providers that provide the PMDI resin used in chip boards, furniture manufacturers as well as big box retailers. EcoSynthetix has indicated that it hopes these tests could lead to commercial orders in the near term.

ECO defines commercial success as running continuously on one line for 30 days. It has run continuously for one or two weeks (and produced 10M sq feet of panels for sale), but for various reasons (largely due to the logistics and processes learning curve involved in bringing a new adhesive into the production process) it has not yet hit its stated benchmark for commercial success but importantly there have been no issues that are not reasonably rectified – and the testing has enhanced ECO’s ability to bring new lines on line expediently.

4) Major retailers are also helping to lead the adoption trend, as both Ikea and Walmart have publicly announced plans to embrace No Added Formaldehyde (NAF) production for the wood products they offer.

5) Putting their money where their mouth is, CEO Jeff MacDonald recently bought 34,200 shares at C$1.65 on 8/24/16 and ECO’s chairman Paul Lucas bought 10k shares on Friday, 8/19/16 for C$1.72 View ECO Insider Activity Here

While it’s taken a year longer than I first expected for the adoption to transpire – in retrospect is was naive to think large companies would move so quickly, particularly during a period of very robust demand for their existing products – and no real impediment to selling those containing Formaldehyde other than in California.  Trialling new adhesives takes time and disrupts production, which impacts the top and bottom line, so it’s understandable in a period of strong demand that the conversion process would get pushed out a bit.  

From our dialogues with those focused on the ECO story – November/December are typically the slowest periods of production in the wood panel industry – where inventories are being worked down and the ability to convert lines to a new methodology is much less disruptive. 

To be continued.


Compelling Microcap Growth / Value Idea – Taking the Formaldehyde Out of Wood Panels

EcoSynthetix Logo

A smart hedge fund analyst we know has identified a compelling microcap value idea EcoSynthetix Inc. (TSE: ECO or OTC: ECSNF– ~US$ 78M market cap) that is poised for a substantial ramp in sales of its revolutionary new DuraBind™ bioresin adhesive for wood panels – while sitting pretty with 77% of its market cap in cash (US $59.1M).  

This company is well worth spending some time on – as the upside is significant while the downside is protected by cost consciousness and a very strong balance sheet safety net.

We’re Always Smartest When Listening…
This very savvy investor has built a large position in ECO while also playing a role in adding new industry expertise and management talent to the company’s board and leadership. Like most of our best stock ideas – we just listen to smart people who have clearly done the work, kicked the tires and invest along with them. The value we provide is in filtering out those who do the work and those who pretend they know all the moving parts. While there are no guarantees – after tacking this company for nearly a year – we are impressed on all fronts regarding the Company, its technology, its persistence and discipline and its progress.  The nature of microcaps is that it takes FOREVER for things to get done; it comes with the territory. So patience and understanding of big company/small company hierarchies is critical to staying the course when things drag on.  The good news for readers is that we’ve spent the last year waiting and watching – so you don’t have to! ; ) 

The launch of DuraBind bioresin adhesive for wood panels represents an enormous potential catalyst for this renewable chemicals company and its portfolio of commercially proven bio-based products. DuraBind is an eco-friendly adhesive positioned to replace formaldehyde-based resins that dominate the field but are facing increasing regulatory and consumer obstacles.

Most notably, cancer-linked urea formaldehyde (UF) based resins tripped up Lumber Liquidators (NYSE: LL) when it was found – despite their labeling – that some of their flooring was emitting formaldehyde at levels far exceeding California EPA and its California Air Resources Board (CARB) standards.

Anecdotally, we have heard that much of the flooring and furniture industry faces the same emissions issues, and is rapidly looking to eliminate formaldehyde from their products.  One prominent example is that IKEA is attempting to reduce or eliminate formaldehyde levels in its wood composites over the balance of this decade.  The industry refers to these products as NAF – No Added Formaldyhyde formulations.

DuraBind Commercialization Progress
As companies seek to produce products that meet regulatory and consumer preferences, DuraBind represents the only economic alternative for wood-panel manufacturers. EcoSynthetix has spent the past 24 months advancing dialogs, pilots, and industrial-scale mill trials with most of leading global wood panel manufacturers. Traction in this area is clearly the key to value creation – so we will provide more detail on this progress below. Suffice it to say, it is our understanding the ECO is already in trial stages with manufacturers who own enough mills to support a substantial ramp in its business. enough mills to support hundreds of millions in annual revenues.  The total potential market is measured in the billions and is dominated by UF products from large specialty chemical companies like BASF and Koch Industries.  We believe early commercialization success by ECO will be met by swift M&A or partnership activity by a large incumbent.

Our optimism is only tempered by past experience: it should be noted that EcoSynthetix had previously attempted to commercialize a formaldehyde-free product targeted in the building insulation market but was unsuccessful in these efforts.  However, we believe that the engineered wood substitution opportunity is much more complex – wood mills in the industry have been looking for economic alternatives since the first anti-formaldehyde legislation in the early 1990s, and still no alternative has been mass-adopted.  Thus, we believe that the company has a truly unique value proposition that will not be easily copied.

Recent progress outlined in the Q1 conference call and slides includes ten large manufacturers in various phases of active trials along with the addition of a few new customer prospects during Q1, demonstrating growing awareness and interest in NAF  Q1.  The Composite Panel Association held its annual panel in Arizona this past April and attendance was extremely strong.  Further, interest was very high in the no added formaldehyde segment.

To date, DuraBind has been utilized in the production of over 5 million square feet of manufactured boards that have been approved for customer sale.

In total, EcoSynthetix estimates there are approximately 1,100 wood board production lines around the world, driving adhesives demand in the billions of dollars each year.  Currently approximately 90% of total demand is being supplied with formaldehyde-added adhesives.  EcoSynthetix DuraBin represents the first bio-adhesive that delivers both on performance and cost – to make it a suitable NAF replacement.

Microcap Risk Mitigated by US $59M Cash Position
Backstopping an investment in EcoSynthetix has an impressive balance sheet with no debt and US $59.1M in cash and term deposits (held in US dollars) and a recent market cap of just US $69.8 M. The strength of the cash position can be diminished by investors who fail to assess the $US cash position in the apples to apples context of a US$ denominated market cap, given that the TSE is the only viable market for ECO shares. Trading on the OTC under the symbol ECSNF is sporadic at best, and our belief is that this only represents grey market trades that are executed in Canada but “printed” on the OTC denominated in US$.

Potential Steep Growth Ramp is Masked by Legacy Business
EcoSynthetix also screens poorly on recent financial performance as its legacy business is in bio-coatings for paper and paperboard. That business has been under pressure due to pricing pressure from petroleum-based alternatives that have benefited from the oil price slide, as well as the secular decline of the paper industry, exacerbated by the bankruptcy of key customers in the US in 2015. FY 2015 revenues totaled US $14.6M, down from US $18.8M the prior year,

New Management Team is Talented, Focused and Executing
However, with the appointment of CEO Jeff MacDonald in 2015, management has been successful in its efforts to reduce costs and cash burn by steering focus exclusively to the wood composites market. Q1 2016 operating expenses were 38% below those in the year ago period, and cash burn now stands at ~$1.5MM/quarter.

Further, the steady ramp in focus on eco-friendly bio-friendly alternatives continues to provide optimism to EcoSynthetix’s prospects in this area.  The recent addition of Paul Lucas, former CEO of Glaxosmithkline Canada, and Jeff Nodland, former president of the coatings division of Hexion (a major industry incumbent now owned by Apollo), to the board of directors gives us confidence that the company is experiencing a resurgence.

EcoSynthetix offers a variety of bio-chemicals proven to help manufacturers reduce their reliance on petroleum-based chemicals and VOCs, while decreasing overall material costs, improving manufacturing performance and reducing their carbon footprint. Its products include

  • EcoSphere®  legacy bio-chemical which is an alternative to petroleum-based latex coatings
    for paper and paperboard
  • EcoMer®       EcoMer can be combined with conventional vinyl monomers, including
    styrene, acrylics, and vinyl acetate to produce polymers suitable for use in
    pressure sensitive adhesives, ink and toner resins and paints.
  • EcoStix®       bio-based pressure-sensitive adhesives for stickers
  • DuraBind™  bioresins for wood panel market 


Biostage at a Glance:
                                                            Canada                                      US
Symbol                                               ECO.TO                                   ECSNF

Recent Price                                       $C 1.70                                  US$ 1.30*

52 Week Range                            $C 1.00 – $C 1.85                     $US 0.77 – $US 1.41

Exchange Rate                             $C 1.30 = US $1.00               $US 0.77 = $C1.00

Market Cap                                        $C 101M                               $US 77M*

Cash & Term Deposits                      $C 76.8M**                         $US 59.1M

   Cash per share                                 $C 1.30**                              $US 1.00

Shares Out                                         59.3M                                    59.3M

*Based on 1.3:1.0 conversion rate
**Based on 0.77:1:00 conversion rate

Disclosure: The principal of Catalyst Global, which publishes CG Focus List, has been an investor in EcoSynthetix since July 2015 – with subsequent purchases over the next 6-9 months.  The principal has no intention to sell any of his position over the balance of 2016 and will weigh any further purchases or sales based on the progress of EcoSynthetix in its commercialization.

Wireless Infrastructure Microcap Turnaround: Not the Westell You Knew > Decade Ago

Full disclosure – wireless telecom equipment co. Westell Technologies, Inc. (Nasdaq: WSTL ) is a new client of our our parent, investor relations firm Catalyst Global, but we wouldn’t write this if we didn’t think this idea would reflect well on CG Focus List

Westell Technologies, Inc. (WSTL) is an attractively valued, well funded turnaround story in wireless telecom infrastructure solutions. With the rapid growth in mobile devices & content access – Westell seems well positioned to help infrastructure providers meet this growing demand by better leveraging their existing resources in a cost effective manner.

Catalyst Global’s charge is to raise WSTL’s profile amongst small and microcap investors and as part of that effort, Westell will be presenting at the LD Micro “Main Event” Conference on Dec. 3rd in Los Angeles and at the Benchmark Company Micro Cap Conference in Chicago on December 10th.

Further, Westell will report Q2 results on Weds. Oct. 28th and host a call Thurs., Oct 29th at 9:30 a.m. ET: Q2 Call/Webcast Details – October 29th @ 9:30 am ET

Westell is progressing through a turnaround let by a talented and wholly new senior management team most of whom joined in 2015, including:

  • CEO – Tom Gruenwald (Tellabs & AT&T) – Feb. 2015
  • CFO – Tom Minichiello (Tellabs, United Technologies & Andrew) – 2013
  • SVP WWide Sales – Brian Brouillette (HP, Juniper & Net Optics) – 2015
  • SVP WWide Sales – Chuck Bernstein (TeleCommunication, Tellabs) – 2015
  • CTO – Mike Moran (Alcatel, Netscout, MacAfee & Tellabs) – 2015

Westell’s new team put up a solid performance in the June quarter (their Q1) and are working to achieve further top line and bottom line operating improvements – moving toward a breakeven revenue range of $25-$27M.

Westell’s new team is refocusing the company on new products, new customers and additional markets. They are also making significant headway in cost reductions and margin enhancements in an effort to return to profitability.

+16% sequential sales growth to $21.6M in Q1’16 (June) with improving gross margin vs. March sales of $18.6M but down from year-ago sales of $27.8M
  • Coming launch of new distributed antenna system will expand product offerings for rapidly growing market for in-building wireless solutions. In-building solutions involve improving the efficiency and quality of wireless service in buildings and other venues to better leverage the existing wireless towers & infrastructure. In-building addresses user experience as well as operator costs – making it a win-win area of opportunity.
  • Existing intelligent cell site management, cell site optimization and rugged outside plant cabinet product lines also offer solid growth potential.

One potential demand stimulus for WSTL could be phase 2 of the Connect America Fund (CAF) The second phase of CAF provides funding for ongoing support to deploy and maintain fixed-location broadband and voice services in high-cost areas at rates comparable to those offered in urban areas. Connect America Fund Background

Valuation: Westell FY 2015 revenues were $84.5M and its enterprise value is $33M, net of $37M in cash, for an EV/sales multiple of 0.4X compared to the average telecom equipment group multiple of 1.1X EV/sales.

Westell’s market cap is $70M with 61M shares outstanding [46.9M Class A & 13.9 Class B] based on recent price of $1.15 (with $0.61 cents per share in cash). WSTL also has $39M in deferred tax assets.

Institutional Ownership: WSTL has attracted solid value-oriented institutional interest with Cove Street, Heartland and Royce owning respectively 15%, 2% and 1.4% of shares outstanding, the latter two funds reflecting well on the underlying investment value of Westell.

Coverage: Just one analyst covers the Company currently – Mike Latimore of Northland Securities in Minneapolis. His report is available on Westell’s IR website.

Changes at Westell Remain Unknown: In closing, while we have found that the Company name has good investor recognition, it’s clear that investor perceptions are generally based on old news – often a decade or older when he Company was much more wireline focused and a major provider of DSL modems.

The prior team sold off the legacy businesses – except the outdoor equipment business – and through M&A built a portfolio of products focused on wireless. And now an entirely new team is rebuilding the sales & marketing effort while also investing in R&D for in-building wireless solutions, in an effort to rekindle growth, and honing in on efficiency and cost reduction opportunities to drive bottomline. The transformation so far in 2015 seems to remain a fairly low profile development.

Now it’s up to the team to execute and like most small companies, it’s probably more of a bumpy ride forward than a linear progression – but they do seem to be focused on the right things have have a solid set of initiatives that make sense for driving improved financial performance, all with a balance sheet that provides the company with as much time as it needs.

Should you have questions or wish to speak to management, please call Tanya Kamatu at Catalyst Global at 212 924 9800 or wstl@catalyst-ir.com

Thanks for reading.

CG Focus List

October 23, 2015


Flux Sees 300% Growth in FY ’16 Following Nearly 100% Rise in FY ’15

Our client Flux Power just issued the following news announcement to provide some greater visibility on the ramping demand it is generating with large national & regional customers.  While we were too early in brining the stock to investors attention (at around $0.17 per share) the company’s current market cap of around $4 million seems modest given the traction they see within what is estimated to be a $600-$800M market for Class III walkie forklift batteries that is virtually all based on legacy lead acid technology.

Flux Logo with (r)

Flux Power Industrial Lithium Battery Sales Expected to Rise 300% to
$3 Million in FY 2016, Driven by Growing National Customer Demand

FY 2015 Revenue Rose Approximately 100% to $700,000;
Q4 Unit Shipments Rose to Record 81 Units vs. Q3 ’15

VISTA, Calif., Aug. 4, 2015 — Flux Power Holdings, Inc. (FLUX), a developer of advanced lithium battery technologies for industrial applications including electric forklifts, today provided an initial LiFT revenue forecast of $3 million for FY 2016 (ending June 30, 2016) in conjunction with a preliminary projection of its Q4 and full year FY 2015 results. Flux launched its LiFT Pack lithium battery line for Class III pallet jack forklifts or “walkies” in January 2014.

2016 Sales Outlook
Flux has built a nationwide network of battery distributors, forklift dealers, OEMs and national and regional customers who now recognize the performance and cost benefits of Flux’s lithium-ion storage solutions over legacy lead-acid batteries. Based on customer and distributor dialogues, LiFT Pack piloting, and initial purchases, Flux management feels confident it can achieve fiscal 2016 LiFT Pack sales of at least $3 million, representing 300% growth over fiscal 2015. The FY 2016 sales estimate excludes other product sales opportunities in development and is subject to Flux’s ability to secure sufficient working capital to fund inventories, demo units, industry certifications, receivables and expanded sales, customer support and administration expense. Flux is currently considering various options to address its working capital needs.EF3C4402

Ron Dutt, Flux CEO, said, “It’s very exciting to see the realization of our team’s strategy and efforts resonating so strongly within the material handling industry. We have developed very meaningful large account interest that supports the strong sales ramp we anticipate beginning in Q2 fiscal 2016. Based on current dialogues we expect our sales to improve significantly over the next year, reaching a $1.5 million per quarter run rate by the end of fiscal 2016. We are also planning several product design, sourcing and cost management initiatives to improve our product margins.”

Growing National/Regional Customer Base
Demand for Flux LiFT Pack solutions is centered on logistics-intensive industries including beverages, food, groceries, consumer goods and shipping and transportation. To date, 26 large national or regional companies have piloted Flux LiFT Packs for walkies and so far 15 of them have proceeded to make initial LiFT Pack purchases. This demonstrates solid progress from the 16 piloting companies, 10 of which had made initial purchases, as reported in March 2015. Flux’s revenue expectations are based primarily on advanced discussions with several companies that are planning to include Flux LiFT Packs in their monthly/quarterly battery replenishment schedules beginning in Flux’s FY 2016 second quarter.

Latest LiFT Pack Image 01-15Q4 and Full Year 2015 Preview
Flux expects to report record LiFT Pack shipments – a total of 81 LiFT Packs – for Q4 2015. The shipment record was achieved despite several customers that await the completion of additional product certifications, pushing the purchase of 65 additional packs into FY 2016.

Though its Q4 and full year 2015 financial statements are not finalized, Flux anticipates Q4 2015 revenue grew to approximately $205,000 and full year FY 2015 revenue rose to approximately $700,000, nearly doubling over FY 2014 revenue of $358,000. Flux expects its Q4 2015 net loss to range between $700,000 – $900,000 and its FY 2015 net loss to range between $2.5M – $2.7M, a significant improvement over the FY 2014 net loss of $4.3M.

About Flux Power Holdings, Inc. (www.fluxpwr.com)
Flux Power develops and markets advanced lithium-ion energy storage systems (‘batteries’) based on its proprietary battery management system (BMS) and in-house engineering and product design. Flux storage solutions deliver improved performance, extended cycle life and greater return on investment than legacy solutions. Flux sells direct and through a growing base of distribution relationships. Products include advanced battery packs for motive power in the lift equipment, tug and tow and robotics market, portable power for military applications and stationary power for grid storage.

Flux Blog:     Flux Power Currents
Facebook:    FLUXPower
Twitter         Company: @FLUXpwr Investor Relations: @FluxPowerIR
LinkedIn      Flux Power

This release contains projections and other “forward-looking statements” relating to Flux’s business, that are often identified by the use of “believes,” “expects” or similar expressions. Forward-looking statements involve a number of estimates, assumptions, risks and other uncertainties that may cause actual results to be materially different from those anticipated, believed, estimated, expected, etc. Such forward-looking statements include the development and success of new products, projected sales, Company’s ability to fund its operations, distribution partnerships and business opportunities and the uncertainties of customer acceptance of current and new products. Actual results could differ from those projected due to numerous factors and uncertainties. Although Company believes that the expectations, opinions, projections, and comments reflected in these forward-looking statements are reasonable, Company can give no assurance that such statements will prove to be correct, and that the Company’s actual results of ‎operations, financial condition and performance will not differ materially from the ‎results of operations, financial condition and performance reflected or implied by these forward-‎looking statements. Undue reliance should not be placed on the forward-looking statements and Investors should refer to the risk factors outlined in our Form 10-K, 10-Q and other reports filed with the SEC and available at www.sec.gov/edgar. These forward-looking statements are made as of the date of this news release, and Company assumes no obligation to update these statements or the reasons why actual results could differ from those projected.

Flux, Flux Power and associated logos are trademarks of Flux Power Holdings, Inc. All other third party brands, products, trademarks, or registered marks are the property of and used to identify the products or services of their respective owners.

Good Looking Falling Knife that Grows Life Saving Organs – BSTG

This is a first look note on Biostage, Inc. (Nasdaq: BSTG) which was spun out of Harvard Bioscience (HBIO) Nov. 2013.  We started taking a closer look at BSTG last week and what we saw seemed very intriguing indeed. Impressive, life saving organ growing technology that has been successfully transplanted into several patients yet their stock is currently getting crushed based on negative investor sentiment, largely retail it seems, following the sudden departure of the CEO a few months ago and persisting negative commentaries regarding a surgeon who had been closely associated with the company and completed the initial transplant surgeries.  The stock closed at $1.67 yesterday for a $17M market cap, despite a $12M cash position, which even burning $1.7M in Q1’15 places a very low valuation on technology with such substantial potential.

Screen Shot 2015-06-02 at 9.57.44 AM




Our non technical explanation of what they do is that BSTG has developed systems and technology that allows them to grow organs/tissue from your own cells which are from your bone marrow.  Like in vitro fertilization but different, instead of an embryo, they are able to provide you with a new trachea or other wind passage (under development).

So far trachea have been grown & transplanted successfully on a compassionate use basis. The BSTG method addresses the problem of replacing critical breathing organs that have been damaged by injury or disease, and it addresses the rejection issues of transplants.  The procedure/organs are not yet approved but they have put forth a clear plan to seek such approvals in the US and Europe and they are publicly affiliated with the Mayo Clinic on their  Hart Trachea product.  Hart plans to file an Investigational New Drug (IND) application with the FDA & similar European body by June 2016 and the Company recently confirmed they are on track with this goal for the BSTG Trachea product which has been granted orphan status by the FDA (Sept 2014). This status provides market protection for 7 years. [Note focus is now Esophagus – with FDA IND filing targeted for end of 2016.

So what’s the business we asked, as the Company was spun out by a medical equipment company. While BSTG has developed an array of products to enable the growth of these organs, the business is to grow and sell organs at prices roughly in the $100-200k range depending complexity, etc.  The gross margin should be easily in the 90% range at normal production levels as the actual Costs of good sold are modest, it’s just the know how, personnel & equipment that’s required to make the magic happen.

And what’s wrong with the picture / driving the stock downward:

1) The pioneering MD closely associated with BSTG and who performed the initial transplants has some credibility issues in the medical world.  For this reason he was removed from the company year and a half ago and the BSTG program was moved from Russia to US & Europe (sounds like a good idea for market credibility), however the perception and stigma remain – probably because the vacuum left by this physician has not yet been visibly replaced.  As a result the physician remains a perception issue for the company as he’s really an industry renegade; the sort of personality that brashly pioneers new things while breaking some of the known conventions. Said another way, not a physician who’s strong on following protocols, adherence to data collection guidelines and postop care, etc. It is in these areas where he is  facing challenges and those perceptions seem to have cast a cloud on BSTG’s technology and future, despite all the other corroborating evidence of efficacy, credibility and potential.

2) Also, founding CEO David Green “resigned” a few months back but what seems clear is he wasn’t getting the job done with the company and so it would appear that corporate governance has responded appropriately.  Making the departure more impactful is that Mr. Green left his post as CEO of the parent company to lead BSTG following its spinoff.  A big selling point of the spinoff was that the CEO and CFO of HBIO were moving to lead BSTG and now the CEO is gone – and the CFO remains now with the added title of acting CEO as well.  Tom McNaughton seems very bright and capable from our conversation with him.

3) Absence of major news flow + overhang from offering done in February at $1.75

Yet we like the story because:

1) The technology is real, has worked on several patients, is moving into regulatory approval processes next year and provides a solution where there really is none. [Since this post, the new Cellframe Platform has been launched and achieved ground breaking results in large animals, focused on the esophagus. The prior trachea work is no longer commercially relevant given the new Cellframe approach [different material, different stem cells and far stronger response.]

2) The approach is supported by institutions such as the Mayo Clinic and others that should come to light later this year.

3) The BSTG team seems strong:  The medical director is very impressive – comes from the DeBakey Heart and Vascular Center in Houston; the CFO & acting CEO seems very solid and the VP R&D comes from Organogenesis where he developed tissue engineered products.  Added great CEO from Genzyme in Jim McGorry.

4) The valuation seems cheap given $12M in cash at 3/31/15 and a market cap of $17M based on yesterday’s close of $1.67.  The Q1 cash burn was $1.7M.  Not sure where the stock goes near term – but it does seem an enterprise value of $5M is probably not appropriate for a company of this genesis and market potential.  This is where Mr. Buffets “voting machine” aspect of the market can make you a lot of money… when the “weighing” aspect of valuation catches up with a business of such potential opportunity.

Like all situations, we are of course interested in the IR opportunity should one present itself, but in the interim we thought we should profile another idea on CG Focus List as we’ve been very remiss in posting our ideas on this forum.  [We have since been hired as IR counsel – our firm Catalyst Global – and are working through October 2016 when the biotech-focused IR firm Jenene Thomas Communications takes over.

Please let us know what you think about BSTG.

CG Focus List


Puradyn’s President Reviews Cost & Environmental Benefits of its Engine Oil Filtration

Oil & Gas Product News
September 2, 2014

Puradyn Filter Technology’s (OTCQB: PFTI) President, Kevin Kroger, wrote a great overview of the benefits of its engine oil by-pass filtration as part of the operations management concept of Condition-Based Maintenance (CBM) which seeks to anticipate the needs of the equipment and extend equipment life. A link to the article is below, and we loosely excerpt a few key elements [and add our own in square brackets]:


Puradyn Filter Technologies’ TF-240 filter provides microfiltration for engines with an oil capacity of up to 85 gallons (322 litres). It can be used in multiples to scale to larger engines that hold 500+ gallons (1,890 litres) of lubricating oil. In a test, one international drilling client safely extended oil drain intervals from 500 hours to 2,500 hours.

[That eliminates four oil changes at roughly $1,360 in oil cost per change.
85 gallons x $16 per gallon = $1,360 in oil savings per omitted oil change
$1,360 x 4 = $5,440 Gross oil savings before filter costs
Filters are ~$170 x 5 filters (one for each 500 hours) = $850
$5,440 savings – $850 filter cost = savings of $4,590 – an 84% reduction in costs BEFORE considering savings from reduced labor, downtime and the cost of transporting new and dirty oil.  We have not factored in the initial unit cost which is approximately $2,000.

Further, if we estimate the engine runs 22 hours per day, these savings would replicate at least 3 times each year, amounting to $13,770 in oil cost savings per engine / per year.  

The larger the engine, generally the more oil it uses and the more (costly) valuable it is – and the more its preservation matters from a CapEx standpoint.  Size matters in engine oil filtration as the savings and the protection/preservation value grow substantially with the engine’s size.   We have heard anecdotal evidence that these significant savings are likely dwarfed by savings in engine maintenance, including overhauls, and extended life of these costly assets.  Normal maintenance procedures, such to overhauls and full overhauls may be eliminated or substantially delayed to far longer intervals – with savings exceeding $50k before the consideration of lost productivity from down time.

What makes Puradyn an attractive investment opportunity today, is that since 2007 they have refocused their solutions and business on far larger engines, versus their prior truck and bus focus.  While they proved the technology worked extremely well, and the cost and performance benefits were clear, the magnitude of the cost savings and preservation benefits were limited by the smaller engine size, and therefore became less of a management priority with companies they were working with.

Now with a broad deployment of units within a major customer – the reduced oil and oil change costs, along with reduced maintenance costs and extended engine use, life and time between overhauls, can be very clearly seen and measured – and the benefits are compelling.]   

A large driller client of Puradyn that uses the CBM tools of bypass oil filtration and oil analysis estimates that the annual savings in new oil purchases and waste oil disposal is more than $5 million (US). This translates to an annual reduction of more than 370,000 gallons of engine lubricating oil. In addition, personnel requirements for oil drain maintenance are reduced by as much as 5,500 hours.  [And as any rational company would, they have been expanding their rollout of Puradyn filtration to more and more drilling systems.

The investment thesis for Puradyn therefore rests on their ability to leverage the clear and proven benefits of their filtration technology proven at a major drilling company – by introducing and then demonstrating the solution to other leading drillers.  This process is well underway and management remains very confident and optimistic that these sales and demonstration efforts will turn into broader deployments that should drive its financial performance and shareholder value.  No guarantees – but proven technology and a highly credible team that seems up to the task of selling substantial savings.

Our thesis remains the same following improved Q2 results from the Company.  We are waiting for further market engagement from one or more drilling companies that will signal growth and adoption that PFTI investors have been patiently awaiting.] 

Note: As we have indicated, our parent company, Catalyst Global, is engaged in discussions to be engaged as IR counsel by Puradyn, however no contract has been executed and there has been (and will not be) any compensation paid related to this or future updates.   The principal of CG Focus List / Catalyst Global has established a long position in PFTI Common Stock and will not trade in PFTI shares over the next 5 trading days.

Clean Energy – Flux Power Holdings, Inc. OTCQB: FLUX

Flux Power is Bringing State of the Art Lithium Battery Technology to Large Untapped Industrial Markets:

Forklifts, Tug & Tow Vehicles & Portable Power for In-the-Field Use.

While Fuel Cells by PLUG, FCEL, BLDP & HYGS Garner Headlines and Trading Frenzy – Flux LiFT Packs offer a much lower cost, easier to implement forklift solution versus incumbent lead-acid storage.


Flux has created innovative lithium-ion batteries that deliver more storage and longer lifespan at a better price. Flux’s design transcends the traditional lead-acid battery and adapts to the modern era with a safer and more cost effective product.

Flux has scaled battery technology initially developed to power smartphones and tablets up to industrial applications like forklifts and other vehicles. Flux offers a far superior power source that performs much better, lasts far longer and is substantially more cost effective.









Flux Investment Thesis:

  • Strong industry interest/validation
    • Tested by major dealers such as Toyota Materials Handling, global leader in forklifts
    • Growing base of distributor & dealer interest in 18 states
    • Working to expand approvals to additional top OEMS
  • Substantial interest & sales potential in large markets such as beverage makers, food & grocery chains, etc
  • Partnerships with:
    • HDT Global – portable packs for military/emergency response
    • Wesley International – electric tow vehicles
    • Penguin Automated – large robots for underground mining / civil construction
  • Proven leadership – CEO /acting CFO Ron Dutt  
    • 30-year career senior management/financial executive experienced with growth and leading through transitions at DHL, Ford, Visa, Directed Electronics, Fritz Co.’s, SOLA Int’l
    • Ron Dutt LinkedIn Profile
  • Substantial Market Opportunities

The slide below is from Flux’s investor presentation (6/19/14). It illustrates the scope of some of Flux’s targeted markets.  Provided Flux can develop industry acceptance, it’s ability to scale its business is both open ended and based on already proven and patented technology.

FLUX Market Opportunity



Initiating Sales Ramp for  New Products

Flux is developing clear sales momentum for its new product lines launched earlier in the year.  We expect that this trend can accelerate as Flux “gets through” the far longer dialogues and testing that are part of entering new markets and developing a reputation and track record.

The first three quarters of FY ‘2014 (ended June 30) were focused on launching and demonstrating Flux’s LiFT Pack forklift solutions, with initial sales really starting in Q4 ’14.  The uptick in sales during Q2 ’14 related to a specialty portable power solution utilizing solar panels and storage for military field applications.

Flux Power Sales Chart

Flux Lithium-Ion Technology Offers  Array of Advantages

  • More power than lead-acid
    • Higher operating power throughout discharge – performance starts high and stays high
    • Lasts 25% longer between recharges
    • Useful life up to 6x longer
  • Light weight – easy to maneuver
  • Advanced technology & design, salable assembly, proven performance
    • Proprietary Flux Battery Management Systems (BMS)
    • Patented, state-of-the-art technology
  • Climatic adaptability – preforms in cold, wet, dry, humid and ever-changing climates & conditions
  • Customization – can be adapted to customers needs
  • Less expensive and easier to deploy than fuel cell technology

More-Up-Timelithium savings


lead acid













Targeting Large, Untapped Markets

While there a wide variety of attractive market opportunities for larger lithium-ion storage solutions, Flux is targeting three primary markets, but is focusing the bulk of its efforts on motive power and portable power.

  • Industrial Motive Power – Lithium packs for lead-acid replacement & new applications:
    • Lift Equipment (forklifts) starting with Class III Lifts “Walkies” via Flux LiFT packs – once Flux has solidified the Class III opportunity, it plans to scale-up its solutions for larger, higher priced Class 1 & 2 lifts.
    • Tug & pull equipment
    • Robotics for mining & civil construction – initial prototype delivered
  • Portable power – Quiet, clean, reliable power source that replaces generators/fuel for:
    • Military field operations
    • On-location entertainment production
    • Events & other remote applications
  • Stationary Power – Solar and Wind Farm Storage for Utilities
    • Longer-term opportunities
    • Pursuing partnerships with grid integrators

Partner Comments:





toyotatoyota quote




Disclosures: The parent of CG Focus List, Catalyst Global LLC, is an investor relations consultancy based in New York City.  Catalyst Global was formed by an investor relations professional with over 25 years of experience serving micro-, small- and midcap public companies.  Flux Power Holdings, Inc. is a client of Catalyst Global and receives over 75% of its IR retainer compensation in the form of restricted Flux common stock that vests over a one year period. Coverage of Flux Power reflects CG Focus List/Catalyst’s belief that Flux Power offers a very attractive special situation investment opportunity based on the deployment of proprietary lithium-ion storage technologies within industrial markets that have been mired in a century-old technology with myriad flaws. The preparation of this CG Focus List report is outside the IR relationship between Catalyst Global and Flux but is intended to help expand awareness of the Flux story. Neither CG Focus list nor Catalyst Global have received compensation of any kind for the preparation and distribution of this Alert. Flux management was not involved in the preparation or review of this report.

CG Focus List and/or its affiliate Catalyst Global owns approximately 0.8% of Flux’s outstanding common stock (the shares are not registered) pursuant to IR retainer compensation and through our participation in a private placement in March 2014.  CG Focus / Catalyst have a long term investment horizon (1-5 years) for their Flux investment and have no plans to sell any Flux stock for at least the next six months (we do have to pay our bills periodically and they generally request cash!).  Further, the founder of Catalyst Global is the tallest son of Timothy Collins, Sr.,  Chairman of Flux Power Holdings. Tim Collins introduced us to Flux’s CEO last fall and later became Chairman in spring 2014. We are very willing to answer questions on the status of our relationship and ownership for anyone who asks, as we completely understand there may be questions or concerns.  Rest assured that our integrity, ethics and adherence to disclosure standards are the bedrock of who we are and what we do each day, no matter the near term financial consequences.  It’s the way it should be everywhere – but alas it is not.

Authors: Our amazing intern this summer, Kate Keller, along with Catalyst Global staffers Chris Eddy & Eric Lentini

cropped-LOGO-Cropped.pngPuradyn Filter Technologies Incorporated

Proven Bypass Oil Filtration Technology – t
hat Reduces Costly Oil
Changes, Downtime and Engine Wear – is Poised for Sales Breakout

pic b

Puradyn produces innovative engine oil filtration systems that drastically reduce costs, maintenance and downtime. Puradyn filters remove oil contaminants and replace additives – keeping oil in “like new” condition, reducing oil changes and increasing engine life.

Having proven the technology with several industry leaders, PFTI is now engaged in sales efforts with several substantial oil field and industrial companies that offer (but by no means guarantee) breakout sales potential. (see “New Business Activity & Outlook”)

PFTI’s CEO is sufficiently confident in Puradyn’s outlook, he has funded working capital deficits totaling $10M over several years. His background and integrity (we met with him) provide us the confidence to introduce you to this nano-cap name.









Puradyn Investment Strengths:

  • Patented filter technology delivers >75% decrease in oil use, oil maintenance and related costs.
  • Thousands of installations in operation globally.
  • Razor-razor blade model – delivers solid ongoing revenue streams from replacement filters required to maintain filtration performance.
  • Rapid customer ROI: 100% cash-on-cash return in as little as a few weeks to several months.
  • Compatible with several large engine markets:
                                  • Oil drilling; pipeline compressors
                      • Marine vessels
                      • Mining haul trucks
                      • Hydraulic systems
                      • Heavy duty equipment
  • Solution works on all size engines including CAT, John Deere, MTU, etc.
  • Scalable production facilities support growth.
  • Impressive management team owns 28%.
                                  • CEO Joseph Vittoria was previously CEO of AVIS.
  • Very attractive valuation relative to annual customer savings and global sales potential across all markets.

chart update

patented bypass oil filtration system saves
one oil industry customer over
$5M per year.”
Joe Vittoria, Puradyn CEO

Yet PFTI’s market cap is roughly 2X this customer’s annual savings – making PFTI worth far more to the customer – than to all of Wall Street.

The CG Focus List thesis is that PFTI’s valuation hugely understates the global cost savings its patented technology could deliver – and that will ultimately be reflected through share price appreciation or M&A when sales ramp.


picture text box 4

Product Strengths:

  • Demonstrated nearly 70% efficiency at removing solid contaminants below 1 micron.
  • Easy-to-change filters; rugged filter canisters built for extreme conditions.
  • Filter replacement ever 250-1,000 hours
                                    • Up to 24 filter replacements per year.
                                    • Saves up to $3K per avoided oil change in large oil field applications.
  • Increases machine efficiency, oil circulation and purity and engine life.
  • Applicable to all diesel, gasoline and gas engines.
  • Approved by John Deere.


U.S. Military

  • Supplying military contractor with 750 small units over 3 years, estimated revenue of $300K.
  • Military Tractors (Freightliner).
  • Armored fighting vehicles (MRAP).

Nabors Industries – Oil Field Services

  • Customer since 2009, ~ 2,000 units.
  • International division saves over $5M per year on 400 systems for large oil drilling rig engines.

South Ferry (Shelter Island, NY)

  • Customer since 2002.
  • Puradyn extends oil drain intervals from 250 hours to 3,000 hours on each vessel.
  • Extended time to engine overhaul by ~300%.

pic 2


DYN’s rugged, high efficiency, multi-stage bypass filtering system consists of an external canister that houses a disposable filter element (with time release additives) and a heated chamber to evaporate water, fuel vapors and other gaseous contaminants.




Why Bypass Filtration is Needed

60% of engine wear is caused by particles between 5-20 microns, yet most OEM full flow filters only perform efficiently down to particles between 15-40 microns.

puraDYN bypass oil filtration systems filter particles as small as 1 micron or less, reducing engine wear from particles not trapped by normal full flow filtration. A micron is really small – 1/1,000th of a millimeter or 1/25,400th of an inch.

Emission Regulations are Driving Demand

New engines are designed to meet strict emission regulations, with the unintended consequence of generating greater amounts of soot in the oil.  Increased soot and other solid contaminants, plus fuel and water that cannot be effectively removed by full flow filters, create greater need for bypass filtration.

picture 3



puraDYN’s simple bag-and-trash filter element disposal.





New Business Activity & Outlook

Currently, a number of evaluations are in progress in the U.S., Mexico, Central  and South America, Africa, Indonesia, China, Russia and the Middle-East, and a few are about to begin.

Each customer prospect insists on a product evaluation, given the high value of the engines involved and their requirement for 24/7 service.

Of note, one evaluation is for one of the world’s largest oil & gas companies. Puradyn has already achieved the customer’s initial objective, but one final test is underway in Europe. This final evaluation is within 80% of the customer’s targeted duration and is progressing as planned.


Disclosure: The parent of CG Focus List, Catalyst Global LLC, is is an investor relations consultancy.  Puradyn Filter Technologies is not a client of Catalyst Global. Coverage of Puradyn reflects the belief of Catalyst and a fund manager we respect that the company represents a very attractive special situation. Neither CG Focus List nor Catalyst Global have received compensation of any kind for the preparation and distribution of this Alert.

CG Focus List and/or its affiliates do have long positions in Puradyn shares but per our trading policy, we will not effect any transactions in Puradyn shares for five days following the distribution of today’s article.

Authors: Kate Keller & David Collins – CG Focus List

www.cgfocuslist.com   ✪ 212.924.9800   ✪   info@cgfocuslist.com

SeekingAlpha Email Alert Re: Gotham Report on EBIX

Screen Shot 2014-02-21 at 11.12.21 AM

Update 12:28 Eastern:   I am now hearing that Gotham did not publish a report.  Anyone who can corroborate one way or the other?  It seems the email alerts are sent to 2,349 people as of just now…. interesting – and one of them is me.

Screen Shot 2014-02-21 at 12.27.27 PM

Click on image to read it: The Gotham City Report has not shown up on SeekingAlpha yet – likely because it’s a Pro Report, that is distributed to paying subscribers around 24 hours prior to their making it available to us unwashed masses.  Another great strategy to increase the impact (damage) that their rumor mongering can have on the share price.  Note that Greg Farrell at Bloomberg seems to be carrying the short’s water as he’s quick to report extensively their allegations – but silent on favorable developments like the dividend re-initiation and the preliminary settlement of the class action suit – with no admittance of wrong-doing. In our view that’s a crushing blow to the all the allegations to date.

The class action was based on the unverified allegations in short reports hosted on SeekingAlpha (Gotham City and another).  That triggered a stock drop that pulled in the ambulance chasers and got the class action suit moving forward.  Adding to the insanity, the Dept of Justice launched an investigation that was based on the Class action allegations (it seems someone had been actively pushing the DOJ to get involved and uncover all this wrong doing… wonder who might have done that?) – so you have DOJ actions that are based on issues who’s genesis is found in anonymously authored short reports that were masterfully launched from SeekingAlpha.  Gotham’s 3 part report on EBIX in March 2011 is worthy of the Pulitzer equivalent of the highest honors one can give to a masterfully spun tale of nefarious doing built on a litany of half truths, missed represented facts and clever omissions.

While we’ve owned the stock for over 10 years – and while it’s been a spectacular investment – over the past 3 years we have suffered true financial injury from the short sellers very effective campaign, what galls us most is how the markets seem all to happy to facilitate the process and the regulators rough up the victim!

Join us at our sister sites – Seeking Compelling Mendacity.

CG Focus