Category Archives: Nanocap < $50M

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
info@cgfocuslist.com

 

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]:

http://www.oilandgasproductnews.com/article/19317/helping-the-environment-can-also-be-good-for-profits

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.