Category Archives: Growth

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

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. (
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 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.

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

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

EBIX to be Acquired for $20 Cash per Share by Goldman, Sachs

Good news – bad news.

Good news first: We are batting .500 on our stock picks for CG Focus List with today’s news that Ebix, Inc. (Nasdaq: EBIX) will be acquired by an affiliate of Goldman, Sachs for $20 per share.   The release is here:  (That’s far less impressive when you note that we have only profiled two stock and up until today they were both in the red.)

CG Focus List recommended EBIX intraday on February 13, 2013 but used the day’s close of $18.42 to track performance of the idea. Based on that price, the deal at $20 (plus one $0.075 dividend) provides nearly a 9% return in less than three months – implying an annualized return over 36%.  I guess we should be dancing in the isle … but we are not.

More good news: Strangely, the market seems to think the stock is worth more than the deal price, as EBIX closed at $20.60 and held a premium in aftermarket trading to $20.25 based on what my limited resources show.  Unfortunately, given the fear, lack of transparency and limited awareness around this company – and the fact that Goldman didn’t feel compelled to pony up more than a paltry 11x trailing EPS (and not much more than 10x trailing operating cash flow) it’s hard to understand where a higher offer would come from.  And I’m not holding out much hope that the sea of ambulance chasers now trying to shake down the company will ever deliver any value to anyone but themselves.

I am a novice in the world of merger arbitrage – but am guessing the current premium to the deal price is a function of EBIX’s huge short position: 10.6M shares short at April 15th – 28.6% of total shares outstanding.  It seems that some of the shorts are deciding to throw in the towel as this doesn’t look like it will get any better and then there’s the concept of cleansing a portfolio of failed concepts to make a more appealing product for fund participants. Once the shorts unwind their positions the premium should disappear and normal deal pricing would come into play – unless I’m completely wrong and a white knight is on the way – but again, I’m not holding my breath.

The final point to be made is that the long term performance of Ebix and its shares has been nothing short of amazing, and the CEO Robin Raina and his team are to be commended, and I am a thankful beneficiary of the value creation since March 2003.

Robin Raina was named EBIX President & CEO in 1999

The Bad News:  So what is the bad news in this you may ask and if so, perhaps you may wish to stop reading for what is to follow is a bit of spoiled, self pity and venting on what could have been even thought  There were no long term investors harmed in the making of this company…

The bad news is that this tremendous success story succumbed to a merger agreement valuing the Company at a paltry 11x trailing EPS despite its high operating margins and cash generating efficiency – this business really sang financially and generated enormous cash.  That’s why a core group of us long term investors hung on despite some terrifying bouts of short attacks and body blows to the stock price. Some of us even risked our reputations to defend a company’s honor and value in the face of those attacks and freely offered experienced counsel on ways to bolster Ebix’s Wall Street profile, reputation and to support/defend its market value from the rabid short selling vandals.

For that loyalty, we are now getting cashed out after a substantial decline in the value of our equity over the last 2-3 years,  despite continued strong execution in the business.

Note to self – next time sell more, a lot more!

To put today’s deal into perspective, EBIX’s shares closed 10% higher at $22.30 on May 2, 2011 – just two years ago, and that price represented an enormous haircut – courtesy of a remarkably well orchestrated short attack launched from – from a high closing price of $29.33 on March 23, 2011 (and yes, I’ve not adjusted for deals, etc. so it may not be as bad). That attack was masterful in every aspect of its manipulation of facts to create illusions of impropriety, poor character and even fraud – and it took the stock as low as $13 before its venom started to wear off (for a while, only).

During this two year period of shareholder value smallification, the Ebix business hummed along very impressively as reviewed below and they even bought back a lot of stock. But for some reason, the Board and management had clearly develop no plan to restore or even protect the Company’s image should they try to attack them again.  Two years later, a perpetrator with a remarkably similar pattern – struck again.  And again EBIX proved ineffective in translating their impressive business, domain expertise, recurring revenue base, and growth record AND potential into greater shareholder value or in mitigating its loss from rogue reports.

Ebix, Inc. Income statement Highlights
(in thousands) 2012 2011 2010 Change 2010 to 2012
Total Revenue 199,370 168,969 132,188 51%
Operating Income or Loss 77,008 68,748 52,507 47%
Income Before Tax 78,029 73,495 59,654 31%
Income Tax Expense 7,460 2,117 635 1075%
Net Income Applicable To Common Shares 70,569 71,378 59,019 20%

So it’s hard to jump for joy with this deal news. For someone who has spent a career in helping companies forge relationships and appreciation with investors – it causes immense frustration that Ebix refused to meaningfully alter their IR strategy or approach and that they were unable to proactively neutralize the short theses and build stronger support from Wall Street.  There was much that could have been done that would have either eliminated the need for this transaction or caused the buyer to pay more for the value they are receiving.

In closing, this outcome was a shock but not surprising – for at the end of the day – EBIX has chosen a path that will deliver great financial benefits to its management team and a modest lift to the recent share price for its holders.  Likely of far greater importance was putting an end to the incessant and highly personal critiques from “the shorts” and the widespread paranoia, concern and distrust these attacks were able to create across Wall Street.  And with petty avarice aside, most long investors such as myself are able to walk away from this stock having earned a solid or even remarkable return.  And professionally, as in a lab experiment, it allowed me to see first hand the valuation vacuum that can develop when investor communications, relationships and open dialogue are not optimized.  In effect, I was witnessing the “control” patient taking the placebo, and it confirmed the fundamental value that my skill sets do provide for those who listen.

So that’s a very long winded wrap up – and so now we need to find some more ideas to present and try to extend our hand.

Thanks for reading.

CG Focus List

P.S. We remain confident that our second CG Focus List stock, Klondex Mines Ltd. (TSX: KDX or OTCQX: KLNDF) is in great hands with a new management team and is well poised to make us look good as they transition from exploration into initial gold production this year and continue to explore and develop their Fire Creek property in Nevada.


EBIX – Analyst at $11B Fund Counters Gotham Smear

I had submitted the following article to Seeking Alpha but it was rejected so rather than play the game, I decided to publish it here.  Hope you find it helpful.  The analyst I site is at a highly credible growth fund manager known for long term ownership of stocks. He of course is not in a position to comment on behalf of his firm so he asked that I withhold his name.  SA should understand that.

Screen Shot 2013-02-22 at 10.20.23 AM

A Screen Capture of my “Declined” advisory from SA.

Interesting that SA refuses to publish my post when they freely published an anonymous report from a newly created firm…  I’m not comfortable with their editorial censorship – particularly given all the things I have read on the site.  It does seem they are not being impartial?  Let the readers decide.

Wanted to pass on the following unsolicited comments from an analyst at a well respected, $11B growth manager regarding EBIX and the Gotham City “Report.” He has particular expertise in accounting in Singapore and accounting in general – clearly something the Gotham writers are assuming most people don’t have. His fund does not have a position in EBIX at this time.

I called the analyst who sent this to me to thank him and get his permission to redistribute it. Among the things he said was the accounting was perfectly normal in his view and even noted that Google has 8 Singapore registered sub’s but mentions none of them in their 10-K (I take him at his word). He said it made sense to him but he could see how they (Gotham) were presenting this as irregular.

Subject: EBIX

Date: February 21, 2013 3:03:13 PM EST

I saw the move in EBIX shares today, and read the “research” by Gotham City Research on Seeking Alpha. Neither I nor my firm have a position in EBIX, but I have been following them since meeting with the company last summer. I saw your comment on the article and thought you may handle IR for the company. If that is the case, I would like to pass along a few observations that may be of use to you. For background, I have an undergraduate degree in accounting and finance, am a CFA charter holder, and at one time negotiated a pioneer tax status extension with the Singapore Economic Development Board (EBD) for a company that had made a number of acquisitions.

1. The credibility questions in regards to the 990 filings do seem spurious, as the author fails to point out that Robin Raina has contributed “about” $2MM a year to his foundation for the past few years, which is perhaps what he was referring to in the interview.

2. The inter company (aka “related party”) loan that seems to be the primary concern of the author would not be disclosed on a consolidated balance sheet, unless the obligation was subject to exchange rate fluctuations, which is almost never the case. If inter company transactions were reflected on consolidated balance sheets, or in footnotes, companies like Google or GE would require hundreds of pages for footnotes alone in their 10-K.

3. To me, knowing accounting, the transactions seem to be fairly obvious, though confusing to those that have never seen cross border IP transactions at the granular level. It appears that US Parent loaned money to Singapore sub, which purchased the intellectual property in the Australia transaction, with the tangible assets staying with the Australian sub. On a consolidated basis, this all rolls up to one clean balance sheet. Why? The company is taking advantage of Singapore’s favorable tax climate by having that subsidiary purchase the intellectual property in the foreign transaction, and then using “transfer pricing” to determine the portion of the revenue for each contract that is “earned” with the IP in Singapore, with the remainder of the revenue “earned” in Australia, thus lowering the effective tax rate. See comment 5 below.

4. The Australia cash flow statement does appear to be somewhat incorrect, in excluding the two offsetting items, but this does not impact the actual cash flow calculation, nor does it impact the consolidated financials since these were all inter company transactions.

5. The difference in the revenues and income for Australia per SEC and ASIC filings seem to be explained in that on a books basis it reflects the tax treatment where a portion of the revenue from a customer is attributed to the intellectual property held by the Singapore sub, while the revenue is actually generated by customers in Australia. For comparison, look at how Google runs revenue through its low tax subsidiaries (i.e. Ireland) on a tax basis, while reporting those revenues as being from the United States in its SEC filings.

6. On the unbilled receivables question, it seems that the company is properly accounting for these. As a refresher, Unearned Revenue is a Balance Sheet account, appearing on the liability side. Unearned revenue can be created if a payment is received for work yet to be completed, or for billings on long term contracts. For a nice summary, see:

7. Why has the company not responded? I imagine it is because they are in a quiet period pre-earnings release, though I have not confirmed this. Impeccable timing on the part of the author.

8. Final note, take a look at the open interest in the Mar 15, 16 and 17 strike puts last week. Unusual? Looks like someone is having a good day.

As for the open interest in options he mentions, he said that on Bloomberg he could see the open interest in March 2013 Puts was limited but ramped substantially a week ago. He said economic studies confirm over and over that options that are 25% or more out of the money, with one month to expiration, are generally like a lottery ticket – they rarely pay off; and that institutional investors would not purchase them. So the aggressive purchase activity is an aberration. From my notes, this is what he saw on Bloomberg – it may be off slightly but the gist is correct and you can look for yourself.

March 2013 EBIX $17 Puts – the open interest went from 700 to 1,900 contracts from 2/13 to 2/14, all trading at the ask price.

March 2013 EBIX $16 Puts – the open interest went from 1,100 to 1800 contracts from 2/13 to 2/14

March 2013 EBIX $15 Puts – the open interest went from 680 to 1,200 contracts from 2/13 to 2/14 – someone paid $0.40 for what is now priced at $2.50

So with the same authority that Gotham questions EBIX, I can state that Gotham – or someone knowledgeable about their plans clearly placed their bets on these options (and perhaps the stock as well) prior to a premeditated plan to attack the stock. They made that investment even before they bought the Gotham website.

Just trying to provide some balance to the story.

Disclosure: I am long EBIX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Have been a shareholder for nearly 10 years and am disgusted by how the media covers this hatchet job as if it were credible – when the author is anonymous and the website was launched last week.

This article is tagged with: Long Ideas

HERE’s The response to my submission.  I can publish it here now because it’s not on SA.




Dear David Collins,

Thank you for the submission, and we do welcome counterpoints, but in order to publish we’d need several revisions. First, we’d ask you to identify the fund the analyst is with, or explain why you can’t. Second, the information on the options is interesting, but the allegations of impropriety are not sufficiently supported. Lastly, if the analyst could provide sources supporting their statements, that would add to the credibility.

Sincerely Yours,

SA Editors

The “New” Klondex Mines – Nevada Gold Moving to Initial Production

Feb. 19, 2013     Klondex Mines Ltd.  TSX: KDX or OTCQX: KLNDF    $1.25

High-Grade Nevada Gold Mine Transformed the Past 8 Months
by New CEO, Team, Plan & Funding; Now Targeting Initial Gold
Production by Year-End with a Team That Has Done it Before

Site View Photo

Why Klondex? – Why Now? KDX has been transformed over 8 months by a new Board & management. Key issues have been addressed, a realistic plan and budget confirmed, $30M in funding raised, impressive exploration results continue, & management is executing on its goals to reach initial bulk sampling. The “New Klondex” story is not yet well known, but the company is working to change that.

KDX Table 1

Klondex Strengths:

  • CEO led Midas mine (Newmont) & Hollister mine from start-up to production of
    over 80k gold oz/year
  • Clear plan for continued development & initial production at Fire Creek by end of 2013
  • Capital in place to fund 2013 program
  • Clear goals: new resource, drilling, vent raise, water management, milling agreement, board additions, bulk sampling
  • Recent exploration has shown high grades, Main Zone continuity and discovered new West Zone
  • Under-explored: meaningful exploration potential
  • In heart of Nevada gold country; good geologic, regulatory & infrastructure environment
  • Low-Cap-Ex path to initial production
  • Significant valuation discount on EV/Resource basis
  • “New Klondex” story not well known

KDX Table 2

About: Klondex Mines is a gold exploration & development company focused on its Fire Creek gold property in Nevada with a gold resource of 1.6M oz. indicated and 0.5M oz. inferred.
Klondex has developed an underground decline and workings to access mineralization for in-fill and exploration drilling as well as bulk sampling. Fire Creek is permitted for small scale, bulk sample gold production anticipated to commence by year-end 2013.

Recent Visible Gold Discovery at Fire Creek

Visible Gold

KDX Intercepts   ✪  212.924.9800   ✪

Disclosure: The parent of CG Focus List, Catalyst Global LLC, is currently providing and has provided investor relations services to Klondex Mines Ltd. since 2007. Coverage of Klondex Mines by CG Focus List is completely independent of Catalyst Global’s IR activities and reflects the belief of several major investors that Klondex shares represent significant value at this time. 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 Klondex shares but per our trading policy we have not bought or sold shares in the last five trading days following today’s article and will not effect any transactions in Klondex stock for five days following the distribution of today’s article.

EBIX, Inc. Nasdaq: EBIX – Our Valentine?

Insurance Services/Software Provider EBIX, Inc. (EBIX) – Our Valentine? 2/13/13
(Alert issued intraday, stock closed at $18.42, up $1.24 (7%) on 1.3M shares)

EBIX Chart

13M shares short out of 37M… we hope the shorts are saying… “What me worry?”

Our planned approach for CG Focus List was to prepare a more formal and thorough one page Alert on each idea, but for those who know us and EBIX – and given time constraints – we threw this together to re-flag the idea for you on a day when the stock is acting “better.” We were not planning to profile EBIX at this time, but today’s trading was brought to our attention by a chartist we know who had told us the stock was a “Sell” on a technical basis the past two years; he now thinks it looks attractive but not conclusive.  We have been working on what was going to be our first idea for CG Focus List. It is almost ready for the presses so you will see one more idea in the next few days.  Then we’ll get back to asking for your favorite stock ideas!  Please be generous and please spread the word about CG Focus List.

As long term believers (and shareholders) in the EBIX story the past 10 years (though we have seen the stock stagnate the past 2 years under waves of rumor & innuendo while getting progressively cheaper…) today’s trading activity makes us think it’s not hopeless that Wall Street could love again… Thank you St. Valentine!?

The naysayers can sling all the mud they like about the stock & the CEO (a former client for 2 years ~2004-2006), but the growth, cash flow and business premise all seem very real; and the execution over 10 years nothing short of amazing. Further, we are hopeful that organic growth will seep into the numbers more each successive quarter as the sales team and selling/cross-selling initiatives they have put into place the last year or two mature at the same time the Company’s expanded size and scope make it more likely to win new or additional business from larger insurance players.

As a major holder of the stock said to us the other day, and we’ve not checked his math yet but he knows the story well (we paraphrase): “if EBIX delivers on the CEO’s goal of growing to $500M in sales with comparable operating margins (~39%) within 3 years, the share price should rise 2-fold while maintaining the same single digit multiple and paying us a 1 1/2 % yield along the way…” (We note that the prior goals of $100M & $200M in sales seemed a stretch but have both been achieved as promised).

Someone’s going to be right on the stock, but we believe that 10 years of precedent with a CEO who’s executed well and delivered as promised on the business while increasing his exposure to the stock is a data set that is more reliable than the scurrilous rumors adeptly floated into the market to scare away week hands. Of course we could be wrong so we keep asking the tough questions as well…

The shorts have certainly succeeded in creating fear around the name, but perhaps the tide has turned and they are experiencing some fear as the stock comes to life on no news as Q4 reporting approaches.

Either way, we do expect the shorts to return with their proven methods, particularly if the shares continue their rally in the coming days and months.  They’ve been masterful and far too successful in scaring 25% and more out of the stock each time they make a run for the Company.

Suffice it to say, we think the story is worth a very close look and a fair review of the pros and cons.

EBIX is covered by Craig-Hallum and Singular Research and perhaps Northland – not sure?

Steve Barlow is the IR guy and very good at it.

Steve Barlow

Call him not us!  He’s paid to know the answers. We’re just trying to add value by exchanging ideas worthy of consideration.

Disclosure: CG Focus List and/or its affiliates have had a long position in EBIX shares for years but per our policy we have not bought or sold shares related to this position in the last five trading days following today’s article. Feeling the stock was depressed and a potential rebound candidate on Q4 results, we had put in place a modest LONG trading position more than five days prior to this article. We may reduce this position as a result of the execution of out of the money limit orders, depending on EBIX market activity.