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Marcum Microcap Notes

This year we attended the Marcum Microcap conference for the second year in a row.  The conference was well attended by both companies and investors.  There were a lot of interesting investment opportunities.  Here is a summary of the few presentations we attended that we plan to keep on our radar screen over the next few months.

Jennifer Galperin:

$MNGA:  MagnaGas: makes hydrogen gas for industrial applications. Their gas has some favorable properties relative to competing products, burns cleaner and at a higher temp. The company is in talks with some big clients such as US Navy for a contract to sell gas to power a torch to demolish a submarine. Working with a large coal plant to test their gas in combination with existing coal. Claim is that it burns cleaner with less emissions and costs less than a scrubber or other environmentally friendly addition to the plant. Expect results of this test 2Q - 3Q 2014. Current cash on hand should fund 18 months of operations. Will keep it on the radar for the fall. 

$MMMB: MamaMancinis: food manufacturer based in NJ. They make fresh and frozen meatballs for sale in the frozen, refrigerated, and hot food sections of supermarkets and big box. CEO / founder has a successful background, he was part of a group that sold Alpine Lakes to Land o Lakes. His goal right now is to grow brand awareness among consumers. Current manufacturing facility is operating well under capacity, it has capacity for $70mm in revenues, compared to $9mm in 2013 so plenty of room to grow. Market cap at $80mm seems fairly valued, not sure there is huge upside in the stock. 
$PLSB:  Pulse Beverage: Markets and sells lemonade, coconut water, and a line of "health drinks" that use a Baxter technology (no royalties) to increase vitamin absorption. Currently selling at WAG, KMRT, WFM, and about 150 distributors. They have no debt, $1mm in cash, and expect cash flow positive in the June Q. Management has tons of experience, including growing clearly Canadian from startup to $178mm. Current market cap is $24mm compared to $3mm in annual revenue seems fairly valued, with limited upside compared to current market.  Key will be growth in the brand. Patricia also attended this presentation, and here are her comments:
Located in Colorado the company produces high quality and healthy drinks (like ROAR). Started with lemonade Natural Cabana. Is in Wholefoods and WINCO on the west coast (says WINCO is fasted growing wholesale store outwest (like costco)). Very lean company – only 21 employees. Highly confident in the product – best taste. Coconut water made in Thailand with Thai coconuts (sweetest) and bottling occuring within 30 min. 
$PROP:  Propel Energy. The company owns the exclusive US license to a plasma pulse technology that can improve productivity of frack wells >100%.  The treatment lasts about 10 months to a year. In 1Q2014 they eliminated converts and debt. Competition includes chemical treatments. Current gross margins are >80% but need to grow scale. Interesting opportunity.
Patricia Winter:

DS Healthcare (DSKX): Daniel Khesin, president, CEO, CFO and Chairman of the company presented. Co makes hair loss prevention products. 1 consumer care ( shampoo etc) 2 treatments (not yet FDA approved in US ...process has not been started bc of expense- big market is Mexico) called Spectral DNC-N.

Very passionate about his product...claims great results with combination of treatments used by propecia Rogaine etc. Early prevention only way...once follicles are gone no way to treat them. Clinical studies are done every 3 months at Miami university hospital ( needs to be confirmed).

Pointed out change in way big competitors are distributing their products...no longer through hair specialists but main stream drug stores and walmarts. He believes that this is an opportunity as customers need emotional support and hand- holding. Case in point Mexico fastest growing market sells through pharmacies ..which are like French pharmacies. Says that no moth $ have been spent..all growth through word of mouth.

Revenue $13.6 million. Up 22 percent from previous year but 2011 down 69 percent at $9.6m. (What happened?) Mkt cap 29.6 m share price of $1.84. Neg cash flow w $2.8 m left in bank.

Some more research might be interesting.

Par Technology (PAR): Ron Casciano presented co providing technology solutions: 1 legacy business with gov software used in drones to track specifics 2 data and communication alerts management system for large Corp - Wal-Mart, wagman stores?- that helps cut costs by monitoring and controlling such things as temperatures and weather conditions affecting locations and 3 - the earnings engine- Altria a hospitality software system operating in the cloud that allows focus on each individual as a guest (vs paying guest only).

Want to diversify customer base..go to tier 3 and 4 organisations with 2.

Excited about Atria.

$241 m in revenue, mkt cap $72.9 m, share price of $ 4.66.cash flow neg w $10 m in the bank.


International Commercial Television Inc. (ICTL): Infomercial co for beauty products.

Richard ..... presented new business development (to be checked). Recent management change!! Tell old mgmt team....years of expertise;). 37 percent insider ownership. Turnaround story. Main product : Derma Wand...since 06. Derma Brilliance new big thing...skin abrasion with diamond tip...continuous refill sales hoped for.

Big outsource..low overhead to be able to cut cost if products do not sell.

Projecting $100 m sales in 2-3 years (corrected via feedback from @IanCassell on twitter) from 41 in 13. Mit cap 14.7m, at 0.64 share price. Slight pos cf, 1.7m in bank.

Boston Therapeutics (BTHE): Dr. David Platt PhD is the Chairman, CEO and CFO as well as the source of all IP and scientific research. The company develops drugs based on carbohydrate chemistry. 1) BTI3 20 is a chewable tablet that decreases the amount of glucose the digestive system could gain from food to help decrease the insulin needed. The target market is Type 2 diabetes patients. 2) OXYFEX is an anti-necrosis drug that enables oxygen supply to trauma caused areas (fex shut down of blood supply to limb in diabetic patients or severe injuries). Both drugs are in early stages of FDA approvals. Name drop: former president of the diabetic society joined board of directors and is blown away by the results.

$323,400 in revenue, mkt cap $21.4 m, share price of $ 0.57.cash flow neg w $3.4 m in the bank.

Hopto (HPTO): Jean-Louis Casabonne (CFO) presented as the CEO’s wife was having a baby. New to the company, that was originally founded in 98 and changed into its current form in 2010, he attempted to present the company’s new generation hopto software. He could not make the demonstration work bc of lack of bandwidth (he believed)! The idea is a “personal cloud” whereby you can access a variety of hosts, sources and programs from any one of your mobile devices without downloading data (security aspect). The release of the early stage of hopto is expected in Q4 14. He also pointed out that in his opinion the market cap of the company in no way reflects the value of the patent portfolio held by the company – 100 invention patents alone that could be monetized.

$6 m in revenue, mkt cap $19.9 m, share price of $ 0.17.cash flow neg w $4.3 m in the bank.

Silversun Technologies (SSNT): Charismatic president, chairman and CEO Mark Meller (Rangers Fan) presented surrounded by a fan club of people (from company, maybe Marcum and others). The company has a portfolio of cloud based technology and software solutions for small to medium sized business. Profit margins are at 42%. The license sale is accompanied by a service contract: “a $100K software license is a $250K ticket for us.” The company uses resellers to distribute the products and has a strategy of purchasing resellers in order to acquire customers – “the purchase price is cheaper than the margin paid to the reseller on the sale”. Expects equity raise of $5 million to finance acquisitions. 92% inside ownership. Plans to be on NASDAQ – believes price should be at 2.7 times sales.

$17.4 m in revenue, mkt cap $17.1 m, share price of $ 0.15.cash flow neg w $763,000 in the bank.

Michael Bigger:

Ricebran (RIBT) : take the stuff around rice. Very nutritious. Do all kind of stuff with that...rice bran derivatives. Play on population growth. Soy is an allergen not rice bran derivatives. Capital intensive... Most likely to raise $ in the future. This is a company worth monitoring.

The Staffing Group:(TSGL): Staffing company focused on the blue collar staffing market. The company is growing nicely but the barriers to entry in this business are very low.

Full Circle Capital (FULL): Another finance company. Not my type of company unless it is very very cheap.

Trend in Micro Caps Panel: Trends in MicroCaps financing: moderator is from Loeb and Loeb. The 2nd is from Roth. Roth says investment banking was really busy until the Russell index came down hard. Deals from early March are not workin very well. Biotech got kill and it was 75% of their biz. Lull in biotech right now. Lawyer says deals are slower. Other lawyer says same thing. Is the window closing?1000 companies in the pipeline.. So maybe good stuff coming. Lot of choppiness below the surface of large caps. All about liquidity right now.  75℅ of funding was in biotech and investors are hurting. Biotech crept up...so many massive follow on. Investors are extremely worried about bottom and deal not working. All deals were working so why not take a flyer. This is not the case right now. Billion dollar market cap companies sold off by more than 40℅. Investors are more picky. Uptick in renewable. Wearable is livening up. There will be more warrants inclusion for deals that are in the pipeline. People don't want to get into illiquid name right now.


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