Heartland Bridge Capital, Inc.
www.heartlandbridgecapital.com
The timing is perfect to invest in Heartland Bridge Capital Inc. (HLBC.OB). This rare private equity firm start-up is publically owned and offers the everyday investor an opportunity to invest like the ultra-rich. An investor can participate in private investments with the potentially attractive risk/reward profiles sought by hedge funds but at an investment level that is manageable for the average investor. Best of all , now with the virtual disappearance of small investment bankers , Heartland is poised to benefit from the currently depressed market for micro-cap stocks by providing growth capital to promising private enterprises at bargain prices. History shows that private equity investments made during times of market distress such as today have produced the best returns. Micro-cap winners are hard to pick. Why not let pros at Heartland do it for you? Six years of possible millions in annual royalties and very big new plans ahead. The best is yet to come for this unique startup.
By Robert J. Flaherty and Arnaldo Arroyo
OTC BB: HLBC
Recent Price: $3.15
52-Week Price Range: $3.27 - 2.00
Shares Outstanding: 16.2 million
Estimated Float: 2.4 million
Stock Market Cap: $51.7 million
Average Daily Share Trading Volume (3 month average): 1,339 shares
Buy Recommendation
Our BUY report in this issue is on Heartland Bridge Capital, Inc. (HLBC.OB), a rare public private equity firm. Its proven veteran team has commenced building a portfolio of investments in emerging private companies with proven or late-stage technologies. Each has a strong entrepreneurial management that is dedicated to creating positive changes in the world.
This start-up functions as an investment and operating company, broadly akin to Berkshire Hathaway or other private equity firms. Heartland provides equity, acquisition debt or bridge financing to emerging high growth enterprises or entrepreneurs.
Having been launched in 2010, Heartland does not have the burden of having to deal with the challenges resulting from having made investments during the inflated valuation environment of 2005 to 2007. Instead Heartland has the opportunity to benefit from the presently depressed micro-cap market and history shows that private equity investments made during times of market distress and illiquidity such as today have produced superior returns.
Because of the near disappearance of small investment bankers many successful private companies are encountering tremendous difficulty in financing their growth. This was one of the major factors which spurred the founding of Heartland in 2010. "It was the perfect time to help these emerging companies because they can't get money any other way," said an analyst familiar with Heartland's business plan. "The only other option these target companies have is for some venture capitalist to fund them and take 90% of the company away from them."
Heartland's primary interest currently focuses on three main areas: clean energy technologies and efficiency (including alternative and renewable energy), waste management technology and reuse and medical technology. In addition Heartland's investment philosophy is based on investing in companies that provide a social benefit aimed directly and tangibly at making people's lives better.
Heartland's website makes the social investing aspect of their business philosophy very clear. The founders believe that if you do something that impacts people's lives in a positive way, you will be blessed. Investors in Heartland can go to sleep at night knowing that the money they are putting into those companies is meant to make a difference whether it's improving the environment or providing a new product or service that people need or will improve their lives. Management's goal is for each new deal to be a win, win for everybody. Of course, that is only true in investments which are successful and become self -sustaining.
Mahwah, NJ-based Heartland Bridge Capital basically provides equity, acquisition debt or bridge financing to emerging high-growth companies. To maximize the value of its investments, Heartland also supplements the capabilities of its investment companies in non-financial areas to help them achieve their potential.
Because Heartland is only 13 month old and just getting started, management believes that its best investments still lie ahead of it. Heartland is targeting to make at least six more acquisitions in 2012 especially in the hot field of the energy technology. Heartland's management team has the contacts to find and acquire great new energy technology, the kind that can be a game changer in a huge market. So, the next acquisition could be the one that eclipses all of its past investments.
The point is to look at the three major areas founding Chairman, CEO and President James F. Groelinger has staked out as a guidepost for how Heartland may evolve in the next few years. And in the body of this report we will do just that.
While current powers are still oriented toward fossil fuel, Heartland sees the need for alternative sources of energy and better ways of disposing of waste or turning it into energy as part of a clean green future world with a safer environment. Likewise, near term debate on healthcare focuses on politics and how to divide the financial pie. Overlooked is how advancing medical technologies will produce undreamed improvements in better quality of life for all the people on our planet. There are enormous private equity investment opportunities waiting for those who want to play a part in making this a better world. The rewards will be great for those who can separate the diamonds from the many lemons among the entrepreneurial efforts.
Over a period of three to five years, Heartland is aiming for a minimum a 10-fold return on its investments. Heartland's management team is experienced in finding diamonds in the rough and polishing them over three to five years to their peak value. Then they plan to harvest them one way or another. If some turn out to be cash cows, Heartland may hold on to them and use the money that's coming in to buy more companies. If others have grown to a certain point and they have a suitor that wants to buy the company, Heartland would likely sell at that point at the right price. A public offering with a carried interest for Heartland would be another possibility.
In 2012, Heartland's ambitious goal is to raise $10 million as well as to acquire six new companies to go with its current holdings, Legends & Heroes, Myself®, HepatoChem and their patented Medical Applicator. This is a good moment to back and bet on a team which is just coming to bat.
The goal of a Flaherty Special Situation is a gain of 50% to 100% within two years. We believe that the stock of Heartland Bridge Capital can achieve gains in that range and become spectacular if management succeeds in finding big venture winners among its picks. Identifying real companies and picking winners among micro-caps is not easy. Why not let the quality management at Heartland do it for you? Read along and see what they are trying to accomplish.
A Bright Today and an even Brighter Tomorrow
First let us examine the potential of Heartland's existing investments which have some exciting potential. Then because the most important investments Heartland will make should be in the future, let us look at how CEO Groelinger outlines the three major areas for new investment. Much of the potential of Heartland will fall within these parameters.
Each of Heartland's current portfolio holdings, Legends & Heroes, Myself®, HepatoChem and Medical Applicator have intriguing possibilities. Management also proved it is fast on its feet when it needs to change direction. In March 2011, the company acquired 100% interests in the iSafe Entities-which include iSafe Imaging, LP, iSafe Imaging Canada, Ltd and eMediSafe, LP-and sold out seven months later for a sizable profit in November.
Legends & Heroes: In the next few months, Heartland is set to benefit from the mass-market launch of Skineez™ Skincarewear™, a health and wellness apparel line for women that is owned and operated by Legends & Heroes. Heartland is in the process of acquiring a 25% equity stake in Legends & Heroes. Skineez features a patented new technology that weaves the garments with microcapsules that moisturize and smooth the skin while a person wears them. Each microcapsule, designed to protect the ingredients inside, is a balanced combination of anti-cellulite ingredients (retinol, caffeine, red algae extract) with natural-based moisturizing ingredients (shea butter, apricot kernel oil, rose hip oil, vitamin E). The special fabric is treated with the microcapsules during the manufacturing process and can be replenished after washing up to 10 times with the Skineez Sliming Spray. When the garment is worn, the body's heat and the friction from wearing the garment slowly release the patented embedded cosmetic ingredients onto the skin. A person can lose weight by just wearing the product and it can even be worn in bed while you are sleeping. Lose while you snooze!
According to the website www.myskineez.com :"If a woman wears it eight hours a day, she is will lose weight and inches. The elasticity of her skin will increase by 19%.Their products will be available in over 3,000 stores and pharmacies in time for Mother's Day. It has been sold on the Home Shopping Network, in Sears-Canada and some of the high-end department stores. And a man's version will be coming out as well.
Myself®: Over a year ago, Heartland purchased the right to receive cash distributions over six years based on the sales of the Myself® pelvic muscle trainer, which is owned by Big-Board marketing maven Jarden Corporation (NYSE:JAH-33.69). This large consumer products company has over 100 brands including personal care and wellness products. Heartland owns 60% of the revenue stream and stands to receive annual multi-million dollar payments over the next six years if Jarden is anywhere near as successful at marketing the Myself® pelvic muscle trainer as Jarden has been in virtually all of their other product lines.
The Myself® pelvic muscle trainer is the first FDA cleared, non-prescription product available direct to the consumer for the treatment of female incontinence. The product is a home-use biofeedback product with proprietary technology that allows a woman to successfully strengthen her pelvic floor muscles on her own. In addition to urinary incontinence, the Myself® product is an effective therapeutic choice for a number of other pelvic floor weakness-related conditions affecting millions of women. These include conditions arising out of pregnancy, menopausal symptoms, pelvic organ relaxation and female sexual dysfunction.
According to various market studies related to female incontinence, one out of three women experience urinary incontinence at least once a month, over 40% of women experience sexual dissatisfaction , an estimated 37 million women suffer from menopausal symptoms, more than 38% of women ages 50 to 79 have some form of prolapsed, approximately 15% of women from age 18 to 50 experience chronic pelvic pain and more than 95% of adult women suffer from occasional vaginal dryness or more frequent vaginal discomfort symptoms
Undoubtedly, these statistics underscore this fact. The marketplace for female incontinence medical devices, especially ones that can be purchased over the counter and used at home for such a personal matter, is substantial. It is estimated that the prevalence of female incontinence rises to 30% to 40% of all women around middle age. It then steadily increases with aging (up to 50% in elderly women). These statistics, combined with the fact the U.S. Census estimates that the number of women over 40 in the U.S. will increase from 63 million today to 80 million in 2020, point to a very significant market potential for the Myself® product.
HepatoChem: Heartland recently made an initial investment of $100,000 in biotech firm HepatoChem pursuant to a definitive investment agreement to provide up to $400,000 of equity capital. Based in Cambridge, MA, HepatoChem is an exciting privately held company that offers pharmaceutical and biotech companies a reliable and efficient means of accessing small molecule metabolites in quantities needed in the drug development process. The technology uses biomimetic catalysts to mimic the metabolic function of the liver. As a result, it enables the production of metabolites more quickly and with greater cost-effectiveness than any other technology currently available. Put in layman's English HepatoChem can help speed up drug testing and reduce research and development costs. This unique technology was developed in collaboration with Professor John Groves at Princeton University.
Medical Applicator: In December 2010, Heartland acquired certain assets including a patent application for a novel medical applicator that is capable of delivering medicines and internal devices within the body without producing injury or damage. The medical applicator has a number of uses including translumenal (within a blood vessel or body cavity) delivery of arterial repair devices such as stents and grafts, insertion of analgesics and other medicines to specific locations within a body orifice or vessel, and delivery of tampon devices for achieving hemostasis within a body cavity.
Of these exciting applications, the use of the applicator technology as a vaginal tampon delivery device offers the largest and nearest-term commercial potential due to its large existing consumer market. The advantages for the new tampon include easier and pain-free insertion, superior disposability (flushable/biodegradable) and smaller size at a cost equal to or less than current plastic applicators.
By March, the company is expected to start marketing its tampon delivery technology to the major consumer product companies in that field. Heartland's management team has the connections and experience in this area to reach the decision-makers in those companies so that they can get the deal done in a relatively short period of time.
According to Population Reference Bureau, the potential number of worldwide tampon users amounts to approximately 1.6 billion women. In the U.S., tampon sales in 2006 were valued at $577 million (excluding Wal-Mart sales). As in the U.S. and Canada, 70% of women in Europe use tampons over sanitary napkins making for a similar market opportunity in the European Union. Over 90% of tampon customers in the U.S. prefer applicator-equipped tampons compared with 30% of European women. Historically, annual growth rates for the tampon market in North America and Europe have been in the 2% to 4% range over the past few years. Tampon sales outside of Europe and North America are expected to increase as living standards improve. Increasing prosperity will allow more women the option of choosing tampons over inexpensive pads. Experts predict a market growth rate in the high single digits for the industrialized Asian countries.
Helping to Create a Brighter Tomorrow
But the best is yet to come: Management is putting a strong emphasis on entering the clean energy space, which Heartland believes is an exceptionally attractive growth market for investing. Currently, investors spend approximately $13 billion a year in the green energy market and it is expected to grow to $92 billion by 2013. Few investors look ahead to see what is happening. Soaring global population is putting strain on the availability of basic resources and energy and degrading our environment and the air we breathe and the water we drink. So new technology must help the world become more efficient and less wasteful. Opportunities in energy generation, transmission, utilization and efficiency will be winners. New ideas for water purification and grid optimization and monitoring are all essential.
Waste management is another economic sector that is of primary interest to the company. The amount of waste in the U.S. continues to rise. According to the U.S. Environmental Protection Agency, the U.S. generated 250 million tons of waste in 2008. About 54% of this trash, or 135 million tons, currently ends up in landfills and is consuming land at a rate of nearly 3,500 acres per year. Consequently, this rapid growing of waste is creating investment opportunities in development of new technical for waste management and treatment. For example, plasma gasification offers new opportunities for waste disposal, and more importantly for renewable power generation in an environmentally sustainable manner. Biological decomposition and reprocessing is also being examined in growing scale.
Medical technology: Rewards for playing a role in this process should be enormous. In the next several years, the U.S. market for medical technology in the form of new devices is expected to approach $100 billion. During that same period, medical technology innovations will fundamentally transform the health care landscape, providing new solutions to address chronic diseases and revolutionize the way treatments are administered.
Management Will Share the Gains and Pains
(Unlike many investment funds in which management is unduly compensated even after poor performance, Heartland's compensation will be modeled with a modest base linked with performance-based incentives. So management and investors should be sitting on the same side of the table.)
James F. Groelinger, 68, Chairman, CEO and President, has been chief executive officer since November 3, 2010. Since 2007, Groelinger has been the managing director at Bellegrove Associates where he provides strategic guidance to emerging clean energy entrepreneurs and companies. This guidance includes, but is not limited to, evaluating potential energy-related investments, assisting inventors with energy-related patents and products, as well as developing strategies for creating joint ventures between U.S. and foreign entities or governments. Since 2009, he has also been the executive director of Clean Energy Alliance, Inc., a national association of clean energy incubators for the purpose of fund raising, policy development, and strategy. From 2001 to 2006, Groelinger served as CEO and a director of EPV Solar, Inc., a photovoltaic technology company that developed a technology for the production of thin-film photovoltaic products. As CEO of EPV Solar, he saw sales increase from nil to more than $20 million annually, developed products sales in the U.S., Germany, and Spain, oversaw joint ventures with foreign manufacturers, and managed a complex $60 million debt-for-equity recapitalization, setting the stage for a $70 million third-party financing and an initial public offering, which never took place because of the collapse of Lehman Brothers. A native New Yorker, Groelinger received his Bachelor of Chemical Engineering from the City College of New York, and his MBA in Finance from Temple University. He has an ideal background to screen alternative green energy and creative waste disposal ideas.
Frederick Larcombe, CPA, 55, has served as chief financial officer and secretary since November 3, 2010. From early 2008 to the present, Larcombe, as a principal with Crimson Partners which is a group of seasoned financial professionals, serves a number of clients primarily in the life sciences. In this connection since September 2009, he has served as the CFO of iBio, Inc., a biotechnology company focused on commercializing its proprietary technology for the production of biologics including vaccines and therapeutic proteins. From 2005 to 2007, he was simultaneously the CFO of Xenomics Inc. and FermaVir Pharmaceuticals, Inc. From 2004 to 2005, he was a consultant with Kroll Zolfo Cooper, a professional services firm providing interim management and turn-around services. From 2000 to 2004, he was CFO of MicroDose Therapeutics. Prior to 2000, Larcombe held various positions with ProTeam.com, Cambrex, and PriceWaterhouseCoopers. He received his BS in Accounting from Seton Hall University, was designated a certified public accountant in New Jersey, and is an alumnus of the Management Development Program at Harvard Business School.
Wayne LeBlanc,64,has been senior managing director for Business Development since November 3, 2010. Since 1999, LeBlanc has been a managing partner in Solutions for Energy Management where he has been involved in brokering electricity to large customers and serving as a consultant for demand side management. He is also currently a managing partner in eMEDiSAFE, a company formed to address the recent requirements to convert to electronic medical records to reduce health care costs. From 2007 to 2008, LeBlanc was vice president of Business Development for EPV Solar. In this position he was part of an executive team assembled to secure capital for manufacturing expansion, both in the U.S. and internationally, and recruitment of senior staff. From 2000 to 2004, LeBlanc was a founder of Utility Choice Electric, the first independent retail electric provider in Texas.
Frederick A. Voight, 54, is managing director of investments. Voight has been the managing director of, a private investment fund since 1994, during which time he has made successful investments in numerous companies and products, focusing on the areas of life sciences, renewable energy and green technology. Voight has more than 20 years of experience in managing these types of investments. He previously served as chairman and CEO of a public company and has served as a director of several public and numerous private companies.
Heartland's Advisory Board
Dr. Magdy Abdel-Malik: He is the first and so far only member of the Advisory Board which will help screen potential investments. Dr. Abel-Malik is a highly reputed corporate innovation leader with extensive R&D and business development experience in the medical field. His experience, combined with an unwavering commitment to innovative thinking aimed at implementing the strategic vision needed to source, evaluate, acquire and commercialize best- in- class life science emerging technologies, will help accelerate Heartland's growth initiatives. He currently serves as founder and president of Quaestio Global Partners, a management consultancy in health care and life science. Previously he served as Director of Global External Opportunities at Pfizer Consumer Healthcare.
Risks
Like any development-stage company, Heartland Bridge Capital's ability to raise additional capital significantly impacts its growth plans. In 2012 Heartland is hoping to raise $10 million in order to be able to invest in at least six targeted companies. Any failure to raise significant capital would postpone the expansion of Heartland's venture portfolio. The firm's future success will also depend on its ability to select winners among thousands of promising investments.
Heartland's investment strategy focuses on proven, or late-stage, technologies. However, those technologies still have to prove themselves in the commercial market place. Bear in mind that there have been proven technologies that at first appeared to be winners, but in fact were never able to achieve commercial success.
Success in its tampon delivery device depends on interesting the market leaders of the major consumer companies. Transfers in market share in this category have been driven by a cycle of innovation and promotion byTampax and Playtex. Going alone would take too much capital and be too risky.
Because clean alternative energy is an area of Heartland's focus, entrenched fossil-fuel politics could be a problem. Unlike China and so many other countries which are aware the global population explosion is creating a shortage of resources and energy, America so far does not have a long-term resource and energy policy. Instead Congress and our leaders have been held as pawns by the pro-fossil fuel, anti-regulatory powers which do not want to see alternative fuels and renewable energy sources developed at the expense of oil and coal. So while America should be trying to become a leader in clean energy investments that will create jobs and keep America competitive in advanced energy technologies , short-term oriented lobbyists and servants of the status quo may slow down or even block many promising ventures. It is just a fact of life.
Having noted all these very real risks, we also feel investors are fortunate in getting a ground floor opportunity to participate with real pros in private investment, which so often is monopolized by institutional investors such as Harvard University or the like.
CONTACT INFORMATION
Heartland Bridge Capital, Inc.
www.heartlandbridgecapital.com
James F. Groelinger, Chairman, President and CEO
1 International Boulevard, Suite 400
Mahwah, NJ 07495-0027
Phone: 201-512-8732
Fax: (518) 252-3917
Investor Relations
Tom Bustamante, managing partner
Ludlow Capital, Inc.
Phone: (347) 483-0121
ludlowcapital@aol.com
