Flaherty Financial News Newsletter #37
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A conferencing we did go!  
Thirteen micro-caps caught our eye, including ACU, AOIL, APPY, ASTV, CVM,
  CVM, DCIN, EGAS, FSNN, NEWT, RNN, TNC.V, UNIS and WEE.V. Also an update on CORT's unfinished crusade to offset morbid obesity and other deadly side effects afflicting millions of mental patients and stressed veterans relying on our five major antipsychotic drugs. Bob's common sense solution!
                                                                              July 23, 2013


Bob Flaherty Rides Again! 

Welcome to our 37th Flaherty Financial News Newsletter. If you have not already done so, please join our financial family. Simply   go to our website www.flahertyfinancialnews.com and opt in as a reader to receive your next FREE issues of Flaherty Financial News and also Flaherty Special Situations. You can opt out any time.

On June 29th  I turned 80 and felt surprised. I never expected to live this long. I feel great and enjoy swimming and writing. It takes a lot of work to keep strong enough and well enough to enjoy life. But it is worth it!

What's ahead? To live day by day and try to be useful. Writers should write so here I go again.

Let us share insights on Up and Comers my son Brian and I liked at Marcum Microcap, See Thru Equity  and Singular Research NYC conferences. So many investors receive fliers in the mail promoting developmental dreams with huge stock market caps and no revenues or financing. At the conferences we found fine overlooked micro-caps with good management and very reasonable total stock market caps. Most were past the risky start-up stage so they were real companies. Besides revenues, many already had profits. Some even paid dividends.   Here's a lucky 13 whose future intrigued us.


FUSION TELECOMMUNICATIONS TURNS THE CORNER: The stock of New York City -based Fusion Telecommunications International, Inc. (FSNN-0.08)   sold for $8.20 in 2005, but   recently was down 90%. With a total stock market cap of around $16 million, it is losing money, has a negative net worth and a big load of debt.

We love turnarounds. Just look forward, not backwards. In an emerging enterprise capable, energetic management backed by a network of financially powerful people can make a huge difference. At the Singular Conference Fusion went over its impressive team of management, investors and friends. Some have served past presidents, other powerful people and achieved great  success on their own.

Dashing, dynamic 41-year old CEO Matthew Rosen conceded that 18 months ago Fusion was seriously troubled. But in 2013 with its initial positive EBDITA, growing core revenues, a unique cloud strategy and a new team, Fusion has turned the corner. "We're an unknown story and a huge opportunity." At the side of the room his 72 -year old dad co-founder and Chairman Marvin Rosen listened quietly and approvingly.

From inception in l997 mostly from friends about $165 million in capital has gone into Fusion. The Rosen family itself has $10 million in cash in the pot.

Repositioned as a cloud services provider, Fusion offers a full range of cloud-based solutions in communications, computing and managed services to small, medium and very large businesses. Another segment provides voice over the internet to large communications carriers around the world. Mark Rosen believes its fiber rings will permit Fusion to have a cost structure below most of its competition.

Hitting the highlights of the turnaround which is not yet visible to outsiders, Rosen starts with the October 2012 acquisition of another cloud communications company which was generating $26.5 million in revenue and $4.9 million of positive EBITDA. That set the stage for Fusion so far in 2013 to report its first positive EBITDA ever. It widened its core and improved infrastructure on which to build.

A management team experienced in communications and business in general is now in place. A unique strategy and a unique product set should allow Fusion to become a leader in its chosen space.

A $110 billion industry and still growing at 20% to 30%, Cloud services is one of the most exciting areas within communications today as companies shift how they do business. The concept is taking technology, software and infrastructure that are currently on premise in your office and moving it to other facilities outside and in most cases having someone else manage it. Accessing through the cloud is really accessing through the internet. Fusion's turnaround strategy is growing on an organic basis and upselling and cross selling current customers with 250 resellers, its own direct sales effort to larger companies and help from its own shareholder network.

Fusion believes industry concentration will be a key to success. This means developing the subject matter expertise, products and services that are geared to particular industries. Fusion's first vertical industry target is health care. It is being driven by government mandates, especially the need for care providers to establish and exchange electronic medical records. Companies are forced to buy very expensive, very sophisticated software applications to comply.

For cloud companies like Fusion, which provide the data connections, the cloud voice, the storage, security, this is a once in a lifetime opportunity.

From the standpoint of the entire business growth will come from two types of acquisitions. Those in the $5 to $30 million in revenues with like products and services will increase critical mass and opportunities for cross and upselling. Smaller acquisitions will add proven new services which can be cross sold with existing accounts.

Wrapping up, Mark Rosen proclaims Fusion has passed the turning point in the company's history. "We're an unknown story and a huge opportunity!"


UNCLE TIO TO THE RESCUE: At the Singular Research conference founding entrepreneur Hamed Shahbazi, Chairman and CEO of Vancouver, BC, Canada-based  TIO Networks Corp. (TNC.V-0.34 and TNCGF), explained why TIO starts off his company name. TIO is Spanish for Uncle and, boy, do under banked and underserved low to moderate income Canadian and U.S. families need a friendly financial uncle.

In the U.S. this $45 billion market of 34 million underserved  households, 28% of U.S. total,  are under stress. It is made worse because many banks shun, ignore or exploit them. Studying this underserved group by ethnicity, TIO concludes it comprises 55% of Afro Americans, 48% of Hispanics, 41% of Indians, 20% of Whites and 19% of Asians.

Economic pressure has forced the underserved to become tech savvy financially. The poor have to use kiosks, retail outlets internet and smart cell phones for payments. Many have no bank accounts or get paid in cash. Yet they need to pay their utility, loan/credit card, transfer and other bills electronically so they are not late but they lack the resources to pay earlier. Their uncle TIO's can be their life saver.

TIO is a cloud-based bill payment processor serving the largest telecom, wireless, cable and utility bill issuers in North America. It provides bill payment, pre-paid debit card and money transfer services from its multi-channel network of kiosks, point of sale terminals web and mobile.

Today TIO's revenues are mostly from helping customers pay bills. Tomorrow Hamed plans including money transfer, loans and prepayments.

Hamed's ambitious goal is to create a profitable $1 billion cloud- based financial services company to serve the underserved in Canada and the U.S.

Moving quickly, TIO with a market cap of just under $16 million has announced plans to make a key acquisition later this year. The target is Silver Spring, Md. - based Global Financial Services, and its operating business Global Express Money Orders, a U.S.-based walk-up bill payment processor. In the U.S. GFC is a good fit with TIO's units in other states. TIO plans to fund the acquisition with cash on hand, $2 million in debt and the issuance of $3 million in equity to Core Innovation Capital at a price of $0.35 a share.

It is fun to meet entrepreneurs like Hamed who are trying to change the world for the better. So the big banks turn their noses up at the clients he's chasing? Don't laugh or be too cynical. Back in the San Francisco earthquake in l906 Amadeo P. Giannini lent to the hard- working, immigrant earthquake victims the establishment banks wouldn't touch. AP flourished as "the people's banker." So did what became the Bank of America. Today Hamed has the opportunity for an encore. An entrepreneur who wants to build a $1billion new enterprise profitably serving underserved financial services consumers could be a big winner! For more information visit: www.tionetworks.com


NEWTEK: THE SMALL BUSINESS AUTHORITY.   Chairman, President and CEO Barry Sloane of Newtek Business Services Inc. (Nasdaq:NEWT-2.12) also had harsh words for the lack of lending from big banks. In his own Singular conference presentation he noted banks had grown so big that they weren't lending to small business, which historically creates most of America's new jobs. They also weren't lending to enough people who needed mortgages to buy homes. This failure is hurting the housing recovery.

One solution being suggested is to break up the ten biggest banks into small parts. Then lending to small business and making mortgage loans would again be significant to their operating units. Our economy would have the liquidity to start growing robustly again.

A new version  now being discussed in Congress of the repealed l933 Glass- Steagall Act   would also bring banks back to basics. That act separated productive banking from speculative trading. Sadly banks still neglect traditional lending to chase quick trading profits. Speculative blow ups can jeopardize the banks and cripple our world economy.

Entrenched interests and powerful lobbies will delay such common sense solutions, if lasting reform can be done at all. That leaves opportunity for newcomers like Newtek.

A favorite of my old buddy the late Max Bowser, Newtek has adopted the slogan "the small business authority" and is  prospering by helping underserved small business. It's wide range of business services and financial products to the small -and medium-sized business market include: Electronic payment processing, Business lending, Accounts receivable, Web services and hosting, eCommerce, Data backup, Storage and Retrieval, Insurance services and Payroll.

NYC-based NEWT has formed a partnership with the Valley National Bank to finance independently owned and operated businesses in the Hudson Valley.   NEWT agreed to service a loan portfolio from Valley consisting of Small Business Administration loans. This should help the local economy growth and create new jobs.

Since 2010 NEWT's track record has been impressive. Guidance for full-year 2013 is record revenues of   $145 to $151 million, pre- tax income of $10 to $13 million and fully diluted earnings per share ranging $0.17 to $0.19. With a total stock market cap of only $77 million, NEWT is young enough to offer a spectacular ride for long term investors. For more information visit: www.thesba.com



ACME UNITED ADAPTS WITH THE TIMES: Founded in l867, Fairfield, CT -based Acme United Corp (NYSE:ACU-13.40) is a profitable, dividend -paying good little growth company. With a market cap of $43 million it has only 3.1 million shares outstanding. Estimates for 2013 are record revenues of $94 million and earnings per share of $1.24 and $108 million and $1.40 for 2014.

Led by Chairman and CEO Walter C. Johnsen, ACU is known for its cutting materials, but really is a marketing marvel. It has survived the massive economic displacements which destroyed so many other New England companies and prospered. It adapted partly by shifting manufacturing abroad to produce low -cost, high-quality products. Also as marketing outlets change, ACU also switches and expands distribution channels.

Acme supplies cutting, measuring and first aid products to school, home, office hardware, sporting goods and industrial markets in the U.S., Canada and Asia. Products are constantly being improved or offered in new variations. For instance, new titanium Wescott nonstick scissors can cut sticky surfaces without getting sticky.

Other cutting devices include modernize old standbys like shears, pencil sharpeners , various paper trimmers , knives, hobby knives and blades, pruners, loppers , saws, manicure products and medical cutting instruments and measuring ones like rulers, drafting tools, compasses and protractors. Acme also offers first aid and safety kits.

The company sells its products directly, as well as through independent manufacturers primarily under the Wescott, Clauss, PhysiciansCare and Pac-Kit brand names. It serves the wholesale market, contract and retail stationary distributors, office supply super stores, school supply distributors, wholesale florists, mass market retailers and hardware chains. In a year when economic growth is slow in the U.S., Europe and Asia Acme is enjoying a good year by staying loose.

You can get lost in the myriad number and variations of products but the key is Acme finds a way to sell them, to constantly improve them and to keep costs down. You would understand if you saws how excited Chairman Johnsen got about those Wescott nonstick titanium scissors.   Looking forward, ACU's P/E is a bargain 11 for 2013 estimated earnings and just 9.5 for 2014. For more information visit: www.acmeunited.com.


GAS NATURAL INC. IS READY TO GROW: At the Singular conference I enjoyed having lunch with Kevin Degenstein, President and COO of Gas Natural Inc. (NYSE: EGAS-10.12). EGAS' vision is for growth from responsive, reliable customer service at reasonable rates with solid profitability. Its opportunity is that America has begun to exploit its huge natural gas reserves, being freed up by the fracking revolution  or unlocked from shale deposits. Natural gas should power more of our utility  energy needs with less pollution.

EGAS plans to grow as this evolution takes place. With a recent stock market cap of around $86 million, EGAS distributes and sells natural gas to end -use residential, commercial and industrial customers. It distributes about 33 billion cubic feet of natural gas to 69,000 customers through regulated utilities in Montana, Wyoming, Ohio, PA, Maine, North Carolina and Kentucky. Other operations include interstate pipeline, natural gas production, propane and natural gas marketing.

As more natural gas becomes available, greater expansion in unsaturated markets is certain to take place. Acquisitions will focus on adjacent areas to create a critical mass near existing utility operations and new areas with low saturation rates for natural gas.

Importantly management is alert for major acquisitions to change operational efficiencies, boost customers and expand new services. The current base is small enough where at the right price acquisitions larger than the base would be possible. A recent $15 million secondary provides more financial fuel. A neat undiscovered emerging natural gas utility with an annual dividend yield of 5.3% versus about 3.6% for its peer group, EGAS should grow at least as much in the next four years or more than it did in the last five. For more information visit: www.eswt.com.


ARMADA OIL'S GREAT GULF CORE PLUS UNCONVENTIONAL UPSIDE:  How often do you receive a mail flier touting some energy start-up with zero revenues and an unbelievably huge market cap? It is always touted to make you rich overnight. Seldom is that the outcome.

Meanwhile, a worthy micro-cap with the real goods is virtually ignored. Dallas, TX-based Armada Oil, Inc. (AOIL-0.25) has a total market cap of around $14 million and is dramatically undervalued versus its peers by a score of the standard investment screens. Its run by good guys. 

AOIL is a cash flow positive exploration company focused on increasing production and reserves by continuing its recompletion secondary recovery programs. Its Gulf coast properties are stable, low -risk proven drilling locations. The Louisiana properties enjoy advantageous commodity pricing and transportation differentials which make drilling and secondary recovery efforts there more effective and profitable than in other areas. New technology improving secondary recovery from existing wells is one of many reasons America is on its way to energy independence.

AOIL Chairman and CEO Randy Griffin is also expanding AOIL's drilling program in its two unconventional resource plays. The Mississippian Lime in OK is an oil-rich carbonate lay developed by vertical wells for over 30 years. Here the opportunity is new horizontal wells to capture some of the black gold the existing very old vertical holes missed.

In the Rockies in Southern Wyoming, Armada has a farm -in agreement with world-class Anadarko. The deal provides AOIL with a large, contiguous block of acreage along with access to large scale horizontal drilling expertise and experience in the Niobrara Shale in the Niobrara Play.

We live in a fascinating but very difficult time to fund start-ups and micro-caps. To keep on course AOIL needs to raise $10 million. Its veteran team of pros offers a combination of stable secondary recovery success in the Gulf plus the chance for explosive gains in its two unconventional plays. Good management! Good prospects! We like AOIL. For more information visit: www.armadaoil.us .



WAVEFRONT'S PULSING PROFIT POTENTIAL: At the Marcum Microcap Conference Canadian newsletter editor Jim Letourneau gave an excellent presentation on behalf of unsung microcap Wavefront Technology Solutions Inc. (TSX Venture:WEE.V-0.27 and WFTSF) . Founded in l980, this Edmonton, AB, Canada-based pulsing pioneer  specializes in designing pulsing fluid injection technology for oil well stimulation, secondary oil recovery and environmental groundwater remediation.

Wavefront is tackling a huge problem with a huge potential payoff. The problem to be solved is poor fluid distribution in oil production. Injected fluids find the path of least resistance. This results in less area pressurized, lower recovery and lots of stranded oil just waiting to be freed.

Wavefront's patented product solutions offer "pressure-pulsed technology" fluid injection to reach a wider reservoir area and  capture more of that stranded oil.

Here is the size of the prize worldwide. Globally the reservoir recovery factor is only 1/3rd of the oil in place. Worldwide a conservative achievable 5% increase in recovery would yield an additional 300 to 600 billion barrels.  But obtaining the prize can be complicated.

Marketing in North America will focus on performance drilling and well stimulation. The strategic plan has been realigned because of changing demand. First the price differential between West Texas oil and Western Canada oil ranging from about $20 to $40 may negatively impact Powerwave mature field revitalization revenue generated in the Canadian market. Second, U.S. operators have increased focus on tight oil plays and the technology for operations in these conditions.

Meanwhile, abroad Wavefront continues pushing its pulsing projects for Enhanced Oil Recovery to high value markets in Latin and South America, The Middle East and Asia. It continues working with governments and important energy companies, emphasizing its products used in the recovery of secondary oil. There is stranded oil everywhere drilling has gone on. Now that much of the easy barrels have been lifted, owners are interested in tapping the secondary oil bonanza and also just improving results.

Why aren't Wavefront revenues soaring? Because officials will get fired if they make mistakes. So new pulsing power technology sales can take an average of nine months and then be followed by two years of testing Wavefront's equipment. Customers must be sure these new pulsing products actually increase results and do not hurt currently very valuable properties before major commitments are made.

Still, some giants have put their toe in the water. Columbia's largest oil producer, Ecopetrol, Petrobras in Brazil, Petroleum Development Oman, Pan American Energy and Pluspetrol in Argentina, among others, are reviewing Wave front technology.

The hope is that the best is yet to come and today's trickle of revenues will become a flood. At recently $0.27, shares are 72% under 2012's $0.96. Financially Wavefront has $12 million in cash, no long term debt and a current ratio of 11 to one. It is poised to prosper from wider use of  pulsing.

For more information visit: www.onthewavefront.com


FUN DIVING INTO AS SEEN ON TV'S SHARK TANK! Kevin Harrington, Chairman of As Seen On TV, Inc. (ASTV-0.26), was the Singular conference luncheon keynoter. Kevin entertained with amusing tales about the birth of the  infomercial business.

Five years ago Snuggie-the blanket that has sleeves- presented on As Seen On TV with a fun infomercial. So far its entrepreneurs are laughing all the way to the bank. Over  30 million Snuggies sold for over $500 million. Snuggie sales have moved product distribution far beyond TV infomercials to retail stores and other outlets. Snuggie's success shows how much bigger than just infomercials a runway hit can be.

Kevin described As On TV's own TV show Shark Tank as sort of would be America Idol. It is building a cult audience interested in entrepreneurs and new products being launched. If the audience can grow large enough, ASTV will have more control over distribution and product pricing.

Eyeballs are power! That's why entrepreneurs flock to Shark Tank. They pitch their untested ideas for new services or products to market through infomercials. Then they plead for seed capital financing from members of a panel. The amounts requested are often surprising small and the percentage ownership requested by some panel members can be outrageous. It's fun! Remember this is a show.

Whether anyone on the panel likes an idea or not may not be the point. Just being on stage in this spotlight can attract outsiders who might ante up or thousands of new customers to boost product sales. That's why  50,000 eager entrepreneurs a year apply to go on the show. Alas there is room for only 200. This leaves 49,800   frustrated  guys and gals left out. Many are brimming with good ideas with big potential.

After lunch Ronald C. Pruett, Jr. gave his first official talk as new President and CEO of ASTV. With over 25 years of experience in direct -to-consumer and direct response marketing, he  was previously an advisor to consumer -focused companies and investors at Boston Associates. Earlier he was  Chief Marketing Officer of a private software company as it grew explosively. He was also CEO of the largest independent direct response agency in the U. S. and Executive Vice President of a turnaround acquired for $1.5 billion in 2007. He played a key role in the creation of Insurance.com. You get the idea.

Why is he a good fit? As Seen On TV, Inc. is a direct response marker and owner of AsSeenOnTV.com and recently acquired eDiets, a provider of convenient at-home diet, fitness and healthy lifestyle solutions. ASTV identifies, develops and markets consumer goods for global distribution via TV, Internet and retail channels.

Deciding ASTV is in the ecommerce and entertainment business, Pruett's pick for a new company motto is "We put a smile on your face!" To the corporate mission he added, "...and we serve up fun for the engaged consumer."

His goal is to make As Seen On TV a category leader in what is now a $350 billion market around the globe. New product infomercials are an evergreen business. "We have a continuous stream of new product ideas and innovations and inventors coming to us and seeking our help to build out their products around the world," says Pruett. "Frankly, what we have not done well is to monetize that flow."

For starters he is strengthening management. Apply if real steam comes out of your ears when you think. "I like to have a really smart team around me," he explains. For instance, his new COO is a Fulbright Scholar who is a PhD in artificial intelligence. The two have worked together on five businesses.

Pruett understands that the obstacles to creating the desired smooth steady stream of increasing annual profits. In venture capital one in 10 investments is a hit. In infomercials it is only one in 50. ASTV will have to be good at it, patient and have a lot of deal flow.

So ASTV is launching its own Crowdfunding platform to help inventors to make their pitch to the world and give consumers early access to innovative new products. Suddenly, there will be an outlet for the frustrated 49, 800 entrepreneurs annually who can't get into the Shark Tank.

New CEO Pruett is just getting started. Expect more celebrity endorsements, more products in more areas and more global marketing using multi-media channels and the latest internet technology.

ASTV stock was recently down from its 12 month high of $0.90 to just $0.26 with a stock market cap of under $16 million. What can a new CEO do to start new momentum? A lot! We think the best is yet to come.

For more information visit www.AsSeenOnTv.com 


HOW DIGIPLEX TURNS A NEGATIVE INTO A POSITIVE. Really smart businessmen like 71-year-old Bud Mayo, Chairman and CEO of Westfield, NJ -based Digiplex Cinema Destinations Corp. (DCIN-6), can make money no matter what happens. Bud built up the new movie complexes of Clearview Cinemas and sold them for $160 million in l998.

Thereafter like the rest of us he observed empty seats popping up in theaters as a hip new high tech generation had more they wanted to do than just sit and watch movies. But where others see disaster Bud sees opportunity.

In 2010 he founded DCIN to buy well positioned cash positive theaters, confident the growing  empty space could be made profitable.

DCIN's solution is to transform its movie theaters into interactive entertainment centers. Bud hopes to fill the empty seats by combining state-of-the-art digital technology with engaging dynamic content. Customers can enjoy live and pre-recorded alternative programming such as concerts, operas, ballets, sporting events, conferences interactive video games, auctions, fashion shows besides major motion pictures.

Bud's goal is to build up Digiplex within the top 100 markets to 100 locations with 1,000 screens. Social media and targeted marketing will generate two way dialog with existing and new patrons and drive traffic to their theaters.  

Those who still read newspapers can find in The Arts Section of The New York Times an article of numerous weekend box office big-budget stumbles as more movie goers turn off. That should mean more empty seats and new movie theater acquisitions for Digiplex. Here's to Bud Mayo, an   old pro who turns movie theaters into high tech adventures!

For more information visit www.digiplexdest.com.


CAN UNILIFE REVOLUTIONIZE INJECTABLE DRUG DELIVERY? With a touch of an Irish brogue, founder and CEO Alan Shortall unleashed his dream of game -changing global injectable drug and vaccine delivery systems to change medical treatment forever and for the better.

Unilife has a broad portfolio of proprietary device technologies including prefilled syringes with automatic needle retraction, drug reconstitution delivery systems, auto-injectors   , wearable injectors and targeted delivery systems. Each of these innovative and highly differentiated device platforms can be customized by Unilife to address specific customer, drug and patient requirements. It sounds breathtaking.

Or maybe not? Some big bears claim its  a bit of blarney. So York, PA-based Unilife Corporation (Nasdaq:UNIS-3.18) suffers from a large short position.

With trailing 12 months revenue of $3.3 million versus a stock market cap of $266 million plus a high monthly burn rate, Unilife will have to deliver revenue from 12 different programs in calendar 2013 as Shortall promised at their annual meeting.

In a 15-year-contract Unilife's EZMix dual chamber devices will be used in Biodel's (BIOD) glucagon rescue device and Biodel hopes to submit its NDA to the FDA in 2015. Many diabetic people are hospitalized each year due to hypoglycemia. Shortall argues his easier to use platform could reduce this number, save lives and be much easier to use.

Going beyond this product, Shortall envisions all sorts of ways to make drug delivery devices safer, more efficient and importantly more do -it-yourself. That would mean taking fewer trips to the hospital or doctor's office where you can get sick. Besides infections, there are sick people there. He envisions partnerships with various drug companies as his delivery platforms are joined for the life of various drugs.

Fortune favors the brave! You could write a book on what Shortall is trying to do. He certainly is correct about many of the drug delivery problems he sees today. This is the exciting first chapter of a daring effort to shake up current practices in injectable drug and vaccine delivery. It is too soon to know how his story will play out.

For more information visit www.unilife.com


CEL-SCI DESERVES CREDIT FOR REACHING PHASE 111.  At the See Thru Equity and Marcum conferences CEO Geert Kersten of Vienna, VA-based CEL-SCI Corporation (NYSE:CVM-0.18) emphasized that its lead investigational therapy is currently in pivotal global Phase 111 clinical trials. Success should send shares soaring; failure even lower.

Shareholders have approved a reverse stock split of not more than 10 for one, but CEL-SCI is wise to try and keep its very valuable major stock exchange listing.

The company has until August 19 to submit a plan to maintain its NYSE market listings and it plans to do so. Meanwhile, bears are filling the company message board with rumors. On July 22 one was: news is pending; bankruptcy is about to be announced. Others charged the company was a fraud or the  distinguished chairman was about to skip the country with some loot. Over 7 million shares traded versus a three month daily average of 903,500 shares.

Like all the other conference presenters, Geert believes his stock is a bargain. Naturally he couldn't comment on the odds of FDA approval of his lead drug which is in Phase 111. But he felt at least investors could give CEL-SCI credit for getting this far.

Indeed they should. Founded in l983 by current Chairman, 83-year old Maximilian de Clara, CEL-SCI has been dedicated to research and development directed at improving the treatment of cancer and other diseases by utilizing the immune system, the body's natural defense system. Its lead investigational therapy is Multikine (Leutkocyte Interleukin, Injection), currently being studied in a pivotal global Phase 111 clinical trials. CEL-SCI is also investigating an immunotherapy (LEAPS-HiNi-DC) as a possible treatment for NiNi hospitalized patients and as a vaccine (CEL-2000) for Rheumatoid Arthritis (currently in preclinical testing) using its LEAPS technology platform.

The investigational immunotherapy LEAPS-HiNi-DC treatment involves non-changing regions of HiNi Pandemic Flu, Avian Flu (H5N1), and the Spanish Flu. Scientists, including those at CEL-SCI, are very concerned about the possible emergence of a new virulent hybrid virus through the combination of H1N1 and Avian or Spanish Flu. That could cause a global pandemic with consequences not see since The Black Death. CEL-SCI has undertaken serious efforts which are important to mankind. We are all fortunate to have people who dedicate their careers to trying to make a difference.

For more information visit www.cel-sci.com.


REXAHN'S NEW CEO SHARPENS THE FOCUS. Making his first presentation as new President and CEO of Rockville, MD- based  Rexahn Pharmaceuticals Inc. (NYSE:RRN-0.61) Peter D. Suzdak made what he was going to do sound easy. He was calm and knew just what to do. That is because he has done it successfully before.

We have followed Rexahn followed many years since it first went public. It is in good shape financially and has no debt. It has done research for drugs to treat numerous kinds of cancer, central nervous disorders, Parkinson's and Alzheimer's and sexual problems. Wow, that is a lot to handle.

But you can't do everything. Some things must be emphasized now and other worthy efforts simply must wait their turn.

Under Suzdak, the mission has been focused and simplified to Rexahn is a clinical stage biopharmaceutical company dedicated to best-in-class therapeutics for the treatment of cancer. Rexahn has three clinical stage oncology candidates, Archexin, RX-3117 and RX-5902 and a robust pipeline of preclinical compounds to treat multiple types of cancer. It has also developed proprietary drug platform technologies in the areas of nano-medicines, 3D-GOLD and TIMES.

Good things are being announced. Teva Pharmaceutical Industries has submitted to the FDA an Investigational New Drug application for RX-3117, a novel oral small molecule chemotherapy agent under an exclusive option agreement from Rexahn. RX-3117 appears so far to have the potential to treat a wide variety of cancers, including colon, lung, renal and pancreatic and overcoming chemotherapeutic drug resistance.

Chemo not only cures but often kills as it weakens healthy parts of a cancer patient's body. On July 17 Rexahn announced an exclusive license with the University of Maryland Baltimore for a novel drug delivery platform, Nano-Polymer-Drug Conjugate Systems. This directs delivery of currently marketed chemotherapeutics agents directly into cancerous tumors. Efficacy is increased and there is reduced toxicity in the rest of the body. Rexahn's first drug candidate developed using this platform is RX-21101, a polymer conjugated form of the common highly toxic chemotherapy agent docetaxel. By minimizing the circulating concentration of free docetaxel in the blood and maximizing the concentration in the cancer tumor, RX-21101may increase anti-tumor activity and lower adverse side effects.

There are many other serious efforts by other companies to develop targeted delivery systems so more patients can be helped by higher doses of necessary cancer killing drugs in the cancerous places and less deadly side effects throughout the rest of their healthy bodies. Rexahn looks to be one of the leaders in this important targeting goal.

For more information visit www.rexahn.com.


VENAXIS, INC: SAVE OUR CHILDREN: After this final segment on the 13th  conference presenter to catch our eyes,   we will follow up the progress of Corcept Therapeutics. CORT is developing a weight gain offset to prevent the side effects of morbid obesity and other deadly side effects from the five major antipsychotic drugs, which harm and often shorten the life spans of mental patients.

However, besides drugs other current medical procedures also can have deadly consequences. As reported in The New York Times each year more than four million CT scans are performed on children under 15. These increase the future risk for these children to get cancer.

Sadly many of these CT scans are unnecessary. How can these be avoided? Are there other tests that can be used?

Enter President and CEO Steve Lundy's Venaxis, Inc. (Nasdaq:APPY-1.27). Castle Rock, CO-based Venaxis is developing a blood-based screen which can identify kids who are complaining of abdominal pain but are at low risk for appendicitis. Having this knowledge could help reduce the number of unnecessary scans as the low risk prospects could skip the CT scan and avoid its potentially harmful radiation.

Venaxis' APPY1 pivotal study results should be out before the end of the year and FDA approval will be sought. Besides U.S patents, others have been issued in foreign countries and a CE-Mark approval in Europe has been obtained to market APPY1.

This is no layup. Because doctors worry about law suits most follow a better safe than sorry approach. So there may be resistance to reducing CT scans or using the new test. Twice earlier Venaxis failed to produce a sufficiently robust screen. Failure resulted in a drastically lower share price and a recent stock market cap of only $25 million. APPY1 includes new markers plus a C-reactive protein and white blood cell count for broader coverage of the body's appendicitis response. We hope the third time will be a charm.

For more information visit www.venaxis.com. -RJF


OUR UNFINISHED CRUSADE!  In case you haven't noticed there is a bit of Don Quixote in me which I try to keep under control. I had to extend my expose "The Return of the Invisible Man" for 12 issues over 16 grueling months. On Feb. 2, 2011 Flaherty Financial News successfully concluded it with our "Mission Accomplished" issue.

On to new adventures! For 67 months so far we have tried to raise national attention and expose how the makers of the five top antipsychotic drugs which help stabilize mental illness also cause morbid obesity and other deadly side effects in millions of mental patients.

My spirit soared recently when obesity was labeled a disease. False alarm! Most resulting articles simply reported that the new disease label should make it easier for the obese to qualify for medical insurance to fight their fat with drugs or surgery.

Alas I did not see a single article explain that the obesity in millions of Americans was being caused by prescription drugs. But this fact is very important before turning to other new drugs as a solution.

In the case of anti-psychotic drugs wouldn't it be saner to imbed or administer at the time a mental patient begins taking these drugs an offset to their propensity to increase the weight of those who must take them? It is just common sense to offset the weight gain before this deadly damage is done to millions of new mental patients.

The giant drug companies have made billions in profits from these drugs and will make billions more. Except for extending their patents by putting in weight gain offsets later, I don't understand why they don't cough up the millions for research to eliminate or reduce their harmful, deadly side effects. Now that obesity is labeled a disease these giants are in essence stabilizing mental disease by selling drugs which cause this newly labeled deadly additional disease-morbid obesity.

As I continue this battle I learn more as I go along. It is not only anti-psychotic drugs which can lead to weight gain and other deadly side effects. Many other drugs, including statins which lower cholesterol, also do the deed.

Since I began by publicizing and trying to clean up the mess in anti-psychotic drugs, here my focus will stay. I do hope progress in this important niche will spread to other drugs which also are harming even as they are helping those who must take them.

Back on September 11, 2011 in Flaherty Financial New Newsletter #28 we wrote our deepest and best article, which is archived on our website homepage www.flahertyfinancialnews.com , following up Stanford University lecturer and part-time practicing psychiatrist Dr. Joseph K. Belanoff. As co-founder and CEO of Menlo Park, CA-based Corcept Therapeutics Inc. (Nasdaq:CORT-1.91) Joe Belanoff is dedicating much of his career on this important unsolved medical dilemma.

Here is a brief summary: Corcept is in the midst of a unique effort to alleviate one of the most serious, least discussed and neglected health problems in America-the dilemma caused by antipsychotic drugs which effectively treat mental illness yet can cause unwanted side effects of morbid obesity, arterial heart disease, stroke and Type 2 diabetes.

"In my opinion the single biggest problem in psychiatry today is the enormous metabolic problems caused by taking these antipsychotic medications," said Dr. Belanoff of which excessive weight gain is one of the most serious and prevalent. "Antipsychotic drugs do wonderful work stabilizing mentally ill people but their Achilles Heel is side effects which cause new serious problems sometimes leading to a shorter life."

How much shorter? Obesity is often named the number one health problem in the U.S. because it can lead to other diseases and shorten life. "Morbid obesity is one of the saddest topics in our field of mental health," continued Dr. Belanoff. The median life expectancy of someone (morbidly obese) with   chronic mental illness is somewhere between 50 and 55." That is roughly two decades below normal.

In our article an optimistic Belanoff believed CORT could e He He over the next five to seven years commercialize a next generation of special cortisol receptor antagonists to prevent the weight gain and morbid obesity caused by antipsychotic drugs used by millions of mental patients.

How is Joe doing?

"Unfortunately, we are at least three to five years from getting one of our new compounds to market. Hard to believe, but in the land of drug development that is considered fast. Rock on! Joe."

Getting two years closer to a possible solution is progress! Meanwhile millions of mental patients will continue to suffer from the side effects. For example, many of our returning war veterans with post-traumatic stress are forced to take antipsychotic drugs. Almost instantly their bodies blow up like balloons. Suddenly they become immobile and less employable. Instead of having one problem, they now   have two. Even worse, their life span has been compromised.

A solution needs to be found for our vets and for the rest of our population which is hurt while it is also being helped.

A bevy of new weight reduction drugs have been trumpeted to solve the obesity problem. But in the case of antipsychotic drugs (and also other drugs which contribute to morbid obesity) will the new weight reduction pills conflict with what is in the original drugs which patients must take? It makes so much more sense if the weight-gain offset is administered with the drugs originally and meant to be used in conjunction with them.

In December 2008 our coverage of CORT began when the stock price was $0.97. While Wall Street is properly concerned with results from CORT's two nearer stage products, our own interest is longer term and remains unchanged. CORT's most important task is fighting to develop an offset to the harmful metabolic side effects of morbid obesity, which include heart disease, stroke and Type 2 diabetes from the ingestion of antipsychotic drugs used to stabilize mental illness.

Millions will continue to suffer and many will die prematurely until CORT or someone else finds an offsetting substance to embed or accompany antipsychotic drugs to offset their deadly side effects.

Will anyone listen? I don't know. At least you have if you are still reading. All my life when I am in a quixotic mood I just keep going ahead. We can sometimes make a difference. We don't find out unless we try. -RJF



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Dear Friends: In the many years since Bob F graduated from Harvard Business School what is the biggest change he has observed?  Everyone has become so short term and transaction oriented. How can great companies be built if they are sold before they can mature? How can important medical products deep in the pipeline ever be developed if the parent company sells out after the first success? We haven't a clue. But somehow mankind continues to evolve. Change takes place  and we end up better off.  So eat  a hot dog , take  a swim and enjoy another sunny  summer. We  hope you find at least one interesting and suitable  idea among those which caught our eye attending conferences. It is an honor to serve you.   
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