Welcome to our 44th Flaherty Financial News Newsletter. We hope  you all are enjoying one of the greatest summers of your lives. If you have not already done so, please join our financial family. Please visit our website  http://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 anytime.

SeeThruEquity Conference Snapshots.

 

Transformation! Pre-public IPOs! Cop Coordination plus Quicker School Shooting Response!  

    

By Robert J. and Brian D.  Flaherty

 

On May 28th my son Brian and I attended the third annual SeeThruEquity Microcap Investor Conference in New York City. Here are presentations we found particularly intriguing.

 

 A Transformative Period Reshaping Harvard Bioscience. Adapt or die! Nowhere is this truth of human evolution more visible than among the older technology pioneers. Corporate missions must be broadened not only concerning product lines but in where these products are marketed globally. What doesn't fit must go. Everything must flourish or fail on its own merits.

Founded in l901 by a doctor at Harvard Medical School as Harvard Apparatus, this highly respected well regarded operation lagged while revenues have declined.

What to do? In 2013 the company was split in two parts, both based in Holliston, MA. Now each separate management team can concentrate on achieving its destiny.

Spun off last November  was exciting Harvard Apparatus Regenerative Technology (Nasdaq:HART-8.83) and top management went along with HART. Here at this clinical stage biotech the focus is on developing and then commercialization of regenerated organs for human transplant. HART is developing the HART-Trachea. This includes a scaffold, the patients' cells and a bioreactor to restore the structure and or function of a severely damaged trachea plus an automated solid organ bioreactor that has the ability to seed cells on an organ scaffold and keep them sterile and healthy during the growth phase prior to transplant.

A trachea? That's your windpipe which transports air to your lungs. Try living without one! That's exciting. That's also another story.

The spinoff left remaining lagging Holliston, MA -based Harvard Bioscience (HBIO-4.70) which was the first of the companies we visited at the SeeThruEquity conference. HBIO is a tiny pure play global developer, manufacturer and marketer of a broad range of primarily under $20,000 apparatus and scientific instruments, systems, laboratory consumables and accessories such as gloves to advance life science research. Products are sold to thousands of researchers in over 100 countries. Sales are primarily though their 850 page catalog and other specialty ones, their website, distributors including GE Healthcare and a field sales organization. Products divide into five segments: Fluidics like syringe pumps, Lab Equipment and supplies, Molecular Analysis, Cell Analysis and Animal Research.

Since the old top management decided to head HART, 48-year-old President and CEO Jeff Duchemin came on board in August 2013 free to create his own new youthful transformative team at HBIO. Previously he spent 8 months as Global Business Director at Corning Life Services (NYSE:GLW) after Corning had acquired his unit from mighty Becton Dickinson (NYSE:BDX). At Becton Jeff had a 16 year career of success with positions involving sales, marketing, executive leadership and strategic acquisitions. HBIO's new 40-year-old CFO Robert Gagnon was previously CFO at Clean Harbors, Inc. (NYSE:CLN). Other key top management additions have impressive global experience at mighty Becton Dickinson and /or Corning.

Revenues for 2014 are estimated to be flat  in the same range as 2013 of $105 million. Non-GAAP fully diluted earnings per share are estimated at $0.26 and GAAP eps at $0.14, up mainly from cost cutting. That is because the CEO describes 2014 as a bridge year to return the company to topline organic growth in 2015.

Because research consumables have only been growing 1% or so in the U.S. and Europe and instruments 2% rival companies had been shifting emphasis to Asia where growth has been over 7% to low double digits. Failing to do so is one reason HBIO's revenues have been sagging.

Last December HBIO realigned its organization which had been built over last 15 years by a series of acquisitions.    The global workforce had been reduced by about 13%. The streamlined structure was revamped for efficiency to accommodate the new management team's mission.

"We are reallocating resources for the purpose of global expansion, "says President Duchemin.

Partnering with Chinese companies to expand distribution in China, a market which has been neglected, should help drive a new global growth strategy. So will reinvigorating product development and accretive product acquisitions.

The prime target is Asia which had not been a high priority for several years. Driving global growth will be emerging markets not only in China but Japan, Korea and India. HBIO is building strategic channels and making better relationships with global distributors. HBIO's strong brands, especially Harvard, should be a hit in China.

"We want to become a company which on an annual basis is launching new products," says Duchemin. "We have a portfolio of new products we're working on. We expect to start delivering new products in the near future."

That is an important statement. Earnings gains this year will come mainly from cost cutting. But real growth must be based on new and improved products plus the new global marketing emphasis to restore growth to the lagging top line. His new top team comes with global skills. "This should help us do business on an international basis," predicts the CEO.

Last and most important in transforming Harvard Bioscience from a small company is its new business development strategy. Acquisitions will be selected to transform HBIO into something much broader. A guess? A few will involve more expensive instruments because these have been growing faster than HBIO's lower priced products.

Hopefully 2015 will show indications of top line growth. Those anticipated new products now with an international market will also increase potential.

Summarizing the transformational restructuring CFO Robert Gagnon ads, "We are confident that the business is going to turn and we are going to start to grow."

For more information please visit: http://www.harvardbioscience.com .

 

BDCA Ventures, Inc. (Nasdaq:BDCV-5.75) formerly Keating Capital is an even better bargain! With over a 20% discount from net asset value and roughly an 8% dividend yield BDCA Ventures, Inc., (formerly Keating Capital) offers even more value and has better prospects than when we profiled it in our Flaherty Special Situation #36 back on January 2, 2014.

Because this closed end fund concentrates on investing in private companies which anticipate going public within two years, the chance for sizable gains depends upon  the volatile IPO market.

Right now we think the IPO market will continue to extend its run. That is the key for this pre-IPO fund because the majority of its private portfolio investments plan to take advantage of this hot IPO market.

Meanwhile, helpful changes should help the fund management company.

Keating Capital needed to be part of a broader diversified investment group because the IPO market instantly can go from sizzling to freezing. While remaining as president of the adviser, Tim Keating's  advisory firm was sold and changed its name to BDCA Advisor LLC. The name of the closed end fund became BDCA Ventures, Inc., (Nasdaq: BDCV-5.75).

This pre-IPO fund is a good diversified way to participate in the quality IPO market rather than taking your chances on one high flier. BDCV continues to invest with quality venture firms. This raises the quality of their portfolio. Recently more IPOs from among the private companies in the closed end fund portfolio are starting to show up. TrueCar (Nasdaq:True) has gone public and Zoosk (ZSK) seems on its way.

Rather than looking at any one investment here is a better way to understand the value locked up in this closed end IPO fund. The majority of the private portfolio companies are expected to complete an IPO or strategic sale/merger over the next two years. The odds favor a few of them being big enough gainers to make that big closed end discount disappear. For more information please visit: http://www.keatingcapital.com 

 

A Tipping Point at COPsync. Writing the first story anywhere on a public company is like swinging at a fast ball. Sometimes you strike out and look silly. And sometimes like in our story in Flaherty Financial News Newsletter #38 on October 23, 2013 "Suspend Your Disbelief!" we put one over the fence. It is archived at http://www.flahertyfinancialnews.com .

Our opus outlined the plans of Dallas, Texas-based start-up COPsync, Inc. (COYN, then $0.10, recently 0.20.) 100% gains always feel good.

COPsync is creating and operates America's largest law enforcement real-time, in-car information sharing, communications and data interoperability network and the related COPsync 911 threat alert service for schools, government buildings, hospitals and other potentially at-risk targets.

In our original story President Ronald A. Woessner charged that while the public watches TV shows and assumes law enforcement agencies, local and national, are well coordinated and can share information seamlessly that is untrue.

"Nothing can be further from the truth," he said again at the conference. Our law enforcement systems are a virtual Tower of Babel. His COPsync would change all that with its systems "for officers by officers."

Because local police units fail to link properly with others, not to mention with state and local agencies, lives are lost, kidnapped kids not found and our borders are less secure. Separately schools attacked by shooters or terrorists are assisted slower than they could be.

Since our story Ron has made progress. COPsync continues to add paying subscribers with now over 440 courts and law enforcement agencies almost exclusively in Texas. Most of the related COPsync911 threat alert customers like at schools are mainly in Texas too.

The good news is that 95% of existing customers are renewing so the push is on  to continuously add more customers. Soon Ron hopes hold out units in Texas will be forced to join because they don't want to miss information which might save their officers lives or alert their team to what or who to watch out for while they are in their patrol cars. "We believe we will be cash flow positive sometime in 2014," he says.

Ron needs to raise about $1 million (he probably needs double that for the unexpected.) That will help continue forward progress and reach "an inflection point" where the path will get easier. "We are looking to raise $1 million to ensure we get to profitability," he explains.

Once Texas, which has one out of every 12 U.S. police officers, is saturated, COPsync wants to expand into other key states, especially CA, FL and the Chicago area. The goal is to create the first nationwide real time law enforcement action sharing network.

Along with its law enforcement network, where cops can communicate real time with cops, COPsync believes its COPsync911 alert should also go nationwide. This is a technology play for our troubled times.

A teacher in a school classroom will be able to send a shooter alert from the computer there to local patrol officers. It will  direct them to the school with a map where the officer can get to the school and even know what entrance to use. A chat room can open where the teacher and officers can talk real time. Clearly this quicker response could save more children's lives.

For more information visit: http://www.copsync.com  or http://www.copsync911.com .

  

FOLLOW UP: Medient Studios (MDNT) resumes trading following SEC suspension: Featured in our Flaherty Financial News Newsletter #43,founding CEO veteran successful Asian film-maker Manu Kumaran planned to turn the Hollywood film production model upside down by building the world's largest mega Studioplex in Georgia. His dream was to turn out movies around the clock using a similar plot but in different languages with different casts. Instead on June 12 he was terminated as CEO.

At a crowded conference while he was still CEO when Manu was asked difficult questions he side stepped each one. He simply repeated them and answered the board of directors had not focused on that yet.  

Entertainment turnaround maven Charles Koppelman took over as chairman and former Governor of New York David Patterson joined the board. But did the cavalry arrive in time?

On June 25 the SEC temporarily suspended the stock of MDNT because of questions about the accuracy of publically disseminated information, concerning things as basic as operations and shares outstanding. Daily trading volume had been going crazy.

On July 9th Medient filed form 8-K disclosing the sale of equity security and other events. On July 10th trading resumed and MDNT's stock price fell to around $0.0004.That compares with $0.12 when our initial  write up appeared.

One reason the share price has fallen to fractions of a cent was that Medient disclosed (compared to 60 million a few months earlier) over 2.3 billion shares were issued and outstanding. Shares had been used and many sold in a series of transactions. Among other events reported was the news that Atlas International Film, acquired with great fanfare by Medient in January 2014, had filed for insolvency with the Munich District Court.    

Medient's idea of bringing more efficiency to film making by sampling the State of Georgia's peachy tax credits looked tasty. But a start-up which stumbles coming out of the gate and has their shares temporarily shut down by the SEC will be lucky to ever finish the race.

What an exciting story! Maybe the moguls in Hollywood will turn it into a movie, a horror film no doubt! - RJF

 

If you have a good company or overlooked fund or idea
which only needs more exposure to become better known, we know how to make enterprises come alive. We can put your activities and products into perspective. We will use  words  ordinary investors can understand.

 In addition to doing regular financial reporting, Flaherty Financial News Newsletter also offers for a properly disclosed fee sponsored distribution over the Internet of ideas we uncover to magnify your audience. We offer more detailed sponsored company profiles and separately BUY reports in our sister Flaherty Special Situations Newsletter. Both can be distributed beyond your talk to a small audience to over one million opt-in online investors. We will also carry banner advertisements. For details, please call our President and Publisher Brian Flaherty.  

Brian Flaherty at 914-539-0688 or email: dfbrian@yahoo.com

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Disclaimer:This Flaherty Financial News Newsletter contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties, and actual circumstances, events or results may differ materially from those projected. We caution readers not to place undue reliance on any forward-looking statements and to supplement this newsletter with specific company SEC filings and their own research. Please be aware that there is risk in every company stock that you buy. Coverage or other mention of a stock or fund in this newsletter is neither an offer nor solicitation to buy or sell any securities mentioned. We are not investment dealers or investor advisers registered with the SEC or State Security Authorities. We do not guarantee all the information in this newsletter is correct or will be updated. Remember some errors are inevitable. Reproduction without written permission is forbidden. Our own policy forbids editorial from buying or selling a featured stock until this issue is out at least ten business days after its issue date, which in this case would be July 29, 2014. None of the  companies mentioned in this issue paid to sponsor this newsletter issue or even knew they were being chosen to appear in it. In cases where a report or profile is subsidized, readers should consider such subsidized articles as paid advertorials and understand that sponsored material will not be as objective as non- sponsored editorial. As Flaherty Financial News editor I always reserve "Final Copy Responsibility" on what to include and what to leave out of every issue. The buck stops here. We have tried to be objective, but may have failed. We are not security analysts or stockbrokers engaged in buying or selling, but financial journalists with all the many failings of that profession. You readers must decide the merits of each investment yourself and whether to invest. -Bob Flaherty, Editor