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David Kugelman is the President of Atlanta Capital Partners, LLC and the Publisher of the OTC Stock Review. Mr. Kugelman has been in the Investment industry since 1986 and has held the National Association of Securities Dealers Series 7, 24, 63, and 66 licenses, as well as the Certified... More
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  • Ironridge Global Partners, LLC: Filling The Gap For Small-Cap Companies

    Summary

    • One of the biggest changes in the market I have witnessed over the past 30 years is the lack of access to capital for small companies.
    • The regional investment banking firms got swallowed up by larger firms and most of the smaller firms simply closed their doors.
    • Since the number of underwritings for small-cap companies by brokerage firms has almost disappeared, CEOs of public companies need to learn how to survive with institutional investors.
    • A large number of small-cap companies will probably end up dealing with an institutional investor that makes direct equity investments in micro-cap public companies.

    This past week's stock market gyrations left investors bruised, but not battered, as the week ended with a rebound. I couldn't help but think about how 27 years ago I was 23 years old, sitting at a desk at Thomson McKinnon Securities, watching the Dow Jones Industrial Average crash as it fell 507 points, or 22%, to 1,738. As I reminisced, I thought of some of the more sweeping changes I've seen in the industry and how those changes have been perceived. As my career path continued through firms like Bear Stearns and Merrill Lynch, one of the biggest changes I have witnessed is the lack of access to capital for small companies. The regional investment banking firms got swallowed up by larger firms and most of the smaller firms simply closed their doors. This has left a tremendous void in the small-cap sector of the market, which is almost devoid of ways to fund American business. Where is a small-cap CEO supposed to go for funding? What's the best way to structure the deal?

    Unless you are a CEO with a lot of wealthy family and friends, you will probably end up dealing with an institutional investor that makes direct equity investments in micro-cap public companies. I think I've had some experience with just about all of them, but rather than focus on the ones I have a negative opinion of, I thought I'd focus on one I have found particularly easy to work with. Ironridge Global Partners is an equity investor in micro-cap public companies. Ironridge is a long only institutional investor, which means they never short stocks. Their transaction sizes range from $250,000 to $25 million each. They work with companies whose shares are traded on exchanges worldwide. The principals of Ironridge have successfully completed billions of dollars in financial transactions over the last 20 years and have devised some processes that allow their firm to structure transactions based upon each company's unique situation.

    In a highly risky sector of the market, where a complete loss is a real possibility, Ironridge Global is willing to write large checks and give companies an opportunity to succeed. I have known John C. Kirkland, who is the Co-Founder and Managing Director of Ironridge, since he was the partner in charge of the securities group at Luce Forward. Prior to that, John was the partner in charge of the securities practice at the Los Angeles office of megafirm Greenberg Traurig, so I was always confident in his abilities. In fact, a few months ago, international corporate finance publication, Finance Monthly, voted John Kirkland as a winner of the Finance Monthly CEO Awards 2014 for North America. Brendan T. O'Neil, CFA and Keith Coulston, round out the Ironridge management team. Brendan was President and Chief Investment Officer for Enable Growth Partners LP from its inception in 2003. Enable was one of the largest and most active funds in the micro-cap space, completing over 500 financing transactions and investing more than $600 million in life science, technology, energy, cleantech, and consumer companies. Brendan held senior Investment Banking and Sales positions at Sutro & Company, Morgan Stanley Dean Witter & Co., and Salomon Smith Barney, and has earned the coveted Chartered Financial Analyst designation. Keith also has nearly two decades of experience in the securities markets.

    One thing that strikes me most about Ironridge Global Partners is the large number of repeat deals they do for the same companies. This is about the strongest evidence I can think of that they make a good financial partner. Ironridge Global has done three deals for $5 million with Marley Coffee maker Jammin Java Corp. (OTCQB:JAMN). According to founder and chairman, Rohan Marley, son of legendary performer Bob Marley for whom the brand is named, "Ironridge is absolutely the best investment partner we've ever dealt with. With each round of investments, we have been able to grow the company in a way that the market and our shareholders have supported." It doesn't get much better than that. Ironridge has done four deals with Ascent Solar Technologies, Inc. (NASDAQ: ASTI) for $16 million. Victor Lee, Ascent's president and CEO, calls Ironridge "a sophisticated and well recognized technology investor." PositiveID Corporation (OTCQB: OTCQB:PSID) has done multiple deals with Ironridge Global over more than three years. "During that time, without exception, Ironridge has followed the financing structures as defined and documented," according to PostiveID CEO, Bill Caragol. "Further, at times when these financing agreements presented challenges in their operation, I found the principals at Ironridge to be very cooperative in attempting to find solutions," says Caragol, who adds, "I always found that the principals of Ironridge tried to use reasonable business judgment to do what was in the best interest of the company and its stockholders." Such an investor is a rare breed in today's world.

    Ironridge Global Partners, like any other business, hopes to turn a profit. What differentiates Ironridge from other institutional investors is that it is a completely passive investor. They write the check and pray for the best outcome. They do not ask for a board seat, restrict the use of proceeds, or even vote their shares. On every transaction, Ironridge Global puts their full faith, along with a significant amount of capital, into the company they are investing in, as well as the company's business plan. Should the company fail, Ironridge stands to lose everything. Should the company prosper and do well, Ironridge stands to make a significant amount of money--along with the other common shareholders. They specifically look for situations where a good company gets in a financial jam, or where the additional capital can fuel explosive growth. One such situation Ironridge was involved in was Advaxis, Inc. (NASDAQ: ADXS). Ironridge invested in ADXS in late December 2012, even though the market was going into the tax selling season. Two months later, the stock was up over 450%. ADXS was able to use the money invested by Ironridge to push their company forward and the shareholders prospered. Ironridge Global's first funding was MEI Pharma, Inc. (NASDAQ: MEIP), which has done well since. Since then Ironridge has done over 70 deals for up to $25 million each, including over $1 million for AVT, Inc. (OTCPK:AVTC), whose stock more than doubled to $5.00 per share from when Ironridge funded until the deal concluded. Similarly, shares of Uluru, Inc. (OTCQB:ULUR) have more than doubled since Ironridge did its deal with the company. Ironridge Global is still a common stockholder of every portfolio company it has invested in since inception.

    Even with a slew of winners, there are still some companies where the return has been less than favorable. Institutional investors, like Ironridge, take a significant amount of risk every time they write a check to a publicly traded company. They breathe life saving capital into a company at a time when no one else will. Ironridge has given numerous small companies an opportunity when they are in the red-zone, which, for non-football fans, is that important slice of real estate from the opposing 20-yard line to the goal. As I mentioned before, Ironridge is a passive investor and there are no restrictions on the funds they invest in a company. Ironridge is willing to directly invest the necessary capital in a company so they can keep the doors open and have a chance to get to the next level. At the risk of reliving the glory days, when I first got in the business in the mid 1980's, once a CEO got funded it was up to him to show a return to shareholders, or be showed to the door by the Board of Directors.

    Summary

    When John Kirkland was asked "What advice do you give to rising CEOs?" His response was simply "Always do what you promise. The rest will take care of itself." Also on their website you will find a Testimonial page. I was happy to see quotes from three people my company has worked with, who I have a great deal of respect for. Allison Tomek, Sr. VP of PositiveID is quoted as saying "Keith is incredibly responsive, knowledgeable and trusted. PositiveID's relationship with Keith and Ironridge Global Partners has been very constructive and his firm takes a passive and flexible approach to providing capital. Keith is a detail-oriented professional and it is a pleasure to do business with him and the rest of the Ironridge team." Joseph Canouse, CFO of Fresh Promise Foods is quoted as saying "John and his firm are innovative, creative and dependable. He has proven reliable beyond our expectations and I would highly recommend him and his firm." Jack Wright, Ph.D., who is Director of Investment Banking for Galileo Asset Management, said "Brendan returns 100% of his phone calls in a timely fashion. We were very satisfied with the $2.5 million funding [Ironridge] closed for a client of ours in 10 days. Excellent job."

    But even the best investors cannot control what the company does with their money. The real responsibility for the success or failure of a publicly traded company rests on the shoulders of its management. Both small and large shareholders are passive and depend on management to make the best decisions for the company and its business plan. When a public company gets an infusion of capital from an institutional investor, the best possible plan would be to put the money to work for the shareholders and not for fat executive salaries and lavish perks. Early employees at Home Depot were teased by their friends for accepting $5.00 an hour cashier jobs. A few years later these same cashiers made millions off of their stock. The only chance small-cap companies have to be successful is to obtain funding from good financial partners like Ironridge Global, who are willing to write the check and take the risk. Since the number of underwritings for small-cap companies by brokerage firms has almost disappeared, CEOs of public companies need to learn how to survive with institutional investors. Shares of stock become the company's currency. In my opinion, it makes more sense to focus on executing the business plan, increasing the volume of the stock, and increasing the number of shareholders than to devalue the currency.

    Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Oct 29 5:39 PM | Link | Comment!
  • Financing By Hercules Provides Validation And A Vote Of Confidence

    Celsion announces $20 million strategic loan facility: Celsion (NASDAQ: CLSN) announced that it has entered into a loan agreement with Hercules Technology Growth Capital (NYSE:HTGC) that would permit up to $20 million in new capital distributable in multiple tranches with agreement from Hercules. Celsion drew the first tranche of $5 million upon closing of the loan agreement on November 25, 2013. Approximately $4 million of the proceeds were used to repay the outstanding obligations under the Company's loan agreement with Oxford Finance LLC and Horizon Technology Finance Corporation. The Company anticipates that it would use any additional funding provided under the agreement for working capital or in support of its previously announced strategic acquisition initiative, which is designed to identify new technologies and clinical stage products for its development pipeline.

    1. Overall survival results from the HEAT Study continue to show a positive trend.
    2. Meetings are planned with regulatory agencies in anticipation of a pivotal ThermoDox trial. Management plans to meet with the FDA and China's regulators to discuss the results from a subpopulation of the HEAT Study and a new clinical trial design.
    3. We believe Celsion is about to expand its R&D pipeline. The recent financing gives the company the flexibility to complete an acquisition that will probably draw upon the Company's expertise in oncology. This might be a single drug or a technology that supports development of anticancer drugs.

    THERMODOX BENEFIT NEARS SIGNIFICANCE :

    Celsion has continued to monitor the status of patients who participated in the HEAT Study. The key metric is overall survival, since it is the endpoint favored by the FDA for clinical trials involving oncology therapeutics. While all patients are being followed, a subpopulation that had single tumors in the 3 cm - 7 cm range and was treated with RFA for at least 45 minutes is the focus of the corporate attention. The HEAT Study yielded the first evidence that prolonged heating is more effective than shorter treatment regimens in delivering ThermoDox to the fringes of a tumor. The overall survival data, which is being compiled at the end of each quarter, has been moving closer to showing a significant difference between patients who received the ThermoDox-RFA combination and those treated only with RFA.

    Other interesting companies in the industry are Celgene (NASDAQ:CELG), ARIAD Pharmaceuticals (NASDAQ:ARIA), Amgen (NASDAQ:AMGN), and Gilead Sciences (NASDAQ:GILD).

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Additional disclosure: OTC Stock Review is not registered as an Investment Advisor or a Broker/Dealer. This information is not an offer to buy or sell securities and is for informative purposes. Any analysis contained herein does not purport to be a complete analysis of the Company and reflects the opinion of the author.

    Nov 27 10:09 AM | Link | Comment!
  • Alternative Energy: Stocks In Motion

    Have alternative-energy stocks run their course, or are they simply taking a breather before making their next run? The recent glut of natural gas has made it a more affordable option, but alternative energy stocks trade in cycles, just like other sectors. They're also here to stay. Clean, green, renewable energy made up close to 13% of the electricity generated in the US in 2011, according to the Energy Information Administration (NYSEMKT:EIA).

    In our ever-expanding quest for stocks to buy, we decided to look at some of the stocks in the alternative energy sector that could have the potential to be market leaders. Let's start with BioFuel stocks.

    BioFuel stocks could be the best bang for the buck since U.S. demand for biofuel exceeds availability. Many ethanol plants in the US are shutting down or curbing production as the drought in the Midwest drives corn prices higher. According to the revised U.S. Federal Renewable Fuel Standard, the requirement for bio fuel production in the U.S. has been increased to one billion gallons of bio fuel that need to be produced domestically in 2012. The U.S. Department of Energy shows the current U.S. bio fuel production is approximately 700 million to 800 million gallons annually.

    Codexis (NASDAQ: CDXS) Biofuels and biochemicals maker Codexis Inc said it was in talks with Royal Dutch Shell that would allow Codexis to sell its biofuels enzymes to other companies outside Brazil. Codexis currently has a partnership with Shell that expires in October and provided about half Codexis' 2011 revenues of $123.9 million.

    FutureFuel Corp. (NYSE: FF) reported its first quarter 2012 results on May 9, 2012. Revenue increased as a result of increased biodiesel sales. FF had pretax income of $12.0 million and adjusted EBITDA of $16.6 million as compared to $4.0 million and $8.9 million in 1Q11. Cash, cash equivalents and marketable securities increased to $157 million.

    Eco Ventures Group, Inc. (OTCQB: EVGI) Newcomer EVGI announced today that it has signed a Definitive Agreement to acquire a majority stake in Germany-based Energiepark Suptitz, GmbH ("EPS"). EPS is a diversified alternative energy feedstock, transportation, heat & solar power production company whose primary business is the production, processing and brokering of alternative energy feedstocks including rapeseed, palm oil and wood. EGVI encompasses biofuel, solar, and wind, while exhibiting one of the only positive cash flow business models.

    According to its preliminary (unaudited) 2011 financial results for the year ended Dec. 31, EPS generated 2011 EBITDA of $2.7 million on $30 million in revenue (using a 1: 1.29 dollar/euro conversion rate), for a 2008-2011 average annual revenue growth rate of approximately 42 percent. EVGI recently stated it is on track for fourth quarter completion of its 3.6 million gallon bio fuel plant at its Groveland, Florida headquarters. The facility will process biofuels from oil-rich plants and recovered cooking oils. At its full capacity, EVGI believes this facility can generate annual gross revenues of approximately $16 million with gross margins of about 30 percent.

    Amyris, Inc. (NASDAQ: AMRS) uses its industrial synthetic biology platform to modify microorganisms, primarily yeast, to convert plant-sourced sugars into a variety of hydrocarbon molecules. AMRS also sells ethanol and ethanol blended gasoline to wholesale customers. A recent successful demonstration flight using the advanced renewable jet fuel produced from Brazilian sugarcane by Amyris got everyone's attention.

    Solazyme (NASDAQ: SZYM) makes various cosmetic, nutritional, chemical, and fuel oils by feeding plant-based sugars to patented microalgae. SZYM has a fairly large contract with U.S. government agencies, but higher corn prices may be the reason investors have suddenly gained more interest in the stock.

    KiOR (NASDAQ: KIOR) has moved higher recently on news that it was granted Part 79 registration for its Renewable Gasoline Blendstock 5 by the U.S. Environmental Protection Agency. The registration, required by manufacturers of motor vehicle fuels by the EPA, must be completed prior to the sale of the product.

    Solar energy is an area where many experts claim the U.S. has a lot of catching up to do to get close to the global leaders. The Solar Energy Industries Association (SEIA), the U.S. trade association for the solar energy industry, recently stated that in fiscal 2011 the U.S. solar energy industry grew 109% year over year to reach 1,868 MW. Don't forget that Berkshire Hathaway together with the biggest Internet search company, the private equity company and insurers MetLife (NYSE:MET) and John Hancock poured more than $500 million into renewable energy in the last year. In Europe, the European Union's goal of a 20% share of renewable sources in the energy basket by 2020 certainly levels the field for companies operating in Europe.

    Ascent Solar Technologies Inc. (NASDAQ: ASTI) recently announced it received an order for 50,000 of its newly introduced EnerPlex cases for Apple Inc.'s iPhone that charges the phone using a thin solar panel. On June 19, 2012, ASTI filed an 8-K that the NASDAQ Listings Qualifications Panel is providing the Company until October 8, 2012 to regain compliance with the $1.00 bid price requirement for continued listing on The NASDAQ Stock Market.

    Suntech Power (NYSE:STP) along with LDK Solar Co., Ltd. (NYSE:LDK), the two top polysilicon makers in China was in the news recently for asking the country's Commerce Ministry to look into possible solar equipment subsidies by the United States and South Korea, and their effects on Chinese manufacturers. This move, which will exacerbate trade disputes, comes at a time of oversupply and of declining demand for solar power equipment.

    First Solar Inc. (NASDAQ:FSLR) was in the news recently since Cowen reduced their earnings estimates prior to Q2 earnings. Cowen said its reduction was due to margin compression from new business. Cowen additionally supplied scenarios based on long-term implications of the solar industry, such as declining backlog, low margins and plant closings.

    SunPower (NASDAQ: SPWR) has a lower price-to-sales ratio than First Solar and a comparable price-to-book ratio. It has been profitable in the last twelve months, which makes a price-to-earnings ratio calculation possible. With a lower debt-to-equity ratio than competitors, SPWR is also domiciled in the United States.

    LDK Solar (NYSE: LDK) is said to be blessed by the city of Xinyu, in the Jangxi province, agreeing to repay its loans from Huarong International Trust and Investment Corp. LDK posted a heavy loss in Q1 2012 because of high production costs and the continuing weakness in the solar panel market. The company is expected to survive the downturn despite its heavy debt load because of government support.

    Wind-power stocks definitely have investors' attention. Wired says wind energy can potentially meet US total consumption needs 12 times over. The natural-gas boom and a weak economy has driven traditional wholesale power prices lower, which has taken some of the wind out the sails of wind energy. Getting approval for a wind farm in the U.S. is often difficult, since many communities are skeptical of their aesthetics. Lower cost wind turbines are lowering costs and the wind sector is predicted to meet close to one-third of America's energy demands over the next several decades. Pinpointing investment opportunities in the wind industry is difficult, since there are very few wind companies trading on the big boards. For companies like General Electric (NYSE:GE) and Siemens (NYSE:SI), wind is only a small portion of their business.

    Guinness Atkinson Alternative Energy Fund (MFD: GAAEX) invests at least 80% of its net assets (plus any borrowings for investment purposes) in equity securities of alternative energy companies (both U.S. and non-U.S.). GAAEX is now at $2.26 from $15 in the past 12 months.

    Vestas Wind Systems (OTC: VWSYF) delivered its first wind turbines in 1979, has been losing money in recent quarters in the face of tougher competition. In October 2010, it announced plans to let go of around 3,000 employees and shut five business units in Europe. Once a high-flyer, VWSYF has lost most of its momentum.

    Broadwind Energy (NASDAQ:BWEN) recently got investors excited when it announced that the Chinese wind energy company Goldwind chooses it to provide 14 wind turbine towers for its Musselshell project in Montana, which is scheduled for installation during the second half of this year.

    Aerovironment (NASDAQ:AVAV) has gotten more active since Jim Cramer ranked this stock a Buy. The stock closed at $25.10, its 52-week high is $34.28, and its 52-week low is $21.14.

    Once again, higher natural gas prices or favorable legislation could easily spark a rally in alternative energy stocks. If you agree the best time to buy a boat is in the winner, perhaps you can see the value.

    Jul 24 2:46 PM | Link | Comment!
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