Crisis Investing: Bullworthy Talks with Leslie Kessler, CEO of PureSafe

As we've seen all too much this year alone, natural and man-made disasters have exposed drinking resources in those stricken communities to bacteriological and chemical contamination, making a once abundant clean drinking water source ineffectual in the greatest times of need. Leslie Kessler and I spoke on many different historical examples of catastrophes whose immediate first response relief has been swift and passionate, but not necessarily efficient as civil unrest and desperation threatened the prosperity of the relief efforts because of a prolonged lack to basic survival resources.

Ms. Kessler is the chief executive officer of PureSafe Water Systems, Inc., a company that has committed to developing PureSafe patented technology to provide purified drinking water to disaster response teams using a mobile unit specifically designed for rapid deployment worldwide. The unit can siphon water from any source albeit a lake, swimming pool, flood site, pumping it through the non-specific contaminant purification system- meaning it can decontaminate any and every strain of bacteria or pollutant with no need to test the water supply first for safety. The output takes only thirty minutes and can supply up to thirty thousand gallons of water a day, enough to serve forty-five thousand thirsty survivors and victims’ in portable bottles or bags onboard the unit.

PureSafe is considered a game changer among the disaster relief community that includes the government analysts testing the prototypes. While disaster relief is a highly collaborative effort among citizens and governments to suppress the damage and deliver resources and aid during an emergency in an efficient and well-organized fashion, the fundamental problem lies in distribution and the lack of preparedness protocol in public and private entities that are overwhelmed during these kinds of crisis (think of a hospital, for example). Take Hurricane Katrina as a practical model. The machine could have been air-lifted on a roof of by the stadium, connected it to contaminated flood water, and distribute it to the suffering people accordingly.

The company is currently undergoing government approval testing and in that effort, has hired on Underwriters Laboratories to help evaluate the electrical safety and performance of PureSafe’s First Response Water System functioning prototype. On today’s agenda is assessment of the uplift capabilities of the machine by crane.

The functions are simple enough so that the end-user only has to turn on the failsafe machine. Buyers of the mobile units (equipment with heavy-duty wheels built for abusive terrain and a helicopter-lift positioned onto the frame) are from the public and private sector and will include local, state, and federal agencies and departments including FEMA; hospitals and universities; the military, national guard and Homeland Security; hotels and many, many more national and international organizations that have interests in disaster response preparedness. The machines can be bought outright with warranties, leased, or rented with PureSafe providing on location support and staffing; towns and cities can also pool money together to buy one machine to share.

Ms. Kessler came into PureSafe in 2007 and immediately recognized that the existing technology was not fitting the needs of those demanding the kind of solutions the company was in the process of creating and subsequently, they started all over. They realized no company was totally focusing itself in the disaster response area that concerns water distribution while recent events have emphasized, now more than ever, that preparedness is the key – what if there’s an interruption in the water supply?

“It’s a great decision to be dealing with something that can make a difference and save people’s lives, and still be a very profitable company” said Ms. Kessler.

They’ve been attending conventions to network with potential buyers and investors this year. The company’s presentations have been extremely impressive: PureSafe is fulfilling a whitespace by providing a simple water purification service that can deliver potable water to thousands with the flip on an “on” switch. Ms. Kessler didn’t want to give information that has yet to be disseminated, but she did give a one-word response to questions concerning this year’s corporate performance that gives all the guidance shareholders need to hear: revenue.

Ms. Kessler confidently asserted that yes, in fact revenue will be booked this fiscal year and sales will be made. In July, the company will be presenting at a fire expo show with representatives from all over the Eastern seaboard that will offer major exposure for the PureSafe First Response Water System. The business structure is in place and the newly appointed board of directors is deeply experienced, knowledgeable, and very active. The workload and margins are in place and favorable. Finally, the need of the products are there, so what comes next, I asked her? It’s time to start selling inventory.

Here are some interesting links from PureSafe Water Systems:

·         Water Purification Overview – from the website

·         The Water Crisis Wiki – from the website

·         Hottest Commodity to Invest In – from the website

·         Water: Cycle of Life – PDF research from Leavitt Capital Management

Disclaimer I have not been compensated or paid by Puresafe Water Systems or their affiliates in stock, cash, or by any other means. Further, the author of this post nor his affiliates own stock or interest in this featured company.

For comments or questions please contact Tom Copeland from the contact page.

Posted via email from bullworthy's posterous

The End of BP: Bullworthy Sits Down With John DiBella, The COO of Enviro Voraxial Technologies

“How long will you be down there for?” I asked John, between sips of coffee. We had just started talking. “As long as we have to be” he responded with authentic austerity.

Within the oil industry, there is a market that a small South Florida company with a proven technology is perusing called “produced water”. For every one barrel of oil extracted and produced from underground wells here in the U.S., up to ten barrels of water is extracted. This water needs to be treated and purified of its contaminants before it is released back into the environment. Just how much water needs to be separated and then produced by these oil explorers? To answer that, you’ll need to consider that more water is produced in one year from oil companies than the amount of water that spills over the Niagara Falls in nine straight days.

Researching companies that are positioned for results in the gulf spill disaster zone there are a few opportunistic publically-traded companies that highlight the skills needed. But the problem, from the day the Deepwater Horizon rig exploded in late April to today has been a severe lack in efficiency – getting more done with less.

Enviro Voraxial is one of the companies meeting the need for efficiency. When I spoke with the company’s chief operating officer John A. DiBella, he was in the Gulf Panhandle meeting with local communities, authorities, and oil spill clean-up officials to discuss their technology and demonstrate the oily-water separator his family and him had built an entire company around called The Voraxial Separator. The separation machinery comes in a series of scalable sizes that are all designed to treat a range of wastewater flow rates and volumes; the Voraxial is arguably the world’s most efficient technology for high volume, bulk separation of fluids such as oil and water.

It’s clear that BP was not equipped to handle this kind of spill, but Mr. DiBella is happy to offer up that the oil company has been responsive in their efforts to locate, test, approve and acquire technologies that can help manage the enormous clean-up effort that lies ahead. In our conversation, Mr. DiBella did confirm that BP is reviewing the Voraxial separators and that Enviro was now one of 60K original clean-up assistance applicants, and then whittled them down to 250-500 closely considered candidates the oil company would be in discussions with.

And that’s the theme Mr.DiBella and I agreed should be emphasized: efficiency. The Voraxial is a proven technology that has generated revenue for the company as a diversified machine coming in four sizes: the Voraxial 1000, the Voraxial 2000, Voraxial 4000, and Voraxial 8000, all designed to handle different volumes of fluid efficiently and cost-effectively while using less space and energy than other technologies. Customers include the U.S. Navy and the State of Alaska (both have issued Letters of Endorsement to Enviro Voraxial that can be found on the company’s website here), and other major, worldwide energy exploration and oil and gas drilling companies.

I asked Mr. DiBella to compare the Voraxial technology to some other high-profile competitors. One of them is a company called Ocean Therapy Solutions that offers an oil and water separator centrifuge developed with financial backing from actor and enviro-activist Kevin Costner. Politely, Mr. DiBella began by acknowledging that any separation technology that can be used should be used because this Gulf oil spill is such a grand disaster.

“It’s great that everyone is trying” he said, before going on to explain that Ocean Therapies separator maxes out at around 150-200 gallons per minute of separating power (about 5,500 barrels per day), while the Voraxial 4000 does over two and a half times the volume of Costner’s machine at fraction of the cost (about 40% the cost), weight, energy, and space. Finally, the Voraxial 8000 does about 25 times the volume of Ocean Therapies largest unit at about 3 times the cost.

Mr. DiBella was confident in the company’s discussions with BP and other Gulf officials in the benefits that the Voraxial technology can bring to all parties involved in the clean-up effort. “BP has been responsive” he said, before going on to explain how Enviro is positioned to not only properly deploy its units in a timely manner and contribute to the Gulf clean-up effort but at the same time maintain as a small company whose technology can be used in a multitude of other functions. The company is currently pursuing many projects in the refinery, tar sands and produced water industries.

Mr. DiBella has also forwarded on to me a letter he received from a fuel division manager from the U.S. Navy. Although the material was confidential and quotes were not available at the time of this publishing, it was well within the manager’s opinion that deployment of the Voraxial would reduce, by large margins the damage done t the Gulf and recover a far greater amount of hydrocarbons that have been released in the Gulf. The letter also went on to praise the technologies efficiency and conceded that the machine is so powerful, spills of any magnitude could be dealt with in the future.

I had also asked about the conditions of the fundamental capital structure of the company – specifically, cash flow and long-term debt. “You have a small company with new technologies working with some of the largest companies in the world with a clean balance sheet and at a time when our product is needed so desperately” Mr. DiBella said, “we moved this company to a debt-free position and we believe the shareholders will be rewarded”.

The debt-load he is talking about shedding is the largest long-term liability on the balance sheet, accrued salaries to executives, which was converted into stock options in the beginning of June. “The officers are not here to draw a salary” Mr. DiBella concluded just before he had to hang up, “we’re here to build a business and in doing so, benefit from the appreciation of our share price”.

As always, feel free to contact me with questions, comments, or concerns, or suggest another CEO or company to interview at Tom@bullworthy.com.

DISCLAIMER: I have not been compensated in any way, shape, or form by Enviro Voraxial, John DiBella, or any of their affiliates or third-parties.

Understanding Biopharms: Bullworthy Sits Down with Tom Chesterman of Bionovo, Inc.

I’ve introduced many small strategies and tips throughout all of my Bullworthy articles, but I have to say the most relevant advice I’ve offered first-time investors to date has to be “know your company”. Essentially, what that means is to ask questions about what a company does and then decide whether or not you (a) understand it, and (b) want to invest in it.

Apple makes personal computers and mobile communications devices that are on the leading edge of invasive technology. Valero Energy is a major oil refining and marketing group that drills, processes, and sells gas to drivers all around the continent. And Coach makes, well, purses.

But there are many companies who operate in complex, obscure, and hard-to-understand industries that could potentially make shareholders very rich in the long-term…if that shareholder was able to understand what the hell is going on behind the scenes. This article’s case-in-point: biopharmaceuticals and drug development companies are difficult to understand, so I brought in some help to explain it all to us first-time investors.

Biopharmaceutical companies come in all shapes and sizes since gaining massive investor appeal in the 1980s when scientists and doctors began to discover that medical drugs could be produced by deriving proteins and synthesized DNA from other sources rather than a purely biological source. The first of such drugs was a blockbuster hit – biosynthetic insulin called Humulin, developed by a drug development company called Genentech and licensed to Eli Lilly, one of the largest drug manufacturers in the world. If you were a shareholder early enough in Genentech, I promise you were rewarded handsomely for your loyalty.

In 1985, the first year of sales for Genentech, the company logged $5.2 million in revenue. In 1986, the company logged an astounding $43.6 million and from there, forget about it. Check out this timeline:

What about the stock price? That record is quite impressive too, in fact, climbing from $15.00 a share in 1988 to over $90.00 in ten years time – a six-fold increase by 1999. Another interesting point is the way in which the stock price of a biopharmaceutical or drug development company reacts to macroeconomic movements or turbulence. During the financial crisis of September 2008, the company’s stock price was off only 11% or so, from an average of $90.00 a share to $80.00 a share during those panicked months. Compare those minimal losses with massive worldwide stock market average declines of 60-70% until the bottom of the Dow Jones Industrial Average Index finally brought the American economy to its bitter lows in March 2009.

I suspect the reason has to do with the nature of the business. These companies produce products, drugs to be exact, that save people’s lives. The biggest hurdles for these drug developers are actually quite simple to understand: investable capital to pay for expensive drug trials and overhead operations and landing Federal Drug Administration approval and clearance. Its how the drugs actually work that’s intensely confusing (eager to understand it all? Be prepared to enroll in medical school then – that’s about the only way to truly comprehend everything you’ll need to know to be an expert on any given biopharm company). If these companies can gain that FDA approval, then the next step is to land a partnership with a drug manufacturer because companies like Genentech and Bionovo are not in the business of actually marketing and selling the drugs; they simply discover the benefits and sell the rights to the discovery, profiting tremendously off the back-end sales.

Unfortunately for individual retail investors like you and I (not to mention first-time investors with little in any experience in researching these companies) biopharm and drug development companies are much, much more complicated to analyze in terms of share price valuation.

So let’s keep it simple for this articles sake: an inventor discovers a DNA or protein strand that can help treat particular types of cancers or diseases. The firm the inventor works for then patents, pays for, and tests their discoveries in controlled government experiments; if FDA approval and clearance is earned, they then partner up with large drug manufacturers and everyone involved (including shareholders of both partners) becomes instantly wealthy.

Of course, for most of these companies (and there are dozens in the U.S. and hundred in the world) the entire process from A-Z is like trying to wash a car in a sandstorm. The FDA trials alone can take anywhere from 3-5 years and cost millions of dollars. Sometimes those trials don’t include human testing, which can cost additional hundreds of millions but is almost always necessary because no drug partner would ever agree to manufacturer the drug without that kind of insurance and the same goes for the angel investors. The day-to-day operations are expensive, complicated, and full of setbacks that threaten to eliminate the existence of an entire firm and all of its work

I wanted to know more. I got on the phone with Thomas Chesterman, the chief operating officer of the early-stage drug development company Bionovo, Inc. Bionovo currently has 6 developing drugs in its products pipeline, one of which is finally entering Stage III clinical trial, sort of like the equivalent of a baseball player getting stuck on third base. He says most drugs available on the market today to treat female menopausal symptoms are based on a foundation that has become irrelevant and outdated– by using chemistry instead of biochemistry – and essentially, biopharmaceutical based therapeutics are much more effective these days.

Tom gave me a timeline of how biochemistry and biopharmaceuticals have come about in the women’s health niche the company focuses on. Currently, women’s postmenopausal hormone therapies are effective but come with substantial side effects that include cancer and disease, recently causing the FDA to issue black box warnings. The founder of what would eventually become Bionovo discovered a series of estrogen receptors (aptly named “beta” and “alpha”) were causing these abnormalities when activated by these drugs that flood the market. Menerba, the company’s first product in the pipeline, could become the remedy since the drug is selective in which estrogen receptors it activates, thus eliminating those newly discovered inherent risks.

Tom and I talked at length about the evolution drug development companies take as society, consumers, and the government begins to discover the dangers and side effects of therapies that were developed years ago are actually much more dangerous than the new treatments and discoveries we’re making now as technology improves. Essentially, as Tom says, “most of our competitors are putting the same salt in different salt shakers”.

If you’re looking at drug development companies to buy stock in, make sure that company meets this basic criterion:

Take a deep look at the company’s pipeline.

Are there many different products in the making, or is there just one or two? Remember, with these small start-ups one product can make or break the entire company. Bionovo has three different drugs in or entering Phase trials with the FDA. There are also three additional discoveries the company has recently made that will sustain the long-term growth of the company. Remember, these drugs may take years and years of investment and incubation before even getting FDA approval, much less actually coming to consumer markets. Make sure those drugs in the pipeline are spaced out in equal intervals of time so that the company your looking at is not wholly dependent on one drug not being ready for sale for an unreasonably long time in the future (“It’s coming along great!” I can hear some clueless CEO trying to convince shareholders during a meeting, “Only twelve more years to go!”).

Make sure the company is actually meeting a high-demand need.

A company that promises to cure athlete’s feet is probably not one you should be betting the farm on. Bionovo has been in development of a topical and orally-administered drug that has promising breast cancer treatment capabilities that so far the company has indicated as being a safer, more accurate, and more efficient treatment when compared with traditional therapeutics including chemotherapy.

Make sure the right team is being the company.

Having experienced and knowledgeable officers in the executive ranks and a powerful and deeply-connected board of directors is much more important than many investors realize. I call it “insider confidence” and I value it. When I buy a stock, I want to know that people who run the company have enjoyed success and they have an interest in the success. Insider confidence I believe is particularly essential in biopharmaceutical companies where cash is tight, the odds against success are high, and smart, dynamic leaders need to be steering the wheel.

For questions, comments, or concerns, contact me at Tom@bullworthy.com. To suggest a CEO or company you would like to see me interview, drop the suggestion in a comment below.

DISCLAIMER: I have not been compensated in any way, shape, or form by Bionovo, Tom Chesterman, or any of their affiliates or third-parties.

Understanding Biopharms: Interview with Bionovo's COO Tom Chesterman

Earning Their Copper: Penny Stocks That Are Actually Worth the Pennies

Originally posted on Bullworthy.com.

June 27, 2010

Successful first-time investing is all about learning as much as you can and then applying that knowledge with discipline and practicality. And while that sometimes isn’t even half the battle you’ll likely face ahead, it is probably the first step and will soon be your golden rule if you ignore it and lost money on your first trades. Investing with discipline and practicality means you’re buying what you know, when you know it, and at a price and value that you understand.

Is that too much to swallow in one sentence? I know it probably is, but you’ll have to get used to it. Let’s take this one step at a time and use (what seems to be, at least) a common first-time investors Holy Grail: the penny stock.

A penny stock has undergone many definitions among traders and no one description seems to hold any more validity than the other. Some say a penny stock is any publically-traded stock that trades for under five bucks a share, while other insist trading under a dollar a share is the mandatory criterion. I have to agree with the former argument; when deep recessions hit and stocks tank, many times it’s because one rotten apple spoils the whole fruit basket because even the good apples are considered tainted (consider the big banks of the 2008 financial crisis: Lehman Brothers and Bear Stearns who dramatically failed and brought down with them some smaller banks and thrifts that had no exposure to mortgage lending and investments and therefore weren’t as vulnerable but their shares plunged anyway). In medicine, and as of recent popularity in business and finance, this foul, bad reputation is referred to as “contagion”. My point is this: sometimes a stock trades below five bucks a share without truly being worth anywhere near that little amount when it’s really not the company’s performance at fault, and they shouldn’t be classified as a penny stock.

Another important criterion a publically-traded company must meet with the penny stock label accurately is that it’s traded “over-the-counter” or OTC on obscure, unregulated stock exchanges that are rife with ambiguity and unsureties. The two most major exchanges in which penny stocks are traded are Over the Counter Bulletin Boards (OTCBB) and Pink Sheets. Here’s the difference between the two and after you read you’ll understand why your knowledge and discipline will be so important when deciding whether or not to buy a penny stock. OTCBB is an exchange in which regulation occurs (companies are required to report financial documents, statements, and changes to the SEC and be made available to the public at all times) and typically they feature companies of all sizes who a) don’t meet the listing requirements of major exchanges, including but not limited to a certain stock price or shares outstanding and free trading; or b) are gearing up for major exchange listing.

The Pink Sheets by stark contrast lists companies who are not required to file any public documentation and are under no obligation of regulation. For all the shareholder knows, a Pink Sheets company could be one big Nairobian credit card and identity theft scam (sorry Africa, I’m just so damn tied of those emails.)

Know what it is you’re trading. Enough said about discipline for now.

Practicality means doing some homework. If you’ve found a penny stock company that you think has a unique idea and could gain some attention, do some homework! These are publically-traded companies; that means any and all information (within reason, and after its public release of course) is available for you to know.

The majority of penny stock companies are new and small companies that have a ton of debt and not much revenue because there are in that start-up phase. So by that very nature, their share prices tend to be very volatile and don’t trade very often, meaning that if a big number of shares traded in a transaction one day in relation to how many shares are outstanding and available to purchase, there is a huge price swing whether it be up or down. Another investor buying ten thousand shares of a fifteen cent stock could send the share price up five hundred percent in a day (I’ll talk more about why penny stocks move up and down and the factors that contribute to those swings in a later post next week that includes why they can also be dangerous and unforgiving).

Expecting a four-thousand percent return on a penny stock you just read about on a YahooFinance bulletin board? Great! Let me know about it, so I can avoid buying it.

Here’s the bottom line. If you found a penny stock you really want to buy because you think it could explode, then stop for a second and consider this: is there really anything interesting about this company? Where’s the story and where is the proof? If you can’t come up with much, it’s hyped. Here’s an example of an interesting company who’s executive board I recently met and talked to.

Janel World Trade* has been a logistics and transportation services company since the 1970’s, shipping all over the world for its clients and has gained exceptional accreditation in its business, most notably into China. In 2007, an environmental organization approached Janel to help them ship six hundred containers to a heavily polluted and contaminated lake in a Chinese providence called Lake Tai, a huge body of water that supplied water to millions of people in many towns and two major cities: Shanghai and Wuxi. The containers held an anti algaecide solution called Clear Blue 104 the environmentalists had been contracted to distribute but were having issues clearing the requisite permits with the local Chinese authorities. Soon, the group had lost the contract to deliver Clear Blue, creating an opportunity for Janel to step in and take over by using their government contacts, knowledge, and experience. The company eventually landed a United States Trade Authority grant to test the solution in live lake conditions, a grant from a U.S. government agency that obviously has big interests in building trade around China. The initial testing has gone well and the next step is to actually implement the solution into Lake Tai. Should this all go according to Janel’s plan, there are hundreds of other lakes (and millions more dollars that will be committed to Janel) that can be taken advantage of, brining in a whole new vertical business to the company’s corporate and operational structure and new streams of dependable, high profit margin revenue.

And what if Janel does not get follow on contracts immediately? Because Janel is such an unknown and under followed company, there has been no value placed on the potential for large high profit contracts in the water pollution remediation sector. Janel, which did $71 million in logistics business last year, is trading at a very low market capitalization of $8.8 million (remember that “market cap” is calculated by taking the amount of shares outstanding (available) and multiplying that by the stock price – loosely defined, its a way to value a companies worth). When Janel gets noticed by more investors, this valuation could easily rise to a more reasonable multiple of sales. In the second quarter of 2010, Janel announced record-high revenue increases of about twelve percent at $20 million dollars in only three months. Janel’s stock trades under the symbol JLWT for just $.40 per share.

Price-to-sales is another fundamental business valuation (PSR) that pegs a stock to it’s performance history or to that of other stocks. PSR is calculated by dividing the share price by the revenue per share. Most small, un-traded, and unnoticed stocks like Janel have little or no revenue, much less $71 million.

So what about Janel? IT’s tremendously low; in fact a PSR of just one times sales, a modest estimation, would put JLWT (on last year’s revenues and no contribution from Chinese environmental contracts) at a price of $2.00/share. Now there is a penny stock worth its copper.

As always, post your comments, questions or concerns or email tom@bullworthy.com.

*I have received absolutely no cash or any form of compensation from Janel World Trade before, during, or after writing this article.