Companies featured in the current edition of the newsletter: AFMI, AMAR, CHIP, CGXP, CKGT, CLXS, CTVWF, CYTR, FMTI, GCEH, HYTM, ISON, IVOT, PLKH, PSTI, RVEP, SMGY, SWVC
The market rallied 4.3% in the prior week, helped by beter-than-expected earnings and economic news that was better-than-feared. In weeks past such strong moves have been quickly followed by a rush to sell into the strength. That didn’t happen this week. The Dow Jones Industrial Average gained 43 points, cutting its year to date loss to 2.8%. The Nasdaq posted a gain of 20 points, reducing its year to date loss to 8.6%. The S&P 500 followed with a small gain of 8 points cutting its year to date decline to 4.8%. The Russell 2000 concluded the week with a gain of one point that kept its year to date loss steady at 5.8%.
The market held its ground this week in the midst of oil prices reaching a new record high of $119.90 per barrel, new home sales for March declining 8.5% to a near 17-year low, and Microsoft dropping 6% on Friday after reporting results and providing guidance that failed to meet up to investors expectations. This week’s data was limited to a handful of reports showing further declines in the housing market, better than expected news for weekly initial jobless claims and durable goods orders, excluding transportation, and yet another depressed consumer sentiment reading. By and large, though, corporate news was the focal point for participants with earnings reports from over 100 S&P 500 members being reported this week.
The retail sector was the week’s big mover, tacking on 2.5% as investors honed in on its recovery potential with the impending arrival of the tax rebate checks. The strength was all the more notable since it coincided with oil prices hitting a new record high. Supply concerns, and a report Friday that there was a skirmish in the Persian Gulf between a contracted U.S. vessel and an Iranian boat, fueled the uptick. Oil prices settled for the week at $118.64 per barrel.
What should investors look to next week? The first-quarter earnings season continues with a flurry of releases as Enterprise Products (NYSEL EPD), Humana (NYSE: HUM), Sysco (NYSE: SYY), Tyson Foods (NYSE: TSN), and Verizon (NYSE: VZ) release results on Monday before the bell. Later in the day Hartford Financial (NYSE: HIG), Visa (NYSE: V), and STMicroelectronics (NYSE: STM) will make announcements. Tuesday will feature announcements from Archer-Daniels (NYSE: ADM), Avon Products (NYSE: AVP), Ashland (NYSE: ASH), Burlington Northern Santa Fe (NYSE: BNI), CBS Corp (NYSE: CBS), Medco Health Solutions (NYSE: MHS), Office Depot (NYSE: ODP), U.S. Steel (NYSE: X), Valero Energy (NYSE: VLO), Waste Mgt (NYSE: WMI), Express Scripts (NASDAQ: ESRX), and Flextronics (NASDAQ: FLEX). Wednesday will be another extremely busy day with announcements from Alcatel-Lucent (NYSE: ALU), Colgate-Palmolive (NYSE: CL), Constellation Energy (NYSE: CEG), Cummins (NYSE: CMI), Dean Foods (NYSE: DF), General Motors (NYSE: GM), Hess (NYSE: HES), Intl Paper (NYSE: IP), Kellogg (NYSE: K), Kraft Foods (NYSE: KFT), Procter & Gamble (NYSE: PG), Siemens AG (NYSE: SI), Southern Co (NYSE: SO), Time Warner (NYSE: TWX), Time Warner Cable (NYSE: TWC), Murphy Oil (NYSE: MUR), ONEOK (NYSE: OKE) and Prudential (NYSE: PRU). Apache (NYSE: APA), Cardinal Health (NYSE: CAH), CIGNA (NYSE: CI), Comcast (NASDAQ: CMCSA), CVS Corp (NYSE: CVS), Dominion (NYSE: D), Exxon Mobil (NYSE: XOM), Marathon Oil (NYSE: MRO), Tyco (NYSE: TYC), Tyco Electronics (NYSE: TEL), America Movil SA (NYSE: AMX), MetLife (NYSE: MET), Sun Microsystems (NASDAQ: JAVA), Chevron (NYSE: CVX) will release results on Thursday. Coming Friday before the bell will be announcements from Con Edison (NYSE: ED), Chevron (NYSE: CVX), Duke Energy (NYSE: DUK), Viacom (NYSE: VIA-B), and Nortel (NYSE: NT).
On the economic front, April Consumer Confidence Report will be released at 10:00am on Tuesday. Wednesday morning, Q1 GDP and Chain Deflator, Q1 Employment Cost Index, and April ADP Employment will be released. Following later in the morning will be the April Chicago PMI, weekly Crude Inventories, and closing out the day will be the FOMC Policy Statement at 2:15pm. Weekly Initial Claims, Match Personal Spending, March Personal Income, and March PCE Core Inflation will be released Thursday at 8:30am. March Construction Spending and April ISM Index will be released at 10:00am on Thursday. Prior to opening on Friday, April Hourly Earnings, April Nonfarm Payrolls, and April unemployment rate will be released. Following later on in the morning will be March Factory Orders to close out the week on Friday.
The Conference schedule will be relatively quiet this week and begins on Tuesday with the LD MICRO Conference in Los Angeles for microcap companies and the two-day Lehman Brothers Annual Retail Conference in NYC. Wednesday will feature the Houlihan Lokey Howard & Zukin Financial Institutions and Business Services Conference in NYC and the three-day Morgan Stanley 2008 Global Healthcare Unplugged Conference in Key Biscayne, Florida.
Could healthcare services company Hythiam, Inc. (NASDAQ: HYTM) finally be in a position to land a managed care deal, as the company discussed in its fourth quarter conference call? The company has not said publicly, but last week shares of the company’s stock recorded their highest weekly percentage gain since the company went public. Shares of the beaten-down stock jumped 48% on strong volume, in the process crossing its 50-day EMA for the first time since October. Despite the gain, shares are still down 12% this year and well below the $4.79 price the company raised capital at in November, 2007. The stock ended the week at $2.67, up 87 cents.
CytRx Corporation (NASDAQ: CYTR), a biopharmaceutical company engaged in the development and commercialization of human therapeutics, announced that scientists at its San Diego laboratory have discovered a novel series of compounds that amplify the natural cellular chaperone response to toxic misfolded proteins in cell culture, providing potential pipeline leads for next generation drug candidates in a number of disease indications, including cancer, cardiovascular disease, diabetes and neurodegenerative diseases. Before this discovery could result in any clinical candidates, the company plans to file a patent application for these compounds, followed by submission of the study results for publication in a peer-reviewed journal, while at the same time continuing the process of compound characterization and lead optimization. Share rose by $0.09, to finish the week at $0.99.
Forbes Medi-Tech Inc. (NASDAQ: FMTI), a life sciences company dedicated to the research, development and commercialization of innovative products for the prevention and treatment of life-threatening disease, announced that it has extended its supply and licensing contract with Pharmavite LLC until mid 2009 for the continued sale of Reducol, the branded cholesterol lowering ingredient in one of Pharmavite’s leading line of dietary supplements, Nature Made CholestOff and CholestOff Complete. The contract calls for Pharmavite’s exclusive rights to Reducol in the U.S. mass-market distribution channel. Pharmavite is expected to support the CholestOff and CholestOff Complete brands through various media channels, public relations and NatureMade.com features. Shares rose $0.15 for the week, to close at $1.16.
Rio Vista Energy Partners L.P. (NASDAQ: RVEP), an energy services master limited partnership focused on the development of oil and gas in Oklahoma and the terminalling and transportation of bulk chemical and petroleum products in Virginia, announced its financial results for the year ended December 31, 2007. The company reported a net loss of $4.9 million or $2.44 per common unit. 2007 was a transitional year in which the company divested non-core assets and acquired the operations of Regional and certain assets in Oklahoma. The company believes that the costs associated with acquisitions and restructuring in 2007 will be supported by increased production levels in 2008. Shares fell by $0.45, to finish the week at $12.55.
VeriChip Corporation (NASDAQ: CHIP), a provider of radio frequency identification systems for healthcare and patient-related needs, said it will launch its first-ever direct-to-consumer marketing campaign in South Florida on April 28. As part of this campaign, the company has renamed its patient identification system Health Link and created a new website that will go live at the campaign launch. The site will provide complete information about the product and how to enroll as a Health Link member. The company has also entered into a relationship with HearUSA, Inc. a leading provider of hearing care, which has eight locations throughout the Palm Beach market where patients can enroll in Health Link. This partnership allows the company to offer consumers a convenient location in a professional setting where they can be educated on Health Link and enroll as a member. Share rose by $0.18, to finish the week at $2.26.
Amarillo Biosciences, Inc. (OTCBB: AMAR), a company that engages in the research and development of biologics for the treatment of human and animal diseases, announced that it has entered into a Supply Agreement for Animal Health with CytoPharm, Inc., a Tapei, Taiwan-based biopharmaceutical company whose parent is Vita Genomics, Inc. Under the terms of the agreement, CytoPharm or its affiliates will conduct all clinical trials and seek to obtain regulatory approvals in both China and Taiwan to launch the company’s low dose oral interferon for treatment and prevention of various diseases in swine, cattle and poultry. According to the agreement CytoPharm paid the company an initial license fee of $30,000 and agreed to pay royalties on all sales of the product in China and Taiwan. The stock fell by a penny for the week, to close at $0.31.
Collexis Holdings, Inc. (OTCBB: CLXS), a leading developer of high definition search and knowledge discovery software, announced that CABI, a not-for-profit international organization specializing in scientific publishing, research and communication, has selected the company to develop a knowledge discovery application and provide semantic search solutions by instituting a Knowledge Dashboard as a pilot implementation. The company will analyze a vertical of CABI content in a cutting edge application that will provide expert profiles and trends related to agriculture and the environment enabling the organization to expand its offering from one of pure content provisioning to discovery. This pilot program represents the first engagement between CABI and Collexis. The stock fell by $0.05 for the week, to close at $0.32.
Global Clean Energy Holdings, Inc. (OTCBB: GCEH), an emerging renewable energy company focused on the production of feedstocks used for the production of biofuels, announced that the three institutional holders of its Series A Convertible Preferred Stock have exchanged all outstanding shares of Series A preferred stock into shares of common stock at the current market price of $0.10 per share. The conversion simplifies the company’s capital structure by eliminating one class of preferred securities. In connection with the exchange of the Series A preferred stock, Global Clean Energy Holdings, Inc. issued a total of 28.9 million shares of its common stock to the three investors. The stock rose by a penny for the week to close at $0.11.
ProLink Holdings Corp. (OTCBB: PLKH), a leading provider of Global Positioning Satellite golf course management systems and on-course advertising, announced that its subsidiary inked a deal with longtime PGA TOUR standout Brad Faxon to join the company’s Strategic Advisory Board. One could expect that Faxon might use his contacts to generate new business for the company. Once finalized, ProLink’s Advisory Board will have up to six members from a variety of professional backgrounds. The board will meet regularly and provide the company expert advice on a range of topics to bolster ProLink’s industry-leading technology, golfer-friendly platform, customer support and internal operations. The Advisory Board will operate independently from ProLink’s seven-member Board of Directors. The stock closed the week unchanged at $0.55.
Seaway Valley Capital Corporation (OTCBB: SWVC), a company that makes equity, equity-related, and debt investments in companies that require expansion capital, announced that its wholly owned subsidiary, Patrick Hackett Hardware Company, has acquired the franchise rights and has opened a RadioShack store-within-a-store for its Hackett’s in Hamilton, NY. The RadioShack store is now the third RadioShack outlet owned and operated by Hackett’s, as earlier this year it assumed the Tupper Lake and Pulaski franchises from WiseBuys. RadioShack stores within the Hackett’s operations have historically been a profitable asset for the company, and its stores typically perform better in the context of a store-within-a-store versus as a traditional independent, stand alone store due to higher foot traffic levels and more flexible hours associated with a department store. The company also announced that its wholly owned subsidiary, North Country Hospitality, Inc., has engaged Quantified Purchasing Resources of Orlando, Florida, to negotiate vendor product purchasing contracts on its behalf. QPR, whose customers are primarily multi unit restaurant groups, annually purchases over $100 million of products from national manufactures and distributors. The stock traded at below $0.01 for the week.
On the Wires: Affinity Media International Corp. (OTCBB: AFMI), a special purpose acquisition company that previously announced a definitive agreement to acquire Hotels At Home Inc., announced that stockholders of record as of April 29, 2008 will be invited to attend Affinity’s special meeting of stockholders to be held on May 28, 2008.
Collexis Holdings, Inc. (OTCBB: CLXS) announced that Mark Murphy has been named the company’s chief financial officer. Smart Energy Solutions, Inc. (OTCBB: SMGY), announced that it will present at the first LD MICRO annual conference at the Omni Hotel in Los Angeles on Tuesday. CityView Corporation Limited (OTCBB: CTVWF) announced the appointment of Ian Egan as the company’s Director. The company also announced the resignation of Peter Smith as a Director in order to reduce his workload. Ceragenix Pharmaceuticals, Inc. (OTCBB: CGXP), a biopharmaceutical and medical device company focused on infectious disease and dermatology, announced that it will be presenting data on its CeraShield antimicrobial medical device coating at the upcoming Medtech Insight conference on April 28- 29, 2008 in Paris, France. Pluristem Therapeutics Inc. (NASDAQ: PSTI), announced that it has been chosen to present at the First Annual Israeli Presidential Conference “Facing Tomorrow”, to be held on May 13-15, 2008 in Jerusalem.
SPECIAL SITUATIONS:
China Kangtai Cactus Biotech Inc. (OTCBB: CKGT) $0.70
The market for cactus plants has seen a promising trend of continued growth which is largely due to the plant’s many uses and strong consumer demand. Cactus products have been shown to provide health benefits and have been used to treat a variety of health issues including, diabetes, adiposity, constipation, cholesterol, high blood pressure, low immunity, and skin disorders. They also contain a number of vitamins, minerals, and essential amino acids. Cactus plants are used in a variety of herbal based medicines and supplements, as well as a number of foods and beverages. Also the increasing public awareness of health benefits of cactus based products as well as an increase in disposable income in China are favorable signs for the market as a whole.
China Kangtai Cactus Biotech Inc. is a vertically integrated grower, developer, manufacturer and marketer of a variety of cactus-based consumer products including nutraceuticals, beverages, packaged foods and various raw and intermediary materials containing cactus leaves, fruits, and cactus derivatives. It is also China’s market leader in cactus plant production and cactus derivative products R&D and sales.
With 387 acres of plants and an active R&D group, Kangtai holds 15 product patents and is seeking another 15 in a variety of product categories. Kangtai’s high-quality products are sold throughout China via a growing distribution network that includes over 10 regional distributors with more than 200 second tier distribution agents, who cover 14 provinces and 4 municipalities.
The company predominantly grows 3 species of cacti which are Mexican Pyramid, Mexican Milpa-Alta, and Mexican Queen. Mexican Pyramid and Queen cacti are used for cactus fruit drinks and nutraceutical products; Mexican Milpa-Alta is mainly used for cactus nutritional food products. The company’s annual production capability of edible cactus was 60,000 tons in 2006. The company also owns two production facilities in Harbin & Guangdong that are fully equipped to produce cactus juice, wine and other company products. Each facility is 10,000 sq. meters. A third R&D facility is based in Heilongjiang.
For the fiscal year ended December 31, 2007, the company’s sales increased 37% to $14.4 million, generating operating income of $3 million. The company earned 13 cents per share, compared to 8 cents in fiscal 2006. With a recent investment of $500,000 from T Squared Investments the company also looks to finance an aggressive marketing program in the domestic Chinese market with a goal to further penetrate and expose the large market demand of the cactus brand of China Kangtai. In the last few years the company has experienced incredible growth which is projected to continue as China Kangtai is positioning itself to become the choice brand of consumers through its patented products and marketing campaign.
iVoice Technology (OTCBB: IVOT) $0.0011
While most people drive cars, far fewer are familiar with what happens to tires after they have been worn out or are no longer commercially usable. While drivers may not focus on this issue, the Environmental Protection Agency (EPA) has identified surplus or worn out tires as both an environmental risk and health issue. One company that is attempting to solve this problem is iVoice Technology, Inc, a company spun out from iVoice in August, 2005. The company is taking steps to become a “green” technology company, focused on acquiring and identifying promising technologies that address environmental issues.
How big a problem is worn out tires? In 2003, the Rubber Manufacturers Association estimated that there were 275 million tires in stockpiles across the United States and that approximately 290 million scrap tires are added each year. The report noted that more than 90% of the illegal scrap tire accumulation and associated stockpiles are located in 11 states, making a targeted marketing program feasible. Many of the states did not have abatement programs or waste management programs in place at the time of that report.
In 2006 the EPA became involved, publishing a Guidebook called “Scrap Tire Cleanup” in which it noted that large scrap tire stockpiles present a risk to human health and the environment for several reasons. It noted that, “They provide an ideal breeding ground for mosquitoes, which carry and transmit life-threatening diseases such as encephalitis, West Nile and Eastern Equine virus, and dengue fever in some regions. Stockpiles can also catch on fire as a result of lightning strikes, equipment malfunctions or arson. The longer a stockpile continues unabated, the more likely it is to catch fire. Some experts no longer consider it a question of if a stockpile will catch fire, but when it will burn.”
What is the economic opportunity? According to the report, “State, federal and local agencies have spent tens of millions of dollars over the past several decades in responding to tire fires and as a general rule it is five to ten times more expensive to remediate a fire site than it is to remove the tires before they catch fire.” This is where iVoice comes in. The company recently said it completed its review and analysis relating to the manufacture of products from recycled tires and will be filing for several patents in the near future, suggesting it is a precursor to marketing its products to address the problem. IVOT is also likely to seek acquisitions to accelerate its development in this area.
The company’s ability to make acquisitions and develop its tire remediation technologies was recently enhanced by a $1.3 million investment it received from iVoice, its largest shareholder. The company used part of the proceeds to repay approximately $691,000 in secured convertible debt to an institutional investor as a result of the capital infusion, reducing a potential overhang in the stock. Still, the company has a nominal valuation. Based upon the outstanding shares as of year-end, the company has a market capitalization of just $2 million. The company’s stock is actively traded. However, if it is successful in marketing its “green” solutions, its valuation could increase significantly.
