Companies featured in the current edition of the newsletter: ACCY, BOKO, CACN, GCEH, GSPG, ILNS, ITUI, SMGY, SRRY, SWVC, TKO, XCR
With the Fourth of July holiday on Friday, it was a short week of trading. It was also a volatile week of trading, accented primarily by a negative bias that was tied to ongoing concerns about the financial sector, rising oil prices, earnings disappointments and the deteriorating state of theU.S. auto industry. The S&P 500 finished the week down 15 points or 1.2%, increasing its year to date loss to 14%. It is currently down 19.9% from the peak it hit last October. A similar claim can’t be made for the Dow, Nasdaq or Russell 2000, though, as each is down more than 20% from the peaks they hit last year, making the “Bear” market a grim reality. The Dow Jones Industrial Average fell by 58 points, bringing its year to date loss to 14.9%. The Nasdaq Composite Index was hit hard last week with a loss of 70 points or 3%, increasing its year to date loss to 15.3%. The Russell 2000 had the biggest percentage loss of the week, as it dropped 4.6% or 32 points, bringing its year to date loss to 13.1%.
For those who thought it was a bad first half of the year for stocks…they were right. It was the worst six-month period in 38 years. Like the first half of the year, there were few safe havens last week, as even energy stocks fell sharply despite a rise in energy prices, and financial and consumer stocks continued their swoon. Merrill Lynch was the real spoiler last week as it downgraded GM to underperform from buy, noting at the same time that bankruptcy for the auto maker was not possible. GM simply responded by saying it believes it has sufficient liquidity to meet its needs in 2008. GM’s stock fell 15% Wednesday to $9.98, marking its lowest level since 1954. Its counterpart, Ford, didn’t fare much better in the shortened week. Its stock dropped 11% to $4.42, or roughly the equivalent of the price of a Happy Meal at McDonald’s. The hardest hit area on the week, though, was the materials sector. It fell 5.8% as a rate hike by the European Central Bank, worrisome economic data out of the U.K. and Japan, and general concerns about a slowdown in the global economy triggered an aggressive bout of profit taking.
Pockets of strength during the week were found in defensive-oriented sectors, such as consumer staples (+1.2%), health care (+1.2%), telecom (+0.3%) and utilities (+1.6%). The consumer discretionary (-2.4%), financial (-2.9%), and technology (-2.3%) sectors all underperformed the market. There were a number of economic reports during the week. They brought mixed results relative to market expectations. The most important report of the week was the June employment report. It was released before the start of trading Thursday and checked in close to expectations on all fronts. Nonfarm payrolls declined 62,000, hourly earnings rose 0.3%, the average workweek was 33.7 hours and the unemployment rate held steady at 5.5%.
What should investors look for this week? Before the open on Tuesday, Pepsi Bottling (NYSE: PBG) will release earnings results, followed by an announcement from Alcoa (NYSE: AA), after the market closes. Shaw Group (NYSE: SGR) will report its earnings Wednesday after the market closes. Thursday will highlight reports from Marriott (NYSE: MAR) and Progressive (NYSE: PGR). The most notable earnings release of the week will come from General Electric (NYSE: GE) on Friday before the market opens.
The conference schedule is relatively light and begins Tuesday with the two day Credit Suisse Emerging Market Currencies Conferences in Geneva and the three-day Oppenheimer 8th Annual Consumer Growth Conference in Boston. Wednesday will feature the Deutsche Bank Securities FinTech 2008: Senior Executive Forum in NYC.
On the economic front, May Consumer Credit, May Wholesale Inventories, and May Pending Home Sales will be reported on Monday. Weekly Crude Inventories will be announced on Wednesday at 10:30 a.m. Prior to the opening on Thursday, Weekly Jobless Claims will be reported. Friday morning before the bell, June Import/Export Prices will be announced along with May Trade Balance. July Preliminary Michigan Sentiment will be reported at 10:00 a.m. followed by the June Treasure Budget later in the afternoon.
Alternative Construction Technologies, Inc. (OTCBB: ACCY), a company that engages in the research, development, and marketing of proprietary products for the construction industry, announced that it has established an e-commerce division to access the massive, untapped B2B and B2C “green” business opportunity available on-line. The intent of Alternative Construction e-Commerce, Inc., is to make available the information needed to make economically sound, environmentally conscious and socially responsible purchase decisions by simplifying the experience of procuring both building designs and structural green building materials, by creating a single on-line interface. The intent is to provide hundreds, eventually thousands, of designs specified with the ACTech Panel System at the core of the design, enabling relative assurance of achieving LEED, Florida Green Building Coalition, Florida Power & Light BuildSmart Program and EnergyStar certifications. The stock finished the week unchanged at $0.95.
Boo Koo Holdings, Inc. (OTCBB: BOKO), a company that currently develops, produces, markets and distributes alternative beverage category energy drinks under the Boo Koo and Gazzu brand names, announced that it has raised $1 million through the issuance of Subordinated Notes in a private placement financing in which Gil Cassagne, a Director of the company, and other accredited investors participated. The proceeds from the private placement will be used for working capital and general corporate purposes. The Subordinated Notes bear interest at a rate of 15% and mature on December 31, 2008. The Notes are not convertible. Investors also received five-year warrants to purchase an aggregate of 1,500,000 shares of the company’s common stock, exercisable at $0.01 per share. Shares rose by $0.05, to finish the week at $0.55.
Customer Acquisition Network Holdings, Inc. (OTCBB: CACN), a company that provides Internet advertising solutions for Internet publishers and advertisers, announced the change of its company name to “interCLICK, Inc.” thereby aligning its corporate identity with its core operations becoming the only pure play publicly traded ad network in the U.S. The company will trade under the new ticker symbol ICLK. The company also announced its preliminary revenue estimates for its second quarter ended June 30, 2008. interCLICK expects to report revenue of between $4.5 million – $4.6 million, an increase of approximately 26% – 29% compared to the 2008 first quarter ended March 31, 2008, when interCLICK generated revenue of approximately $3.6 million. For the 2007 second quarter, interCLICK generated revenue of $1.7 million. The company also announced 2008 full-year revenue guidance. interCLICK projects it will generate full-year revenue in excess of $20 million. This compares to $11.8 million that interCLICK generated in fiscal 2007. The stock fell by $0.03 for the week, to close at $3.00.
GoldSpring, Inc. (OTCBB: GSPG), the holder of what is believed to be the largest mineral rights land position in Nevada’s Comstock Lode Mining District, reported assay results from its drill holes, numbered 37-44. Of note is the fact that Hole #44 encountered five feet grading 1.559 ounces of gold per ton and 6.35 ounces of silver per ton, suggesting potential for high grade levels in the area of this hole. To date, the company has drilled 57 holes and has received third-party assay results for the first 43 of those drill holes. The company expects to receive assay results for holes 45 – 57 later this month. The stock finished the week unchanged at $0.03.
Sancon Resources Recovery, Inc. (OTCBB: SRRY), a rapidly growing waste management and waste recycling company, with operations in both China and Australia, announced that it is developing glass powder raw materials from recycled waste glass that the company is currently collecting in China as part of its environmental services. Sancon expects the glass powder processed from the recycled glass can be used in the manufacturing of numerous consumer products. The company believes that there is a significant demand for recycled glass and that it represents a potentially new source of high-margin revenue. Sancon expects to begin selling these recycled raw materials during the 2008 third quarter. The stock finished 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 the grand opening of the Canton location of wholly owned subsidiary, Hackett’s, was a great success with sales continuing to remain significantly higher since. The grand opening weekend saw over 1,400 transactions totally over $47,000 in sales. Average weekly sales since the grand opening have been about $63,000 per week, which compares well to the average sales of $21,000 per week that both WiseBuys and the smaller Hackett’s were doing on a combined basis prior to the transition. The company also reported that its War of 1812 Amber Ale, which is produced by wholly owned subsidiary Sackets Harbor Brewing Company, was featured on draught at this year’s Macy’s 4th of July Roosevelt Island Fireworks Festival. The Dinosaur, whose New York City restaurant is located at 646 West 131st Street, was the primary concessionaire at the Roosevelt Island July 4th Fireworks Festival. The stock traded below $0.01 for the week.
On the Wires: Global Clean Energy Holdings, Inc. (OTCBB: GCEH), an emerging renewable energy company focused on the production of non-food based feedstocks used for the production of biofuels, announced that it has appointed Dr. Mark A. Bernstein Ph.D. to its Board of Directors. Telkonet, Inc. (AMEX: TKO), the leading provider of innovative, centrally managed solutions for integrated energy management, networking, building automation and proactive support services, announced that it has appointed Jeff Sobieski as Chief Operating Officer. Smart Energy Solutions, Inc. (OTCBB: SMGY), a company that engages in the manufacture, distribution, and sale of Battery Brain, an electronic control for vehicle batteries, announced that Pete Mateja, who has served as the chief executive officer of the company and a member of its board of directors since February 26, 2007, resigned. Edward Braniff, the company’s chief financial officer, was appointed to serve as the chief executive officer on an interim basis. Xcorporeal, Inc. (AMEX: XCR), a development stage medical device company that is developing an extra-corporeal platform of products that might be used in devices to replace the function of various human organs, announced that Nina Peled, a former senior vice president, is no longer employed by the company.
SPECIAL SITUATIONS:
i2 Telecom International, Inc. (OTCBB: ITUI) $0.145
Over the past decade, the telecommunications industry has been swept up in a rapid deregulation and innovation cycle. This led to privatization of many monopolies and created a plethora of new competitors. Traditional markets have been transformed as internet communication services are gradually replacing fixed line communication businesses. While “old fashioned” telephone calls continue to be the industry’s main revenue generator, new technology advances are changing that trend. With hundreds of players in the market, competitors rely heavily on price and technology innovation to differentiate their services and to stay ahead of the competition.
i2Telecom provides high-quality international and domestic long distance calling services to subscribers at a fraction of the cost of traditional carriers by leveraging the power of the Internet. Better yet, the company is an anomaly in the VoIP space. It actually is scheduled to report its first profitable quarter during the 2008 second quarter ended June 30, 2008, helping to possibly explain its rising stock price in an ugly market for microcap stocks.
Recently the company announced preliminary results for the three months ended June 30, 2008. For the 2008 second quarter, i2Telecom expects to report net income in excess of $4 million, or approximately $0.02 per share. The company’s second quarter results benefitted from a gain of over $5 million related to the sale of a patent involving the Company’s VoIP Services Access Module technology, known in the marketplace as VoiceStick. The company also announced that it expects revenue from the sale of VOIP products and related services to exceed $5 million in the year ending December 31, 2008, compared with less than $1 million in revenues during 2007. This anticipated revenue growth will be driven by revenue-sharing and licensing agreements involving the company’s new MyGlobalTalk technology. The $6.5 million received from the patent sale, when combined with over $5 million in projected operating revenue for the year, could result in total gross receipts in excess of $11.5 million for the year ending December 31, 2008.
The company uses its technological advantage to provide cheaper prices for high quality VoIP service. However, i2Telecom is truly defined by its patented products that set it apart from competition. The company’s staple product is the company’s patented VoiceStick technology. This device enables any telephone or business phone system to access the company’s global network and advanced routing technologies to complete most of the call over the Internet, paying only for the last leg of the connection. The company’s newest product, MyGlobalTalk, was just awarded Internet Telephony Magazine’s “Product of the Year 2007”. In an industry first, MyGlobalTalk places Internet telephony in the hands of every cell phone user, independent of wireless carrier technology, handset manufacturer or the type of wireless carrier voice plan involved. In addition, MyGlobalTalk is fully functional without local access to the Internet or proximity to an Internet “hotspot”. Users also need not wait for the availability of a dual-mode WiFi phone, because MyGlobalTalk provides the benefits of a dual-mode phone at a fraction of the cost using the customer’s existing mobile handset.
The company may have the opportunity to realize further gains from the monetization of a portion of its growing intellectual property portfolio. Currently the company has patent applications pending related to over a dozen additional significant VoIP technologies.
The company’s strong financial performance combined with its technological innovations could make it a competitive force in the industry with the ability to continue its strong revenue growth. The company’s stock is currently trading at $0.145, which may prove to be a bargain as new technological innovations are rolled out and gain market acceptance.
