Companies featured in the current edition of the newsletter: ACCY, ACTC, CETG, CLXS, CTVWF, CVM, DRGP, FMTI, GNBT, GSPG, HJHO, ITUI, PFOB, PLKH, SRRY, SWVC, TKO, VYTR
In three sessions last week, volume at the NYSE failed to exceed 1.0 billion shares. Call it a vacation factor or whatever you want. It clearly indicates that there wasn’t a lot of conviction in last week’s trading action. The Dow Jones Industrial Average dropped 32 points or 0.3%, increasing its year to date loss to 12.3%. The Nasdaq Composite Index finished the week 38 points lower, with a year to date loss of 9%. The S&P 500 dropped 6 points or 0.5%, bringing its year to date loss to 12%. The Russell 2000 had the biggest percentage loss of the week as it fell 16 points or 2.1%, giving it a year to date loss of 3.7%.
The major headlines last week were predominately negative. Fannie Mae and Freddie Mac were considered to be on the verge of needing to be rescued by the U.S. Treasury, producer prices experienced their highest annual rate of increase since 1981, housing starts dropped 11% in July, the 4-week average for initial claims rose to 445,750 from 438,500, geopolitical tension flared between the U.S. and Russia, earnings estimates were slashed for the investment banks and the financial condition of Lehman Bros. was called into question. Fortunately, it wasn’t all bad. Dow component Hewlett-Packard turned in another solid earnings report and provided a reassuring outlook. Meanwhile, several retailers, including Home Depot, Target and Gap, reported relatively good results.
Oil prices did end the week slightly higher, yet Friday’s pullback played a big part in the end-of-week rally. Additionally, so did a Reuters report that indicated Korea Development Bank said Lehman Bros. was among a list of potential acquisition candidates. Shares of LEH soared 11% Friday and carried the broader market along for the ride. Even Fannie Mae participated Friday. Its slight gain, though, was no consolation for shareholders who saw the stock plunge as much as 45% during the week. Freddie Mac shares fell as much as 57%. The pummeling the GSEs took reflected shareholders’ fears that the common equity will be wiped out in the event the U.S. Treasury institutes a recapitalization effort.
What should investors look for next week? The corporate earnings calendar for the week is fairly light. Smithfield Foods (SFD) will report numbers before the opening bell on Monday. Sears Holdings (SHLD) will announce its earnings Thursday before the bell, followed by an earnings release from Dell (NASDAQ: DELL) after the market closes.
By contrast, the economic calendar for the week is packed. Existing Home Sales for July will be announced on Monday at10:00 a.m. On Tuesday, look for the Consumer Confidence numbers for August and July New Home Sales at 10:00 a.m., and the FOMC minutes from the Aug. 5th meeting at 2:00 p.m. On Wednesday, July Durable Orders and Weekly Crude Inventories will be announced at 8:30 a.m. and 10:35 a.m., respectively. Thursday at 8:30 a.m., expect preliminary second quarter GDP data, preliminary Chain Deflator data, and Weekly Jobless Claims. Friday morning will be extremely active, with Personal Income and Personal Spending for July being released at 8:30 a.m. At 9:45 a.m., the Chicago PMI for August is expected, followed by the revised Michigan Sentiment Index for August at 10:00 a.m.
CEL-SCI Corporation (AMEX: CVM), a company that engages in the research and development of drugs and vaccines used in the treatment of cancer, said last week that it has entered into an exclusive licensing agreement with Teva Pharmaceutical Industries Ltd., a leading Israeli-based global pharmaceutical company, under which CEL-SCI has granted Teva an exclusive license to market and distribute the company’s cancer drug Multikine for Israel and Turkey. The agreement helps to validate the company’s technology to treat head and neck cancer, which is entering a pivotal Phase III trial. Shares rose by $0.06 in heavy and volatile trading, to finish the week at $0.65.
Forbes Medi-Tech Inc. (NASDAQ: FMTI), a life sciences company focused on evidence-based nutritional solutions, announced the introduction of an innovative processed cheese slice containing the company’s proprietary cholesterol-lowering ingredient, Reducol. Available through the Pirkka Reducol product range – jointly developed by Kesko Food and Scanvit Ltd. – the processed cheese slices will initially be available in Finland. With Reducol already incorporated into a variety of foods – including yoghurts, yoghurt drinks, breads, milk drinks and spreads – European consumers will now be able to include Reducol cheese slices in meals and snacks, such as grilled cheese and deli sandwiches. Rupp AG, an Austrian-based cheese company with over 100 years’ experience in the food industry, will produce the cheese slices containing Reducol. The stock fell by $0.03 for the week, to close at $0.88.
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 will be installing the in-room, occupancy-driven Telkonet SmartEnergy energy management solution throughout the eco-friendly luxury Metro Hotel, located in downtown Milwaukee, Wisconsin. TSE will be implemented during August with the help of Focus on Energy, Wisconsin’s energy efficiency and renewable energy initiative, providing a rebate package to help offset energy management equipment and installation costs. The Metro is the latest in a number of 5-star hotels in Milwaukee to choose Telkonet’s advanced energy management solutions. This latest contract win for TSE underlines the rising importance of green issues within the hospitality industry. Shares fell by $0.07 for the week, to close at $0.33.
GoldSpring, Inc. (OTCBB: GSPG), a North American precious metals mining company, focused in Nevada, with extensive, contiguous property in the Comstock Lode District, announced that its updated Reclamation Permit has been approved by the Nevada Department of Environmental Protection. The updated and amended permit expands the footprint of the allowable surface mining limit from 23.5 acres to 110.0 acres and expands the boundary of its exploration and development area by approximately 467% from 173 acres to 809 acres. The company sought an expansion of the allowable area under the Permit as a result of favorable drilling results in the Comstock Lode project. The company also entered into a binding letter of intent to purchase certain property owned by DWC Resources, Inc. in Storey County, Nevada. DWC Resources, Inc. is owned by the company’s largest shareholder. The purchase price is $7.5 million but is subject to adjustment pursuant to the results of a fairness opinion and appraisal to be obtained by the company. The acquisition will further consolidate the company’s land position as the largest landowner in the Comstock, and could provide the scale which would make it an attractive acquisition candidate to a major looking to gain a stake in the area. The stock finished the week unchanged at $0.05.
Volume Alert: Shares of Sancon Resources Recovery, Inc. (OTCBB: SRRY), a rapidly growing Chinese environmental services and waste recycling company, surged more than 10% last week on over 5 times average volume, after the company announced record second quarter results for the period ended June 30, 2008. The company generated record 2008 second quarter revenue of $2.94 million, a 251% increase compared to $0.84 million in the 2007 second quarter. Revenue increased significantly due to strong growth in China, despite interruptions to the company’s business due to the closure of highways and road as a result of the earthquake. 2008 second quarter net income was a record $0.24 million, or $0.01 per diluted share, compared to a loss of $0.06 million, or a loss of $0.00 per share in the year ago period. The 2008 second quarter was the company’s second consecutive quarter of profitability. The company also said it expects to generate 2008 revenue of between $11 million and $12 million and net income between $2 million and $2.1 million and $0.09 to $0.1 per share. Shares rose by $0.06, to finish the week at $0.55.
Alternative Construction Technologies, Inc. (OTCBB: ACCY), a company that engages in the research, development, and marketing of proprietary products for the construction industry, announced its earnings for the three months ended June 30, 2008. Total revenues decreased to $1,510,730 for the three months ended June 30, 2008 from $3,997,773 for the three months ended June 30, 2007. The decrease of $2,522,793 or 62.2% resulted primarily from the company’s inability to reach financing terms and the lack of capital it needed to move forward with the contracts it had in place. Gross profit was $228,287 and $1,301,710, respectively for the three months ended June 30, 2008 and 2007. The stock fell by $0.09 for the week, to close at $0.30.
Advanced Cell Technology, Inc. (OTC: ACTC), a developer of stem cell-based treatments, announced that it has signed patent-licensing agreements with a subsidiary of life sciences researcher Bio Time, Inc. The licensed technology covers methods to transform skin or other cells in the human body into cells with properties found throughout the human body. The company also reported that it is feasible to differentiate and mature human embryonic stem cells into functional oxygen-carrying red blood cells under conditions suitable for scale-up. The company remains optimistic about the potential future role for stem cells as a donorless source of blood for transfusion. The stock rose by a penny for the week, to close at $0.05.
Calypte Biomedical Corporation (OTCBB: CBMC), a company that engages in the development, manufacture, and distribution of in vitro diagnostic tests primarily for the diagnosis of human immunodeficiency virus infection, entered into a subscription agreement with Tinja Limited, pursuant to which the Investor agreed to purchase 14,000,000 shares of the company’s common stock at a purchase price of $0.05 per share, for a total purchase price of $700,000. The company also issued a two-year warrant to the Investor to purchase 1,000,000 shares of the company’s common stock at an exercise price of $0.08 per share. The stock finished the week unchanged at $0.04.
Capital City Energy Group, Inc. (OTCBB: CETG), a diversified oil and natural gas company with three separate divisions, announced results for the period ended June 30, 2008. The company reported that revenues increased to $1,547,848 during the first six months of 2008, compared to revenue of $1,405,511 during the first six months of 2007. Total net oil and gas production realized from principal investments was 8,892 barrels of oil and 59,230 thousand cubic feet of natural gas for the first six months of 2008. Production for first six months of 2007 was 9,288 barrels of oil and 61,597 thousand cubic feet of natural gas. The stock rose by $0.25 for the week, to close at $2.85.
CityView Corporation Limited (OTCBB: CTVWF), an exploration and development company, announced that it is in the process of completing the asset purchase agreement for the acquisition of a crude oil refinery. CityView will acquire the oil refinery in its own name, rather than through Pensador Resources Inc. The asset purchase agreement for the acquisition of the oil refinery will be for an aggregate consideration of US$320 million most of which will be debt finance. A dedicated team of professionals experienced with crude oil refining, processing, logistics and operations as well as civil and electrical engineering, project development and financing, are currently working on the project. The stock finished the week unchanged at $0.09.
Drug delivery company Generex Biotechnology Corporation (NASDAQ: GNBT), said it has entered into a product licensing and distribution agreement with ABP-Comercio, Importacao E Exportacao Ltda. for the registration, importation, marketing, distribution, and sale in Brazil of Glucose RapidSpray, the company’s proprietary glucose buccal spray product. ABP is a specialized import/export organization headquartered in Brazil. Brazil offers the largest South American market for products for the treatment of diabetes and its complications. The stock rose by a penny for the week, to close at $0.73.
i2Telecom International, Inc. (OTCBB: ITUI), a developer of award-winning patented and innovative high-quality Voice-over-Internet Protocol products and services, continues to generate growing media recognition for its promising technology as the company’s flagship product MyGlobalTalk was mentioned in a Wall Street Journal article. ITUI also announced that its proprietary technologies are featured in a case study article in the August 2008 issue of Technology Exec magazine. Technology Exec is an online publication dedicated to the coverage of next-generation technologies. The stock finished the week unchanged at $0.13.
ProLink Holdings Corp. (OTCBB: PLKH), the world’s leading provider of Global Positioning Satellite golf course management systems and digital out-of-home on-course advertising, announced the Battleground at Deer Park Golf Course now features the ProLink Solutions GPS system used at many of the world’s most famous golf courses and plans to participate in ProLink’s exclusive national advertising opportunity. The stock rose by a penny for the week to close at $0.50.
Seaway Valley Capital Corporation (OTCBB: SWVC), a corporation that makes equity, equity-related, and debt investments in companies that require expansion capital, reported its earnings for the three months ended June 30, 2008. The company’s net sales increased to $4,682,455 for the three month period ended June 30, 2008 from $0 for the three month period ended June 30, 2007, an increase of $4,682,455. The increase in sales was the result of the acquisition of WiseBuys, Hackett’s and North Country Hospitality which took place on October 23, 2007, November 7, 2007 and June 1, 2008, respectively. The company incurred a loss from continuing operations of $2,870,171 for the three months ended June 30, 2008, compared to a loss of $2,111,939 for the same period in 2007. The primary drivers of the 2008 loss were the increases in SG&A expenses, the expenses associated with the conversion of WiseBuys stores to Hackett’s stores, and the loss of potential revenues while these stores are being converted. The stock traded below $0.01 for the week.
On the Wires: Collexis Holdings, Inc. (OTCBB: CLXS), appointed Dr. Andrew Sorensen to serve as a director; Vyteris, Inc. (OTCBB: VYTR) announced the formation of a Scientific Advisory Group comprised of four renowned scientists, researchers and clinicians with diverse expertise in active transdermal drug and peptide delivery and central nervous system disorders. The members of the Scientific Advisory Group are: Russell Potts, PhD, chairperson; Richard Guy, PhD; Randy Mrsny, PhD and Stephen Silberstein, MD, FACP; Performing Brands, Inc. (OTCBB: PFOB), announced that shares of the company’s common stock will now be listed under the ticker symbol “PFOB”; Halcyon Jets Holdings, Inc. (OTCBB: HJHO), announced that its Board of Directors appointed Gregory D. Cohen as the company’s Chief Executive Officer.
SPECIAL SITUATIONS:
Dynamic Response Group, Inc. (OTCBB: DRGP) $0.022
Very often small companies operating below the radar screen are undervalued as the investment community is unaware of their business or growth prospects. While DRGP has chosen to grow sales at a breakneck pace at the expense of immediate profitability, there are few companies, even in the current challenging environment, that are expected to generate more than $30 million in sales this year and have market capitalizations less than $2 million.
Dynamic Response Group, Inc. is a leading innovator of strategic marketing solutions. The company uses the knowledge of its customers to create, develop and market innovative products and services that build brand awareness and drive sales across large national and international consumer audiences. The company reaches customers across multiple channels, including direct response TV, the Internet, print, radio, direct mail, and ultimately retail.
The foundation of the company is its direct response TV and Internet advertising business, which has produced many highly effective products including: ProCede, a hair thickening system for men; Riddex, a pest control product; “Backyard Drills with Bill Parcells,” a DVD series for fathers and sons; and “The Legends of Soul,” a DVD series of current day concerts of classic soul artists. The company has also signed an exclusive three year deal to market The Official NASCAR Members Club to the over 75 million estimated NASCAR fans in the US.
The company recently reported net revenue of $7.2 million for its 2008 second quarter ended June 30, 2008, which increased 166% compared to net revenue of $2.7 million for the three months ended June 30, 2007. The company’s record revenue growth nearly surpassed its sales for all of 2007. Gross profit of $6.2 million, which was the highest in the company’s history, increased 169% versus the year-earlier period gross profit of $2.3 million. The second quarter is typically a slower quarter for the company, yet it managed to more than double revenue without the contribution of any new products in the quarter. While still not profitable (loss of $1.4 million for first six months ’08) primarily due to investments in sales and marketing, the company has generated $15.2 million in revenue for the first six months of ’08, nearly triple the revenue from the same period last year.
The company expects to continue the strong sales growth it experienced in the first half of the year, but plans to focus on increasing efficiencies in other areas of operations to drive bottom-line results. The company is also focusing on strategically expanding and diversifying its suite of products and services. Over the coming months the company said it expects to make several announcements about new products and lines of business.
DRG also recently started Phase I of its direct-to-consumer business plan for its new subsidiary Medico Express, Inc., which will become a licensed durable medical equipment provider. Medico plans to be a provider of direct-to-consumer Medicare reimbursed medical products focused exclusively on chronic diseases afflicting the rapidly growing Hispanic community in the United States, Puerto Rico and the Virgin Islands. It is the only company positioned to serve this growing market segment a s a direct-to-consumer Medicare provider on a national level. Given the company’s favorable market position, existing and new product inventory, as well as its impressive revenue growth, with a current market cap of less than $2 million, the stock could provide intriguing upside potential.
