Companies featured in this edition of the newsletter: ACTC, CETG, CVM, ENZ, GISV, IFAQ, ITUI, IWEB, MWAV, PCFG, PHC, PLKH, PSTI, SKYI
Markets managed to post their largest weekly gains in months, as all the major indices closed sharply higher as stocks rebounded from extremely oversold positions. The Dow closed at 7223, posting a gain of 597, up 9%, trimming its YTD losses to 17.7%. The Nasdaq fared slightly better, posting a 10.6% gain to close at 1431, halting its slide which is now 9.2% on the year. The S&P 500 and Russell 2000 also managed to post gains of 10.7% and 12% respectively, narrowing their YTD losses to 16.2% and 21.3%.
Some of the week’s best performers were coincidentally some of the year’s worst laggards, with financials notably soaring 34% on the week following news that Citigroup managed to post a profit for the first two months of ’09. Markets received further support from speculation regarding reinstatement of the uptick rule following an announcement by House Financial Services Chairman Barney Frank that he expects the SEC to reinstitute the rule, designed to limit short selling, as early as next month. Better than expected retail sales data, which declined just 0.1% in February, and renewed buying interest in bellwether General Electric managed to fuel the rally, despite continuing negative reports on the unemployment front as Weekly Initial Claims continued their climb, rising to 654,000.
In other potentially positive developments last week, the House Financial Services Subcommittee held its highly anticipated hearing on mark-to-market accounting. While no announcement was made, the general consensus seems to be that the majority of members favor suspending the rules temporarily. Friday saw another potentially uplifting announcement as the trade deficit narrowed to $36 billion in January from just shy of $40 billion the previous month, but more likely reflects an overall contraction of the global economy rather than an expansion of U.S. exporting capabilities.
What should investors look for this week? The major catalyst for the week is expected to be the Federal Reserve’s interest rate decision, which is forecast to remain in a range of 0.00%-0.25%.
Earnings will be relatively slow this week, but expect reports from Goldman Sachs (NYSE: GS) Tuesday before the bell, followed by software developer Adobe (NASDAQ: ADBE) after the close the same day. General Mills (NYSE: GIS) releases Wednesday before the bell, with Nike (NYSE: NKE) and Oracle (NASDAQ: ORCL) reporting after the close. On Thursday morning, expect reports from Barnes & Noble (NYSE: BKS), Carnival Cruiseline (NYSE: CCL), Discover Financial Services (NYSE: DFS), Fed Ex (NYSE: FDX), and Morgan Stanley (NYSE: MS).
Economic reports for the week begin on Monday with the Empire Manufacturing Index for March at 8:30am followed by Net Long-Term TIC Flows for January at 9:00am and February Capacity Utilization and Industrial Production due out at 9:15am. Building Permits, Core PPI, Housing Starts and PPI, all for February, will be released together at 8:30am Tuesday. On Wednesday, expect CPI and Core CPI for February and Q4 Current Account Balance figures at 8:30am, followed by Weekly Crude Inventories at 10:30am. The Federal Open Market Committee will announce their rate decision Wednesday afternoon at 2:15pm. Things finish up with Weekly Initial Jobless Claims at 8:30am Thursday, followed by February Leading Indicators and March data from the Philadelphia Fed due out at 10:00am.
Conferences for the week begin Monday with the four-day Cowen & Co. Healthcare Conference being held in Boston. The three-day B. Riley & Co. Las Vegas Investor Conference begins Tuesday in Vegas, as does the two-day JP Morgan Gaming, Lodging Restaurant & Leisure Conference. Credit Suisse holds their Group Retail Roundup Tuesday in Boston, and the three-day Jefferies Global Clean Technology Conference also begins on Tuesday in New York. GE Capital will hold an Investor Meeting Thursday in New York. The UBS Specialty Chemicals Conference and the Credit Suisse Investor Meetings will both begin Thursday in Boston.
Enzo Biochem, Inc. (NYSE: ENZ), a vertically integrated life sciences company, reported record Q2 revenue for the period ended January 31, 2009 last week. Total revenue increased 15%, to a second quarter record $20.9 million, compared with $18.2 million in the corresponding year-earlier period. Revenue gains were attributable to a 51% increase in the company’s Life Sciences’ business, but were partially slightly by an 11% decrease in revenue reported by the Clinical Labs division. The net loss for the second quarter of 2009 was $7.7 million or ($0.20) per share compared to a net loss of $4.1 million, or ($0.11) per share, a year ago. The increase is associated with non-cash (pre-tax) charges of $3.9 million, which included, among other items purchase accounting adjustments for inventory, depreciation and amortization, provision for uncollectible accounts receivable and foreign currency loss. The company’s financial position remains strong, with working capital of $79.3 million and cash and short term investments at $73 million, as compared to $78.3 million at July 31, 2008. The company was able to post record revenue despite the difficult economic conditions in which it has been operating. Enzo also announced the acquisition of substantially all the assets of privately-owned Assay Designs, of Ann Arbor, MI, for a purchase price of approximately $12.2 million in cash. Assay Designs sells a steadily expanding research product line worldwide that includes kits and reagents for the detection and quantification of small molecules and proteins that are important in inflammation and immunity, oxidative and cellular stress, steroid and hormone biology, cell signaling, and bioenergetics. The acquisition should serve to further bolster sales in Enzo’s Life Sciences division, as Assay Designs has annual revenue exceeding $11 million. Shares gained 56 cents on the week to close at $3.47.
Shares of healthcare services company PHC, Inc. (AMEX: PHC) surged 40% last week, likely in anticipation of the announcement that the company has completed the sale of the assets of its research division, Pivotal Research Centers, Inc. for $5 million. Previously, in a regulatory filing, the company said it had agreed to a ten-day extension in order to allow the buyer additional time to complete their documentation to close the transaction. The purchaser paid PHC a non-refundable deposit of $200,000, which will be credited towards the purchase price if the transaction closes by March 13, 2009. Since the deadline occurred on Friday, we would expect the company to say something early this week about the status of the transaction. Shares ended the week at $0.70, up 20 cents.
Pluristem Therapeutics (NASDAQ: PSTI), a company engaged in developing regenerative therapies from stem cells derived from the placenta, announced last week that the company has completed several key initiatives in preparation for the upcoming clinical trial in Germany using the company’s placental-derived stem cell product candidate, PLX-PAD to treat Critical Limb Ischemia (CLI). In order to assure as smooth an initial trial as possible the company staged a real time check (dry run) of PLX-PAD preparation for injection, a proceeding performed at Pharmicell, which was overviewed by Pluristem’s team. In addition, the process flow between Pluristem and Pharmicell and the procedures of cell delivery to the two German hospitals which will serve as clinical sites for the upcoming trial were reviewed and verified. Following European preparations, the company expects to sign agreements with clinical sites in the US, and to conduct the necessary steps in order to initiate the clinical studies in the US. The US Food & Drug Administration recently cleared the company’s Investigational New Drug (IND) application to initiate a Phase I clinical trial of PLX-PAD for the treatment of CLI. Shares gained 37 cents to close at $1.55 on the week.
CEL-SCI Corporation (AMEX: CVM), a company engaged in research and development of drugs and vaccines used in the treatment of cancer, announced that it had entered into an exclusive licensing agreement with Byron Biopharma, under which CEL-SCI has granted Byron an exclusive license to market and distribute the Company’s cancer drug Multikine in the Republic of South Africa. Pursuant to the agreement, Byron will purchase $750,000 worth of stock from CEL-SCI and will make a payment of $125,000 in 12 months. Once Multikine has been approved, CEL-SCI will be responsible for manufacturing the product, while Byron will be responsible for registration and sales in South Africa. Revenues will be split 50/50 between CEL-SCI and Byron. In other news last week, CVM announced that it is planning to launch a new manufacturing process that could allow drugs developed using stem cells and other biological products to maintain their potency and thereby potentially also their shelf life. CEL-SCI’s new state-of-the-art manufacturing facility near Baltimore, Maryland, where it expects to manufacture its lead cancer product Multikine for a pivotal Phase III trial, will be used for the process known as cold 4 degrees Celsius Aseptic Filling on a contract basis to stem cell and biologic companies, academic institutions and commercial media suppliers. The use of a cold 4 degrees Celsius fill, as opposed to the normal room temperature fill, significantly increases the probability of maintaining drug activity, potency and thus potentially extending the shelf life of new biological and stem cell produced products. CEL-SCI will be the only company providing this cold 4 degrees Celsius filling service on a contract basis to other companies and academic institutions. Shares gained six cents on the week to close at $0.26.
Stem cell therapy developer Advanced Cell Technologies (OTC: ACTC), announced last week that it has garnered the requisite funding to commence filing an IND application for their retinal pigment epithelium (RPE) cell program for the treatment of diseases of the eye. The company secured a $5 million credit facility with a life sciences fund based in New York and Los Angeles early last week that will greatly enhance the company’s clinical capabilities. Proceeds from the facility must be used exclusively for the development of the company’s RPE cells program, and should be sufficient for the company to file an IND for its RPE program this summer, which would allow ACTC to begin clinical trials in humans shortly thereafter. There are some 200 different retinal diseases that may be impacted by this stem cell derived therapy including macular degeneration, which represents a $28 billion dollar market. Age-related macular degeneration (AMD) affects more than 30 million people worldwide and is the leading cause of blindness in people over 60 years of age in the United States. The company currently has available what is believed to be the only technology that can produce stem cell lines without the destruction of the embryo, which could prove to be a significant advancement as the moral and ethical debate over stem cell research heats up following the recent expansion of federal funding for stem cell research implemented by the Obama administration. Shares gained a penny on the week to close at $0.12.
Capital City Energy Group, (OTCBB: CETG), an independent vertically integrated oil and gas company, announced that Hotwell Services, its wholly owned subsidiary and a provider of oil field services in the Appalachian Basin, has significantly increased its cased hole service activity in the Marcellus Shale, one of the most active areas for natural gas exploration and production in the continental United States. More than 800 wells are expected to be drilled in the prolific Marcellus Shale in 2009, a projected increase of 400% from 2008. In this environment, the Company anticipates the opportunity to rapidly grow its business by increasing its presence in the basin and expanding its market share. Hotwell’s clients include many of the major independent producers active in the Marcellus Shale area. Shares lost four cents on the week to close at $1.10.
Global Investor Services (OTCBB: GISV), a company that engages in the education of investors through online services, entered into a marketing agreement with Wealth Engineering & Development Inc. to market its proprietary subscription based financial tools through a direct marketing campaign that shares the idea of building wealth using The Rule of 72, a simple compound interest formula that Einstein referenced as the greatest mathematical discovery of all time. The campaign will promote the company’s InvestView offering, a tool that presents investors with critical information regarding companies stock in a comprehensive, intuitive interface. The platform provides investors with screens for the healthiest and weakest companies, analyzes all stocks using a grading system of 1-100, determines if the company is trading at a discount or premium, and uses proprietary charts to identify both buying & selling opportunities. Shares remained unchanged at $0.05 on the week.
Steel Vault (OTCBB: IFAQ) a premier provider of identity security products and services, announced that its NationalCreditReport.com subsidiary grew its subscriber base from 768 active subscribers at the end of January 2009 to 1,689 active subscribers at the end of February 2009, an increase of 120 percent. NationalCreditReport.com specializes in providing consumers with accurate, complete and easy-to-understand credit reporting and monitoring services. Steel Vault acquired NationalCreditReport.com in December of ’08 and relaunched the site in early February. Since that time, the subscriber base has seen significant growth despite very limited marketing efforts. The company plans to expand its marketing campaign and expects to see those efforts rewarded with even more growth in coming weeks. Shares gained fourteen cents on the week to close at $0.39.
i2Telecom International, Inc. (OTCBB: ITUI), a developer of award-winning patented and innovative high-quality mobile applications and services, continues to receive accolades for its highly touted MyGlobalTalk service offering as the platform was recently named, 2008 Product of the Year, by Biz-News.Com, an online media group providing consumer electronic business news to professionals worldwide. MyGlobalTalk received 33% of the nominations, earning praise for its sound quality and call rates, as well as features such as no contract requirements, no connection fees and no minimums. The platform works on any cell phone, land line or computer, and will be offered as an add-on to Outlook, iGoogle or Facebook in coming weeks. In the many comments of recommendation, voters also highlighted customer service and ease of use as reasons for their satisfaction with MyGlobalTalk. Shares remained unchanged on the week at $0.06.
Green St. Energy (OTCBB: MWAV), a company developing a portfolio of renewable wind energy assets, received news last week that validates its acquisition of a three-year option to acquire 4,840 areas of land located in Tehachapi to develop a wind farm. The neighboring 3,100 MW Alta Wind Project in Tehachapi, California was sold for $325 million, plus the assumption of approximately $65 million of outstanding letters of credits. According to reports, Allco Finance Group Limited, the project’s owner, received over 60 indications of interest, with seven bidders invited to submit fully binding proposals. The project was estimated to have great value due to its access to transmission lines, which enticed Southern California Edison to enter into an agreement to purchase the energy produced by the project. Green St. believes that its acreage is located in an area comparably suited for wind energy production and that it will also have access to transmission lines when completed. Shares gained 24 cents on the week to close at $0.37.
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, continues to expand its position as a leader in GPS course management systems, as three new courses have signed up to join the Prolink Network. Broken Arrow Golf Club in Lockport, Ill., The Deerfield Golf Club and Learning Center located in Deerfield, IL, and Los Marlins Golf Course at the Metro Country Club in Juan Dolio, Dominican Republic, are the latest courses to adopt the Prolink system. Broken Arrow is located a short drive from downtown Chicago, and boasts 27 holes of championship golf are spread across more than 215 acres of sprawling farmland. Home to the Midwest’s only dual green concept course, the public facility features an additional nine-holes, designed to resemble many of the world’s most intriguing Par 3s. Deerfield is one of the elite 18-hole courses in the greater Chicago area, and features four sets of tees that will challenge scratch golfers, while at the same time offering a very playable and pleasurable experience for beginners. Designed by renowned golf course designer Edward Lawrence Packard, the Deerfield Park District’s only golf facility was named a 2008-09 Golf Digest “Best Place to Play.” Los Marlins is the first Dominican course to install the Prolink system, and was designed by award-winning international golf architect Charles Ankrom- the course challenges golfers of all skill levels within the setting of a Caribbean paradise. Located on the pristine south-east coast of the island, the course offers numerous artistic sand traps, lakes, mounds and contours that enhance the natural beauty of the site. Shares lost two cents on the week to close at $0.05.
Mining and exploration company Pacific Gold Corp. (OTCBB: PCFG), announced last week that Oregon Gold, Inc. received its trading symbol. The new symbol is ORGG. Pacific Gold distributed 2,000,000 common shares of Oregon Gold, representing 20% of the Company by way of a stock dividend paid on March 9th to record holders as of March 2nd. PCFG is spinning off the subsidiary in order to increase possible funding options for Oregon Gold and to increase shareholder value by allowing the market to evaluate the assets and operations of Oregon Gold separately from those of the parent company. Oregon Gold owns the Defiance mine and placer claims covering nearly 280 acres in Josephine County, Oregon. Shares remained unchanged on the week at $.0045.
On the Wires: Capital City Energy Group (OTCBB: CETG) announced the resignation of its CEO Timothy Crawford last week. Mr. Crawford will remain as Chairman of the Board. His duties will be assumed by Daniel Coffee, the current President and Chief Operating Officer of CETG. In other regulatory filings last week, Skye International (OTCBB: SKYI) announced the appointment of L. Fred Huggins as the company’s Vice President of Sales and Marketing. Prior to joining the company, Mr. Huggins was the Vice President of Sales and Marketing for Noble Innovations Inc., a company that is developing a competing line of electric tankless water heaters.
SPECIAL SITUATIONS:
IceWEB (OTCBB: IWEB) $0.09
As we continue to become a more digital society, storing the massive amounts of data necessary to run the advanced applications which seem to be springing up on an almost daily basis becomes an increasingly in demand venture. Both governmental and corporate entities have insatiable demands for data storage and networking capabilities far beyond their own means and are often forced to outsource these needs in order to manage costs, creating significant opportunities for companies with the foresight to invest in the infrastructure necessary to manage these massive amounts of data efficiently. IceWEB is one such storage technology company specializing in Geographic Information Systems (GIS) that provides services to bureaucratic and corporate organizations seeking to streamline their data management capabilities.
Headquartered just outside of Washington, D.C., IceWEB was founded in 2000 to serve the commercial and federal markets with network security products and proprietary on-line software solutions. In 2008, the Company narrowed its focus and expanded its capabilities by acquiring InLine Corporation, a data storage company specializing in custom designed, short production run storage solutions. These products simplify how enterprises retain, access, manage and protect their data. Demand for data storage is ever-growing and ubiquitous, as data files in all market sectors have become larger and richer with video and multimedia content.
Nowhere is this growth and demand for data storage more prevalent than in the GIS (Geospatial Information Systems) storage market. GIS applications allow customers to acquire, view, understand, interpret and visualize data in ways that reveal relationships, patterns and trends in the form of maps, globes, reports and charts. It is essentially a method of interfacing a set of region specific data with a map or satellite image to bring the data set to life- a simplistic example would be an interactive traffic report showing congested roadways in red and free moving roads in green.
Already a billion dollar market, the GIS industry is projected to grow ten-fold over the next decade as our data storage needs continue to expand with our technological capacity. In response to these explosive growth forecasts in the GIS market, the company has formed software alliances with leading suppliers of GIS software which, when integrated with IceWEB’s storage products, allow customers to analyze data in ways never before possible. Commercial customers include enterprise companies, small to medium sized businesses SMB and GIS software leaders such as ESRI. IceWEB serves Federal Government markets through GSA, GWAC and BPA agreements with customers in the US Departments of Defense, Homeland Security, the National Aeronautics and Space Administration and the National Science Foundation.
Even with depressed equity market valuations, storage companies such as Network Appliance ($5 billion) and Data Domain ($696 million) sport robust valuations. Even smaller peers, which are not yet profitable such as Isilon, 3Par, which are not currently profitable, trade for multiples of sales.
The shift in focus from a reseller of low margin IT services to the thriving, high margin data storage business by capitalizing on solid software alliances, an in-house manufacturing facility and a forward-thinking leadership team, positions IceWEB strongly to be a leader in the manufacturing of custom-built GIS storage products and solutions. With forecasts for the GIS market predicting explosive growth, IceWEB presents investors with an opportunity to own a company at the forefront of a soon to be booming industry while it is still relatively underdeveloped.
