12/03/2007
VOLUME 328
Companies featured in the current edition of the newsletter:ACTC, CHIP, CLXS, CYTR, DOC, DVLY, GSHF, HSOA, IASCA, LNXGF, MBND, MSHI, PBIO, PLKH, RVEP, SFPI, SWVC
After a sluggish start, the major averages finished the past week higher, as expectations for a rate cut at the Federal Reserve’s next meeting helped ease growing concerns about problems in the housing and credit markets. The Dow finished this week up 391 points and increased its year to date gain to 7.3%. The NASDAQ continued its strong performance with a gain of 64 points contributing to a year to date gain of 10.2%. The S&P 500 gained 2.8%, improving its yearly advance to 4.4%. The struggling Russell 2000 gained 13 points, trimming its year to date loss to 2.5%.
Despite early optimism about the start to the holiday shopping season, U.S. stocks tumbled on Monday. The sell-off that caused the drop was short lived however, as stocks rebounded Tuesday with the announcement by the Abu Dhabi Investment Authority that it would invest $7.5 billion to acquire a 4.9% stake in Citigroup, whose stock has sharply declined in recent months due to the company’s poor operating performance and exposure to the fallout in the credit markets. A 10% drop for the week in oil prices helped to further support the market. Meanwhile signals from the Federal Reserve raised expectations that interest rates would be cut again at the December 11 FOMC meeting to help keep the economy stabilized amid turmoil in the housing and credit markets. On the economic side, third quarter real GDP was revised upward to a solid 4.9% annual growth rate. On the downside, unemployment claims for the week rose to 352,000 from 329,000 the week before, while home sales failed to meet expectations with a modest rise of 1.7%. On the corporate side Sears Holdings reported a 99% drop in earnings for the third quarter and Dell, while reporting a higher quarterly profit, remained cautious in its outlook. Still, the market continued its rally, which was largely centered on expectations of another rate cut.
What should investors look for in the upcoming week? Earnings reports continue to be slow, but investors can expect to see some key announcements around the middle of the next week. AutoZone (NYSE: AZO) will make report on Tuesday before the bell. Thursday, Toll Brothers (NYSE: TOL) and UTI Worldwide (NASDAQ: UTIW) report results prior to the market opening.
The economic news for next week shifts from recent spending to a greater focus on recent employment numbers and recent orders. The week will kick-off on Monday, with the auto and truck sales report. Wednesday morning looks to be very busy with Factory Orders, ISM Services, Weekly Crude Inventories and Q3 Nonfarm Productivity and Unit Labor Costs announcements. Investors can expect to see the majority of announcements Friday morning with the release of November Nonfarm Payrolls, the November Unemployment Rate, November Hourly Earnings, and the Average Workweek for November. The week will finish with the October Consumer Credit announcement.
The conference schedule for the upcoming week remains busy and will begin Monday with the Bear, Stearns & Co. Inc. Real Estate Conference and the CCMI Telecom Fundamentals Conference. The UBS Global Media Conference will also begin on Monday. The BMO Capital Markets Healthcare Conference is scheduled for Tuesday, with the Banc of America Securities Credit Conference concluding the same day. Wednesday will be highlighted with the start of Wachovia’s Global Real Estate Securities Conference and the Standard & Poors’ Annual Bank Loan & Recovery Ratings Conference. The rest of the week will be rather light as the there are few conferences scheduled for Friday. Thursday and Friday will conclude with the Lehman Brothers Annual Technology Conference and Wachovia First Union Pipeline and Energy MLP Conference.
Volume Alert: Shares of Rio Vista Energy Partners L.P. (NASDAQ: RVEP), an energy master limited partnership, surged Friday on more than eight times average volume after the MLP announced that it had entered into a definitive agreement with institutional investors for the private placement of 355,556 common units of Rio Vista at a price of $11.25 per unit, for expected gross proceeds of approximately $4 million before payment of offering expenses. Rio Vista intends to use the net proceeds of the private placement for general working capital purposes, likely to further develop producing properties it recently acquired in East Oklahoma. The properties are expected to significantly increase the MLP’s cash flow, and its ability to make distributions. The units ended the week up a robust $4.04 at $15.50.
Based on its recent analysis of the protein separation technologies market, Frost & Sullivan announced that Pressure BioSciences, Inc. (NASDAQ: PBIO), a company focused on the development of a novel, enabling technology called Pressure Cycling Technology, has been named the recipient of the 2007 North American Frost & Sullivan Award for Technology Innovation. This Award recognizes PBIO for its development of a new, cutting-edge sample preparation technology for tissue and cell disruption and for the development of a method for the detergent-free extraction of proteins from lipid rich tissues. Protein expression from lipid rich tissues is crucial to understanding many disease states such as obesity, heart disease, diabetes, and certain cancer types, among others. The company also completed the closing of a private placement resulting in gross proceeds to the Company of approximately $633,750 at a slight discount to the closing price of the stock. Shares ended the week down 6 cents at $6.05.
CytRx Corporation (NASDAQ: CYTR), a biopharmaceutical company engaged in the development and commercialization of human therapeutics, reported results from a previously announced double-blind, placebo-controlled clinical trial in healthy volunteers indicating that its drug candidate arimoclomol was safe and well-tolerated at a dose of 400 mg administered orally three times daily throughout the 28-day trial period. CytRx believes that results from this clinical trial, together with previously-announced clinical data support the use of arimoclomol in future clinical trials, including its planned ALS Phase IIb efficacy trial, at a dose four-fold higher than administered in its prior Phase IIa. The company continues on track to initiate Phase IIb efficacy trial in ALS, subject to U.S. Food and Drug Administration clearance, before the end of this year. The stock ended the week up 18 cents at $3.34
VeriChip Corporation (NASDAQ: CHIP), a provider of RFID systems for healthcare and patient-related needs, and its project partners Digital Angel Corporation (AMEX: SOX) and Receptors LLC will host an event for the medical, diabetic and investment communities on Tuesday at 4:30 p.m. in New York at the Hyatt to unveil details, including plans to build a prototype self-contained implantable bio-sensing device included in an RFID microchip that for the first time will have the ability to measure glucose levels in the human body. Millions of patients with diabetes utilize needle sticks to monitor levels of glucose on a daily basis. Through the Microchip, patients are expected to be able to track glucose levels without the constant invasive and painful effect of a needle. Prior to the event, the Company will issue a white paper describing the features, benefits and technology underlying the development of its revolutionary self-contained implantable glucose-sensing device. Shares of CHIP rose 55 cents last week to close at $3.24.
While investors speculate on the outcome of the company’s meetings held last week with the Florida Insurance Guarantee Association (FIGA), in which the company seeks payment on storm-related work completed in Florida nearly two years, shares of Home Solutions of America, Inc. (NASDAQ: HSOA) remain volatile. The company also has yet to report third quarter results, or to announce the conclusion of its internal investigation, although it appears possible that it could take a charge for related-party transactions. A favorable resolution of these issues could lift the cloud of uncertainty that has been overhanging the shares for months. The shares ended the week at $1.06, up $0.03.
Digital Angel Corporation (AMEX: DOC), a leading provider of radio frequency identification (RFID) and global positioning system (GPS) technologies that enable the rapid and accurate identification, location tracking and condition monitoring of people, animals and high-value assets, announced that it has signed a long-term contract between its McMurdo division and the UK’s Royal National Lifeboat Institution (RNLI), to supply the RNLI’s MOB (man overboard) Guardian rescue system. The fishing industry is recognized as the most dangerous occupation in the world and MOB Guardian will make a substantial contribution towards assisting the safe recovery of the fisherman in difficulty. It is also clear that many work boats and leisure craft around the world would benefit from such a system in a man-overboard event and providing a substantial opportunity to penetrate these markets in the near future. The RNLI has underwritten the first 300 systems totaling $450,000, which Signature will begin supplying in December 2007 and complete by March 2008. The RNLI has identified that there are over 4,500 coastal fishermen who would greatly enhance their safety if they were to select the system. RNLI has encouraged the installation of the safety system by organizing RNLI and European Union financial support to offset the cost of the system to the fishermen. The stock gained $0.03 to finish the week at $0.92.
MSTI Holdings, Inc. (OTCBB: MSHI), a carrier class communications technology company that specializes in providing “quadruple play” services consisting of video, voice, Internet and Wi-Fi to residential and commercial properties, announced that its wholly-owned subsidiary, Microwave Satellite Technologies, Inc., had completed enhancements and re-configuration of infrastructure to support the 2008 first quarter launch of Internet Protocol Television (IPTV) at Newport, NJ, where it has over 2,000 residential and commercial telecommunications subscribers. Newport plans to expand to more than 10,000 residential units, thereby making it one of the largest mixed-use communities in the United States. The Company also recently started to provide the next generation of phone service to all buildings, NuVisions Digital Voice (NDV). NDV allows customers to use existing phones and jacks, without the need for an internet connection, and provides many more features, for the low price of traditonal VoIP service. By offering new IPTV and NuVisions Digital Voice services to both residential and commercial customers, NuVisions will take the communications and entertainment experience to a new level. The investments made have also created route diversity to and from the existing network , thus providing a more reliable quality of service. The response from residents, since NuVisions began providing services this Summer, has been overwhelmingly positive. The stock ended the week down 2 cents to finish at $0.90.
ProLink Solutions (OTCBB: PLKH), a wholly-owned subsidiary of ProLink Holdings Corp. and the world’s leading provider of Global Positioning Satellite golf course management systems and digital out-of-home on-course advertising announced that Black Gold Golf Club in Yorba Linda, California, 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. This was followed by an announcement that Sterling Hills Golf Course in Camarillo, California, will also feature the ProLink Solutions GPS. While golfers appreciate the assistance ProLink GPS provides, courses realize significant gains due to the multiple revenue streams the system delivers. National advertisers also recognize the tremendous value of reaching golfers at high-end facilities such as Sterling Hills and Black Gold Golf Club. Overall these high-end clubs choose ProLink for the system’s user-friendly features, reliability and unbeatable return on investment. Shares ended the week at $0.55, down 3 cents.
Collexis Holdings, Inc. (OTCBB: CLXS), a developer of high-definition search and discovery software, announced that it has formed a partnership with Altum, Inc., a national leader in grants management, to provide customized solutions to the biomedical research industry. The alliance brings together the non-profit and government markets expertise of Altum with the breakthrough search engine technologies of Collexis. Through this strategic partnership, Altum and Collexis will create a value-added solution on the Easygrants and proposalCENTRAL grants management platforms. It will enable Altum to expand capabilities in the area of knowledge management and discovery. Collexis has a robust software platform to perform sophisticated grant analysis, categorization, trending, retrieval, and reporting worldwide. Perhaps more importantly, the technology will help customers identify trends and gaps in research and showcase new opportunities and breakthroughs in the medical research they fund. The stock finished the week at $0.80, down 8 cents.
Deer Valley Corporation (OTC BB: DVLY), a growth-oriented manufactured home builder, announced that production and delivery has begun on the first 100 two-bedroom cottages to be supplied to the State of Mississippi in accordance with the terms of the company’s recently announced contract extension. These cottages are being supplied as part of a federally funded pilot program that is designed to test and evaluate future disaster housing units. Subject to timely receipt of a further notice to proceed, fifty additional units are scheduled for delivery during the first quarter of 2008 to complete the requirements of the extended contract. The combined shipments of all 150 units will result in a contribution to revenue of $4.79 million in the 2007 fourth quarter and $2.4 million in the 2008 first quarter. The stock ended the week unchanged at $0.99.
Advanced Cell Technology Inc. (OTCBB: ACTC), a biotechnology company that engages in the development and commercialization of human stem cell technology, pursuant to unanimous approval of the Board of Directors, amended its Bylaws to delete all references to multiple classes of directors. Accordingly, Sections 2.3, 2.4, 2.5 and 2.9 have been amended to reflect that the Board currently consists of one class of directors. As a result, the terms of all classes of the directors shall expire at the 2007 annual meeting. Upon election at that meeting and thereafter, each director will serve for a one-year term and each director shall hold office until the next annual meeting of shareholders and until his or her successor is duly elected and qualified. Prior to this amendment, the Bylaws provided for a classified board with directors being elected for three-year terms. The stock ended down 2 cents, to finish the week at $0.26.
Seaway Valley Capital Corporation (OTCBB: SWVC), a company that makes equity, equity-related, and debt investments in companies that require expansion capital and in companies pursuing acquisition strategies, reported that sales of its wholly-owned subsidiary, Patrick Hackett Hardware Company , enjoyed significant increases totaling close to 60% in same store sales on the day after Thanksgiving. Hacketts showed tremendous increases in all stores. The stores, which included Canton, Massena, Ogdensburg, Potsdam, and Watertown, each were operating on the same day last year. All stores showed sales increases, with a range of a 137% increase in the Massena store and a 35% increase in the Ogdensburg store. Hacketts’ sales remained strong on the following day, with sales increases that averaged about 22% across the company. Management feels that these results are a strong indication that Hacketts is on target with its merchandise mix and footprint for these and future stores. The stock ended the week unchanged at $0.015.
On The Wires: VeriChip Corporation (NASDAQ: CHIP), a provider of RFID systems for healthcare and patient-related needs, presented at the ID World International Congress on November 28, 2007, in Milan, Italy. Multiband Corporation (Nasdaq: MBND), the nation’s largest DIRECTV Master System Operator (MSO) for Multiple Dwelling Units received a Nasdaq staff determination letter indicating that the company fails to comply with Nasdaq Marketplace Rule 4310c3 and that the Nasdaq staff is reviewing Multiband’s securities for continued listing on the Nasdaq Capital Market. It is likely that the upcoming merger with DirecTECH will allow the company to regain compliance with Nasdaq listing requirements. The Board of Directors of Salton, Inc.(OTC: SFPI), a designer, marketer and distributor of branded, high-quality small appliances, home decor and personal care products, has set Friday, December 28, 2007 as the date for a special meeting of stockholders to consider a vote upon the agreement and plan of merger, dated as of October 1, 2007, by and among Salton, SFP Merger Sub, Inc. and APN Holdco and related matters. GreenShift’s Board of Directors declared that GreenShift (OTCBB: GSHF), a company that through its subsidiaries, develops and supports clean technologies and companies that facilitate the use of natural resources. will make a distribution to the holders of record of its common stock on December 12, 2007. The distribution will consist, in total, of 2 million shares of common stock of GS EnviroServices, Inc., 1 million shares of common stock of GS Energy Corporation, and 20.8 million shares of common stock of GS CleanTech Corporation. CytRx Corporation (NASDAQ: CYTR), a biopharmaceutical company engaged in the development and commercialization of human therapeutics, announced that it will present the scientific data that supports the previously-released conclusions from the company’s six-month, open-label extension of its Phase IIa clinical trial with arimoclomol in ALS volunteers at the 18th International Symposium on ALS/MND to be held December 1-3, 2007 in Toronto, Canada.
SPECIAL SITUATIONS:
IAS Energy, Inc. (OTCBB: IASCA) $0.75
Often, when a company completes a reverse merger, its name does not reflect its business model. Such is the case with IAS Energy, which does not produce oil and gas as its name suggests, but instead owns an interest in a Chinese Internet property that is in one of the hottest areas for the investment community. At this point, few are unaware that Google purchased YouTube for approximately $1.6 billion in revenue, despite the fact that the fledgling Internet property had nominal revenue at the time. IAS recently acquired a 20% ownership stake in Video1314.com, a Chinese Web 2.0 platform similar to YouTube, which will allow users to watch and upload their videos and other videos of interest. Asian Internet properties such as Baidu and recent IPO Alibaba have been hot stocks for the investment community.
So how does Video1314.com work? It appears to be a combination of eBay and YouTube. The company plans to complete a buy-and-sell site, which will allow users to make money by buying and selling merchandise at no cost. The Company also has plans to allow users to connect with friends and contacts similar to Facebook and to offer photo, audio sharing and a marketplace to buy and sell goods for its members. It will also offer video and photo sharing, and plans to stream high resolution TV programs that can be watched over the Internet. As part of its expansion plans, it expects to launch across Asia in Japanese, Korean and English.
How big is the opportunity? With a target market of over 162 million Internet users in China and over 459 million Internet users in Asia, the opportunity is substantial. While the site is not yet a leading Internet portal in China, it has attracted over a million visitors since March, 2007. Today, there are over 10,000 video clips in 18 video channels that consist of sports, music, food and many others.
Many of you may still be wondering how an energy company acquired an interest in a Chinese web portal. In late October, IAS entered into an agreement to acquire a100% interest in Power Telecom, which owns the rights to Video 1314.com in exchange for the issuance of 50 million shares and an investment of $650,000 cash. Last week, IAS purchased the first 20% of Power Telecom in return for $100,000 and 10 million shares of IAS stock. IAS Energy, can acquire 100% Video1314.com by paying the remaining cash payment and stock within one year.
Shares of IASCA surged on the initial announcement, and established a new 52-week high of $1.37 on November 12th, before retreating on lighter volume. With interest in Chinese stocks at an all-time high as reflected by many IPO’s surging on their first day of trading, we would not be surprised if investors bid shares higher as investors learn more about this company. We would expect that at sometime A company name change and the completion of the acquisition of the 80% interest the company does not presently own could be catalysts for the stock, along with additional details on the Video 1314.com. While most investors do not have the opportunity to get in on the ground floor on many of the Chinese IPO’s, nimble investors have the opportunity to participate in the rapid growth of ecommerce in China through an early investment in IAS Energy.
Linux Gold Corp. (OTCBB: LNXGF) $0.23
While many have been focusing on the soaring price of crude oil, gold prices have quietly surged 20% since late summer, due to scarce supplies and a weak dollar. According to many pundits, neither of those scenarios is expected to change soon, which brings us to Linux Gold Corp., a junior Canadian-based gold company with interests primarily in Alaska, an area prolific in gold since the 1870’s. Since 1985, Alaska’s gold resources have increased from one million ounces in 1985 to 108 million ounces in 2004.
Linux Gold Corp. also owns a 50% interest in 30 mineral claims known as the Fish Creek Prospect, located in the Fairbanks Mining Division in Alaska. Linux Gold Corp. optioned to another junior gold company, Teryl Resources Corp., a 50% interest in the Fish Creek claims, in return for them expending $500,000 over three years. Linux retains a 5% net smelter return or may convert into a 25% working interest. Nearly two years ago, the company staked 148 claims at several locations near Granite Mountain on the eastern Seward Peninsula of Alaska. Subsequently, it has increased the claim position to 284 claims, representing approximately 68 square-miles of property. The company began a drilling program on the Granite Mountain Property a little more than one year ago.
While most junior gold companies with similar valuations have only one property, what makes Linux particularly exciting is a second play that it just acquired. Recently, the company acquired an option to purchase a 100% interest in 26 mining claims, close to the historic Ester Dome mining camp near Fairbanks, Alaska for $10.3 million. Ester Dome is reported to be the one of the largest placer gold discovery in the Fairbanks Mining District, a particularly prolific area. An estimated 10 million ounces of gold have been recovered from placer mining alone since 1902. The owner of the 26 claims believes the land was and is the primary source for the majority of Placer Gold that has been mined from Ester Creek and its drainage over many years. Linux commenced a sampling program in mid-October, and upon receipt of the results plans on drilling select targets in the Ester Grade deposit.
To illustrate how prolific the area is, one property in the heart of the Fairbanks District is Golden Summit, which contains over 6.75 million of the placer-mined ounces directly attributable to the streams of interest. Kinross Gold’s Fort Knox mill is within 6 miles from the Fish Creek claims. Golden Summit contains over 80 known gold occurrences and has the largest and highest-grade historic lode gold producers in the district, with over 500,000 ounces of gold having been produced via underground mines from 1902 to 1940.
Widely respected gold analyst Joe Granville, in his newsletter, recently named Linux as his top pick, placing a $1 price target on the shares. The stock has performed well recently, doubling from mid-August lows on heavy volume, before retreating to current levels, which leaves the stock slightly lower for the year. The stock rallied to a 52-week high of 34 cents in November, on heavy volume, but has pulled back on relatively lighter volume, usually a bullish indicator. On Mr. Granville’s previous recommendation of the company, the stock doubled. Another favorable indicator is often insider purchases, and John Robertson, the company’ President, has been a regular buying of the company’ stock. With gold prices near historic highs, and Linux positioning itself for expansion through its recent option agreement, speculative oriented investors strike gold with Linux.
