12/09/2007
VOLUME 329
Companies featured in the current edition of the newsletter: ACCP, AVGO, CBAI, CBMC, CGXP, CHIP, CORG, DOC, DVLY, ENZ, HYTM, ISON, IWEB, MBND, MSHI, RVEP, SWVC, TAGS, XCR
In another turbulent week, the stock market managed to finish sharply higher despite tumbling early on. The Dow closed the week up 254 points, to increase its year to date gain to 9.3%. The Nasdaq also finished up for the week with a gain of 45 points, to extend its year to date gain to an impressive 12%. The S&P 500 finished with a modest gain of 24 points, to extend its year to date gain to 6.1%, while the Russell 2000 advanced 18 points to reduce its yearly loss to 0.3%. While small-caps have underperformed as measured by the Russell, microcaps have done even worse. The Russell Microcap Index is down 5.8% this year.
Despite ongoing problems in the housing and credit markets, and mounting concerns about the overall health of the economy, the stock market endured after a rough start. The market made a comeback during the middle of the week, after the release of new economic data, including a report that showed non-farm productivity rose 6.3% in the third quarter, up from a preliminary estimate of 4.9%. On the corporate front, Fannie Mae announced that it will cut its dividend by 30% next year due to worsening credit conditions, while bond insurer MBIA saw its shares tumble after Moody’s raised the possibility that it might cut MBIA’s for its triple-A credit rating. Oil was another focus, as OPEC said it would stick with its current production levels, despite the recent drop in oil prices. Oil prices ended the week down 0.5% at $88.28. November same store sales results, however, were mixed, specifically as Target Corp. reported lower than expected sales. Overall, the economy showed it can stand up to pressure from the housing slowdown and credit market turmoil.
What should investors look for the upcoming week? Earnings reports will once again take a back seat to economic reports, but several leading companies will report. Investors can expect to see SAIC (NYSE: SAI) report on Monday after the bell and Kroger (NYSE: KR) before the bell on Tuesday. Thursday before the bell announcements from Costco (NASDAQ: COST) and Lehman Brothers (NYSE: LEH) are expected to cap off a rather slow week. Altera (NASDAQ: ALTR), Agilent (NYSE: A) and Hewlett Packard (NYSE: HPQ) meet with analysts on Tuesday. Advanced Micro Devices, Inc. (NYSE: AMD) meets with analysts on Thursday.
Next week will be active for economic news and events. The Pending Home Sales and the October Wholesale Inventories will be the only announcements for Monday and Tuesday, respectively. The major economic event for the week will be the release of the FOMC policy statement Tuesday afternoon. November Retail Sales will be announced before the market opens on Wednesday followed shortly after by announcements for weekly Crude Inventories. Thursday announcements will include Business Inventories and November Retail Sales. Friday is another active day for reports. Before the opening, announcements of the November Core CPI and CPI will occur. The week will close with morning announcements for November Capacity Utilization, as well as November Industrial Production.
The conference schedule for next week will be relatively light. The week kicks off with the UBS Outlook 2008-Economist Luncheon. Tuesday will mark the beginning of the Goldman Sachs Financial Services Conference and the Dow Jones Newswire Technology Summit. Wednesday, RBC Capital Markets will host a two-day Healthcare Conference in New York. Hythiam, Inc. will present on Wednesday at 10:00am eastern. Merrill Lynch will also host a two-day Industrial Growth Conference in New York starting Wednesday. Roth Capital will host a two-day Software Conference starting Thursday in San Francisco.
Earnings Preview: Enzo Biochem, Inc. (NYSE: ENZ), a life sciences and biotechnology company that provides diagnostic services to the medical community, will report first quarter results for the period ended September 30, 2007 Monday after the market closes. Shares rallied sharply last week after the Lazard analyst who covers the company issued a bullish report on the stock. The Firm said it expects a solid quarterly report with modest upside driven by gains in ENZ’s Life Sciences Division. The Firm’s estimate calls for Q1 sales of $17.6 million, up 69%, and they are modeling EPS of ($0.11). While firm expects gross margin to again be negatively affected by the Axxora inventory adjustment (recent acquisition of Enzo’s), firm is modeling for gross margin improvement going forward. Firm forecasts 300% growth for Enzo Life Sciences, due mainly to the Axxora contribution, while firm estimates Enzo Clinical Labs to post growth of 38% as its esoteric test offering expands. Shares ended the week at $12.65, up $1.69.
Volume Alert: Shares of Hythiam, Inc. (NASDAQ: HYTM), a provider of behavioral health management services to health plans, surged 20% on Friday on more than three times average volume as investors bid shares up ahead of CBS Television’s 60 Minutes story on the company’s PROMETA’s Protocols this evening. According to CBS’s web site, the report is likely to be balanced, and could include quotes from doctors and patients who believe that the Protocols are highly effective in treating addiction. Note that shares have declined significantly since the company completed a $46 million registered offering of stock, at $4.79 per share, in early November. Note that short interest has also increased dramatically, contributing to the decline. Shares could bounce on a favorable report tonight. The stock closed the week up 66 cents, to finish at $3.99.
Access Pharmaceuticals, Inc. (OTCBB: ACCP), a biopharmaceutical company engages in the development and commercialization of products for the treatment and supportive care of cancer and other diseases said Friday that it had demonstrated the ability, using the company’s proprietary Cobalamin technology, to significantly reduce glucose levels in an animal model of diabetes, through its oral insulin product candidate. Several formulations using Cobalamin, which is based upon the body’s natural absorption of vitamin B12 in the gastrointestinal tract, were tested in an animal model of diabetes. The Cobalamin technology has the potential to enable and improve oral bioavailability of active drugs which currently have to be administered by injection, including proteins, antibodies and siRNA. Additional pre-clinical studies are planned. Access intends to develop the Cobalamin oral delivery technology in collaboration with other pharmaceutical and biotechnology companies. Access has in the past and continues to conduct sponsored research programs with leading pharmaceutical companies based on its Cobalamin technology. The company is also actively seeking additional partners for both its oral insulin and other potential programs. ACCP also had its proprietary therapeutic compound ProLindac featured at the industry-renown conference entitled “10th International Symposium on Platinum Coordination Compounds in Cancer Chemotherapy” held in Verona, Italy. The broad array of preclinical and clinical data presented at this conference continued to support the premise that ProLindac, with continued development success, could provide a new and preferential treatment for a variety of cancers currently served by platinum agents, as well as cancers for which platinum is currently not an option. The company also announced that it has demonstrated the ability, using its proprietary Cobalamin technology, to significantly reduce glucose levels in an animal model of diabetes, through its oral insulin product candidate. Several formulations using Cobalamin, which is based upon the body’s natural absorption of vitamin B12 in the gastrointestinal tract, were tested in an animal model of diabetes. Additional pre-clinical studies are planned. The shares ended the week down 41 cents, to close at $2.57.
VeriChip Corporation (NASDAQ: CHIP), a provider of RFID systems for healthcare and patient-related needs, and Digital Angel Corporation (AMEX: DOC), announced that development plans for their self-contained implantable RFID glucose-sensing microchip on track and that the parties expect to have a prototype unit of the microchip available within six months. The two companies also announced that they have published a white paper entitled, Development of an Implantable Glucose Sensordiscussing development plans for a self-contained implantable RFID glucose-sensing microchip. Upon completion, the in vivo glucose-sensing microchip will be the first device able to measure glucose levels in the human body and be read with an external reader. Shares of CHIP rose 28 cents to close at $3.52.
Digital Angel Corporation (AMEX: DOC), a leading provider of radio frequency identification and global positioning system technologies, announced today that it has launched a completely redesigned and enhanced website at www.DigitalAngel.com. The new website contains more investor-oriented information and contains expanded information about the company’s businesses that it believes will enhance its presence among the investor community. The company also announced that it entered into Amendment No. 1 to Agreement and Plan of Reorganization. Amendment No. 1 amends the Agreement and Plan of Reorganization, pursuant to which the Acquisition Subsidiary will be merged with and into Digital Angel, with Digital Angel surviving and becoming a wholly-owned subsidiary of Applied Digital. Shares of Digital Angel ended the week at 40.99, up 7 cents.
Multiband Corporation, (NASDAQ:MBND), the nation’s largest DIRECTV Master System Operator for Multiple Dwelling Units, filed an S4 registration statement last week, giving investors the first look into unaudited pro forma financial statements for the merger with DirecTECH, one of the nation’s largest DirecTV Home Satellite Provider companies. Under the agreement, Multiband shareholders will own approximately 23% of the new company. For the first nine months of the year, DirecTECH had revenue of $158 million and operating income of $3.1 million, suggesting that the combined companies for 2008, if their current growth rates continue, should be solidly profitable. The merger should create significant synergies, and allow for a more stable and predictable revenue base. In addition, both parties should be able to reduce redundant expenses. Shares of MBND ended the week at $2.53, down 23 cents.
Calypte Biomedical Corporation (OTCBB: CBMC), a developer, manufacturer and marketer of HIV diagnostic tests, announced that in honor of World AIDS Day, it has donated 4,000 Aware HIV-1/2 OMT oral fluid tests to the National AIDS Control Council of the Republic of Kenya, in conjunction with its distributor in Kenya, Ultralab & Allied Services Ltd. This is the company’s second such donation. The company also announced that a joint venture with its Beijing China manufacturing subsidiary, Beijing Marr Bio-pharmaceutical Co., Ltd., Beijing China, has successfully passed its quality system audit and obtained certification of its quality system to the international standard, ISO 13485:2003. Conformance to the ISO standards is one of the many requirements for compliance with the European Union Medical Device and In Vitro Diagnostics Directives and obtaining CE Marking. The shares ended the week down 2 cents, to finish at $0.11.
Ceragenix Pharmaceuticals, Inc. (OTCBB: CGXP), a biopharmaceutical company focused on infectious disease and dermatology, announced that recent in vitro testing has shown that its Cerashield antimicrobial coating applied to endotracheal tube segments was able to completely prevent bacterial adhesion and biofilm formation in a 14 day continuous challenge with 10E6 of Pseudomonas aeruginosa. According to the US Centers for Disease Control and Prevention, there are over 250,000 cases annually of ventilator associated pneumonia and over 60,000 deaths. Protection of the ventilated patient from life-threatening infection is a priority. These most recent results from Ceragenix show significant promise in sustained protection of the endotracheal tube surface from infection by a key pathogen implicated in nosocomial pneumonia. Given the emerging crisis in mutating bacteria and the resultant hospital derived infections, half of which come from implanted medical devices, a coating that can prevent bacterial colonization of such devices is both timely and critically important. The stock remained unchanged at $1.40.
IceWEB, Inc. (OTCBB: IWEB), a leading one-stop source for best-of-class computing hardware, on-demand software, advanced networking solutions and innovative online services, announced that it has been selected by Apple to serve as an authorized distributor of Apple products and services to the U.S. Federal Government. Pursuant to the distribution agreement, IceWEB will offer Apple’s entire line of solutions and products to government agencies under its current supply contracts. The expansion of its product and service offerings to include Apple’s solutions presents enormous growth opportunity for IceWEB. With industry experts predicting that government IT spending will rise from $79 billion this year to $102 billion by 2012, the environment for capitalizing on strategic sales opportunities within the Federal Government is presently ideal. Moreover, prevailing federal IT demand for standards-based, open sourced products and solutions particularly those related to video and optimized storage plays to Apple’s strengths and should assist IceWEB in achieving notable market penetration on their behalf. The company also announced that it has entered into a binding Letter of Intent to acquire INLINE Corporation, a privately held U.S. company that has earned a reputation as a globally recognized leader in the manufacturing of enterprise data storage. Both companies current and future customers will greatly benefit from this larger and stronger team. The customers will immediately benefit from the unification of Data Storage Appliances, Clustered Virtual Platforms, Embedded Security Modules delivered on Turnkey ‘Complete’ appliances and through existing Online Storage & Application providing data centers. The companies will have the ability to deliver tomorrow’s Service Oriented Architecture through online services or rapidly deployable hardware platforms, today. The stock finished the week up $0.06, to close at $0.59.
Avicena Group, Inc. (OTC Bulletin Board: AVGO), a late-stage biotechnology company that develops central nervous system therapeutics for neurodegenerative diseases, announced positive Phase II data for a combination trial involving AL-08, the company’s second generation proprietary drug candidate for the treatment of Amyotrophic Lateral Sclerosis (ALS). The Phase II trial evaluated the neuroprotective capacity of two combinations, AL-08 and minocycline versus AL-08 with celecoxib, using group sequential design and a natural history control group for a futility analysis. The primary objective of the trial was selection of a treatment based on which drug combination appeared to slow deterioration in the ALS- Functional Score. Results showed that patients taking the AL-08/celecoxib combination showed a smaller mean decline in ALS- Functional Score compared to those taking the AL- 08/minocycline combination. Results also showed that the AL-08/celecoxib combination was non-futile compared to historical controls, and merits further evaluation. The trial was concluded ahead of schedule after the first pool of patients met the selection criteria. The ability to halt the trial early underscores the potential efficacy of AL-08, which can be further evaluated in a Phase III ALS clinical trial. The stock finished down 25 cents to end the week at $0.45.
Deer Valley Corporation (OTCBB: DVLY), a growth-oriented manufactured home builder, updated its business outlook for the 2007 fourth quarter by confirming stable earnings expectations and a continued strong backlog in the face of the weak housing market. The company expects to generate fourth quarter revenue of approximately $16.6 million, which is only slightly down from the third quarter, bucking the trends reporting by the overall homebuilding industry. Shares ended the week at 95 cents, down 3 cents.
MSTI Holdings, Inc. (OTCBB: MSHI), a carrier class communications technology company that specializes in providing “quad play” services consisting of video, voice, Internet and Wi-Fi to multi-tenant unit and multi-dwelling unit residential, hospitality and commercial properties, announced that New Jersey State officials have designated the company’s wholly-owned subsidiary, Microwave Satellite Technologies, Inc., as a Competitive Local Exchange Carrier, allowing it to offer local and long-distance services as a carrier, rather than a reseller. The CPCN certification broadens the range of services that MST may offer its customers. It enables the company to compete cost effectively with larger telecommunications carriers in New Jersey. The license also means the company can reduce costs on trunk rates from ILECs, saving MST up to 45 percent off of what it now pays. The CLEC designation further allows MSTI to offer ISP services to companies that cannot qualify for CLEC status. The stock ended the week down 20 cents to close at $0.57.
Seaway Valley Capital Corporation (OTCBB: SWVC), a company that invests in equity, equity-related, and debt in companies that require expansion capital and in companies pursuing acquisition strategies, consummated a financing agreement with YA Global Investments, L.P. in the form of a convertible debenture for total gross proceeds of $550,000 and a warrant to purchase an additional 60 million shares of the company’s common stock. The funds will be used for various business activities, including effectuating an acquisition of 100% of the stock of an undisclosed company that Seaway recently executed letter of intent to acquire. In addition, a certain portion of the funds may be used to assist its recently acquired wholly owned subsidiary, Hacketts, in the transition of WiseBuys stores into Hacketts stores. The stock finished up a penny for the week, to close at $0.16.
On The Wires: Tarrant Apparel Group (NASDAQ: TAGS), a company that engages in the design, contract, manufacture, and sale of casual apparel for women, men, and children, announced that its Chief Financial Officer David Burke has resigned. Patrick Chow who had served as its CFO and as a director from January 2002 until August 2004 will replace Burke. Xcorporeal, Inc. (AMEX: XCR), a medical device company developing an innovative extra-corporeal platform technology that may be used in devices to replace the function of various human organs, announced that its common stock has been approved for listing on the American Stock Exchange. Isonics Corporation (NASDAQ: ISON), together with subsidiaries, focuses on the development of homeland security products and services in the United States, received a letter from the Nasdaq Stock Market that it has determined to delist the company’s securities and will suspend trading in the company’s shares on the Nasdaq. The company believes that following the delisting from the Nasdaq, its shares will be eligible for immediate quotation on the OTC Bulletin Board by the Company’s existing market makers for a period of 30 days.
SPECIAL SITUATIONS
Cordia Corporation (OTCBB: CORG) $0.60
Sometimes companies turn their operations around before Wall Street recognizes it. One such company is Cordia Corporation, a communications service provider of traditional CLEC and Voice over Internet Protocol technologies. The company recently reported revenue of approximately $11.9 million for the quarter ended September 30, 2007, representing an increase of approximately $3.4 million for the same period in 2006, and an increase of approximately $2 million from the previous quarter ended June 30, 2007. The growth is driven by the company’s VoIP and International businesses, which surged approximately 70% quarter over quarter, and its acquisition of a CLEC operation that closed in August of 2007. During the fourth quarter and 2008. we expect these trends to continue.
In addition to impressive top-line growth, the company also improved its bottom line. Cordia reported a net loss of approximately $(304,000) or ($0.05) per share for the three-month period ended September 30, 2007, compared to a net loss of approximately $(1,032,000) in the previous quarter, and to a net loss of approximately $(932,000) or $(0.17) per share for the same period ended September 30, 2006. Despite the improved operating results, the investment community has been slow to recognize the improvement. As a result, the company in effect “put itself in play” recently, announcing that it would consider strategic alternatives in an effort to better have its value reflected in the stock price,
So how has Cordia been able to turn itself around? While the U.S. communications market is extremely competitive, the company has found significant opportunities for growth internationally. For example, the VoIP market in places like Asia and Brazil has been showing explosive growth, a reason why Cordia has established a presence in both countries as part of the company’s plan to deploy a global VoIP network. Cordia has developed a unique retail VoIP platform with network nodes in New York, Hong Kong and Brazil specializing in local services including multi currency’s and multi lingual capabilities. In addition to embracing new technologies, Cordia has been careful not to ignore traditional calling services as well, which is where the company still generates the majority of its revenue servicing the residential and small business markets throughout the Qwest and Verizon territories.
Ultimately, most communications products are price-driven, which is where Cordia is able to differentiate itself. In addition to residential and small business plans, Cordia offers over thirty Basic, Unlimited, International and Country calling plans. With plans available in over 300 cities throughout forty countries, combined with low prices that traditional services can’t compete with, it is only a matter of time until VoIP technology overtakes traditional calling services. In this attractive market, Cordia appears to be well entrenched to compete by offering some of the most diverse and extensive services in the market today. In addition to its strong position in the VoIP market, Cordia’s diverse services, including traditional telecommunications offerings , helps to diversify its revenue. Some of the other services it offers are: Shared and Dedicated DSL, International Phone Numbers, Magellan, Wholesale and outsourced offerings, and traditional calling services. Further, the Company develops and provides a suite of proprietary Web-based billing software and outsourced services to local, long distance, and VoIP telecommunications providers.
While the company has improved its operating results, the stock price has not been a reflection of the company’s progress. At $0.60 a share, the stock is actually lower today than before it reported third quarter results. With operating results continuing to improve, the company is determined to create value for shareholders either through recognition from the investment community or by taking matters into its own hands through a strategic transaction.
Cord Blood America Inc. (OTCBB: CBAI) $.023
Stem cells are currently used in the treatment of leukemia, breast cancer, lymphoma, Hodgkin’s Disease, Sickle Cell Anemia, as well as various other cancers, blood diseases, genetic conditions and immune system disorders. It is possible, that with further research and as stem cell transplants become routine, that one day it may be used to fight diseases such as Parkinson’s, Muscular Dystrophy, Diabetes and heart disease. Stem cell research is constantly expanding as the industry continues to learn more about how to use stem cells to treat disease and sickness. The majority of scientists have come to a conclusion that umbilical cord blood has the greatest amounts of condensed stem cells, making it the prime sample to collect.
As new advances occur, the new issue will be the availability of stem cells for people who are requiring these treatments. This is where the stem cell banks will be crucial as for their ability to store umbilical cords safely and to have rapid availability at all times. Cord stem cells are also inexpensive, present no risk or discomfort to donor, and experience only a rare contamination by viruses. This highly publicized industry appears to be primed for growth.
Cord Blood America Inc. looks to become the global dominant stem cell storage facility. It is accomplishing this through accretive asset purchases, intelligent organic growth, and larger global merger opportunities. The company’s core business is the storage of umbilical cord blood which consists of four separately owned wholly subsidiaries which include: sales, processing of cord blood units, storage, and billing and collection. Its second business line is an advertising agency which was acquired several years ago.
The cord storage market has continued to grow and is estimated to reach $1 Billion by 2012. Customer growth Cord Blood America Inc. has more than doubled over the last six years and is projected to continue its strong performance. The expected profit growth for 2007 is 40% as a result of CorCell acquisition. In a rapidly growing market the company is making the right moves to position itself as the leader for years to come. At $.023 its stock looks to be a bargain for a company positioning itself to hold a major market share in a fast growing business.
