Companies featured in this edition of the newsletter: ACTC, CVM, CUR, DKAM, FMTI, ICLK, IMUC, IWEB, OMCM, ONEZ, SIHI, TAGS
Markets took pause from their four week run this week, as some less than encouraging economic reports coupled with profit taking led to slight declines in all of the major indices. All told, the Dow ended the week down 0.5%, surrendering 48 points to close at 9321, bringing its YTD gains to 6.2%. The Nasdaq was off 0.7%, closing at 1985, up a healthy 25.9% on the year, while the S&P 500 and Russell 2000 were down 0.6% and 1.5% respectively, paring their yearly gains to 11.2% and 12.9%.
Disappointing economic data relating to inventories and consumer sentiment soured the mood for much of the week, as worse than expected declines in retail sales, consumer sentiment, and business and wholesale inventories gave investors cause for concern. Retail sales figures, excluding autos, showed a 0.6% decline versus expectations for a 0.1% gain and July retail sales dropped 0.1% against expectations for an increase of 0.8%, mostly on consumer concerns regarding job security and weakness in wage growth. These unexpected declines combined with worse than expected consumer sentiment readings and inventory reports helped set the stage for a broad based sell off that saw all ten sectors of the S&P finish the week in the red.
The news wasn’t all bad however, as July CPI met expectations and Q2 productivity and July industrial production were all better than expected. In addition to these developments, signs of improvement in the global economy in the form of unexpected GDP expansion in France, Germany and Hong Kong, helped temper the selling pressures. Further balance was added by the FOMC announcement that rates would remain at historic lows due to its expectation that inflationary pressures will remain subdued and economic recovery is likely to remain weak for some time.
What should investors look for this week? Earnings reports continue to wind down slowly, but look for reports from CIT Group (NYSE: CIT) and Lowe’s (NYSE: LOW) Monday morning, followed on Tuesday morning by Cardinal Health (NYSE: CAH) and Home Depot (NYSE: HD), with Hewlett-Packard (NYSE: HPQ) reporting after the bell. On Wednesday before the bell, Deere (NYSE: DE) reports, followed on Thursday morning by Barnes & Noble (NYSE: BKS), HJ Heinz (NYSE: HNZ), and Sears Holdings (NASDAQ: SHLD). The week rounds out with Gap (NYSE: GPS) reporting Thursday after the market.
Economic releases for the week begin on Monday with the Empire Manufacturing Index for August due out at 8:30am, followed by Net Long Term TIC Flows for June at 9:00am. On Tuesday, keep an eye out for Building Permits, Core PPI, Housing Starts and PPI, all for July, released together at 8:30am. Weekly Crude Inventories will be released at10:30 am on Wednesday, with weekly Initial Jobless Claims due out at 8:30am Thursday, followed by Leading Indicators for July and Philadelphia Fed minutes from August at 10:00am. The week wraps up with Existing Home Sales for July at 10:00am on Friday.
Conference schedules will be light this week, but look for the Southern California Investor Conference being held in Newport Beach, CA on Tuesday in which ImmunoCellular Therapeutics (OTCBB: IMUC) will participate, and the Pritchard Capital Partners Mini Conference, which will be held in Dallas that same day.
Forbes Medi-Tech Inc. (NASDAQ: FMTI), a life sciences company focused on evidence-based nutritional solutions, reported results for its second quarter ended June 30, 2009 last week. For the period, FMTI generated revenues of $1.02 million Canadian versus revenue of C$2.69 million in the corresponding year ago period. Gross margin for the period improved from $524,000 in Q2 ’08 to $1.16 million in the current period. The significant increase in gross margin is attributable to decreased cost of sales of the company’s nutraceutical products, which fell from $2.2 million in the year ago period to $749,000 in the period ended June 30, 2009. As a result, FMTI managed to post net income of $113,000, or $.02 per share for the period, a significant improvement over the net loss of $3.03 million, or $0.63 per share in the period ended June 30, 2008. The company also said that that it has extended its supply and licensing contract with Pharmavite LLC until mid 2010 for the continued sale of Reducol, which it expects to favorably impact operating results in the coming quarters. Shares remained unchanged at $0.34 on the week.
Tarrant Apparel Group (NASDAQ: TAGS), a design and sourcing company for private label and private brand casual apparel, announced results for the quarter ended June 30, 2009. TAGS reported total net sales of $41.0 million in the second quarter of 2009, a 20.0% decrease compared to $51.3 million in the same period in 2008, mostly attributable to weak Private Label sales resulting from decreased demand from consumers and bankruptcies of significant retail customers such as Mervyn’s. The decrease was partially offset by an increase in sales to Wal-Mart of $7.4 million in the second quarter of 2009. Gross profit decreased by $1.4 million, or 12.9%, to $9.6 million in the second quarter of 2009 from $11.0 million in the second quarter of 2008, primarily resulting from the overall decrease in net sales. Income from operations in the second quarter of 2009 was $505,000 or 1.2% of total net sales, compared to loss from operations of $5.4 million or 10.5% of total net sales, in the second quarter of 2008. Net income was $219,000, or $0.01 per basic and diluted share for the 2009 second quarter, compared to net loss of $5.3 million, or $0.16 per basic and diluted share for the 2008 second quarter. Shares gained a penny on the week to close at $0.84.
Neuralstem (AMEX: CUR), a company targeting major central nervous system diseases using neural stem cells of the human brain and spinal cord, announced last week that it has submitted a plan to address its non-compliance with NYSE Amex listing requirements. Shares lost four cents on the week to close at $1.18.
CEL-SCI Corporation (AMEX: CVM), a late stage cancer immunotherapy company and vaccine developer, reported results for the period ended June 30, 2009 last week. The company’s loss from operations for the quarter ended June 30, 2009 was $3.7 million, or $0.05 per share versus a loss of $2.2 million, or $0.02 per share during the same quarter in 2008; the most current period loss includes $2.6 million in non-cash expense. R&D expenses during the most current period were $1.6 million compared to $1 million during the corresponding year ago period. The company feels that it has emerged from this period of disrupted capital markets stronger than ever and anticipates completing the validation of its manufacturing facility which it hopes will enable it to accelerate the pivotal Phase III test for its lead product candidate Multikine, a next-generation, comprehensive immunotherapy that targets newly diagnosed head and neck cancer. Shares gained a penny on the week to close at $0.49.
SinoHub (AMEX: SIHI) a company providing world-class supply chain management services with transparent information access for participants in the electronic components supply chain in China, reported results for the three months ended June 30, 2009 last week. Among the highlights was a nearly six-fold increase in net income and revenue growth of more than 137%, compared with the 2008 second quarter. Net income for the 2009 second quarter grew substantially to $3.2 million, or $0.13 per fully diluted share based on 25.2 million weighted average shares outstanding, from $540,000, or $0.03 per fully diluted share based on 19.6 million weighted average shares outstanding, in the year-ago quarter (the increase in shares outstanding was the result of a private placement in September of ’08). Total revenue for the 2009 second quarter rose significantly to $31.4 million from $13.2 million for the 2008 second quarter. Revenue from electronic component sales, including procurement-fulfillment and spot component sales, increased more than 130% to $29.1 million for the 2009 second quarter from $12.6 million for the same period last year. Revenue from the company’s supply chain management services business increased to $2.3 million for the second quarter of 2009, from $569,000 last year. The company attributes its impressive results to increased recognition of SIHI’s value offering to manufacturing clients within Chinese markets which has been enhanced by the company’s decision to target second tier mobile phone sector of the Chinese electronics industry where suppliers and manufacturers are looking to SinoHub to expand the flexibility of their supply chains. Shares lost seven cents on the week to close at $3.90.
Drinks Americas Holdings (OTCBB: DKAM), a company that develops, owns, markets, and nationally distributes alcoholic and non-alcoholic premium beverages associated with renowned iconic celebrities, will hold a conference call on Tuesday, August 18th to discuss results for fiscal year 2009 which are to be released that same day. The company also plans to discuss the progress of Kid Rock’s American Badass Beer, its pending export sales to Israel, key market distributor additions, and a recap of the Olifant Vodka Concert Series. Shares lost a penny on the week to close at $0.13.
interCLICK (OTCBB: ICLK), a leading behavioral targeting company, reported record results for the quarter ended June 30, 2009 last week. Among the highlights was record revenue of $10.6 million which rose 128% from 2008 second quarter revenue of $4.7 million, and increased 26% sequentially from the 2009 first quarter, attributable to increased demand from existing advertisers as well as strong penetration into new key accounts. Gross profit of $5.0 million grew 235% from pro forma 2008 second quarter gross profit of $1.3 million, and increased 26% from 2009 first quarter gross profit of $4.0 million. Gross margin of 47.2% compared with pro forma gross margin of 27.0% in the year-earlier period and 47.3% in the prior quarter. The company attributes its significant increases in gross margin to supply chain management improvements and efficiencies generated through its advanced proprietary technology platform. EBITDA was $0.2 million, compared to an EBITDA loss of $1.6 million in the year-earlier period. Net loss for the period was $1.0 million, or $0.03 per share, compared to a net loss of $3.9 million, or $0.11 per share in the year earlier period. ICLK expects third quarter revenue to exceed $12.5 million and gross margin to approach 50%. The company raised its full-year revenue forecast to exceed $44 million, an increase of at least 96% compared to 2008. Previously, the company forecast that revenue would exceed $40 million. Shares lost seven cents on the week to close at $1.84.
IceWeb (OTCBB: IWEB), a storage technology company specializing in Geographic Information Systems (GIS) that provides services to bureaucratic and corporate organizations, announced last week that its wholly owned subsidiary, INLINE Corporation, was recently awarded a contract by the Department of Defense (DoD) to develop innovative storage solutions to accommodate the government’s growing need for data storage in connection with defense applications. Under the agreement, INLINE Corporation will provide data storage to one of DoD’s Combatant Commands. The company’s TruEnterprise 444 model, a scalable data center grade product, will be deployed by the DoD to build an initial 48TB repository for geospatial imagery data. DoD plans to scale the overall solution to accommodate growth of this GIS data to upwards of 200TB’s. Shares lost a penny on the week to close at $0.10.
OmniComm (OTCBB: OMCM), a leader in integrated electronic data capture (EDC) solutions for clinical trials, announced last week that it has been selected to provide eClinical data management solutions for two more organizations engaged in clinical research. The first deal involves two Phase I HIV studies for a large west coast based biotechnology company that will handle over 100 patients over the course of approximately seven months. The second deal involves a pivotal Phase III trial in Rheumatoid Arthritis for a large European based Contract Research Organization (CRO), which is expected to enroll close to 300 patients over the course of 48 months at 20 sites in Europe. The company believes that organizations within the clinical research space have become increasingly aware of the high value and tailored solutions that OMCM offers to clients thanks to its recent acquisition of the EDC assets of eResearch and Logos Technologies. Shares gained three cents on the week to close at $0.23.
Advanced Cell Technologies (OTC: ACTC), a company engaged in the development of regenerative therapies utilizing stem cells, announced last week that Dr. Robert Lanza, its Chief Scientific Officer, was featured on Deepak Chopra’s Wellness Radio on Sirius/XM Stars, Channels 102 and 55. The channel is the flagship talk station on the Sirius/XM network and boasts a listenership of approximately 9 million people. The show focuses on Dr. Lanza’s research at ACTC and his new book “Biocentrism.” Chopra is a prolific author of over fifty-five books on topics ranging from health to consciousness and quantum mechanics, and was heralded by Time Magazine as one of the top heroes and icons of the century. In other news last week, ACTC announced that it has hired Edmund Mickunas as Vice President Regulatory. Mr. Mickunas will be in charge of spearheading the company’s effort to translate its cutting edge research into FDA approved therapies ready for clinical trials. Specifically, Mr. Mickunas will work with Dr. Robert Lanza and ACT’s Development Team to finalize and submit an IND for the RPE program to the FDA for approval to commence a Phase I Clinical Trial. Mr. Mickunas has over 28 years of experience across a breadth of disciplines including the biotechnology, medical device and pharmaceutical fields. Shares remained unchanged at just under $0.15 on the week.
Special Situation:
ONE Holdings, Inc. (OTCBB: ONEZ) $1.05
As economic growth resumes following the global recession, many investors have begun to look towards opportunities in emerging markets where growth is expected to resume at higher rates. ONE Holdings is a rapidly growing company focused on the acquisition of core operating assets in the Asia Pacific and greater China region that is positioning itself to capitalize on the strong growth expected to characterize the region as it leads the global economy out of recession. The company pursues fast growing, cash flow positive leaders in the biotech and technology industries where management has a long history of operating experience; it seeks to acquire companies with proprietary technology, high barriers to entry, repeatable and sustainable revenue streams and synergies with its current operating assets. Their strategy is to support the growth of operating subsidiaries by providing strong managerial direction and adequate financing aimed at promoting sustainable, long term growth fostered by the robust markets which the company has chosen to operate in.
While it may sound complex, the company’s business model is fairly simple and very sound strategically; find profitable, high growth companies operating in strong emerging markets, acquire them and help them continue to grow by providing managerial guidance and financing. In addition to a sound business model, ONE Holdings benefits from an affiliation with Abacus Global Investments, a business advisory firm assisting small to midsize companies in reaching their full potential, which recently purchased a controlling interest in the company with plans to refocus its business strategy on accretive acquisitions and delivering value to shareholders. Abacus identifies best in class midsize private companies and transforms these companies into fast growing public entities by assisting them in raising capital for growth in addition to providing sound strategic guidance.
The company’s first operating subsidiary in a series of planned strategic acquisitions is Green Planet Bioengineering, a fast-growing, high-tech bioengineering company operating in China that uses proprietary processes to extract highly profitable health supplements, fertilizers, and pesticides from waste tobacco. Green Planet posted revenues of $10.4 million in FY’08, with EBITDA of $5.0 million and net income of $3.3 million, with FY ’09 forecasts for revenue of $13.5 million and EBITDA and net income of $6.9 million and $4.8 million respectively. The company’s proprietary processes and exclusive access to raw materials allow it to generate gross margins in excess of 50%, illustrating the type of opportunities that ONE Holdings targets.
With future plans for further accretive acquisitions in the works that the company has indicated that it expects will bring substantial value to shareholders, ONE Holdings appears extremely well positioned to capitalize on the renewed growth spurred by the slowing of recessionary pressures. Their strong business model and strategic focus on fostering growth within already high growth markets makes them an intriguing prospective investment as more and more investors continue to scour emerging markets in hopes of finding higher return on investment than is available stateside. The company’s aggressive acquisition strategy combined with a strong, high growth target market and focus on providing value to shareholders makes ONE Holdings an enticing play on emerging Asia that appears to provide significant value at present levels. The prospect of forthcoming acquisitions alluded to by management in a recent public filing provides the possibility for potential catalysts on the horizon, making now an opportune time to think about investing as the company is operating largely under the collective radar of investors for the time being.