12/16/2007
VOLUME 330
Companies featured in the current edition of the newsletter: CACN, CBMC, CHIP, CYTR, DOC, ENZ, GNBT, GSHF, HJHO, HSOA, HYTM, ILNS, MSHI, PBIO, PLKH, RVEP, SMGY, TKO, VOIC, XCR
After trading in volatile fashion, the major averages finished the week noticeably lower. The Dow dropped 286 points, paring its yearly gains to 7%. Even after giving up 70 points, the technology heavy Nasdaq continued to be the best performing index with year to date gain of 9.1%. The S&P 500 declined by 37 points, trimming its year to date gain to 3.5%. The small-cap based Russell 2000 continued its drop as it declined by 32 points, increasing its yearly loss to 4.3%.
Concerns about weakness in the financial sector and credit market turmoil continued to weigh on investor sentiment. In a mixed week, the market continued to rally ahead of the Federal Reserve’s policy-setting meeting, however, stocks ended the session sharply lower after the meeting as investors were hoping for a larger rate cut amid mounting concerns that the liquidity strain in the financial markets could lead to larger problems for the economy. In a positive sign for the holiday shopping season, the Commerce Department reported retail sales rose 1.2% in November. On the negative side the Labor Department’s producer price index jumped 3.2 % as gasoline prices surged to record levels. Excluding food and energy costs, core PPI was still up a larger than expected 0.4%, which fanned inflation concerns. On the corporate front, financial giant Citigroup announced plans to consolidate $49 billion worth of assets on its balance sheet from several of its structured investment vehicles that have been hurt by the meltdown in sub-prime lending and tighter credit markets.
What should investors look for in the upcoming week? Earnings reports continued to be relatively tame this week, but the activity level picks up with big name companies reporting results. Starting the week will be earnings announcements by Goldman Sachs (NYSE: GS) and Best Buy (NYSE: BBY) coming before the morning bell on Tuesday. In a busy day on Wednesday, CarMax (NYSE: KMX), Commercial Metals (NYSE: CMC), General Mills (NYSE: GIS), and Morgan Stanley (NYSE: MS) will all make announcements before the bell. Also on Wednesday, Accenture (NYSE: ACN), Nike (NYSE: NKE), and software provider Oracle (Nasdaq: ORCL) will make earnings announcements after the close of the market. The following day will be an eventful Thursday morning with the bulk of announcements coming before the bell from FedEx (NYSE: FDX), Rite Aid (NYSE: RAD), Carnival (NYSE: CCL), and Bear Stearns (NYSE: BSC). Friday will be a slow day with only two earnings announcements from Circuit City (NYSE: CC) and Walgreen (NYSE: WAG).
Next week’s economic news and data will not have a specific focus and should include news involving housing, personal income and spending. The Third Quarter Current Account will be announced Monday morning and should get some attention. The November Core Producer Price Index and Building Permits will be announced before the market opens Tuesday. The weekly crude inventories will be the sole announcement on Wednesday. Thursday morning investors can look for the Third Quarter Final GDP and Chain Deflator announcement, as well as the weekly Initial Unemployment Numbers. November personal income and personal spending will cap off the week with announcements on Friday.
Enzo Biochem, Inc. (NYSE: ENZ), a biotechnology company specializing in gene identification and genetic and immune regulation technologies for diagnostic and therapeutic applications, announced results for the fiscal first quarter ended October 31, 2007 which beat the lone analyst’s estimate. The company’s total revenue increased 86%, to $19.4 million, compared to $10.4 million in the corresponding year ago period, and up 8.5% from $17.9 million in the preceding fourth quarter of fiscal 2007. Gross profit for the fiscal 2008 first quarter amounted to $9.9 million, up from $6.3 million a year-ago and $9.2 million in the preceding quarter. This quarter continued the trend of improved operating results in both Enzo Life Sciences and Enzo Clinical Labs. The company continues to experience benefits from the Axxora acquisition, where it said it expects results of future quarters to benefit from expanded distribution capabilities and a broader product line. The stock ended the week up $0.35, to finish at $13.05.
Shares of Hythiam, Inc. (NASDAQ: HYTM), a healthcare services management company that offers solutions for patients suffering from alcoholism and substance dependencies, were volatile last week, plunging after a CBS Television 60 Minutes report on its PROMETA Treatment Program, created confusion among investors. The report featured doctors lauding the protocol for its ability to treat methamphetamine addiction, as well as raised questions about whether the company should seek FDA approval. The FDA has historically permitted the use of drugs off-label for many years and the company’s protocol suggests using the drugs in this manner, which would comply with the approach that the FDA has taken in other situations, so there is no historical precedent that would suggest regulation in this situation. The stock dropped $1.30, to close the week at $2.75.
Volume Alert: Shares of Generex Biotechnology Corporation (Nasdaq: GNBT), the leader in drug delivery for metabolic diseases through the inner lining of the mouth, closed at their highest level since February, as the stock jumped 4.4% on Friday on more than twice average volume. The company announced last week that the Ministry of Health of the United Arab Emirates, Drugs Control Department had issued a non-objection letter to the Imperial College London Diabetes Centre to import Generex Oral-lyn, Generex’s proprietary oral insulin spray product, into Abu Dhabi. The Manager of the Drugs Control Department indicated that importation of Generex Oral-lyn can be done via the issuance of a purchase order from the Imperial College London Diabetes Centre to a drug store or pharmacy licensed by the Ministry of Health of the United Arab Emirates. According to the International Diabetes Federation the UAE has the second highest rate of diabetes in the world, affecting 20% of residents. Abu Dhabi is the capital and second largest city of the UAE with a population of 2.3 million. It is also geographically the largest of the seven emirates. This step is significant in that it allows the Company to introduce Generex Oral-lyn into the Middle East via an established organization with a strong diabetes treatment program. The company wasted little time in securing an order in the Middle East, as it said Thursday that it had already received a $400,000 purchase order for its over-the-counter products, including Glucose Rapid Spray, from Leosons General Trading Company, its Marketing and Distribution Partner in the Middle East. The stock closed the week up 10 cents, to finish at $0.90.
Patients with chronic kidney failure could finally be freed from fixed dialysis machines, as a result of Xcorporeal’s (AMEX: XCR) wearable artificial kidney that has shown promising results in a pilot study. Researchers said last week that the battery-powered device had proved successful when worn for periods of 4 to 8 hours. The company’s longer-term objective is round-the-clock use, eliminating the need for patients to be hooked up to a fixed haemodialysis machine in a hospital or clinic for 12 hours a week. The study involved eight patients, with an average age of 52 years, who were established on regular haemodialysis before being fitted with the wearable device. The rate of blood flow and the speed at which toxic chemicals were removed from the body was considerably slower than in conventional dialysis but this was not seen as a problem, since the device can be worn for long, continuous periods. Two of the patients experienced blood clotting, due to receiving insufficient anticoagulant medication, and one was temporarily disconnected when a needle became dislodged. Nonetheless, all the subjects said they would recommend the treatment to other patients with kidney failure, the researchers reported. Nearly 1.3 million people worldwide suffer from chronic kidney failure that requires treatment with dialysis. Few are fortunate enough to receive a transplant. Shares ended the week at $4.84, down 90 cents.
Pressure BioSciences Inc. (Nasdaq: PBIO), a life sciences company, engaged in the research, development, and commercialization of sample preparation system, announced that scientists at the New York University School of Medicine have reported that their use of the company’s patent-pending, award winning technology (ProteoSolve-LRS) was in large part responsible for the identification of potential biomarkers in breast and colon cancer tissue. ProteoSolve-LRS is the Company’s recently- released method for the detergent-free extraction of proteins from lipid-rich and other tissues. This is a significant finding, since these potential biomarkers may prove to be important indicators of disease detection and progression. It is possible that these findings may alter the current paradigm of histopathology tissue diagnosis for tumors. In the future, examination of biopsy tissue may require not only histopathology, but also mass spectrometry for complete diagnosis. The company believes that its ProteoSolve-LRS method, when used in combination with its pressure cycling technology, will often allow proteomics researchers to achieve more rapid, more reproducible, and higher quality protein extraction results when compared to other current methods. The company further believes that this improved method for protein extraction should lead to an enhanced ability for researchers to find and identify new biomarkers of disease. Shares ended the week down $0.47, to finish at $5.35.
RXi Pharmaceuticals Corporation, a majority-owned subsidiary of CytRx Corporation (NASDAQ: CYTR), a biopharmaceutical research and development company, that develops human therapeutic products primarily based upon small molecule molecular chaperone’ co-induction technology, announced that it has entered into an agreement with Thermo Fisher Scientific Inc. to exclusively license certain RNA interference sequences to an undisclosed number of target genes, with an initial focus in the areas of type 2 diabetes, obesity, neurology and oncology, for the ongoing development of RXi’s rxRNA compounds. The stock finished the week down $0.33, to close at $3.12.
Home Solutions of America Inc (NASDAQ: HSOA), a company that provides restoration, construction, and interior services to commercial and residential properties in the United States, said late Friday that its financial reports for the first two quarters of 2007 should not be relied upon. The news should not come as a surprise to investors, as the company previously said it was reviewing related party transactions and analysts had said it was likely it would take a charge. The filing could indicate that the company is getting closer to filing its quarterly statements, which could remove one area of uncertainty for the company, although results could be disappointing due to several transactions previously recorded as revenue by Fireline. Shares closed down 28 cents to finish the week at $1.05.
VeriChip Corporation (Nasdaq: CHIP), a provider of RFID systems for healthcare and patient-related needs, announced that the company’s wholly-owned subsidiary, Xmark, recently completed a sale of an infant protection system in the state of Ohio, where Xmark’s infant protection systems are now installed in more than half of all birthing facilities. This install base features systems sold under the company’s HUGS brand. The HUGS system, which is the industry standard, continues its sustained growth in maternity wards and birthing centers throughout the U.S. The expansion of the install base is deemed critical to the company’s ongoing success. Shares finished the week down 55 cents to close at $3.09.
Rio Vista Operating Partnership L.P., a wholly owned subsidiary of Rio Vista Energy Partners L.P. (NASDAQ: RVEP), entered into an Amendment to Binding Letter of Intent which amends the binding letter of intent with TransMontaigne Partners L.P. regarding TLP’s acquisition of RVOP’s remaining liquefied petroleum gas assets. The amendment is dated December 4, 2007 and is effective as of September 12, 2007. Pursuant to the Amendment to Letter of Intent, pending the completion of a definitive agreement between the parties, TLP has agreed to advance to RVOP an additional refundable deposit in the amount of $1.5 million. The stock finished the week down 60 cents to close at $16.00.
Halcyon Jets Holdings, Inc.(OTC BB: HJHO), operating through its wholly owned subsidiary Halcyon Jets Inc., a leading broker for on-demand charter aircraft services, announced impressive results for its third quarter for the period ended October 31, 2007. The company announced net revenue of $2.9 million, representing a 102.3% increase from its second fiscal quarter ended July 2007. Net revenue for its fourth quarter to date, representing a period of approximately six weeks, has already exceeded the quarterly revenue for the entire third quarter. The company reported a third quarter net loss of $3.1 million, or a net loss of $0.13 per share, which includes $100,000 in merger-related expenses, and $2.0 million in non-cash costs for depreciation, amortization and stock-based compensation. The quarterly report was Halcyon’s first full quarterly report as a publicly traded company. Results reflect the growing recognition, despite the company’s limited operating history, of the increased customer utilization and the growing market for private jet travel. The stock closed up 9 cents for the week, to close at $0.89.
MSTI Holdings, Inc. (OTCBB: MSHI), a carrier class communications technology company specializing in providing true quad play services to residential, hospitality and commercial properties, said that its wholly-owned subsidiary, Microwave Satellite Technologies, Inc. (MST, Inc./NuVisions), should benefit from a recent Federal Communications Commission decision. The decision denied Verizon’s forbearance petitions that sought to eliminate pro-competitive rules in six major East Coast markets affecting 34 million Americans. By denying the petitions, the FCC acted to protect competitive choice in the Boston, MA, Providence, RI, New York City, NY, Virginia Beach, VA and Philadelphia and Pittsburgh, PA markets. The FCC’s denial is expected to enhance consumer choices and spur price competition for the benefit of telecommunications users. Verizon remains obligated by law to provide unbundled network elements at regulated prices to competitors in several densely populated metropolitan service areas. The shares were down $0.05 for the week, to close at $0.55.
Calypte Biomedical Corporation (OTCBB: CBMC), a company that engages in the development, manufacture, and distribution of in vitro diagnostic tests, primarily for the diagnosis of human immunodeficiency virus, entered into the Seventh Amendment to 2005 Credit Facility Agreement with Marr Technologies, BV, its largest stockholder and affiliate to Marr Technologies Asia Limited, the company’s joint venture partner in Beijing Marr Bio-Pharmaceutical Co., Ltd. Pursuant to the Credit Facility Amendment, Marr was given the option to convert, for a one year period commencing on December 4, 2007 and ending on December 3, 2008, all or any portion of the principal amount and accrued interest of the promissory notes issued under the 2005 Credit Facility and outstanding during the term into shares of common stock of the company at the conversion price of $0.16 per share. Also the company entered into Amendment No. 3 to the Secured 8% Convertible Promissory Notes with Marr, lowering the conversion price of the 8% convertible promissory notes issued to Marr in the PIPE dated April 4, 2005 and all subsequent notes issued, and to be issued, to Marr thereafter for the payment of interest on the notes from $0.30 per share to $0.16 per share of common stock. The stock ended the week unchanged at $0.11.
Smart Energy Solutions, Inc. (OTCBB: SMGY), a developer and manufacturer of the innovative Battery Brain product line of vehicle and marine devices, announced that All Start Battery, Inc., a Los Angeles based private Automotive Dealer Expeditor, will be carrying a private label version of the Battery Brain under the name “StarterGuard Failsafe Battery System” developed for automotive/truck dealerships. The two companies have signed a long-term, multi-million dollar distribution agreement together with a purchase order for immediate delivery. The agreement with All Start Battery, Inc. provides the company the opportunity to increase its penetration in the California vehicle market. Shares were down 3 pennies for the week, to close at $0.31.
ProLink Holdings Corp. (OTCBB: PLKH),the world’s leading provider of Global Positioning Satellite golf course management systems and digital out-of-home on-course advertising, announced that Steeple Chase Golf Club now features the ProLink Solutions ProStar GPS system used at many of the world’s most famous golf courses and plans to participate in ProLink’s exclusive national advertising opportunity. The company also announced that Towa Golf Resort in Santa Fe, New Mexico now also features the ProLink Solutions ProStar GPs system and will participate in advertising as well. The company expects excellent returns from the food-and-beverage ordering function and advertising program, while the system is also very attractive to tournament organizers. The addition of upscale venues such as Steeple Chase and Towa Golf Resort is yet another reason why leading consumer brands have chosen to advertise on ProLink’s screens. The stock finished the week unchanged at $0.49.
GreenShift Corporation (OTCBB: GSHF), a company that through its subsidiaries, develops and supports clean technologies and companies that facilitate the use of natural resources, provided an update on the status of its ongoing restructuring and other efforts. GSHF will change its name to GS Project Corporation in January 2008. Starting January 2008, its business model will be based on providing project financing and other support for qualified renewable fuels and energy efficiency projects for third party clients utilizing GS CleanTech technologies, equipment and services. While GS Projects’ primary goal will be to generate income from any investments that it makes, the company’s focus will be to provide financial support in ways that facilitate more sales of GS CleanTech technologies, equipment and services. GS Project plans to hire new senior management with experience in project development and finance as soon as possible. GreenShift shareholders of record ss of December 12, 2007 will receive 0.104 shares of GS CleanTech Corp., 5 shares of GS Energy Corp, and 0.010 of EnviroServices Inc. for each share of GreenShift. At the completion of these distributions, GreenShift will cease to have any direct ownership interest in GS CleanTech, GS Energy or GS EnviroServices. Shares were down 2 cents for the week, to close at $0.01.
ON THE WIRES: Telkonet, Inc. (AMEX: TKO), the leading technology solutions provider for broadband networking, end-to-end service support and energy management, announced that Jason Tienor has been named President and Chief Executive Officer, and Dottie Cleal has been promoted to Chief Operating Officer. VoIP, Inc. (OTCBB: VOIC), a company that provides wholesale long-distance and local telephone services through its VoIP network, announced that it has appointed Arthur L. McCabe and Kevin Behanna as Co-Chief Technology Officers. Intellect Neurosciences, Inc. (OTCBB: ILNS), a biopharmaceutical company, which specializes in the research and development of drugs to treat Alzheimer’s Disease and other major disorders of the central nervous system, filed its quarterly report for the period ended September 30, 2007, regaining compliance with the reporting regulations. The E was removed from its ticker symbol as a result.
SPECIAL SITUATION:
Customer Acquisition Network Inc. (OTCBB: CACN) $5.85
The worldwide advertising industry is worth hundreds of billions of dollars and likely to continue its strong growth. Advertisements come in many different forms. Among them is the traditional way of advertisers paying for the right to expose their product or message to the public. However, new forms of advertising are gaining ground and replacing the old methods. Internet advertising is at the forefront of this change as it gives advertisers a large audience and lets them pay only for real and measurable actions, such as clicking a web link.
The new way of advertising is based on consumers themselves taking the initiative by showing up voluntarily and interacting with what they find online. This action alone lowers the cost to the advertiser because the average media time consumer spends online continues to outpace the advertising costs. The internet has changed the way advertisers view their craft and will continue to play an increasingly important role in the industry. With internet advertising compiling only a portion of the entire industry’s revenue, there remains lots of room for growth, in which companies like Customer Acquisition Network, Inc. are making giant strides.
Customer Acquisition Network Inc., an emerging, pay-for-performance, multi-channel Internet marketing company, offers its advertiser customers an integrated, multi-channel Internet advertising solution designed to deliver on their insatiable demand for new customer leads and acquisitions. This multi-channel, pay-for-performance network solution will deliver advertisers high-volume, high-quality new customer conversions and the ability to refocus ad dollars quickly based upon ROI. By providing advertisers with the ability to manage their campaigns across multiple channels with a single reporting interface, Customer Acquisition Network is taking internet advertising to a new level.
With its recent acquisition of interCLICK, which is considered the fastest-growing Internet ad network in the U.S., according to leading Internet audience tracker, comScore, the company has put itself in a strong position to be a long term player in the growing internet advertising market. interCLICK is the only ad network that provides real-time operational transparency for both advertisers and publishers. interCLICK advertisers select publisher sites for their ads via an easy-to-use Web interface and then receive performance reports on each site placement in real-time. InterCLICK serves approximately 4 billion adds a month and has 47% of online population view its ads in any given month. Customer Acquisition Network continues to seek to acquire other leading Internet pay-for-performance networks, as well as develop organically-built distribution businesses. Following the acquisitions the Customer Acquisition Network intends to fully-integrate the companies to provide advertiser customers a single point of contact to manage their multi-channel pay-for-performance marketing campaigns and return-on-investment.
Like many companies in the space, growth is rapid. Pro forma revenue for the third quarter, which includes interCLICK, totaled $3.5 million in the third quarter, an increase of 101% from the previous quarter pro forma revenue of $1.7 million. For the nine months ended September 30, 2007, revenue was $6.4 million on a pro forma basis. interCLICK grew 135% from December to September, according to comscore, which was twice the rate of the next fastest growing network.
Reflecting the recognition that the Internet is likely to drive advertising sales growth in the coming years, acquisitions have been completed in the sector at a breathtaking pace. Microsoft acquired advertising network aQuantive, the parent company to Avenue A | Razorfish, Atlas and DRIVEpm, for roughly $6 billion Previously, Google bought Doubleclick for $3.1 billion in April. Later that same month, Yahoo acquired competitor RightMedia for $680 million. WPP Group, a traditional advertising agency, acquired 24/7 Real Media for $649 million. With Customer Acquisition Network’s revenue growing rapidly, could it be next?
