Companies featured in this edition of the newsletter: AEN, AIDO, CNLG, FMTI, GISV, HYTM, ICLK, ITUI, MNDL, PLKH
Developments in Washington commanded the markets’ attention last week, as investors looked to Capitol Hill in anticipation of both the impending stimulus package and Treasury Secretary Geithner’s financial sector rescue plan. All told, the Dow ended down 430 points to close at 7850, losing 5.2% and bringing its YTD loss to 10.6%. The Nasdaq, which has been outperforming the Dow regularly since the New Year, surrendered 3.6% to close at 1534 on the week, bringing its yearly loss to 2.7%. The S&P 500 and Russell 2000 posted losses of 4.8% and 4.7 % respectively, bringing their YTD losses to 8.5% and 10.2%.
The week started out fairly uneventfully, as markets searched for direction with investors anticipating developments from Washington. Things picked up Tuesday however, with Treasury Secretary Geithner’s much anticipated address regarding the Obama administration’s plan for shoring up the nation’s embattled financial system. Ambiguities and the lack of a clearly defined plan for removing bad assets from banks’ balance sheets were poorly received by the market, resulting in a 5% drop which was spearheaded by a 10.9% drubbing of the financial sector. The Secretary was careful not to announce a plan for bad assets until he was sure that the administration had an actionable strategy, but did say that together with the Fed, FDIC and private sector, the Treasury will establish a public-private investment fund to provide capital and financing to restore order to private markets. There are a range of different structures for the program, but Geithner believes it will be in the neighborhood of a $1 trillion facility.
Disappointing economic news, headlined by the announcement that initial jobless claims were worse than expected and uncertainty following Geithner’s announcement led to a sell-off on Thursday with stocks falling as much as 3.1% before rallying back by the close. The late surge was spurred by a report that the Obama administration is working on a proposed $50 billion plan to subsidize mortgages in order to help homeowners avoid foreclosures. The fiscal stimulus package, which was in focus throughout much of the week, appeared to have a minimal impact on trading, as it continued to meet partisan opposition, with the Senate eventually passing a modified version of the bill late Thursday. The adjusted package was passed in the House Friday afternoon with a vote in the Senate anticipated over the weekend. Expect developments from Washington to weigh heavily on investors again this week, as both the stimulus package and developments from the G-7 summit in Rome have significant market moving potential.
What should investors look for this week? During this holiday-shortened week (markets closed on Monday) the remnants from Earnings Season will garner some attention. Results begin with Medtronic (NYSE: MDT), Teva Pharmaceuticals (NASDAQ: TEVA) and Wal-Mart (NYSE: WMT) reporting before the bell on Tuesday with Agilent Technologies (NYSE: A) reporting after the close. On Wednesday morning, look for reports from Comcast (NASDAQ: CMCSA), Constellation Energy (NYSE: CEG), Deere & Co. (NYSE: DE), Goodyear Tire (NYSE: GT), Officemax (NYSE: OMX), and Owens Corning (NYSE: OC). CBS Corp (NYSE: CBS), Hewlett-Packard (NYSE: HPQ), Ingram Micro (NYSE: IM), and Whole Foods (NASDAQ: WFMI) will all release earnings after the bell Wednesday. On Thursday before the open expect data from CVS (NYSE: CVS), General Motors (NYSE: GM), Hormel Foods (NYSE: HRL), MGM Mirage (NYSE: MGM), Sempra Energy (NYSE: SRE), and Sprint Nextel (NYSE: S). Friday morning look for reports from JC Penny (NYSE: JCP) and Lowe’s (NYSE: LOW).
Economic reports for the week begin with the February Empire State Manufacturing report and the Net Long-Term TIC Flows for December both scheduled to be released at 8:30 a.m. on Tuesday. Building Permits, Export Prices, Housing Starts and Import Prices, all for January, will be released together at 8:30 a.m. Wednesday, along with Capacity Utilization and Industrial Production also for January- at 9:15 a.m. that same day. PPI and Core PPI for January will be released along with Weekly Initial Jobless claims at 9:15 a.m. Thursday, followed by Leading Indicators for January and February Philadelphia Fed Meeting minutes at 10:00 a.m. Weekly Crude Inventories will follow at 11:00 a.m. On Friday, expect January CPI and Core CPI at 8:30 a.m.
Conferences for the week begin with the Consumer Analyst Group of New York Conference which kicks off in Boca Raton on Tuesday and lasts throughout the week. Morgan Stanley will host their two day Global Basic Materials Conference in New York beginning on Tuesday. Also beginning Tuesday is the Independent Petroleum Association of America OGIS Florida conference, which spans two days and is being held in Palm Beach. The three day Roth Capital Partners OC Growth Conference also begins Tuesday and is being held in Dana Point, CA. Mandalay Media (OTCBB: MNDL) presents Monday at 4:40 p.m. pacific time, while Hythiam, Inc. (NASDAQ: HYTM) presents Wednesday at 5 p.m. Oppenheimer & Co. will host their REIT/Real Estate Forum on Thursday in New York, in addition to their Semiconductor Summit which also begins Thursday in Vail. The Credit Suisse Global Forest Products Conference kicks off Thursday in New York, along with the Piper Jaffray Clean Technology and Renewables Conference.
interCLICK (OTCBB: ICLK) the fastest growing advertising network in the US according to comScore, announced record revenue for the fourth quarter and year ended December 31, 2008, managing to post its first quarter of positive EBITDA and free cash flow as a public company, despite operating in an extremely difficult advertising environment. ICLK reported fourth quarter revenue of $8.4 million, an increase of 46% sequentially, compared to 2008 third quarter revenue of $5.8 million. Revenue exceeded the company’s previously announced guidance of $7.0 million. interCLICK’s 2008 fourth quarter revenues increased 54% compared to revenue of $5.5 million for the prior year period. Gross profit for the 2008 fourth quarter was $3.3 million, a 160% increase compared to gross profit of $1.3 million in the prior year period. Gross margin was 38.6%, representing a sequential increase of 750 basis points from the prior quarter’s 31.1% gross margin. Gross margin for the 2007 fourth quarter was 22.8%. Gross margin gains were attributable to higher ad rates, which increased over 40% sequentially, and improved supply chain management. Due to operating leverage as revenue gains surpassed growth in the company’s expense base, ICLK managed to report EBITDA for the 2008 fourth quarter of $0.3 million, compared to a 2008 third quarter EBITDA loss of ($0.8) million and a 2007 fourth quarter EBITDA loss of ($1.1) million. For the full-year ended December 31, 2008, the Company’s revenue was $22.4 million, an 89% increase compared to pro-forma revenue of $11.9 million in 2007. Gross profit for the full-year ended December 31, 2008 was $7.2 million (32.0% margin), an increase of 168% compared to pro-forma gross profit of $2.7 million (22.5% margin) in 2007. interCLICK expects first quarter revenue, for the period ending March 31, 2009, to exceed $6.5 million and gross margin to exceed 38.6% of revenue. Full-year revenue is expected to rise at least 60%. Shares remained unchanged at $0.80 for the week.
Adeona Pharmaceuticals (AMEX: AEN), a specialty pharmaceutical company developing innovative late-stage drug candidates for the treatment of autoimmune and central nervous system diseases, announced last week that it has received a notice of allowance for claims from the Japanese patent office. This notice of allowance covers claims relating to various heat shock protein sequences which are derived from dnaJP1. The allowance provides further intellectual property protection for molecules associated with the company’s once daily oral treatment for rheumatoid arthritis which has passed a Phase II clinical trial. Upon issuance, this will mark over 47 issued, pending U.S. and international patents related to this novel technology. Shares gained two cents on the week to end the week at $0.19.
Forbes Medi-Tech Inc. (NASDAQ: FMTI) , a life sciences company focused on evidence-based nutritional solutions, announced last week that it has raised approximately $800,000 in additional funding from a Non-Dilutive Funding Transaction, likely from the sale of a net operating loss carryforward, which was originally announced on March 20, 2008, with the subsequent closing expected to be announced by May of ’09. Forbes also announced that its cholesterol lowering ingredient, Reducol, was recently featured as one of the All-Star Supplements in the February 2009 issue of Prevention magazine. The article focuses on natural remedies- such as Reducol, which has been scientifically proven to lower cholesterol levels by as much as 15% in a number of clinical trials in both the US and overseas markets. Reducol is marketed in the US under the brand names Nature Made, CholestOff, and CholestOff Complete and is available at most mass market retailers including Costco, Walgreens, CVS, Wal-Mart and Target. Shares gained five cents on the week to close at just below $0.19.
i2Telecom International, Inc. (OTCBB: ITUI), a leading developer of award-winning patented and innovative high-quality mobile applications and services, announced last week that 2009 Presidents Cup Captain and former Masters Champion Fred Couples will represent i2Telecom and endorse its MyGlobalTalk application on the PGA Tour. Couples is one of the most popular players on the Tour, and will endorse ITUI’s award winning technologies by wearing the company’s logo on his golf shirts, in addition to being a spokesman at various events world-wide. Shares gained two cents to end the week at $0.11, closing at the highest level since mid-September.
Mandalay Media (OTCBB: MNDL), the owner of new media distribution and content companies, announced third quarter results for the period ended December 31, 2008 last week. The company managed to generate revenue of $11.1 million for the quarter, bringing their combined YTD revenue for fiscal year ’09 to $21.4 million after three quarters. Adjusted EBITDA, a non-GAAP measure, was negative $0.2 million, an improvement of approximately $1.1 million compared with the previous quarter, which can be attributed to the company’s ability to generate positive EBITDA for the month of December. Mandalay should continue to make strides towards profitability in coming quarters following the acquisition of AMV Holdings Ltd, a European leader in direct-to-consumer mobile Internet content and services which MNDL acquired in October of ’08, and expects to more than double their monthly mobile revenues. It was a busy week for MNDL, as the company also entered into two deals with major developers that should serve to significantly enhance the user base of their play for prizes platform. The first agreement is with leading global publisher and developer of digitally distributed video games, Gameloft, and will feature the developer’s best selling game Block Breaker Deluxe. Users of Twistbox’s play for prizes platform will now be able to play the immensely popular Gameloft offering and compete amongst other gamers vying for top honors and prizes from leading retailers including Starbucks, Amazon, Best Buy, Target, and Apple. The company’s platform will also be featured by VH1 Mobile, which is launching a new trivia game based on the TV series, Best Week Ever. The game will be called Best Week Ever for Prizes, and will incorporate Twistbox’s proprietary play for prizes platform into the gaming experience.
Conolog Corporation (NASDAQ: CNLG), an engineering and design company that provides digital signal processing solutions to global electric utilities, announced record sales for the month of January 2009 that totaled $248,000 compared to $121,000 for January 2008, representing a 104% increase. The steadily increasing orders which the company has been receiving, despite the difficult environment in which it has been operating, demonstrates systems preferences amongst customers and high reliability in field operations which have been rewarded with reorders. The company expects that additional significant revenue will be generated from the introduction of their new CM 100 product line later this quarter. Shares gained eleven cents on the week to close at $0.49, up 29%.
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 Active International, a global leader in corporate trade and one of the world’s largest media specialists, has entered into an agreement with ProLink to purchase up to $3 million of net advertising on the ProLink Network through January 31, 2010. Active International, which places more than $1 billion in media annually, will offer its clients advertising on the ProLink Network, which reaches more than 13 million golfers at approximately 400 courses across the U.S each year. Clients of Active International will gain access to the ProLink Network’s inventory of ads, which appear on GPS screens affixed to golf carts alongside useful content such as course graphics and strategic information that reach highly desirable target demographics of hard to reach, wealthy individuals. The announcement reflects the advertising industry’s growing desire to cost-effectively reach the highly desirable target audience that Prolink’s customers represent, which should further enhance their position as the leading provider of on-course advertising solutions worldwide. In addition to the advertising agreement, Active will be able to offer alternative financing structures to Prolink’s clients, greatly expanding the company’s capabilities during these difficult times. Shares lost a penny to end the week at $0.11.
Advanced ID Corp (OTCBB: AIDO), a complete solutions provider in the RFID market with a focus on the tire management industry, issued a letter to its shareholders last week, updating them on recent developments and plans to change some of its operational initiatives in response to the global economic slowdown which is expected to reduce worldwide tire production by as much as 40%. The company plans to restructure UK and China operations in order to reduce costs associated with legal, accounting and compliance issues, and is no longer pursuing the acquisition of Chinese based RFID manufacturer DDCT, which it believes can be partnered with through exclusive licenses on a scale which would benefit both companies in a manner comparable to the proposed acquisition. In addition to restructuring overseas operations, the company has also proposed to implement company-wide cost reduction programs which will result in significant decreases in expenses in ’09, including the implementation of a new compensation plan for their sales force that will be more closely aligned with sales results, and the relinquishment of stock received by the Board of Directors for services rendered in ’08. Looking ahead, the company believes that their two core businesses, pet recovery and tire management for fleet owners, operate in markets that are relatively recession resistant and should continue to generate revenue that will be more ably maximized by the proposed cost reduction measures. The company expects that these changes will be reflected in the coming quarters in the form of stronger cash flows and increased gross margins. Shares lost a penny on the week to close at just below $0.05.
Global Investor Services (OTCBB: GISV), a company that engages in the education of investors through online services, announced the launch of its online Investor Education Continuity program as it continues to expand its web-based educational offerings. The program is supported by an innovative online marketing strategy, which the company believes will broaden the distribution of its online investor education products and services through cost-effective customer acquisition aided by the formation of a strategic partnership with Half-Day, LLC, an internet lead generation company. Half-Day, in combination with its network of affiliates, generates thousands of leads every week for companies such as Forex, eBay, and several real estate and web based businesses, and will execute customer acquisition campaigns for GISV via this network. The company plans to grow its business by implementing a strategy that allows customers complete access to its full line of products and services at lower price points than competitors, achieved through lowering costs associated with acquiring customers- costs which are typically passed on to consumers who sign up for the subscription based services. By lowering the costs associated with generating leads through partnerships such as the one recently formed with Half-Day, GISV will be able to offer its customers a robust and efficient platform of investor education and services at a cost significantly lower than their competitors in the space. Shares lost a penny on the week to close at $0.05.