Companies featured in this edition of the newsletter: ACTC, CETG, GERS, ICLK, ITUI, MNDL, PLKH, SKYI
With the prevalence of bad news torpedoing markets and predominating investors’ attention of late, this week offered a welcome respite from the storm, as all of the major indices finished in positive territory for the first time in 2009. The Dow managed to post a gain of 279 points to end at 8280, closing up 3.5% on the week and narrowing its YTD loss to 5.6%. The Nasdaq jumped 7.8% on the week to close at 1591, pushing it into positive territory on the year with a 0.9% gain. The S&P 500 and Russell 2000 posted gains of 5.2% and 6.1% respectively on the week, narrowing their YTD losses to 3.8% and 5.8%.
Investors managed to shake off yet more bad news on the economic front this week and seemed to focus on the impending stimulus package and unveiling of a plan to strengthen the financial system, which are expected to be announced next week. 598,000 jobs were lost in January, a new 34 year record, boosting the unemployment rate to 7.6%, 2.7% higher than it was at this time last year. Continuing jobless claims are at a record high of 4.79 million with more cuts expected, but still investors remained resilient in the hope that a government bailout would help ease some of the economic woes facing the nation.
Of course, the “devil is in the details.” With the Senate expected to narrowly approve its version of an economic stimulus bill, lawmakers from the House and Senate still face difficult negotiations over spending for tax cuts, education and aid for local governments. The $827 billion measure is on track to pass the Senate on Tuesday, despite stiff opposition from the GOP and disappointment among Democrats, including President Obama, who labeled it imperfect. The Senate convened in a rare Saturday session to debate a compromise reached between a handful of GOP moderates, the White House and its Senate allies.
What should investors look for this week? Expect major developments from the government that have the potential to move markets early in the week, as Treasury Secretary Timothy Geithner is expected to unveil plans for strengthening the financial system on Monday. Earnings reports for the week begin with Hasbro (NYSE: HAS) and Whirlpool (NYSE: WHR) reporting Monday before the market opens and Time Warner Telecom (NASDAQ: TWTC) after the bell. On Tuesday morning, expect reports from DIRECTV (NYSE: DTV), Molson Coors Brewing (NYSE: TAP), Qwest (NYSE: Q), and Unisys (NYSE: UIS). Wednesday will be a quiet day for the bigger names in the market, but on Thursday, Aetna (NYSE: AET), Coca-Cola (NYSE: KO), General Motors (NYSE: GM), RadioShack (NYSE: RSH) and Viacom (NYSE: VIA) are expected to release before the open.
The economic calendar will be relatively quiet, but look for December Wholesale Inventories Tuesday morning at 10 a.m. December Trade Balance figures will be released at 8:30 a.m. Wednesday, followed by Weekly Crude Inventories at 10:35 a.m. and the January Treasury Budget at 2:00 p.m. Weekly Initial Jobless Claims, and Retail Sales for January will be released at 8:30 a.m. Thursday, followed by Business Inventory reports for December at 10:00 a.m. Preliminary Michigan Sentiment figures for February will end the week at 9:55 a.m. Friday morning.
The conference schedule for the week kicks off with the three-day Thomas Weisel Technology & Telecom Conference beginning Monday in San Francisco, as does the three day Barclay’s Capital Industrial Select Conference which is being held in Miami. The two day Biotechnology Industry Organization’s CEO & Investor Conference also begins Monday in New York, as does the three-day UBS Global Healthcare Services Conference. The two day Deutsch Bank Small and Mid-Cap Growth Conference begins on Tuesday in Naples, Florida, as does the Goldman Sachs Agricultural Conference which is being held in New York. Goldman will also be holding its second annual Consumer Retail Leveraged Finance Conference in New York, later in the week, beginning on Thursday and running through Friday. Bond markets will close early on Friday for President’s Day.
VOLUME ALERT: Shares of i2Telecom International, Inc. (OTCBB: ITUI), a developer of award-winning patented and innovative high-quality Voice-over-Internet Protocol (VoIP) products and services, surged more than 41% last week on four times average volume after the company said that it had retained one of the world’s leading intellectual property law firms, Vinson & Elkins LLP, to investigate possible infringements of its recently-awarded patent for Dynamically Adapting Transmission Rate of Packets in Real-Time VoIP Communications to Available Bandwidth (DMTR), U.S. Patent #7,460,480. The Company believes this is the most valuable patent it has received, to date, exceeding in value the patent that i2Telecom sold for $6.5 million during the second quarter of 2008. Investors may remember that ITUI previously retained the law firm months before entering into a deal for the sale of the patent. The company believes that a number of original equipment manufacturers that deploy softphones, microgateway devices, gateways, and routers may be infringing on its DMTR technology and carriers that rely upon the technology to improve transmission quality and eliminate degradation issues when sending voice packets over the Internet may also be infringing. ITUI was the first to file a patent application regarding DMTR technology several years ago, and is currently in the process of seeking protection for the patent in a number of overseas markets. Shares gained $0.025 to end the week at $0.085.
Capital City Energy Group, (OTCBB: CETG), an independent vertically integrated oil and gas company, announced last week that the company’s CEO entered into a 10b5-1 plan, under which he is scheduled to conduct open market purchases of the company’s common stock throughout 2009. The executive entered into a similar arrangement in 2008, a year in which he worked without receiving any salary, in either cash or stock. The CEO said he believes that the company’s stock is undervalued and expects 2009 to bring even higher revenue and cash flows following several key acquisitions made during ’08. SEC Rule 10b5-1 allows executive officers or board members of public companies to adopt pre-arranged stock trading plans when they are not aware of any material nonpublic information about the company. Most plans involve the sale of shares, not the purchase. Insider buying is generally viewed as a bullish indicator. Shares lost 5 cents to close at $1.95 for the week.
Earnings Preview: interCLICK (OTCBB: ICLK) the fastest growing advertising network in the US according to comScore, is scheduled to report earnings for its 2008 fourth quarter ended December 31, 2008 on Wednesday afternoon following the closing bell. Revenue of $5.7 million was reported for the 2008 third quarter, up significantly compared to 2007’s third quarter revenue of $1.1 million. The company recently raised its 2008 Q4 guidance, expecting revenue to exceed $7 million, compared with previous estimates for revenue to exceed $6.5 million. ICLK also guided that gross margin will exceed 35%, up from a prior forecast of 31%. In addition to these upward revisions, the company also expects to see its first quarter of positive Adjusted EBITDA since becoming public. The company attributes these increases to the gains its behavioral targeting platform is making amongst advertisers seeking to reach more highly targeted demographics during difficult economic times, where companies are seeking maximum effectiveness from their advertising dollars. Investors will likely focus on the financial results and whether the growth that is expected to be generated during the fourth quarter is sustainable during 2009. The first quarter is seasonally a slower period for the online advertising industry. The stock lost two cents on the week to close just over $0.76.
Stem cell therapy developer Advanced Cell Technologies (OTC: ACTC), continues to generate positive press, as the company announced last week that another of the studies conducted by its scientific team will be published in Cloning and Stem Cells, a leading journal in the field of stem cell research. The study focused on differentiation between human-human clones and human-animal clones, and found that although the two appear similar, the pattern of reprogramming human donor cells is dramatically different than the pattern associated with reprogramming animal donor cells. In contrast to human-animal hybrids, the gene expression pattern of human-human clones was highly similar to normal human embryos. The study found that several core factors associated with the activation of genetic material in the donor cells were activated in both normal and human cloned embryos, which contrasted sharply with the human-animal hybrids which showed no difference in regulation of these critical genes, effectively rendering the generation of stem cells through use of animal surrogates impossible. The data call into question the potential use of animal egg sources to generate patient-specific stem cells, essentially quelling the moral controversy surrounding human-animal hybrids due to the fact that it appears beyond our current capabilities. The study can be found online ahead of the release of its print version in the journal. Shares surrendered three cents in heavy trading to close at $0.19 on the week.
Earnings Preview: Mandalay Media (OTCBB: MNDL), an emerging new media company focusing on development of entertainment platforms for mobile phones, is scheduled to release earnings for its 2008 third quarter ended December 31, 2008 this week. For its second quarter, ended September 30, 2008, MNDL reported revenues of $5 million and a gross margin of 62%. Due to the fact that 2008 was the company’s first full year of operations following acquisition of their subsidiary, Twistbox Entertainment, there are no comparisons which can be drawn year over year. On an unaudited pro forma basis, assuming the company had completed the acquisition of AMV and had consolidated the results of its operations, for the quarterly period ended September 30, 2008, the combined companies would have had revenue of $14.5 million and EBITDA, excluding stock option expense, of $0.4 million. For the six months ended September 30, 2008, on an unaudited pro forma basis, the two companies would have generated revenue of $30.0 million and EBITDA excluding stock option expense of $0.1 million. Investors will likely focus on how the two companies combined operations will aid in MNDL’s ability to continue to improve its earnings profile through earnings growth and cost reductions. Shares ended the week unchanged at $1.40.
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, unveiled its next-generation new Prolink Touch GPS system to industry-wide acclaim at the Annual PGA Merchandise Show in Orlando last week. The Touch, which is the most technologically advanced course management system available to the golf industry, generated record sales commitments at the event and was met with considerable enthusiasm by industry professionals stopping by the booth to experience the new, next-generation GPS offering. The Touch represents a significant advancement in GPS course management systems, providing users with an interactive touch screen interface that allows them to do anything from tracking their progress on the course to ordering lunch from the clubhouse by using the intuitive touch screen technology mounted to their golf carts. Advertisers will benefit as well, thanks to the Touch’s expansive memory which can hold up to 7,500 ads in a variety of shapes and sizes that will be rotated continuously across the new proprietary custom interface. The company has high expectations for its newly unveiled system’s revenue generation capabilities, which it feels will further enhance its position as the leader in GPS course management systems worldwide. Shares gained three cents to end the week at $0.12.
Greenshift (OTCBB: GERS), a company that develops and commercializes clean technologies that facilitate the efficient use of natural resources, announced an amendment to its previously announced joint venture with GE Energy Financial Services and YA Global Investments, an institutional investor, that extends the Initial Equity Contribution Date to March 2, 2009 from its previously arranged date of January 30, 2009. Under the previously arranged terms, the newly formed subsidiary, CleanBioenergy, will invest up to $38 million in GS NextDiesel, newly formed GreenShift subsidiary,o help deploy twelve new corn oil extraction facilities across the country and double the capacity of GreenShift’s Michigan-based NextDiesel biodiesel refinery from 10 million gallons per year to 20 million gallons per year. Shares lost a penny on the week to close at $0.012.
On the Wires: Capital City Energy (OTCBB: CETG) announced last week that Dave Tenwick resigned as a director to concentrate and devote more time to his other business opportunities. The company also named Douglas B. Crawford its Principal Financial Officer. Since September, 2008, Mr. Crawford has been serving in the capacity as the Company’s Principal Accounting Officer.
SPECIAL SITUATION:
Skye International (OTCBB: SKYI) $0.41
With the economy continuing to face challenges, investors are increasingly looking for situations that provide an opportunity for real and sustained growth not driven by discretionary consumer spending. One market sector that clearly hits the mark involves something we all use each and every day “ot water”specifically, hot water provided by a technology class known as Tankless water heaters. Skye International, a Scottsdale, Arizona based company, has developed a promising suite of tankless technologies providing both instant and endless hot water for homes and businesses. Skye is market ready to change the way we heat water.
Skye’ new generation technologies provide features and functionality that strike an accord with all of us. Ask yourself the following: Have you ever run out of hot water? Have you ever had to wait to get hot water? Have you ever had to replace a leaking tank? If you have experienced any of these annoyances take comfort that these may be problems of the past.
Skye recently commenced sales of its products that range from point of use water heaters and in-line booster heaters to whole-house electric tankless solutions. The FORTIS line of electric tankless water heaters are capable of providing endless hot water for most every American family, featuring a next generation microprocessor capable of precise temperature control, power usage monitoring by Skye’s website and even a connection to your home automation system, an industry first. Boasting over 98% efficiency, Skye’s FORTIS product can save enough energy to pay for itself in only 5 -7 years of use. When you consider that this appliance has more than a 20 year life expectancy, and full 10-year warranty, you can understand why many families are enjoying savings and comfort with Skye’s tankless electric products.
Additionally, Skye now provides a solution for the age old problem of waiting for hot water. Utilizing Skye’s patented Paradigm technology, this next generation heater is capable of efficiencies exceeding 99% and response times of less than 3 seconds cold to hot. No more waiting and no more wasted water. The secret to Skye’s success lies in their patented heating element design, yielding industry leading performance and the promise of never again waiting for hot water. The power of Paradigm is housed in an incredibly small package resulting in no more wasted floor space. A specially designed microprocessor regulates water temperatures and shuts down the heater when hot water finally arrives. This design boosts efficiency and significantly reduces electrical and water waste which is good for consumers, and beneficial for the environment.
Traditional storage tank water heaters of old are designed to “heat and hold” a fixed quantity of heated water for use when needed. Typically the tank water temperature is set at or above 120 degrees, and in many cases at temperatures much higher as people seek to get more hot water from their tank. Heated water is kept hot 24/7 despite the fact that an average household only uses 30 minutes of heated water per day. The heat and hold strategy of the 100 year old tank technology requires the tank to constantly consume energy to reheat the water as it cools in the tank over-time, this is commonly referred to as “standby heat loss” and typically accounts for 60% of the water heating cost in the home. This bears special significance when taken into account that over a third of the total energy consumed in the home is used to heat water, a staggering amount of energy used in the household is completely wasted everyday!
Around the world tankless water heaters are the primary method of heating water – except in the United States and Canada, where water and energy have historically been cheap and abundant. With a renewed focus on energy and water conservation, many consumers are switching to tankless water heaters that use up to 40% less energy than storage tank systems in an effort to save money and reduce their impact on the environment. The market for tankless grew 44% in 2004; 70% in 2005 and is estimated to be growing at a rate in excess of 100% per year. Tankless water heaters are replacing inefficient and outdated tank heaters. Skye’s proprietary technology positions them as a leader in the growing tankless market, which despite still being in its relative infancy in the US, is poised for explosive growth as consumers increasingly demand environmentally friendly and cost effective products.
Over 9.8 million water heaters are replaced in homes across the United States each year and another 2.1 million water heaters were installed in new U.S. homes during 2008 alone. Given the size of this market it is easy to understand why Skye has chosen to offer a better product in this market segment. Skye;s s tankless solutions are space saving (no floor space taken up), energy saving, water saving, quiet and durable. By design Skye’s products are uniquely suited to high rise apartments and condos where space is at a premium, and where leaks are catastrophic. Skye’s FORTIStankless heater has both internal and external leak detectors that shut-off the water and power in the event of a leak no other electric tankless water heater can boast being as high rise friendly.
Skye only recently began selling its products, exclusively through the wholesale channel to plumbing and home supply warehouses. Skye’s current customer list includes names like Ferguson, Moore Supply, a member of the Hajoca group and Winnelson, putting the new devices directly in the hands of the professionals who understand and appreciate these remarkable technological advancements best. This strategy greatly enhances distribution abilities as word of the technical superiority of Skye’s water heater spreads. Offering consumers a superior product improvement over a common household device, impacts the lives of millions on a daily basis. Skye International presents investors with an opportunity to invest in a company that is well positioned to capture market share in an enormous and often overlooked market.
