Companies featured in the current edition of the newsletter: ACTC, ADL, CACN, CGXP, CLXS, CORG, CYTR, DIGA, DVLY, GSHF, HSOA, IWEB, RVEP, SFPI, SWVC, USAT
Stocks moved sharply lower in the first week of the year, as the malaise that had been limited to smaller stocks spread to the Nasdaq technology leaders, sending equities sharply lower across the board, as a weak Employment Report and record energy prices stoked fears of an economic slowdown. The Dow fell 566 points to end the week at 12800, starting the year with a loss of 3.5%. Similarly, the tech-heavy Nasdaq lost 170 points, to start the year on shaky ground with a year to date loss of 5.6%. The S&P 500 posted a loss of 67 points, generating a loss of 3.9%. The worst relative performance was turned in by the Russell 2000 which lost 50 points, to start the year lower by 5.8%.
Stocks began last week on shaky ground, trading lower on Monday, the last day of 2007, amid ongoing concerns about the fallout in the housing and credit markets, yet the market still managed to post a modest gain for the year as strength in the technology sector offset declines in financials and consumer-related stocks. After returning from the New Year break on Wednesday, investors pressured stocks further due to a surprise contraction in manufacturing activity and surging oil prices, which hit $100 per barrel. The Dow Jones Industrials plunged more than 220 points during the session, dashing any hope for a New Year’s rally. Also during the session, the Fed released the minutes from its December 11 FOMC meeting, but the report offered little insight for the market and failed to calm jittery investors. Meanwhile, the November factory orders report rose a surprisingly strong 1.5%. That marked the third straight month of an increase and is good news for the economy. The Labor Dept.’s much anticipated employment report on Friday, which showed weaker than expected job growth and a rise in the unemployment rate, compounded the market’s slide in the shortened week as all three major indices posted sharp declines on the news. Separately, the ISM index of non-manufacturing activity showed the nation’s services sector grew at a slightly slower pace in December than in the previous month. The index slipped to 53.9 from 54.1 in November, yet was slightly ahead of analysts’ forecast of 53.5.
What should investors look for in the upcoming week? The earnings reports pick up in the coming week with a few significant announcements, starting with Constellation Brands (NYSE: STZ), Family Dollar (NYSE: FDO), Great A&P Tea (NYSE: GAP), KB Home (NYSE: KBH) reporting results before the bell on Tuesday. Mosaic (NYSE: MOS) will make an announcement before the market open on Wednesday, followed by Alcoa (NYSE: AA), and Energy Transfer (NYSE: ETP) making announcements after the market closes. Infosys (NASDAQ: INFY) will be the last major announcement for the week coming before the bell on Friday.
The economic news for next week includes November Consumer Credit and November Pending Home Sales on Tuesday. Initial Weekly Unemployment Claims will be announced before the bell on Thursday, followed November Wholesale Inventories and Crude Inventories announcements later on in the day. Friday is the busiest day for economic news beginning with announcements for December Import and Export Prices and November Trade Balance before the market opens. The final announcement of the week will be the December Treasury Budget, coming Friday afternoon.
The conference schedule for next week will be active, beginning with the 25th annual JPMorgan’s Healthcare Conference, which will be held January 8-11 in San Francisco. Also on Monday will be the four day Consumer Electronics Show held in Las Vegas. Tuesday will be highlighted by Citigroup’s three day Eighteenth Annual Entertainment Conference and the 10th Annual Needham & Company, LLC Growth Conference. The last conference of the week will be the CHK at Pritchard Capital Partners Energize 2008 Conference taking place on Wednesday.
Shares of volatile stocks have been hit particularly hard during the downturn. One such stock is biotechnology company CytRx Corporation (NASDAQ: CYTR), as investors have sold the stock sharply lower recently. Despite the absence of negative developments, the stock has lost more than one-third of its value since the beginning of December. Apparently, at least one analyst thinks the stock is cheap and the selloff unwarranted, as he commented in a research note that, “we think there is tremendous upside potential at these levels and reiterate our Buy rating ($8.50 price target). We spoke with the CEO last night and he assures us there is no fundamental reason for the recent drop in the share price. All trials are on track with the Phase IIb arimoclomal ALS Trial recently started, a Phase IIb arimoclomal trial in stroke recovery, and a Phase IIb trial for iroxanidine in diabetic ulcers slated to begin by the end of 1H08. The RXI spinoff is awaiting approval by the SEC and we would expect the dividend to occur by the end of February.” Shares ended the week at $2.09, down 69 cents.
Small cap stocks have been battered by the sharp decline in the markets, even those with positive developments. At least one company’s management team believes that the drop in its stock price has created an investment opportunity, as USA Technologies’ (NASDAQ: USAT) CEO purchased 5,000 shares last week in the open market. The purchase by George Jensen marks the second such purchase in less than 10 days. Shares ended the week at $4.33, down 57 cents.
Customer Acquisition Network, Inc. (OTCBB: CACN), an emerging Internet multi-channel network, announced that its 2007 fourth quarter unaudited revenue are expected to exceed $5 million, as a result of significant growth achieved by its wholly-owned interCLICK advertising network subsidiary. The fourth quarter revenue represents approximately 50 percent sequential growth on a pro forma basis, based upon previously reported 2007 third quarter pro forma revenues of $3.5 million. The company continues to gain momentum and market share, as a result of interCLICK’s ability to deliver compelling results for its clients. InterCLICK was recently rated the tenth largest Internet-based advertising network by comScore during the fourth quarter and currently serves advertising to approximately 100 million unique U.S. visitors per month. The announcement helped propel the stock 60 cents last week to close at $5.95.
RVOP a wholly-owned subsidiary of Rio Vista Energy Partners L.P., (NASDAQ: RVEP), a company that transports liquefied petroleum gas, completed the sale of the LPG Assets to TLP pursuant to the Purchase and Sale Agreement. In connection with the sale of the LPG Assets to TLP, RVOP and TPSI agreed to terminate the LPG Transportation Agreement and the U.S. Pipeline Service & Operating Agreement shed by and between RVOP, Penn Octane International, LLC and TPSI as of such closing date. The LPG assets consist of the US Pipelines, the US Easements, the Included Subsidiaries, the Mexican Pipelines and the Mexican Terminal. The company received approximately $8.0 million in cash, following adjustments and payments provided in the Purchase and Sale Agreement, including payment of the Restated and Amended Promissory Note, in the principal amount of $1,000,000 payable to TPSI. The amount of such consideration was determined under the Purchase and Sale Agreement following arms length negotiation between the parties, including a review of the replacement cost of the Assets. Shares shed 70 cents last week to close at $16.50.
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 to its shareholders regarding the status of its pending distribution. GreenShift shareholders of record as 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. The stock ended the week unchanged at $0.02.
Collexis Holdings, Inc. (OTCBB: CLXS), a company that develops software that supports the market-building tools to search and mine sets of information, closed the sale of 2.9 million shares of common stock at $0.75 per share to a single investor in a private placement. The company received net proceeds of approximately $2.2 million. The company used the proceeds primarily to make the first installment payment on the acquisition of SyynX Solutions GmbH, a privately-held software company based in Cologne, Germany. SyynX has been the Company’s long-time software development partner. Under the terms of the acquisition, the Company has agreed to pay the sellers in four installments. The financing was completed at a significant premium to the market price of CLXS’s stock. The company’s shares ended the week at $0.57, down 12 cents.
Cordia Corporation (OTCBB: CORG), a global communications service provider of traditional CLEC and Voice over Internet Protocol technologies announced that its CLEC division has begun to sell unlimited bundle plans at $29.95. With service offerings in 17 states this new pricing will be one of the most aggressive in the wireline industry. This service, available in most areas, offers the consumer an unlimited local and long distance bundled service plan which also includes their local line, call waiting, caller ID and 3-way calling. This is an aggressive initiative in the industry when most companies are raising rates. The company expects that this strategy will not only accelerate sales but also lower churn by offering a product that will be hard to beat based on price and excellent service standards. The introduction of these aggressive plans is part of the company’s strategy to leverage its expanding marketing capabilities to accelerate the growth of its profitable CLEC business. The company also announced that it bought back Common and Series A Convertible Preferred Shares totaling approximately 6% of its combined outstanding shares during the quarter ended December 31, 2007. The company continues to believe that its shares are undervalued and expects to continue to grow CLECs both organically and through additional acquisitions. The stock gained 1 cent last week to close at $0.57.
Home Solutions of America (OTC: HSOA), a provider of restoration, construction and interior services to commercial and residential customers, said late Friday that it will withdraw its appeal to remain listed on the Nasdaq and that it expects its common stock to start trading on the Pink Sheets on Monday. The company has been unable to file its third quarter financial statements for the period ended September 30, 2007 due to an ongoing investigation into related party transactions. The decision to delist, while disappointing to investors, could allow the company the opportunity time to complete its investigation without pressure from the Nasdaq to file its statements. Of course, until the financials are filed and the company’ collects on the receivables guaranteed by FIGA, it is impossible to determine what the business looks like, or whether HSOA has the ability to fund operations. Investors might want to consider that there was a pre-existing, albeit much smaller business, prior to the acquisition of Fireline. Shares ended the week at
Deer Valley Corporation (OTCBB: DVLY), a growth-oriented manufactured home builder, announced that the scope of the company’s contract with the State of Mississippi has been increased to provide for the production and delivery of an additional 100 two-bedroom cottages. The contract with the State of Mississippi is part of a $280 million federal pilot program designed to test and evaluate future disaster housing. The company estimates that the increase in scope will generate an additional $4.79 million in revenue which will bring Deer Valley’s combined revenues from the pilot phase contract to a total of $19.51 million. The company has already delivered 200 units out of the aggregate total units ordered of 400 units. The receipt of this contract extension assures the company of a continued strong production backlog throughout the winter months when the industry often has to throttle back. Despite the positive news, the stock lost 3 cents last week to close at $0.95.
IceWEB, Inc. (OTCBB: IWEB), a company that delivers advanced hardware, software, solutions and online services to U.S. government agencies, enterprise companies, small to medium sized businesses and tech-savvy consumers, announced that it has completed the acquisition of INLINE Corporation, a privately held company recognized as a leader in the manufacturing of cutting-edge intelligent enterprise data storage solutions. Pursuant to the terms of the transaction, IceWEB paid the selling shareholders of INLINE total consideration of approximately $1,900,000 – $1,600,000 in cash and 500,000 restricted shares of common stock. Based on INLINE’S historical financial performance, it is expected to contribute approximately $8-$10 million in revenues to IceWEB in the coming calendar year. INLINE also provides IceWEB with the ability to deliver in excess of $50 million of enterprise class data storage products to the end user and OEM marketplace. This acquisition will now allow the company to offer customers proprietary, high-margin data storage products and will position the company as a rapidly growing participant in one of the hottest growth areas in today’ IT arena, particularly in the government and enterprise sectors. The stock ended the week at $0.56 up a penny.
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 Golden Gate Investors, Inc. in the form of a convertible debenture for gross proceeds of $400,000. 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 ended the week unchanged at $0.01.
Ceragenix Pharmaceuticals, Inc. (OTCBB: CGXP), a biopharmaceutical company focused on infectious disease and dermatology, reached an agreement with the holders of its 2006 Debentures ($5 million in aggregate principal amount) and 2005 Notes ($3.2 million in aggregate principal amount) to extend the redemption date to June 30, 2008. As consideration for this extension, the company agreed to increase the original aggregate principal amount by 10% of the original aggregate principal amount initially issued to the holders. This is positive news for Ceragenix as it should help the company conserve cash in the intermediate future and extend the maturity of notes that would have been due imminently. The stock ended last week at $1.05, down 10 cents.
Salton, Inc. (OTC: SFPI), a company that designs, markets, and distributes small appliances, home decor, and personal care products, in connection with the consummation of its recent merger, entered into a Third Amended and Restated Credit Agreement that provides for a 5-year $200 million revolving credit facility, and a Term Loan Agreement that provides for a 5-year $110 million term loan facility. Also in connection with the merger Salton repaid in full all obligations and liabilities owing under an Amended and Restated Credit Agreement to Wells Fargo. The pay-off of the Wells Fargo Credit Agreement included a make-whole fee of $14 million and the warrant to purchase 719,320 shares of Salton common stock held by SPCP Group, LLC, an affiliate of Silver Point, expired upon consummation of the merger and is no longer exercisable. The stock closed the week at $0.20, down 2 cents.
On the Wires: Digital Angel (NASDAQ: DIGA), a company formed by the merger of Applied Digital Solutions Inc and Digital Angel Corp, announced that it named Joseph Grillo as its chief executive officer. At its annual stock holders meeting, Advanced Cell Technology, Inc. (OTCBB: ACTC), a biotechnology company, that engages in the development and commercialization of human stem cell technology in the field of regenerative medicine, reelected William M. Caldwell, IV, Alan C. Shapiro, Alan G. Walton, Ph.D. and Erkki Ruoslahti, M.D., Ph.D. In addition, Gary Rabin was elected as a new independent director.
SPECIAL SITUATION:
AMDL Inc. (AMEX: ADL) $3.98
From 1998 to 2006, global pharmaceutical sales have more than doubled with U.S taking the lead. While U.S has the largest share of the market, China is emerging as the fastest growing pharmaceutical and consumer market in the world. China is also using its manufacturing capabilities to produce licensed drugs fostering worldwide sales of existing and to-be-developed products.
The future of the business will increase pressure on pharmaceutical and diagnostic companies to work together, to take advantages of the many synergies available. Mergers and acquisitions will give diagnostic companies improved sales and marketing capabilities, giving them a competitive edge. AMDL, Inc., a biopharma company that together with its subsidiaries, engages in the development, manufacture, and marketing of proprietary pharmaceutical and diagnostic products, has already taken the step of merging its manufacturing, marketing, and diagnostic capabilities. With its acquisition of Jade Pharmaceutical, Inc. it has positioned itself for future growth and to be come the market leader.
The company offers DR-70 diagnostic test kit, which is used to detect various common cancers, including lung, stomach, breast, rectal, colon, and liver cancer. AMDL currently, by a significant margin, is by far the most undervalued China Bio-Pharma company within its publicly listed peer group. Its 3rd quarter 2007 Results show a significant positive trend. Not only was it the first profitable quarter with earnings of .05, future quarters should only improve based on recently signed distribution agreements. The company is also working on new products that should be introduced in the next year or two. Specifically, the company’new product development strategy is expected to provide at least an additional six new products to the existing family of products over the next 36 months.
The company’ shares offer aggressive investors an opportunity to get on board of an early-stage China play at an attractive price. At less than $4 per share, AMDL is trading at only 2.8 times its book value and 4.3 times its sales for the trailing twelve months. Additionally, a recent research report, The Rudd Report, re affirmed its revenue projection of $53 million in 2008 from Jade’s distribution business alone and anticipation of an additional $17 million in revenues from the new JPGreen Health & Beauty Centers. Therefore, the total revenue in 2008 from Jade is currently estimated at $70 million by The Rudd Report. Assuming the current net profit margin remains at approximately 25%, Jade should contribute minimum net earnings of approximately $17.5 million in 2008. If such analysis proves even remotely accurate, AMDL’s valuations should improve exponentially in 2008 and early investors would be handsomely rewarded for recognizing this opportunity early on.