Companies featured in the current edition of the newsletter: BOKO, CACN, CETG, ETGF, GNBT, GSPG, ITUI, IVOT, MBND, SEE, SWVC, TKO
The Bear reared its ugly head last week, as the Dow plunged sharply, briefly entering “bear market” territory, in a week where stocks suffered heavy losses. For the week, the S&P 500 tumbled 3.0% and the Dow fell to its lowest level since September 2006. Record high crude prices, tumbling financials and less-than-stellar outlooks from technology companies took a toll on market sentiment. The S&P 500 dropped by 40 points, increasing its year to date loss to 12.9%. The Nasdaq Composite Index fell 91 points, adding to its year to date loss, now 12.7%. The Dow dropped 4.2% or 496 points, bringing its year to date loss to 14.5%. The Russell 2000 fell 28 points, bringing its year to date loss to 8.9%.
The focal point for the week was the FOMC announcement on Wednesday. As expected, the Fed left the fed funds rate unchanged at 2% and its wording in the directive largely reiterated more hawkish comments leading up to the meeting from Fed Chairman Bernanke and other Fed officials. In its FOMC directive, the Fed said overall economic activity continues to expand, partially due to “firming” in household spending. However, the fed expects economic growth will face the burdens of tight credit conditions, housing contraction and the rise in energy prices.
The financial sector took a beating throughout the week, falling 6.6%. Wall Street firms were in downgrade mode, prompting most of the selling. Goldman Sachs sent financials tumbling on Monday after cutting the sector to Underperform from Neutral. Meanwhile, Wachovia downgraded Goldman Sachs to Market Perform from Outperform. Credit Suisse cut its earnings estimates on Merrill Lynch and JPMorgan Chase, citing incremental credit quality deterioration that is largely mortgage-related. Toward the end of the week, financials continued to tumble. Goldman added Citigroup to its Conviction Sell list, and forecast an $8.9 billion second quarter write-down. Lehman said Merrill Lynch will likely incur a $5.4 billion second quarter write-down, mainly from its exposure to bond insurers.
Energy was the only sector to post a gain, as crude surged 4.5% to an all-time closing high of $140.62. A declining dollar, supply concerns and unrest in Nigeria prompted the advance, as traders shrugged off an increase in inventory levels and word that Saudi Arabia is increasing output in July. On the economic front, the May personal income and spending data showed some decidedly good economic news, indicating the fiscal stimulus is having a beneficial impact. Real PCE, which accounts for 71% of GDP, rose 0.4% in May, and April was revised upward to a 0.2% gain. Real PCE is on track for a 2.5% annual growth rate in the second quarter, and indicates second quarter real GDP will be up close to a 2% rate, well ahead of Wall Street’s expected gain of 0.5%.
What should investors look for this week? There are no major earnings reports and the conference schedule is empty due to the holiday shortened week. The stock market will close early on Thursday (1 p.m.) and will be closed on Friday in honor of Independence Day. The economic calendar will be active with the June Michigan Sentiment Index and June Chicago PMI being reported Monday morning. On Tuesday, June Auto and Truck Sales will be announced, followed by May Construction Spending and June ISM Index at 10:00 a.m. Wednesday at 10:00 a.m. May Factory Orders will be reported, followed by the Weekly Crude Inventories announcement at 10:30 a.m. Thursday morning, June Nonfarm Payrolls, June Unemployment, June Hourly Earnings, Average Workweek, and Weekly Jobless Claims will all be reported before the opening bell. June ISM Services will be released at 10:00 a.m.
Multiband Corporation (NASDAQ: MBND), a company that together with its subsidiaries, provides software and integrated billing services, including voice, data, and video services, said last week that DirecTECH Holding Company, Inc., has entered into a agreement with its primary lender whereby DTHC and its subsidiaries have extended its loan agreement until October 10, 2008. Pursuant to the extension of the agreement, DTHC has reduced its indebtedness with the lender from approximately $15 million to approximately $12 million and revised certain loan covenants. The reason this is significant for Multiband is that the company entered into an agreement to acquire a majority stake in DirecTECH Southwest and has already completed the acquisition of a majority interest in Michigan Microtech, a DirecTECH subsidiary. Since DirecTECH would be a minority owner of both entities, its relationship with its lender could impact operations. This agreement should reduce concerns about debt-related issues. Shares fell by $0.17 for the week, to close at $0.93.
Telkonet, Inc. (AMEX: TKO), the leading provider of innovative, centrally managed solutions for integrated energy management, networking, building automation and proactive support services, announced that the company will provide its advanced Telkonet SmartEnergy solution to Bellingham School District, the largest of seven school districts in Whatcom County. TSE will be installed in the majority of the school district’s portables, used for extra class space and during renovations, as a cost and time-efficient method of maintaining energy efficient temperatures without manual intervention. The district is implementing TSE under the Puget Sound Energy rebate program, designed to encourage schools to upgrade thermostats to the latest 365-day programmable models. The stock fell by 2 pennies, to close the week at $0.57.
Drug delivery company Generex Biotechnology Corporation (NASDAQ: GNBT) announced that according to a paper to be published in the Journal of Clinical Oncology, the company’s breast cancer vaccine currently being tested in a Phase II trial has demonstrated to be safe and well tolerated in patients. The therapeutic breast cancer vaccine AE37 uses a peptide antigen of a cancer gene known as HER-2/neu. This gene is present in many types of cells, but it is over-expressed in a high proportion of breast cancers as well as many others. The vaccine is being developed by Antigen Express, Inc., a wholly owned subsidiary of Generex. The company also announced that Antigen Express, Inc. has signed a second collaboration agreement with the Mayo Clinic. Antigen Express previously entered into an agreement with the Mayo Clinic to work with Dr. Keith Knutson, a leader in the field of peptide vaccines in breast cancer. The current agreement focuses on advancing an immunotherapeutic vaccine for melanoma into the clinic with Dr. Svetomir Markovic, a distinguished translational researcher with expertise in melanoma trials. The Rodman & Renshaw analyst who covers the company noted that, “We view the current agreement by the Mayo Clinic as further validation of the value of the immunogenicity enhancing properties of AE’s li-Key platform technology.†The stock fell by 2 cents for the week, to close at $0.96.
Customer Acquisition Network Holdings, Inc. (OTCBB: CACN), a company that provides Internet advertising solutions for Internet publishers and advertisers, announced that it has sold Options Acquisition Sub, Inc. to a newly formed public company, Options Media Group Holdings, Inc. for $4 million. Under the terms of the agreement, Customer Acquisition Network Holdings, Inc. will also receive 12.5 million shares of Holdings’ common stock. Proceeds of the Options sale, were used to redeem approximately $2.75 million of CACN 8% senior secured promissory notes, leaving approximately $1.77 million outstanding under the notes. The redemption will reduce the company’s interest expense by approximately $150,000 on an annual basis, based upon the revised interest rate in effect. The sale now positions CACN as a pure-play Internet ad network, which could allow it to realize valuations comparable to many of the companies in the sector that have recently been acquired. Shares dropped $0.34, to finish the week at $3.01.
Element 21 Golf Company (OTCBB: ETGF), the leading manufacturer of advanced Scandium Alloy golf and fishing equipment, announced that Elite Series pros Russ Lane and Jeff Reynolds, nationally recognized fishermen, have agreed to join the company’s national pro staff and will support marketing initiatives of Element 21’s highly popular Carrot Stix fishing rods. Lane and Reynolds join 2007 Bassmaster Classic champion Boyd Duckett and other leading fishermen on the Element 21’st staff. Shares fell by $0.25, to finish the week at $1.50.
While many are familiar with 10b5-1 plans, most are accustomed to seeing them used as a way for company executives to sell stock. However, Capital City Energy Group (OTCBB: CETG), a diversified oil and natural gas company with three separate divisions, announced last week that its Chief Executive Officer had entered into a pre-arranged, systematic trading plan to purchase Capital City Energy Group’s shares on a monthly basis. The company’s CEO also agreed to take all of his 2008 salary and bonus in shares of the company’s stock. Shares ended the week at $2.15, up 5 cents.
GoldSpring, Inc. (OTCBB: GSPG), the owner of the largest mineral rights land position in Nevada’s Comstock Lode Mining District, announced that it has entered into a definitive agreement with an existing shareholder, who is an accredited investor, under which it will receive $2.5 million over the next six months, through the issuance of 11% five-year Senior Convertible debentures. The first $500,000 has been funded. The debentures are convertible into restricted common stock at a price of $.015 per share, which was the price of the company’s stock when the parties reached an agreement in principle earlier this month. In addition, the company has entered into an agreement with its existing lenders, under which the parties have agreed to extend the maturity date of certain indebtedness with terms ranging from an additional two years to an additional five years. This financing, from a committed long-term shareholder, provides the company with additional capital to expand its drilling activities. By doing so, the company hopes to increase its resource base, making the company more attractive to potential strategic partners and increasing its financial flexibility. In addition, by extending the maturities of debt that had previously been in default, the company has strengthened its balance sheet, which will allow it to focus its attention on operations, and not capital raising. The stock finished the week unchanged at $0.031.
Volume Alert: Shares of i2Telecom International, Inc. (OTCBB: ITUI), a developer of Voice-over-Internet Protocol products and services, surged to a new 52-week high last week on more than four times average volume after the company said that it expects revenue from the sale of VOIP products and related services to exceed $5 million in the year ending December 31, 2008, compared with less than $1 million in revenue during 2007. This anticipated revenue growth will be driven by revenue-sharing and licensing agreements involving the company’s new MyGlobalTalk technology. In addition, the company may have the opportunity to realize further profits from the monetization of a portion of its growing intellectual property portfolio. The Company currently has patent applications pending related to over a dozen different additional important VoIP technologies, all of which are deployed today in the Company’s VoIP technology offerings. Shares ended the week at $0.15, up 1 cent.
SeaMiles Limited (TSX Venture: SEE), North America’s premier cruise loyalty provider, announced that it has reached agreements with certain debtors to eliminate approximately $624,000 of pre-acquisition debt of SeaMiles, LLC. Under the agreements, approximately $380,000 of debt will be exchanged for 190,000 shares of the company at a price of $2.00 per share, with the remaining debt of approximately $244,000 being forgiven. The shares for debt transactions will eliminate significant debt from the company’s books which will strengthen the company’s balance sheet. The stock rose by $0.16 for the week, to close at $2.26.
Boo Koo Holdings, Inc. (OTCBB: BOKO), an innovative beverage company which recently disclosed plans to change its name to Performing Brands, Inc., announced that it has appointed Jack Belsito, formerly President of Snapple Distributors, Inc. as Chairman. In addition, Mr. Belsito will assume the CEO’s position during the 2008 fourth quarter. Joe Bayern, formerly Chief Strategy Officer of Cadbury Schweppes Americas Beverages and currently a consultant to the company, will become the company’s President in September. Shares ended the week at $0.45, unchanged.
Seaway Valley Capital Corporation (OTCBB: SWVC), a company that makes equity, equity-related, and debt investments in companies that require expansion capital, announced that its War of 1812 Amber Ale, which is produced by wholly owned subsidiary Sackets Harbor Brewing Company, is now offered at all nine Tully’s Good Times and its affiliate, Copper Top Tavern. Tully’s, which has locations in Syracuse, Batavia, Rochester, Amherst, North Syracuse, Buffalo, Liverpool, and Vestal, is one of the area’s most popular sports bar chains. Seaway also reported that it is currently in discussions with an area retailer for possible acquisition. The company, which has and has had locations in various northern and central New York markets, generated approximately $15.2 million in revenues and income before taxes of over $500,000 in 2007. The stock traded below $0.01 for the week.
iVoice Technology, Inc. (OTCBB: IVOT), a “green” technology company, focused on acquiring and identifying promising technologies that address environmental issues, announced that its wholly owned subsidiary B Green Innovations, Inc., has completed a reseller agreement with Fleet Electronics Company, LLC, to sell its EcoPod shock absorber anti-vibration pad. By partnering with B Green Innovations, Inc. Fleet Electronics will be able to offer the EcoPod pad to its customers in the RV, Trucking and Heavy Equipment Industries. The stock traded below $0.01 for the week.