In another ugly week for the broader market, the Dow Jones Industrial Average fell by 373 points, adding to a year to date loss that is now 10.3%. The Nasdaq continued its slide with a loss of 59 points, and a dismal year to date loss of 16.6%. The S&P 500 fell 2.8% or 37 points, weighed down by a host of concerns regarding the lack of liquidity in the municipal bond and secondary mortgage markets, bringing its year to date loss to 11.9%. The Russell 2000 lost 26 points for the week, increasing its year to date loss to 13.8%.
Overall, the credit market issue was the biggest driver this week as it exacerbated concerns about the risk exposure for financial firms that culminated in reports of Thornburg Mortgage and Carlyle Capital being hit with margin calls. On a related note, the Federal Reserve announced on Friday that it will be increasing its term auction facility to $100 billion in an effort to address heightened liquidity pressures in term funding markets. The Fed’s announcement didn’t do much to help stock market sentiment on Friday, though, as it was followed by a weaker than expected jobs report for February. Oil prices went as high as $106.54 on Friday and ended the week up 3.6% at $105.53 per barrel. Conversely, gold prices fell back to $979.10 per ounce, which marked a $0.90 decline from the prior week’s close. Once again, the dollar index declined as expectations for further rate cuts from the Fed weighed on the greenback. Separately, same-store sales results for February turned out better than feared, led by a 2.6% increase for Wal-Mart, and the ISM indexes for the manufacturing and services sectors both checked in stronger than expected. The market, however, didn’t place as much emphasis on the good news this week as it did on the fear of the unknown, which was most apparent in the financial sector.
How weak is the overall market? On Friday, there were 201 new lows on the Nasdaq and 1 new high. On the NYSE, there were 169 new lows and 2 new highs. Note that on Friday, declining stocks on the NYSE exceeded advancing stocks by nearly 3-to-1, with more than 2 stocks falling for each one rising on the Nasdaq. All of the indices took out their January lows on Friday, reflecting further technical damage that was done to the market.
What should investors look for this week? Taking center stage for earnings reports on Monday will be Foot Locker (NYSE: FL) followed by announcements before the bell on Tuesday from Kroger (NYSE: KR) and Dick’s Sporting Goods (NYSE: DKS). Wednesday before the bell, AES Corp (NYSE: AES), American Eagle (NYSE: AEO), and Vimpel Comms (NYSE: VIP) will announce results, followed by Dillard’s (NYSE: DDS) earnings announcement in the evening. Thursday will feature announcements from Carnival (NYSE: CCL), WellCare Group (NYSE: WCG), and Williams-Sonoma (NYSE: WSM). An announcement from Liz Claiborne (NYSE: LIZ) will close out a tame day for earnings reports on Friday.
The economic calendar will be active this week beginning with the release of the January Wholesale Inventories on Monday mid-morning and the January Trade Balance on Tuesday. Wednesday the February Treasury Budget and the weekly Crude Inventories will be reported. Thursday morning is very busy and starts with the February Retail and Auto Sales, Weekly Initial Claims, Export/Import Prices, and midmorning Business Inventories announcement. Friday before the bell the February CPI and Core CPI will be released, followed by the March Michigan Sentiment Report.
The conference schedule for the week looks to be very active. The week will get off to a busy start on Monday with a four day Bear Stearns 21st Annual Media Conference in Palm Beach, Florida and a three day Credit Suisse Group Communications Equipment & Networking Conference in Boston. The Deutsche Bank 2008 Hospitality & Gaming Conference in Boston, the three day Lehman Brothers High Yield Bond and Syndicated Loan Conference in Florida, and the two day UBS European Technology Services Conference in London, will all take place on Wednesday. Bear Stearns’ London Health Care Conference in London and the two-day Wachovia Small Cap Seminar in Utah, will conclude an active week of conferences.
Earnings Preview: Enzo Biochem (NYSE: ENZ) is scheduled to announce second quarter and six-month results for the period ended January, 2008 on Tuesday after the market closes. Total revenue for Q1 showed a significant increase, rising 86%, to $19.4 million, compared to $10.4 million the prior year, and up 8.5% from $17.9 million in the preceding fourth quarter of fiscal 2007. Revenue growth was driven by strength in both the Life Sciences and Clinical Labs businesses. Labs rose as a result of several recent contracts the company entered into, while Life Sciences’ gains were helped by the acquisition of European distributor Axxora. Investors will also likely focus on the Therapeutics Division. Recently, the company hired a former Novartis executive to head the business. Investors will likely look for an update on the clinical trial activity surrounding Alequel, the company’s innovative immune regulation medicine for treatment of Crohn’s disease. ENZ is nearing completion of a Phase II study in Israel. Shares are down approximately 33% since the company reported Q1 results. Note that the company had nearly $104 million in cash and cash equivalents as of its first quarter, representing nearly one-third of its market capitalization. Shares fell 83 cents last week, closing at $8.59.
CytRx Corporation (NASDAQ: CYTR), a biopharmaceutical company engaged in the development and commercialization of human therapeutics, reported the award of the previously announced stock dividend of RXi Pharmaceuticals Corporation common shares to holders of CytRx common stock as of the record date for the distribution, which was the close of business on March 6, 2008. The company expects that RXi common stock will be distributed on or about March 11, 2008. RXi common shares are expected to begin trading following the distribution date on the NASDAQ Capital Market under the symbol RXII. If RXi’s share increase after commencing trading, it could provide a boost to shareholders of CYTR. CytRx continues to hold approximately 49% of RXi common stock. All holders of CytRx common shares as of the record date have been awarded the dividend of one share of RXi common stock for every 20.05 shares of CytRx common stock they held as of the record date. Shares fell by $0.28, to finish the week at $1.55.
VeriChip Corporation (NASDAQ: CHIP), a provider of radio frequency identification systems for healthcare and patient-related needs, reported fourth quarter and year-end results for the period ended December 31, 2007 last week. CHIP had Q4 revenue of $8.6 million compared to revenue of $7.0 million for the fourth quarter of 2006, an increase of 24.0% due to strong sales of the company’s healthcare security and industrial products. Net loss in the fourth quarter of 2007 was $(2.8) million, or $(0.29) per share, compared to a net loss in the fourth quarter of 2006 of $(3.3) million, or $(0.59) per share. Full-year revenue of $32.1 million, was above the company’s guidance. CHIP also reported hospital registrations and protocol adopted hospitals in the VeriMed Patient Identification System of more than 900 and 200, respectively. The company also announced that it had entered into an $8 million debt financing with Valens Offshore II, Corp. The financing is a thirteen-month, non-convertible term loan bearing interest at an annual rate equal to 12%. In consideration of the financing, VeriChip issued to Valens 120,000 shares of the company’s common stock. The company will use $5.3 million of the proceeds from this financing to prepay debt owed to Digital Angel. As a result of this prepayment, the company will not be obligated to make any further debt service payments to Digital Angel until September 2009. By eliminating all 2008 debt service payments, the financing will result in an increase of more than $3.6 million to working capital for the company in 2008. Shares rose by $0.13, to finish the week at $2.70.
Generex Biotechnology Corporation (NASDAQ: GNBT), a company that is engaged in the research and development of drug delivery systems and technologies, announced that it has extended its agreement with the Lebanese-Canadian Hospital in Beirut for follow-on testing of specific peptides screened over the past year. During the initial screening, it was found that all vaccine peptides were safe and well tolerated. The vaccine is being developed both in the U.S. and at the Lebanese-Canadian Hospital in Beirut. The company also announced that it has received new patents in Canada and Argentina. The Canadian Intellectual Property Office has granted the company a new patent titled, Mixed Micellar Pharmaceutical Delivery System and Method of Preparation. The patent contains process, formulation and use claims to a mixed micellar pharmaceutical formulation for buccal administration. The National Institute of Industrial Property of Argentina has granted the Company a new patent titled, Proteinic Drug Delivery System Using Membrane Mimetics. The patent contains process and formulation claims to a mixed liposome pharmaceutical formulation. The stock fell by $0.19, to finish the week at $1.12.
CEL-SCI CORPORATION (AMEX: CVM), a company that engages in the research and development of drugs and vaccines used in the treatment of cancer, provided details at its 2008 Annual Meeting of Shareholders on groundbreaking activities currently underway at its manufacturing facility near Baltimore, Maryland. The facility will be used to manufacture Multikine, the company’s lead compound, for a pivotal Phase III clinical trial as first-line therapy of previously untreated head and neck cancer patients. The facility is expected to be completed during the third quarter of 2008, with manufacturing and patient enrollment to begin soon thereafter. At the Annual Shareholder’s Meeting, the company’s executives also provided highlights from fiscal year 2007. Some of the highlights include the FDA clearance of Multikine for Phase III clinical trial in head and neck cancer and $15 million the company managed to raise during the year. The stock fell by $0.02 for the week, to close at $0.65.
Earnings Preview: Pressure BioSciences, Inc. (NASDAQ: PBIO), a life sciences company focused on the development of a novel, enabling technology called Pressure Cycling Technology (PCT), will discuss fourth quarter and year-end results on Wednesday after the market closes. For the three months ended September 30, 2007, the company had revenue of approximately $138,000, primarily from the sales of PCT products and services. During Q3, the company installed 8 PCT Systems, a record number. Investors could be expecting an increase in sales in Q4, as the company more than doubled the number of salespeople during the third quarter. Since announcing Q3 results, the stock has declined 31%. Shares ended the week at $4.08, down 36 cents.
Pluristem Therapeutics, Inc. (NASDAQ: PSTI), a bio-therapeutics company dedicated to the commercialization of non-personalized cell therapy products for the treatment of several severe degenerative, ischemic and autoimmune disorders, announced that it has filed a Pre-Investigational New Drug application with the Paul Ehrlich Institute in Germany for PLX-PAD, the company’ product for the treatment of Peripheral Artery Disease. The PEI is the German federal authority granting clinical trial approvals. The company has submitted a scientific package to the PEI. The package contains the results of a proof of concept study and preclinical study synopses utilizing PLX-PAD to support an Investigational Medicinal Product Dossier submission planned for later this year. This Pre-IND document also contains information concerning the process used to manufacture Pluristem’s PLX-PAD product and the proposed clinical trial supporting the company’s IMPD. Shares fell $0.55 for the week, to close at $2.15.
Deer Valley Corporation (OTCBB: DVLY), a growth-oriented manufactured home builder, reported a summary of unaudited financial results for the fourth quarter and year ended December 31, 2007. Revenue for the 2007 fourth quarter was $17.5 million, an increase of 4.6% compared to revenue of $16.7 million in the year earlier period. Net income applicable to common shareholders for the quarter was a record $1.1 million, or $0.05 per diluted share, compared to $0.7 million, or $0.03 per diluted share in the fourth quarter of fiscal 2006. The company’s record earnings came in a period which has been one of the most challenging in the history of the factory built housing industry. The company also announced the launch of a new manufactured housing product line designed to meet the needs of lower income buyers. The Copper Ridge homes will provide a higher level of construction integrity and feature greater amenities that are typically found in homes sold at the more moderate price levels. The new line will include homes ranging from 900 to 2,280 square foot. The stock rose 3 cents for the week, to close at $0.95.
CityView Corp. LTD (OTCBB: CTVWF), an exploration and development company, in conjunction with a major African partner, has entered into preliminary arrangements to purchase an Oil Refinery with capacity of 100,000 bpd. The refinery will be relocated to West Africa. West and Southern Africa do not have enough refinery capacity. This situation is forecast to continue, providing the company with a high demand market for refined products which are in short supply and very expensive. The company also concluded agreements for the acquisition of interests in oil permits in Angola, specifically of Existing Offshore Oil Permits, Current Licensing Round which comprises seven offshore blocks, and Onshore Kwanza Basin Blocks. In addition the company announced the completion of the previously planned transfer of its working interest in the Longonjo and Ucua license areas to Fortitude Minerals Limited for 15 million shares of Fortitude. CityView now owns 22.6 million or approximately 40% of the company. Shares ended the week at $0.17, down 1 cent.
Advanced Cell Technology, Inc. (OTCBB: ACTC), a biotechnology company applying cellular technology in the emerging field of regenerative medicine, announced that it has reached a supply agreement with Biologics Delivery Systems Group, Cordis Corporation, in which Biologics Delivery Systems will supply catheters for the Phase II human clinical trial of ACT’s myoblast therapy for the treatment of heart failure. The company’s myoblast therapy successfully completed Phase I human clinical trials in 2007 utilizing the therapy safely in more than forty patients. Safety of the therapy was demonstrated in four independent studies. The U.S. Food and Drug Administration has given the company clearance to proceed with Phase II human clinical trials. The company expects its Phase II human clinical trial to begin shortly. The supply commitment for NOGA mapping and Myostar injection catheters from Biologics Delivery Systems Group represents another step toward commercializing the company’s myoblast therapy and bringing novel treatment to patients with few effective alternatives. The stock fell 6 cents for the week, to close at $0.17.
Amarillo Biosciences, Inc. (OTCBB: AMAR), a company that engages in the research and development of biologics for the treatment of human and animal diseases, announced that enrollment for its Phase 2 oral warts clinical trial had reached 40 patients, halfway towards the goal of enrolling 80 patients in a study testing low dose oral interferon alpha lozenges administered orally to human immunodeficiency virus positive subjects with oral warts. Thirteen clinical sites are participating in the study. In a related development, the company announced that it has retained The Patient Recruiting Agency of Austin, Texas to accelerate enrollment in its Phase 2 clinical trial of oral warts in HIV positive patients. The stock remained unchanged at $0.30 for the week.
Global Clean Energy Holdings, Inc. (OTC: GCEH),a company that operates as a renewable energy company in the biofuels industry, and its wholly-owned subsidiary, MDI Oncology, Inc. entered into an Asset Sale Agreement with Eucodis Pharmaceuticals Forschungs – und Entwicklungs GmbH, to sell all of the company’s rights to its SaveCream technology to Eucodis for an aggregate of 4,007,534 euros, which consideration is payable in cash and by the assumption of certain of the company’s outstanding liabilities. Although Eucodis has entered into an agreement with an investor to provide it with the funds necessary to complete the purchase of the SaveCream assets, no assurance can be given that Eucodis will, in fact, be able to obtain the necessary funds to purchase the SaveCream assets or that the transaction agreed to in the Letter Agreement will be completed by April 30, 2008, or ever. The stock fell two pennies, to finish the week at $0.04.
GreenShift Corporation (OTCBB: GERS), a company that develops and commercializes clean technologies that facilitate the efficient use of natural resources, and its agrifuels subsidiary, GS AgriFuels Corporation announced that a wholly owned subsidiary of GreenShift filed a Certificate of Ownership and Merger merging the subsidiary into GS AgriFuels pursuant to the short-form merger provisions of Section 253 of the Delaware General Corporation Law. As a result of that filing, GreenShift Corporation became the owner of 100% of the outstanding shares of GS AgriFuels Corporation. The stock remained unchanged for the week at $0.17.
BridgeWave Communications, the leading supplier of gigabit wireless solutions, said last week that MSTI Holdings, Inc. (OTCBB: MSHI), a high-growth next generation provider of quad-play services based in Hawthorne, N.J., has deployed seven BridgeWave 80 GHz gigabit wireless links as part of an accelerated network expansion in the New York metropolitan and northern New Jersey areas. BridgeWave’s ultra high-capacity wireless links fuel the rapid rollout of MST’s quad play voice, data, WiFi and IP video services to residential, hospitality and commercial properties in New York and New Jersey under its NuVisions brand. Additionally, BridgeWave’s GigE wireless bridges have enabled MST to offer higher data rates and a wider range of services than incumbent providers, with a ROI of less than a year as compared to the leasing of fiber circuits. With BridgeWave’s wireless GigE radios in place, MST now has the right backbone elements to deliver innovative, differentiated services cost effectively to tens of thousands of customers years ahead of its competitors. Shares fell by $0.08, to finish the week at $0.45.
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 Whiskey Creek 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. Top-notch golf facilities like Whiskey Creek trust ProLink to deliver the best in technology and service, while boosting revenue through a number of different functions. The stock increased by $0.08, to close the week at $0.53.
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, and its wholly owned subsidiaries, WiseBuys Stores, Inc. and Patrick Hackett Hardware Company, consummated a $5 million credit and security agreement with Wells Fargo Bank, National Association, acting through its Wells Fargo Business Credit operating division. The funds available under Line of Credit are based on the company’s current inventory with adjustments based items such accounts payable. The term of the Line of Credit is three years. The interest rate on the Line of Credit is equal to the sum of the Wells Fargo prime rate plus one and one-quarter percent, which interest rate shall change when and as the Wells Fargo prime rate changes. These funds will be used for general working capital at the company. Shares remained unchanged at $0.01 for the week.
Cord Blood America, Inc. (OTCBB: CBAI), the umbilical cord blood stem cell preservation company focused on bringing the life saving potential of stem cells to families nationwide and internationally, announced its wholly owned subsidiary, RainMakers International, was featured with their logo prominent on car #49 at the NASCAR UAW-Dodge 400 race at Las Vegas Motor Speedway. The race was featured on the FOX network. RainMakers recently signed a services agreement with BAM Racing to sell advertising nationwide for the #49 race car, driven by Ken Schrader. The stock increased by two cents, to close the week at $0.04.
On the Wires: Multiband Corporation (NASDAQ: MBND), a company that provides software and integrated billing services, through a unanimous vote of its board of directors, appointed Bernard Schafer to its board of directors to serve until the next regularly scheduled annual meeting of shareholders. Mr. Schafer was also appointed to the company’s nominating committee. The Board of Directors of Access Pharmaceuticals, Inc. (OTCBB: ACCP), a biopharmaceutical company that engages in the development and commercialization of products for the treatment and supportive care of cancer and other diseases, elected Steven H. Rouhandeh as director and Chairman of the Board.
SPECIAL SITUATIONS:
Affinity Media International Corp (OTCBB: AFMI) $5.80
Affinity Media International Corp. (AFMI) is a publicly traded special purpose acquisition corporation (commonly known as a SPAC). The company raised approximately $19 million in its IPO in June 2006 for the purpose of acquiring or merging with an operating company. 100% of the proceeds from the IPO were placed into a trust account.
AFMI has entered into a merger agreement with Hotels At Home, Inc. (HAH), a leading provider of in-room retail catalogues and hotel-branded e-commerce websites for hotels and resorts worldwide. HAH allows guests to purchase the items in their rooms they’ve come to enjoy during their stay, such as beds, linens, pillows, amenities, and the like. HAH has exclusive contracts with 42 leading hotel brands, and their catalogs are available in more than 500,000 rooms worldwide. The company’s headquarters are in Fairfield, NJ, and its European operations are based in Paris, France. The merger agreement is subject to shareholder approval.
AFMI/HAH offers a rare opportunity for growth during a slowdown in the domestic retail market, and presents investors with an attractive way to play the international growth trend in the hospitality industry. HAH benefits from an enviable position in the market with considerable room for growth, and given its first mover advantage, is devoid of significant competition.
HAH’s unique business model places the company in its own category with four primary competitive advantages over traditional catalog marketers: (1) negligible customer acquisition costs, (2) strong gross margins with limited inventory as a result of its ability to piggy-back on its hotel partners’ buying power, (3) exclusive products that are only available via HAH, thus eliminating the opportunity for comparative shopping, and (4) negligible returns because customers have already tried the product before placing their orders.
HAH’s financial results for 2007 support the optimism regarding the company’s future. Total revenue for the twelve months ended December 31, 2007 was $24.9 million, as compared to $20.8 million for the comparable period in 2006, a 19.6% increase. Revenue from international operations, which include Canada and Europe, grew approximately 61.8% to $5.2 million for the twelve months ended December 31, 2007 from $3.2 million in the same period of 2006. Gross profit for the twelve months ended December 31, 2007 was $15.7 million, a 17.9% increase over the $13.3 million reported in the same period in 2006. These numbers are even more impressive considering the financial difficulties many companies in the retail and mail order sectors have been experiencing in the current economic environment.
HAH is an industry leader with a rapidly expanding partner base and a record of both revenue growth and profitability. Investors will vote on whether to approve the merger with HAH in the second quarter of 2008. If the merger agreement is not consummated, AFMI will be liquidated and its public shareholders will receive $6 per share from the trust proceeds. Currently, AFMI is trading at $5.80, leaving investors a potentially significant upside if the acquisition is completed, and the downside protected if the deal is not consummated.
