Companies featured in the current edition of the newsletter: ACCP, ACCY, AFMI, CACN, CETG, CYTR, ENZ, GCEH, GNBT, GSPG, HJHO, HYTM, IFSG, IVOT, MBND, PLKH, PSTI, RVEP, SMGY, SWVC, TAGS, TKO
For the first time in four weeks the market lost ground. To be exact, the S&P 500 lost 26 points or 1.8%, bringing its year to date loss to 5.5%. The Nasdaq Composite Index declined by 31 points, increasing its year to date loss to 7.8%. The Dow Jones Industrial Average had the most severe decline last week, with a loss of 312 points or 2.4%, bringing its year to date loss to 3.9%. The Russell 2000 finished the week down 6 points, contributing to its year to date loss to 6%.
Oil dominated the headlines throughout the week with crude futures closing at new record highs each day. The final settlement of $126.13 per barrel marked an 8.4% gain for the week. That move was underpinned by supply concerns, speculative buying interest as momentum investors chased returns and weakness in the dollar. The spike in oil prices took its toll on sentiment and knocked the wind out of the market’s sails. Its effect was punctuated at the end of the week when FedEx issued an earnings warning late Friday that was pinned on rising fuel costs.
By the same token, the financial sector also had a heavy hand in the action, falling 6.3% for the week following a batch of ugly earnings reports from the likes of Fannie Mae, UBS and Dow component American International Group. Separately, Citigroup announced that it would be pursuing a plan to sell $400 billion in noncore assets over the next two to three years. Dow component Disney for its part demonstrated this week that it still has ample earnings power. The entertainment giant reported a 35% increase in fiscal second quarter earnings per share on growth in each of its business segments. Cisco was the other heavyweight that reported earnings last week. It posted a 12% increase in fiscal third quarter earnings per share and reaffirmed its long-term growth targets. There wasn’t a lot of economic data, yet the majority of the data released provided relatively good news. The ISM Services, Q1 Productivity, Initial Claims and Trade Balance reports were all better than expected. Pending home sales for March fell 1.0%, which was in line with estimates, while consumer credit in March expanded to $15.3 billion from $6.5 billion in February.
What should investors expect for this week? With over 90% of the S&P 500 companies having already reported results, there are few market moving earnings reports left this week. Monday before the bell Sprint Nextel (NYSE: S) will announce results, followed by an announcement from Fluor (NYSE: FLR) after the market closes. DISH Network (NASDAQ: DISH), TJX Cos (NYSE: TJX), Wal-Mart (NYSE: WMT), Applied Materials (NASDAQ: AMAT), and Whole Foods (NASDAQ: WFMI) will release results on Tuesday. Coming Wednesday before the bell will be reports from Arcelor Mittal (NYSE: MT), Deere (NYSE: DE), Freddie Mac (NYSE: FRE), Macy’s (NYSE: M), and Sony (NYSE: SNE). Thursday will feature announcements from Blockbuster (NYSE: BBI), Daimler AG (NYSE: DAI), JC Penney (NYSE: JCP), Hewlett-Packard (NYSE: HPQ), Kohl’s (NYSE: KSS), and Nordstrom (NYSE: JWN).
The economic calendar holds several key reports this week that should peak the interest of the market. The April Treasury Budget will be released on Monday at 2:00p.m. Prior to the opening on Tuesday, the April Export/Import Prices, April Retail and Auto Sales will be reported, followed by the March Inventories at 10:00a.m. The all important April CPI will be reported before the bell on Wednesday. Weekly Crude Inventories will be announced shortly after the opening bell. Weekly Jobless claims will be announced Thursday morning with the May Philadelphia Fed Report being reported at 10:00a.m. Also on Thursday April Capacity Utilization, April Industrial Production, and March Net Foreign Purchases will be announced in the morning. April building Permits and Housing Starts will be released Friday before open. The May Preliminary Michigan Sentiment Index will be released at 10:00a.m.
There are a number of notable conferences this week. The Goldman Sachs Consumer Products Conference in NYC and the three day UBS Global Financial Services Conference in NYC both begin on Monday. The two day Goldman Sachs Power and Utility Conference in NYC, the three day Merrill Lynch Global Metals, Mining & Steel Conference in Biscayne, Florida, and Morgan Stanley Communications Conference in Washington, D.C., are scheduled to begin Tuesday. The three day Banc of America Securities Health Care Conference in Las Vegas and the three day Credit Suisse Group Semiconductor & Hardware Conference will also begin on Tuesday. Thursday will feature the two day Credit Suisse Group European Technology Conference in London, Merrill Lynch Global E&C/Infrastructure Conference NYC, and Baird’s 2008 Growth Stock Conference in Chicago.
Earnings Preview: Healthcare services company Hythiam, Inc. (NASDAQ: HYTM), will report Q1 earnings on Monday after the market closes. Investors are likely to focus on details surrounding the agreement with a CIGNA HealthCare affiliate, in which it has become the first managed care provider to reimburse for PROMETA, a key component of HYTM’s substance dependence treatment program. The initial venue will be in Dallas, and the company is likely to provide further information on timing, and a subsequent launch in Dallas. While the announcement last week seemed to trigger profit-taking from the stock’s recent advance, details on the operational logistics should allow investors to begin to build a revenue model associated with the contract. The program is expected to initially be offered through a Hythiam managed treatment center in Dallas, with anticipated expansion throughout Texas. Identified and qualified CIGNA HealthCare members will receive medical treatment, psychosocial treatment and care coaching. The clinical and financial impact of the program will be evaluated with the objective of expanded adoption beyond the state of Texas. Investors will also likely pay attention to the revenue generated from the company’s private pay business, and more importantly, the company’s cash “burn” for Q1, and details on its cost reduction initiatives which are expected to impact results in subsequent quarters. In January 2008, the company streamlined its operations to increase its focus on disease management and managed care opportunities, which is expected to result in an overall reduction of 25% to 30% of cash operating expenses in its healthcare services this year. The combination of increased revenues and cost reductions is expected to significantly reduce the company’s net cash utilization. The stock dropped by $0.42 for the week, to close at $2.33.
Enzo Biochem, Inc. (NYSE: ENZ), a life sciences and biotechnology company that provides diagnostic services to the medical community, announced the acquisition of substantially all of the U.S. based assets of BIOMOL International, LP, of Plymouth Meeting, PA, and all of the stock of its two-wholly-owned United Kingdom subsidiaries. BIOMOL is a privately owned global producer of over 3,300 specialty life science products for the areas of signal transduction, lipid research, apoptosis, neuroscience and drug discovery, with a research focus in the field of functional proteomics. This acquisition is in line with the company’s strategy to grow Enzo Life Sciences, backed by its extensive IP estate, both organically and through acquisition. Coupling BIOMOL with the company’s acquisition of Axxora Life Sciences less than a year ago, Enzo Life Sciences has transformed itself into a global manufacturer and marketer of reagents and systems spanning a wide spectrum of scientific applications. BIOMOL has a strong record of revenue and profit growth, and is expected to become accretive to Enzo’s earnings. Moreover, Enzo’s strong international presence will serve to enhance the worldwide marketing efforts of the BIOMOL product line. The stock rose by $0.32, to finish the week at $9.13.
Earnings Preview: Tarrant Apparel Group (NASDAQ: TAGS), a company that engages in the design, contract, manufacture, and sale of private label and private brand casual apparel, announced that it will release its first quarter results for the period ended March 31, 2008 on Monday, May 12th after the market closes. The company reported net sales of $57.3 million in the fourth quarter of 2007, a slight decrease compared to $57.4 million in the same period in 2006. Gross profit for the fourth quarter of 2007 was $11.1 million, a 19.1% decrease compared to $13.7 million in the fourth quarter of 2007. The recent announcement by the company’s founders and executive owners of their intention to acquire the outstanding publicly held shares of Tarrant for $0.80 per share in cash shows their strong belief in the company’s future earning potential. As economic concerns weigh on consumer spending, many retail-related companies have reported lower comparables. The company had revneue of $56.1 million in its 2007 first quarter. The company’s stock fell by a penny, to close the week at $0.72.
Earnings Preview: 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 it will report first quarter results for the period ended March 31, 2008 on Tuesday, May 13th after the market closes. For the 2007 fourth quarter, the company had revenue of $4.7 million, an increase of 393% compared to $0.9 million in the fiscal 2006 fourth quarter. The increase was a result of both organic growth and growth from acquisitions. Excluding revenue from its MST subsidiary, Telkonet had revenue of $3.7 million, compared to $0.5 million in the year-earlier period. The company said it expects record 2008 first quarter revenue and expects significant sequential revenue growth, due to excellent visibility from recent customer awards. Investors will likely focus on its cash position as well, as it said it would require additional working capital to support its growth. Shares have declined approximately 40% since the company reported Q4 results on April 1st. Shares fell by $0.02, to finish the week at $0.48.
Rio Vista Energy Partners L.P. (NASDAQ: RVEP), an energy services master limited partnership, announced that its board approved a quarterly cash dividend of 25 cents. The dividend is payable on May 15 to shareholders of record as of May 9. Shares rose by $0.55 for the week, to close at $12.45.
Shares of Multiband Corporation (NASDAQ: MBND), the nation’s largest DIRECTV Master System Operator (MSO) for Multiple Dwelling Units, plunged 28% on Friday on heavy volume, possibly due to concerns surrounding a published report that said that DirecTech Holding Company, an entity that MBND previously announced it had merged with, was being sued by its lender for breach of contract and fraud. If true, MBND could be affected since it recently acquired a 51% interest in one of DirecTECH’s subsidiary as part of the overall transaction. However, the writer appeared to be unaware that the lawsuit was dismissed by the District Court sua sponte for lack of jurisdiction. Shares ended the week at $0.85, down 20 cents.
CytRx Corporation (NASDAQ: CYTR), a biopharmaceutical company engaged in the development and commercialization of human therapeutics, announced that for tax purposes it has valued the shares of common stock of RXi Pharmaceuticals Corporation distributed to CytRx stockholders on March 11, 2008 at $8.84 per share. The value was based in part on the market value of comparable companies. Shares fell by $0.19 for the week, to close at $0.71.
Drug delivery company Generex Biotechnology Corporation (NASDAQ: GNBT) said last week that it had sponsored a poster presentation at this year’s International Society for Pharmacoeconomics and Outcomes Research. Major findings described in the presentation were that clinical studies for non-injectable insulins did not include adequate information and outcomes that are required by decision makers for reimbursement recommendations. This research will pave the way for the conduct of an upcoming utility study of the company’s proprietary oral insulin spray product, Generex Oral-lyn. Shares fell by $0.09, to finish the week at $1.05.
Pluristem Therapeutics Inc. (NASDAQ: PSTI), a bio-therapeutics company dedicated to the commercialization of non-personalized cell therapy products for a variety of degenerative, ischemic and autoimmune indications, announced that the Paul Ehrlich Institute in Germany has approved the pre-clinical study synopsis to support a Phase I/II clinical trials in Germany and that the Center for Biologics Evaluation and Research , a division of the US Food and Drug Administration, has approved the synopsis to conduct a Phase I clinical trial in the US utilizing PLX-PAD for the treatment of limb ischemia associated with peripheral artery disease. The PEI is the German federal authority granting clinical trial approvals. The stock dropped by $1.63, to finish the week at $2.97.
Access Pharmaceuticals, Inc. (OTCBB: ACCP), an emerging biopharmaceutical company that develops and commercializes propriety products for the treatment and supportive care of cancer patients, announced that noted business columnist and author Gene Marcial of BusinessWeek highlighted the company in his recently released investing book titled “7 Commandments of Stock Investing.” In a section pertaining to his sixth commandment of “not fearing the unknown,” Access Pharmaceuticals is included as one of three “unrecognized attractive biotechs” that are not widely followed by Wall Street but “whose prospects look tantalizing because of their huge potential value.”The company’s stock rose by $0.30 for the week, to close at $3.25.
Alternative Construction Technologies, Inc. (OTC BB: ACCY), a company that engages in the research, development, and marketing of proprietary products for the construction industry, announced that Modular Structure Systems, Inc. (MSS) has entered into a definitive agreement selecting ACCY and the ACTech Panel system as its sole source of structural insulated panel products and the primary source of its building materials. The agreement calls for MSS to use the ACTech Panel as its only product of choice wherever structural insulated panel products are used. At a minimum, this includes specifying the material for 80% of the work MSS performs. The company’s shares fell by $0.20, to finish the week at $2.25.
Affinity Media International Corp. (OTCBB: AFMI), a special purpose acquisition company that previously announced a definitive agreement to acquire Hotels At Home, Inc., an industry leading publisher of in-room retail catalogs and hotel-branded e-commerce Web sites for luxury hotels and resorts worldwide, announced that Hotels At Home has signed a new three year renewal contract with a major International upscale hotel brand. The brand, which operates 79 properties and approximately 21,000 rooms in the United States, Caribbean, Mexico and the United Kingdom, is part of a major hotel company that franchises over 6,500 properties and 542,000 rooms worldwide. This agreement, combined with several other agreements renewed or signed in the first half of this year, strengthens the company’s industry-leading position within the lodging space. The stock finished the week unchanged at $5.95.
Global Clean Energy Holdings, Inc. (OTCBB: GCEH), an emerging renewable energy company focused on the production of non-food based feed stocks used for the production of biofuels, through its subsidiary GCE Mexico I, LLC has acquired approximately 5,000 acres of land in the State of Yucatan in Mexico. The property will be used for the cultivation of Jatropha curcas. When fully planted, the land will be home to over 4.0 million Jatropha trees, which will produce a high quality seed oil and biomass, for more than 30 years. The acquisition of this land puts the company right on track with its business plan for the commercialization of Jatropha in Latin America. This land has the ideal climate to grow Jatropha and keeping with the company’s corporate philosophy, has never been used for agriculture or food production. The company has already begun preparing the land for planting and will have plants in the ground this month. The stock finished the week unchanged at $0.10.
InfoSmart Group, Inc. (OTCBB: IFSG), a leading recordable digital versatile disc manufacturer in Hong Kong and Brazil, announced that it closed on a $5.0 million commercial secured lending transaction with two institutional investors. The proceeds of the loan are marked for the company’s development of Blu-Ray Disc sales and marketing efforts in their local and international markets. Also in connection with the loan, the company issued to the lenders 5-year warrants to purchase up to an aggregate 19,083,970 shares of its common stock at an exercise price of $0.262. The stock fell by $0.02, to finish the week at $0.21.
iVoice Technology, Inc. (OTCBB: IVOT), a company that engages in the design, development, manufacture, marketing, and licensing of the interactive voice response line of computerized telephony software, announced that it has formed BGreen Innovations, Inc., a wholly-owned subsidiary, to commercialize its “green” technology platforms. The new subsidiary will contain the company’s green technology and will pursue associated developmental activities. The first technology will be used to recycle tires. Recently, iVoice announced that it had filed, a new patent application for a process it describes as Recycled Tire Pod with Appliance Recess Guide. The company has also agreed to invest up to $500,000 in BGreen Innovations. The company believes this investment will allow B Green to further develop its promising technologies. The stock remained below $0.01 for the week.
ProLink Holdings Corp. (OTCBB: PLKH), a leading provider of Global Positioning Satellite golf course management systems and digital out-of-home on-course advertising, announced that Brickyard Crossing Golf Course in Indianapolis, Indiana, Copper Ridge Golf Club in Davison, Michigan, and Grande Valley Ranch Golf Club in Eloy, Arizona now feature the ProLink Solutions ProStar GPS system used at many of the world’s most famous golf courses and plan to participate in ProLink’s exclusive national advertising opportunity. The golf courses anticipate a solid return on their investment through many features offered by ProLink GPS, as well as its national advertising program. The stock rose by a penny, to finish the week at $0.58.
Smart Energy Solutions, Inc. (OTCBB: SMGY), a company that engages in the research and development, production, and distribution of Battery Brain, an electronic control for vehicle batteries, and Ever Green Fields Ltd. executed an agreement to amend the conversion terms of the $500,000 15% convertible promissory note made by the company in favor of EGFE on or about June 18, 2006. The two parties also executed an agreement to amend the conversion terms of the $500,000 15% convertible promissory note made by the Registrant in favor of EGFE on or about May 22, 2006. Pursuant to the June 18 Amendment and the May 22 Amendment the conversion price shall mean 60% of the average closing price of the company’s common stock, $0.001 par value, as quoted on the over-the-counter market under the symbol SMGY for 15 consecutive trading days prior to the closing of the offering. EGFE is the beneficial owner of more than 5% of the company’s issued and outstanding share capital and its manager Michael Ben-Ari has served as a director of SMGY since February 26, 2007. The stock finished the week unchanged at $0.18.
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 wholly owned subsidiary, Patrick Hackett Hardware Company, is developing and will soon launch a new branding campaign that will showcase Hackett’s wide range of unique, premium merchandise with a particular emphasis on its branded clothing and footwear. The comprehensive advertising campaign, which shall utilize traditional media such as television, print, third party website banner advertising, and radio, will be used to emphasize Hackett’s message as well as to drive customers to Hackett’s new website www.hackettsonline.com, which is expected to launch in May. The company also announced that through its newest subsidiary, North Country Hospitality, Inc., it has engaged franchise development company, Fransaction, Inc., to explore the development of its Goodfello’s Brick-Oven Pizza and Wine Bar into a multi unit franchise concept. Goodfello’s, based in Sackets Harbor, New York, is an award winning restaurant that specializes in gourmet pizzas and specialty pasta dishes and offers an extensive list of fine wines. The company believes that Goodfello’s could be a strong franchised concept. Goodfello’s unit economics are excellent, and it has a very popular but focused menu that lends itself to rapid development in multiple markets. The stock remained below $0.01 for the week.
On the Wires: Tarrant Apparel Group (NASDAQ: TAGS), announced that Charles Ghailian resigned his position as President of its subsidiary, Tax Mex, Inc. Halcyon Jets Holdings, Inc. (OTCBB: HJHO), announced that its Board of Directors appointed Gregory D. Cohen as a Member of the Board of Directors to serve until the next annual meeting of the Stockholders of the or until his successors duly elected. Seaway Valley Capital Corporation (OTCBB: SWVC announced that it has appointed Christopher M. Swartz of Watertown, to its Board of Directors and as Chief Operating Officer. Capital City Energy Group, Inc. (OTCBB: CETG) announced that it has appointed accomplished energy executive Lee Alan Robinson as an independent member of its Board of Directors.
SPECIAL SITUATIONS:
GoldSpring, Inc. (OTCBB: GSPG) $0.0153
It is no secret that prices of gold and precious metals have been in a strong uptrend since 2005, which brought a change from the mini- bull market in precious metals that began in January 2001 to a major bull market. Most coverage of gold’s rise focuses on the plunge in the U.S. dollar and a general fear of exposure to paper assets. Less attention has been focused on the supply side of gold, silver, and other precious metals. As demand for these metals remains strong, especially from China, many mines are operating at near full capacity. Supply concerns are also dominating the copper market. With the suppliers being swamped there is ample room for precious metal mining companies with resources and prospects to post impressive increases in revenue.
With the commodity scarce, one company has gone “back to the future” by targeting one of the most historically prolific precious metals areas. The company is GoldSpring, Inc., a North American precious metals mining company with extensive, contiguous property in the Comstock Lode District and a fully permitted gold and silver mine. It is a truly unique company that in its relatively short history, secured permits, built an infrastructure and brought the Comstock Lode project into production. The company was formed in 2003 when it acquired the Plum Mine property and since 2005, the company has been acquiring additional properties around its Comstock Lode project in northern Nevada, expanding its footprint and creating opportunities for exploration. The company’s objectives are to increase reserves through exploration, expand its footprint in the Comstock, resume mining and optimize its production.
For those who might not be familiar with the Comstock, more than 130 years ago it was one of the most exciting mining venues. In fact, the area produced more than 15 million ounces of gold and 230 million ounces of silver in the 1870’s, highlighted by 33 Bonanza discoveries. Recently the company announced favorable drill results from its exploration program at the Hartford Complex in the Comstock Lode region of Nevada. High-grade silver and gold mineralization was intersected in many of the drill holes and all holes intersected multiple gold- and silver-bearing veins. The grades GoldSpring is encountering in the current drilling program are much higher quality than the grades previously mined, and are progressively improving. Based on the strong results, a second reverse circulation drill is now on site to accelerate the drilling program. The phase one drilling program is bringing the company an important step closer to the scheduled resumption of mining the Hartford Complex in the summer of 2008
For the three months ended December 31, 2007 the company reported revenues of $45,000 and a total of $396,000 for fiscal year 2007. This was a decrease from 2006 revenue of $1,255,000 which was largely due to the company’s decision to temporarily cease mining operation allowing it to focus on delineating the ore body and exploratory drilling. Mining activities continue to be suspended and thus there were no precious metals sold during the first quarter 2008. The company is poised for success as it acquired the largest footprint ever held in Comstock at favorable prices and looks to acquire additional properties. GoldSpring also remains optimistic about its exploration potential based on positive March and April, 2008 drilling results. The company retains the ability to accelerate production and looks to resume its mining operation in the near future.
The stock trades actively at $0.0153, which could grow exponentially if drilling continues to show promising finds and as the company restarts its mining operation. With nearly 3 billion shares outstanding, Goldspring has a market capitalization of approximately $45 million, which could rise dramatically if its exploration program yields results. Some savvy investors currently own positions, including Jonathan Merriman, the CEO of San Francisco brokerage firm MCF Corporation. Merriman was a large early investor in Special Situation company Points International, which increased more than 400% since we profiled them. We believe he could replicate this success with Goldspring.