Companies featured in the current edition of the newsletter: ACCP, ACCY, AFMI, CACN, CETG, CHIP, CKGT, CLXS, CTVWF, CVM, ENZ, ETGF, FMTI, GNBT, GSPG, HSOA, HYTM, ILNS, IVOT, MBND, PLKH, PSTI, SWVC, TAGS, TKO, XCR
It was another example last week of the marked improvement in sentiment since the bailout of Bear Stearns in mid-March. While bad news was attended to, it was the good news – and the thought of good news – that carried the market last week. This reflected in all the major indices being up for the week. The S&P 500 gained 37 points for the week, cutting its year to date loss to 2.1%. The Nasdaq Composite Index gained an impressive 83 points, reducing its year to date loss to 4.7%. The Dow Jones Industrial Index posted an increase of 241 points or 1.9%, paring its year to date loss to 2.1%. The Russell 2000 finished the week with a gain of 21 points, bringing its year to date loss to 3.2%.
Oil prices came within a hair of $128 last week and industrial production was reported to have declined 0.7% in April. The retail sales report was arguably the most pleasant surprise in the week’s economic reports. On Tuesday the Department of Commerce reported retail sales rose 0.5% in April, excluding autos. If not the most significant surprise, the report that housing starts rose 8.2% in April to an annualized rate of 1.032 million units may have been the biggest. This doesn’t mean the housing recession is over, but it does provide some hope that stability is returning to the housing market as residential construction may not be the drag on GDP growth that it has been in past quarters.
Earnings news last week slowed noticeably from prior weeks, but like past weeks, the majority of reports were better than expected. Dow component Hewlett-Packard, which announced an acquisition of Electronic Data Systems for $13.9 billion, also reported preliminary fiscal second quarter results that topped consensus estimates. Separately, Freddie Mac reported a sizable first quarter loss, yet its loss wasn’t as great as feared and its stock rallied as a result, gaining 9% the day of the report. Numerous retailers also beat quarterly expectations. Wal-Mart was one of them, but its conservative guidance and the understanding that its stock had gained approximately 15% in the two months leading up to its report, left the stock pretty much flat for the week.
What should investors look for this week? Many retailers are reporting earnings which should provide more insight into the health of consumer spending. Prior to the opening on Monday, Lowe’s (NYSE: LOW) releases numbers. Tuesday will feature earnings releases from Home Depot (NYSE: HD), Medtronic (NYSE: MDT), Staples (NASDAQ: SPLS), Target (NYSE: TGT), and Hewlett-Packard (NYSE: HPQ). Coming Wednesday after the bell will be a announcements from Computer Sciences (NYSE: CSC) and Limited (NYSE: LTD). Barnes & Noble (NYSE: BKS) and Tech Data (NASDAQ: TECD) will release results Thursday before the bell. Gap Inc (NYSE: GPS) will report its earning after close on Thursday.
The economic calendar is light but will feature several key reports. April Leading Indicators will be reported Monday at 10:00a.m. April Core PPI/PPI will be reported Tuesday before the bell. Shortly after the opening on Wednesday Weekly Crude Inventories will be reported. Weekly Initial Claims and April Existing Home Sales will be reported on Thursday and Friday, respectively. On Friday, there is an early close for financial futures and options pits at 1:00 p.m., ahead of the Memorial Day holiday weekend.
Notable conferences being held this week begin on Monday with the three-day JP Morgan 36th Annual Technology Conference in Boston, the four day UBS Global Oil & Gas Conference in Austin, Texas and the three day Goldman Sachs Basic Materials Conference in New York. In Europe, the two-day Rodman & Renshaw Fifth Annual Global Healthcare Conference begins on Monday in Monaco. Enzo Biochem, Inc. (NYSE: ENZ), Hythiam, Inc. (NASDAQ: HYTM) and Access Pharmaceuticals, Inc. (OTCBB: ACCP) present on Monday. Tuesday will feature the three-day Bear Stearns Global Transportation Conference in NYC and the two-day Deutsche Bank 8th Annual Swiss Equities Conference at the Hilton Zurich Airport. The two day Citigroup Global healthcare conference in New York will begin on Wednesday. Also on Wednesday Goldman Sachs will hold its 9th Annual Internet Conference in Las Vegas.
VeriChip Corporation (NASDAQ: CHIP), a provider of radio frequency identification, or RFID, systems for healthcare and patient-related needs, said last week that it agreed to sell its Canadian subsidiary Xmark Corp. to Stanley Works for $45 million in cash. After paying off debt and other costs, the company expects proceeds of about $21.4 million. It plans to use at least $15 million to pay a special dividend. The company also put its implantable business on the block, hiring Kaufman Brothers to sell the Verimed Patient Identification business. After the sale, the company will have disposed of its principal businesses. Investors could receive an initial cash distribution of approximately $1.40-$1.50 per share, and a subsequent one of approximately $0.60 in the event that the company does not realize any additional proceeds from the sale of the Verimed business. Shares rose by $0.13, to finish the week at $2.30.
Healthcare services company Hythiam, Inc. (NASDAQ: HYTM), announced financial results for the first quarter ended March 31, 2008, which included the consolidated results from its majority-owned subsidiary Comprehensive Care Corporation. For the 2008 first quarter, the company reported revenue of $11.3 million, which includes $2.0 million in revenues from Hythiam’s healthcare services business and $9.3 million in revenues from CompCare’s operations, compared to consolidated revenues of $8.9 million in the first quarter of 2007, which included $1.25 million in healthcare services revenues. The 60% increase in Hythiam’s healthcare services revenues, compared to the first quarter of last year, was attributable to the increase in the number of patients treated at the company’s U.S. licensed sites, managed treatment centers and international operations. The company also reported a net loss of $10.7 million for the 2008 first quarter, or $0.20 per share, compared to a net loss of $10.7 million, or $0.25 per share, in the first quarter of 2007. The company indicated that it expected to reduce its cash consumption over the balance of the year significantly, providing it with approximately 2 years of cash in the event that revenue from its managed care operations does not accelerate. Recently, HYTM said that it had landed its first managed care agreement with healthcare giant CIGNA, which is initially supposed to provide addiction treatment in Texas, beginning in Dallas. The stock rose by $0.23 for the week, to close at $2.50.
Multiband Corporation, (NASDAQ: MBND), the nation’s largest DIRECTV Master System Operator for Multiple Dwelling Units, announced results for its first quarter ended March 31, 2008. The company recorded revenue of $5.7 million compared to $4.4 million in the first quarter of 2007. The increase in revenue is partially due to the purchase of a controlling interest in Michigan Microtech, Inc. (MMT) in March, 2008, although Q1 results only include one month of MMT’s operations. The improved operating results as reflected in EBITDA of $253,428 for the 2008 first quarter, compared to $150,763 in the year-earlier period help to validate the company’s decision to acquire MMT and to divest itself of certain subscriber-related assets in 2007. The company also announced that it had entered into a Letter of Intent to acquire a 51% interest in DirecTech Southwest, a wholly-owned subsidiary of DirecTECH Holding Co. Multiband believes that the completion of this transaction will generate increased synergies, enhance its operating results and strengthen the company’s balance sheet. The company appears to be buying the businesses of DirecTECH in stages. Upon completion of the Southwest acquisition, MBND will own two of DirecTECH’s most profitable businesses. We note that there continues to be a disparity in the valuation between MBND and companies such as 180 Connect, which generate similar profits but have substantially higher valuations. Shares rose by $0.02, to finish the week at $0.96.
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 its first quarter earnings for 2008. The company reported that total net sales decreased by $5.6 million, or 10.0%, to $50.5 million in first quarter of 2008 from $56.1 million in the first quarter of 2007. Its gross profit decreased by $2.3 million, or 18.7%, to $10.0 million in the first quarter of 2008 from $12.3 million in the first quarter of 2007. The decrease in gross profit was partially due to a decrease in sales. The company also reported that its loss from operations in the first quarter of 2008 was $43,000, or 0.1% of total net sales compared to income from operations of $64,000 in the first quarter of 2007. The company continues to operate in a difficult environment, as retailers continue to face many of the challenges created by a slowing economy and high energy prices. The company remains highly focused on tight expense controls, while seeking ways to improve sourcing and inventory management. Tarrant also continues to work closely with its customers, to ensure that they receive highly attractive products on a timely basis. Shares fell by $0.07, to finish the week at $0.66.
Telkonet, Inc. (AMEX: TKO), the leading provider of innovative, centrally managed solutions for integrated energy management, networking, building automation and proactive support services, announced first quarter results for the period ended March 31, 2008. For the 2008 first quarter, the company had revenue of $5.0 million, an increase of 298% compared to $1.2 million in the 2007 first quarter. The increase was a result of both organic growth in the company’s energy and hospitality management businesses and growth from acquisitions. Gross profit was $1.1 million, compared to a loss of $0.07 million in the year-earlier period. The company also reported a first quarter 2008 net loss of $5.1 million, or $0.07 per share, compared to a net loss of $5.4 million or $0.09 per share in the 2007 first quarter. The loss includes non-cash charges and the cost of operations for its majority-owned subsidiary MST. The company said that it had a strong backlog, including contracts and monthly services in place for more than 2,400 hotels which are expected to generate approximately $3.6 million in annual recurring support and Internet advertising revenue. TKO has also received certain purchase orders relating to a major utilities energy management initiative which are currently expected to generate approximately $0.6 million in revenue, with committed future sales expected to generate $4.5 million in revenue for products and services to be provided through March 2010. In addition, the company recently partnered with a similar energy efficiency program in Wisconsin , estimated to achieve 5,000 rooms and establish offerings within utility programs nationally. The Company has also contracted with a national hotel operator to install energy management devices in approximately 16,000 rooms, with revenue anticipated to be $3.8 million. The current order backlog for this contract is expected to generate $2.5 million in revenue, which is expected to be recognized through the 2008 third quarter. Shares rose by $0.08 for the week, to close at $0.55.
Forbes Medi-Tech Inc. (NASDAQ: FMTI), a life sciences company dedicated to the research, development and commercialization of innovative products for the prevention and treatment of life-threatening disease, announced its results for the 2008 first quarter ended March 31, 2008. The company reported a net loss of $1.66 million for the first quarter compared to a net loss of $2.34 million for the same period last year. Total revenues, including interest income, for the quarter ended March 31, 2008 were $2.08 million compared with $2.11 million for the quarter ended March 31, 2007, a decrease of 1%. As of March 31, 2008, the company’s net cash and cash equivalents were $3.2 million. More significantly, the company also announced that, as part of its continuing reorganization plan, it had completed the previously announced transaction with a private investor to reorganize Forbes Medi-Tech Operations Inc., a wholly owned subsidiary of Forbes. By closing the transaction, Forbes obtained $3 million of non-dilutive capital for its business development and operational plans, to be followed by an additional $800,000 within a year. Also in line with its restructuring efforts Forbes announced a plan to focus exclusively on its revenue-generating nutraceutical business, which includes functional foods and dietary supplements, and cease all in-house drug development activities. The restructuring plan involves staff reductions across various departments within the company’s current active workforce. Shares increased by $0.33, to finish the week at $1.09.
Drug delivery company Generex Biotechnology Corporation (NASDAQ: GNBT), announced that it has produced clinical samples of MetControl, the company’s proprietary Metformin chewing gum product. These samples have been manufactured under GMP conditions and will be used in an upcoming trial, the results from which will allow the company to proceed with additional R&D initiatives and consider regulatory agency registration applications. The protocol for the MetControl study is an open-label crossover study comparing MetControl and immediate release tablets in healthy volunteers. The company anticipates that approximately 36 patients will participate in the study. The delivery of Metformin in a good tasting chewing gum format may make the drug more acceptable to these patients and may thereby increase compliance with the therapy. The company finished the week unchanged at $1.05.
Volume Alert: Shares of junior energy company CityView Corporation Limited (OTCBB: CTVWF) surged 27% on Friday on more than 10 time average volume after the company announced the conclusion of negotiations to finance key projects in West Africa in which CityView holds interests or is currently evaluating. Pensador Resources Inc., a US corporation that will assist CityView with the financing of these projects, is in the final stages of securing underwriting which will aggregate on completion approximately $1.1 billion in equity. Pensador shares will be subscribed for by Angolan nationals and other parties at a price of US$20 per share. Three prominent Angolan businessmen are joining the Board of Pensador. As a first step, in exchange for 3.4 million Pensador shares valued at $68, CityView will transfer to Pensador its rights to and interests to invest in four Angolan offshore oil licenses which CityView has been evaluating for the past two months the opportunity to invest in an oil refinery in West Africa with guaranteed supply and off-take which is currently in the advanced due diligence stage. The stock rose by $0.09 for the week, to close at $0.23.
Alternative Construction Technologies, Inc. (OTCBB: ACCY), a company that possesses a unique and patented construction technology called the ACTech Panel System that is used in the design and erection of state-of-the-art buildings, released its first quarter 2008 financial results. The company reported an increase in sales of 48% over the comparable 3 month period in 2007. Although profit for the 2008 first quarter declined, revenue continued to be in line with the company’s strategic goals, recent sales and marketing efforts. The loss for the quarter was directly related to the delay associated with the passing of the Florida Referendum which slowed educational spending, the recent increase in transportation cost, and the ripple effect of current credit crisis on construction. EBITDA was $69,854 for the period. The company also reported a loss of $0.01 per share for the three months ended March 31, 2008. In other news the company announced that it had been selected to participate in “The Faces of Climate Change” Media Campaign by the Environmental Defense Fund for its contributions to value-added construction methods, social and environmental consciousness and the ability of its state-of-the-art ACTech structural insulated building system. Shares rose by $0.49, to finish the week at $2.99.
Affinity Media International Corp. (OTCBB: AFMI), a special purpose acquisition company, said that it had entered into 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. The stock fell by $0.02 for the week, to close at $5.93.
China Kangtai Cactus Biotech Inc. (OTCBB: CKGT), a vertically integrated grower, developer, manufacturer and marketer of a variety of cactus-based consumer products in China, announced its financial results for the three months ended March 31,2008, For the three months ended March 31, 2008, revenue increased by 16.5% to $2.8 million from $2.4 million in the corresponding period of the prior year. The increase in revenue was attributable to the fact that the company has continued to expand its production and distribution, and its products are better accepted by the Chinese market customers. For the three months ended March 31, 2008, income before income taxes increased by 20.6%, to $0.7 million from $0.6 million for the corresponding period of the prior year. The stock fell by $0.08 for the week, to close at $0.64.
Collexis Holdings, Inc. (OTCBB: CLXS), a leading developer of high definition search and knowledge discovery software, announced its results for the three months ended March 31, 2008. The company reported that total revenue increased by 145%, to over $1.4 million compared to $0.6 million for the three months ended March 31, 2007. This increase was due primarily to database subscription fees from Lawriter. Shares rose by $0.08, to finish the week at $0.47.
Volume Alert: GoldSpring, Inc. (OTCBB: GSPG), the largest landholder in Nevada’s prolific Comstock Lode District, reported promising assay results from its Hartford Complex surface drilling program. The latest two drill holes are part of the company’s ongoing Comstock Lode exploration drilling program, which began in December 2007. Drilling results to date point to a significant underground mining opportunity within the Hartford Complex. The company intends to begin exploration for underground targets after the completion of its ongoing surface drilling program. The current exploration drilling remains on schedule to allow the company to complete its initial 43-101 reserve/resource report by the end of June, which could serve as a significant catalyst for shares of the stock. Shares rose 5.4% on Friday on more than three times average volume, closing at $0.0155.
ProLink Holdings Corp. (OTCBB: PLKH), the world’s largest provider of digital advertising screens for the golf course market and Global Positioning golf course management systems, announced financial results for its first quarter ended March 31, 2008. The company reported that total domestic revenue for the 2008 first quarter of $5.7 million increased 40% compared to $4.1 million in the 2007 first quarter. The company also experienced record revenue from Domestic System sales, increasing domestic system sales to $4.8 million or 90%, as compared to $2.5 million in the year-earlier period. The strong domestic results have helped to mitigate the impact of the loss of the company’s distributor in Europe. Also the company’s ability to tightly control costs, as a result of the cost reduction programs it implemented in late 2007 and the first quarter of 2008, helped ProLink report improved results. The company estimates that the full benefits of its cost reduction programs will be realized in Q2 and the remainder of 2008. We believe there are two areas the company needs to address near-term in order to generate significant appreciation in its shares. The first is to secure distributors in Europe to replace the one that was terminated. Late last week, the company said it had selected Sport Business Group to distribute the ProLink system at upscale golf courses and resorts throughout France. The other is to demonstrate that it can attract advertising to support its plans to monetize its installed base. The stock finished the week unchanged at $0.57.
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, said it will remove the restrictive legends on 3.9 million shares of common stock of a total of 4.4 million shares and warrant shares sold in its PIPE private placement in May 2007. The company is removing the restrictive legends on a portion of the shares in order to facilitate the ability of the PIPE shareholders to sell shares no longer subject to the lock-up. Shares dropped by $1.31, to finish the week at $1.98.
Volume Alert: Could Intellect Neurosciences, Inc. (OTCBB: ILNS), a biopharmaceutical company that engages in the discovery and development of disease-modifying therapeutic agents for the treatment and prevention of Alzheimer’s disease and other disorders of the central nervous system be on the verge of inking a significant licensing deal? Shares soared last week to $0.95 on heavy volume, perhaps due to an 8k the company issued stating that it had entered into a License Agreement providing for a non-exclusive license of its ANTISENILIN patent estate. It said a press release on the deal is expected this week.
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, will be opening a new location in Sackets Harbor, NY with a targeted opening date scheduled for mid-June 2008. The company’s tenth store will be located at the site of the former Harbormaster and Smokehouse restaurants on West Main Street and will carry an assortment of clothing, footwear, gift, and select specialty food and beverages. The company also announced that Hackett’s, has launched its updated website. The site www.hackettsonline.com offers customers up to date product information, new product offerings, in-store sales and specials, and certain Internet-only specials. The site will also be used for other information, such as store hours, locations and directions, and as an interactive forum for customer questions and feedback and “opt in” email alerts on new store specials. Hackett’s eventually intends to roll out select e-commerce opportunities through the website. The stock remained below $0.01 for the week.
On the Wires: Seaway Valley Capital Corporation (OTCBB: SWVC), announced that it has formed its Board of Advisors at Patrick Hackett Hardware Company. Among others, the board includes Juliann Hackett Cliff, Patrick Hackett, Jr., Norman Garrelts, Christopher Swartz, and Joseph Ettore. ProLink Holdings Corp. (OTCBB: PLKH), said that it has appointed Ron Bension to its Board of Directors. Home Solutions of America, Inc. (OTC: HSOA), a company that provides restoration, construction, and interior services to commercial and residential properties, announced that Brian Marshall resigned his position as a member of the Board of Directors. Collexis Holdings, Inc. (OTCBB: CLXS), announced that Stephen Leicht, chief operating officer of the company, will speak at the 30th annual meeting for the Society for Scholarly Publishing in Boston, Mass. May 28-30. Carlo, Monaco. Customer Acquisition Networks Holdings, Inc. (OTCBB: CACN) announced that its board of directors approved the appointment of Michael D. Mathews, Chief Executive Officer of the company, to serve as its Interim Chief Financial Officer, Secretary, principal financial officer and principal accounting officer. VeriChip Corporation (NASDAQ: CHIP) entered into a Separation Agreement with Scott R. Silverman, its Chairman and Chief Executive Officer, which provides that upon the closing of the Xmark Transaction, Mr. Silverman’s employment will be terminated. iVoice Technology, Inc. (OTCBB: IVOT) announced that its wholly-owned subsidiary B Green Innovations, Inc. has appointed Harold Halman as its President and Ken Glynn, Esq. as Chief Operating Officer. Capital City Energy Group (OTCBB: CETG), a promoted two executives and hired a third to lead the company’s efforts in the energy industry. Greg Reed has been hired as Controller of Capital City Energy Group; Keith J. Kauffman has been promoted to CEO of Avanti Energy Partners and Daniel R. Coffee has been promoted to CEO of Eastern Well Services.
SPECIAL SITUATIONS:
Element 21 Golf Company (OTCBB: ETGF) $2.00
Many have seen Tiger Woods, the most recognizable athlete in the world, sink a key putt or hoist a trophy after a major win. In addition to being one of the most well-known athletes in the world, he is among the richest, highlighting the fact that golf is a big business. The sport equipment industry is $25 billion per annum, which translates into big profits for a company capable of bringing a performance enhancing product to the market.
The golf equipment industry is $5.5 billion annually, yet it has not seen significant performance advantages since the introduction of titanium and graphite in the early 1990s. This recently changed with the discovery of scandium which provides the highest strength-to-weight ratio of any material currently used in competitive sports. The willingness of the golf equipment industry to accept this product could translate into big profits for a little-known company.
Element 21 Golf Company holds the exclusive rights to proprietary Scandium Metal Alloy, used in manufacture of the new driver and the scandium shafts, as well as a sophisticated multi-technology production path. Scandium alloy is 55% lighter and offers 25% strength to weight advantage over titanium alloys, which are the current standards of the golf equipment industry. The advanced dynamics of scandium and the material economics offer a performance-enhanced alternative to manufacturing driver clubs with titanium, which is by far the largest segment of the annual $5.5 billion dollar golf equipment marketplace. The vision for E21 is to create a new material branding, where scandium sports products used by manufacturers and OEMs, are all “powered by E21” metal. The marketing strategy is to achieve a wide acceptance of scandium through sales of E21 clubs to retailers, scandium components to OEMs, and by licensing factories the use of scandium metal components.
In 2007, E21 expanded its product line to include fishing equipment that has quickly secured international recognition by winning several top honors at the 2007 ICAST, the world’s largest sports fishing trade show. The expansion into fishing has increased E21’s sport sectors, visibility, and branding opportunities. The company also plans to expand its product lines to include hockey, baseball, cycling, tennis and other sports.
For companies with disruptive products to succeed, they must show that they are able to market them. E21 is already off to a good start. For the three months ended March 31, 2008 the company had revenue of $565,630 from the sale of its golf and fishing equipment, representing at least its fifth consecutive quarterly sequential increase in sales. For the nine months ended March 31, 2008 the company posted revenue of $952,562. Recently the company inked an order worth a minimum of $4.24 million from Kanata Shaft Co, which plans to distribute its products.
Element 21 Golf Company has already received numerous endorsements from professional golfers and golf instructors. Also, the company’s recent PGA tour presence has helped to jump start E21 golf exposure further. The company has the distinct advantage of holding two patents protecting its technology and a jump start in a marketing campaign which should give it an edge over future competitors. Currently the company’s stock is trading at $2.00 per share, giving it a valuation of less than $20 million. By contrast, industry leader Calloway is worth nearly $1 Billion. If the company continues its recent sales success, it could begin to close that gap dramatically.
