Companies featured in the current edition of the newsletter: ACCY, BOKO, CACN, CETG, CGXP, CKGT, CORG, ETGF, FMTI, GERS, ILNS, IVOT, MBND, PLKH, RVEP, SFPI, SRRY, SWVC, TKO
The stock market closed 3.5% lower this week after stocks declined in the face of persistently high oil prices and broad-based selling efforts ahead of the long weekend. Entering the week, the S&P 500 was up 13% from its low on March 17, which was the day of the orchestrated bailout of Bear Stearns. In May alone the market had risen 2.9%. Given that performance, it wasn’t a stretch to think that it was due for a breather. The S&P 500 finished the week down 49 points, or 3.4%, bringing its year to date loss to 6.3%. The Dow Jones industrial average ended the week down 507 points, or 3.9%, increasing its year to date loss to 5.9%. The Nasdaq composite index ended the week down 84 points, or 3.3%, bringing its year to date loss to 7.8%. The Russell 2000 index posted a loss of 17 points, or 2.3%, contributing to a year to date loss of 5.5%.
Soaring oil prices were mostly to blame, but renewed concerns about the state of the financial sector and growing concerns about inflation pressures also played a part in dictating the market’s fate last week. Supply concerns and speculative interest were heralded as the main drivers of oil prices. Regardless of the cause, it was an unnerving sight for many participants who were worried that such a move might finally be the tipping point for the consumer. Concerns and strains of rising oil prices took on a new dimension for the market last week when AMR Corp. announced it would be cutting 11-12% of its capacity and instituting a $15 fee for the first checked bag on its flights in an effort to combat rising oil prices. Additionally, Ford announced a cutback in production of its full-size SUVs and trucks in North America, citing customers’ shift in demand for more fuel efficient vehicles.
Cautious outlooks from home improvement retailers Lowe’s and Home Depot didn’t help matters either. On a related note, it was reported Friday that existing home sales in April fell 1.0% from March to an annualized rate of 4.89 million units. That was better than expected. Overall, the economic data last week didn’t incite much buying interest. Weekly initial claims and the leading indicators reports were encouraging from an economic standpoint, yet they were overshadowed by inflation concerns tied to a less than pleasing Producer Price Index, the jump in oil prices and some sobering statements in the minutes from the April 30 FOMC meeting. The surprise for the market was that it sounded as if the Fed wasn’t talking down the prospect of another rate cut so much because it saw economic conditions improving, but rather, because it was showing increased concern about inflation expectations.
What should investors look for this week? There are only a few major corporate earnings announcements during this holiday-shortened week. Dollar Tree (NASDAQ: DLTR) and Polo Ralph Lauren (NYSE: RL) will announce their earnings Wednesday before the bell. Costco (NASDAQ: COST), HJ Heinz (NYSE: HNZ), and Sears Holdings (NASDAQ: SHLD) will report before the bell on Thursday, followed by an announcement from Dell (NASDAQ: DELL) after the market closes.
The economic calendar will be busy this week, starting with the release of May Consumer Confidence and April new Homes Sales on Tuesday at 10:00 a.m. April Durable Orders will be reported Wednesday at 8:30 a.m. Before the opening on Thursday, the Q1 Preliminary-GDP figures will be reported along with Q1 Preliminary Chain Deflator and Weekly Jobless Claims. Weekly Crude Inventories will be reported at 10:30 a.m., Thursday. Friday will be busy, as April Personal Income and Spending data and April Core PCE Inflation will be released before the bell. At midmorning on Friday, the May Chicago PMI will be reported as well as Revised May Michigan Sentiment.
There are a number of conferences being held this week, beginning Tuesday with the three day Deutsche Bank’s 5th annual Asian & Australian Property Conference to be held in Hong Kong, the two day Ninth Annual US Real Estate Opportunity & Private Fund Investing Forum in NYC, and the two day Pan Asia Telecom Conference 2008 in Singapore. Wednesday will feature the two day Deutsche Bank Energy and Utilities Conference in Miami, Florida, the two day Lehman Brothers Wireless and Wireline Conference in NYC, and the UBS Global Specialty and Generic Pharmaceuticals Conference in London, England. The three day Simmons & Company Alternative Energy Conference will also begin on Wednesday and will take place in Sonoma, California.
For those that believe that Insider buying portends well for a company’s prospects, one following that theory might look at Multiband Corporation (NASDAQ: MBND), the nation’s largest DIRECTV Master System Operator (MSO) for Multiple Dwelling Units, as two of the company’s Directors collectively purchase approximately 100,000 shares last week in the open market. Although shares are slightly above their 52-week low, the company recently reported improved first quarter results, generating EBITDA of approximately $250,000 as compared to a loss of $150,000 in the year-earlier first quarter. entered into a Letter of Intent to acquire a 51% interest in DirecTech Southwest, a wholly-owned subsidiary of DirecTECH Holding Co. The acquisition, once completed, is expected to be accretive to earnings. Shares ended the week at $1.00, up 4 cents.
Telkonet, Inc. (AMEX: TKO), a provider of innovative, centrally managed solutions for integrated energy management, networking, building automation and proactive support services, announced that it has won an energy management contract with Cornerstone Hotel Management as part of Wisconsin’s Focus on Energy incentive program. Cornerstone Hotel Management will initially install the in-room, occupancy-driven Telkonet SmartEnergy energy management system at three of its properties to lower utility bills by eliminating unnecessary heating and cooling of unoccupied guest rooms. Shares rose by $0.08, to finish the week at $0.64.
Rio Vista Energy Partners L.P. (NASDAQ: RVEP), a company that engages in the acquisition, development, and production of oil and natural gas properties, released its results for the three months ended March 31, 2008. The company reported total revenue of $3.1 million for the three months ended March 31, 2008 compared to total revenue of $0.7 million for the three months ended March 31, 2007. The company also reported a gross profit of $681,000 for the quarter. The stock fell by $0.08, to finish the week at $10.47.
Alternative Construction Technologies, Inc. (OTCBB: ACCY), a company that engages in the research, development, and marketing of proprietary products for the construction industry, announced that it has completed a financing line of credit of up to $4.5 million with BridgePointe Master Fund, LDC, CAMOFI Master Fund, LDC, and The Private Bank of Atlanta, Georgia. Under the terms and conditions of the Line of Credit, the company may draw up to 60% of the available balance of its contracts and purchase orders. The company also announced that it is now qualified to certify homes that meet The Florida Green Building Coalition’s Green Home Designation Standard. The standard applies to new and existing homes and is appropriate for builders, re-modelers, homeowners and homebuyers. The accredited status will enable Alternative Construction Technologies to receive fees for inspecting and authenticating a home’s compliance with the Florida Green Building Coalition’s rigorous green building standards. It will also enable the company to certify homes constructed with its ACTech Panel System. Shares fell by $0.23 for the week, to close at $2.67.
Customer Acquisition Network Holdings, Inc. (OTCBB: CACN), a fast growing Internet multi-channel network, announced results for the first quarter ended March 31, 2008. First quarter revenue of $4.3 million, which includes the Interclick and Options Media operations, increased 190.9% compared to pro forma revenue for the first quarter ended March 31, 2007 of $1.5 million. Gross profit for the three month period ended March 31, 2008 was $1.5 million or 34.4% of revenue, an 11.4 percentage point increase as compared to the 2007 fourth quarter, in which the company’s gross margin was 23.0%. The investments the company made in the 2007 fourth quarter and 2008 first quarter have positioned Customer Acquisition Network for further growth in 2008. Shares rose by $0.44, to finish the week at $3.50.
Capital City Energy Group, Inc. (OTCBB: CETG), a diversified energy company, released its financial results for the first quarter of 2008. Revenue was $561,065 and net income rose to $111,022 during the first quarter of 2008 compared to revenue of $700,148 and a net loss of $9,836 recorded during the first quarter of 2007. Lower interest expense combined with a net gain on sale of assets helped boost net income over the same period in 2007. Total net oil and gas production realized from principal investments was 33,892 MCF of natural gas and 4,798 barrels of oil during the first quarter of 2008. Shares fell by $0.25 for the week, to close at $2.50.
Ceragenix Pharmaceuticals Inc. (OTCBB: CGXP), a biopharmaceutical and medical device company focused on infectious disease and dermatology, announced positive results from its investigator-blinded study comparing the safety and efficacy of EpiCeram Skin Barrier Emulsion to that of Elidel Cream, a standard non-steroidal therapy in the treatment of mild-to-moderate pediatric atopic dermatitis. The study demonstrated that both EpiCeram and Elidel Cream produced significant improvement in patients’ conditions after four weeks of treatment. The study showed that EpiCeram offers a novel approach to the therapy of atopic dermatitis based upon its barrier repair-based mechanism of action. EpiCeram appears to be safe and effective in a substantial number of pediatric patients with mild to moderate AD, without the use of additional prescription drugs. The stock fell by 2 cents to finish the week at $0.73.
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 results for its 2008 first quarter ended March 31, 2008. The company reported revenue of $2.8 million, an increase of 16.5% compared to $2.4 million in the corresponding period of the prior year. The increase in revenue was a result of the company continuing to expand its production and distribution, and due to increased acceptance by customers of products such as Cactus Protein Nutrient, Cactus Calcium Peptide Soft Capsule and Cactus Shuxin Capsule. Gross profit increased to $1 million compared to $0.8 million in the year earlier period, as a result of increased sales of the company’s products. Net income increased by 25% to $606,516, compared to $485,140 in the year-earlier period. The stock rose by $0.06 for the week, to close at $0.70.
Cordia Corporation (OTCBB: CORG), a global communications service provider of traditional CLEC and Voice over Internet Protocol technologies, announced financial results for its first quarter ended March 31, 2008. The company reported revenue of approximately $12 million for the quarter ended March 31, 2008, representing an increase of approximately $1.8 million for the same period in 2007. The company reported a net loss of approximately $838,000 or $0.13 per share for the period ended March 31, 2008, compared to a net loss of approximately $641,000 or $0.11 per share for the same period ended 2007. The company ended the quarter with approximately 6% more customers than the previous quarter. Cordia has had three successive quarters of increased revenue and expects this trend to continue throughout 2008. Shares rose by $0.04, to finish the week at $0.56.
Element 21 Golf Company (OTCBB: ETGF), the leading manufacturer of advanced Scandium Alloy golf and fishing equipment, announced record fiscal third quarter revenue for the period ended March 31, 2008. The company reported net revenue of $565,630, an increase of 533% compared to net revenue of $89,325 for the year earlier period. Revenue increased 121% compared to the company’s fiscal second quarter. The fiscal third quarter results represent the fifth consecutive quarterly sequential increase in revenue. Revenue increased as a result of growing sales of golf and fishing equipment. For the nine months ended March 31, 2008, the company had net revenue of $952,562, an increase of 723% compared to the prior year in which the company had net revenue of $115,636. Results for the third quarter reflect the growing penetration and acceptance of the company’s unique technology by the golf and fishing industries, designed to enhance the competitiveness of golfers and improve the performance of fishermen. Shares rose by $0.20 for the week, to close at $2.10.
GreenShift Corporation (OTCBB: GERS), a company that through its subsidiaries, develops and commercializes clean technologies that facilitate the use of natural resources, announced its financial results for three months ended March 31, 2008. Total revenue for the three months ended March 31, 2008 were $6.6 million, representing an increase of 552%, over the three months ended March 31, 2007. Gross profit for the three months ended March 31, 2008 was $1.8 million, representing a gross margin of 27.1%. This compared to $0.1 million or 9.7%, in the comparable period of the prior year. Net loss from continuing operations for the three months ended March 31, 2008, was $3,794,409 as compared to a loss of $4,357,564 from the same period in 2007. The company also announced that GreenShift and the owners of Biofuels Industries Group, LLC exchanged company stock in return for 100% of the equity of BIG. This transaction is currently in escrow pending receipt of all final post-closing deliverables. The stock fell by a penny, to finish the week at $0.09.
Intellect Neurosciences, Inc. (OTCBB: ILNS), a biopharmaceutical company focused on development of disease-modifying therapeutic agents for the treatment and prevention of Alzheimer’s disease, announced that it has entered into a license agreement with Wyeth and Elan Pharma International Ltd. regarding certain of Intellect’s patents and patent applications related to antibodies and methods of treatment for Alzheimer’s disease. Under the terms of the agreement, Wyeth and Elan may pay the company potential future milestone payments and royalties based on sales of potential products, if it is determined that they are covered by patents that issue from Intellect’s patent applications. Shares fell by $0.32, to finish the week at $0.61.
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 a new Patent Application filing for Vehicle Mud Flaps made of molded recycled tire rubber. The application supports one of the company’s new “green” platforms. B Green Innovations, Inc., its wholly-owned subsidiary, is developing its “green” technology platforms. The new technology will be used to utilize rubber from recycled tires. Like other B Green technologies, this product removes environmentally harmful used tires and recycles the rubber to reduce raw material consumption. The company also announced that it anticipates to redeem the balance of the $186,000 in convertible debt held by Y.A., Yorkville Advisors investor prior to the end of October 2008, when pursuant to the terms of the convertible debenture, the debt becomes convertible into common stock at the option of the holder. The debt is not convertible into common stock until after October 31, 2008. The company recently repaid approximately $691,000 in secured convertible debt to the institutional investor. The stock remained under $0.01 for the week.
ProLink Holdings Corp. (OTCBB: PLKH), the leading provider of Global Positioning Satellite golf course management systems and digital-out- of-home, on-course advertising, announced that it was selected by Billy Casper Golf to install the ProLink GPS system at nine additional properties. Casper now has fifteen 18 hole golf courses with ProLink’s systems managed by Billy Casper Golf. BCG already boasts ProLink GPS at four of its operations, one with 36 holes. The additional nine facilities, three with 36 holes, bring the total to thirteen clubs and 306 holes. Under the multi-year agreement, ProLink Solutions becomes BCG’s preferred GPS provider for managed properties and exclusive provider for owned properties. The company also announced that it has partnered with Golf Consulting Services to install the ProLink system at upscale golf courses and resorts throughout Spain and Portugal. One of Europe’s most recognized golf consultant specialists, Golf Consulting Services will oversee sales, marketing, installation and service of ProLink screens mounted on golf carts in Spain and Portugal. Golf Consulting Services and ProLink will partner on the advertising platform on ProLink-installed courses across these countries, which boast hundreds of courses blessed with sunny climates and stunning scenery. Golf Consulting Services will also support all existing company customers in these territories. The stock finished the week unchanged at $0.55.
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, released results for the quarter ended March 31, 2008. The company’s net sales increased to $3.1 million for fiscal period ended March 31, 2008 from $1.0 million for the fiscal period ended March 31, 2007, an increase of 215%. The increase in sales was the result of the acquisition of Hackett’s, which took place on November 7, 2007. The company also announced that its subsidiary, Sackets Harbor Brewing Company, successfully introduced on a national basis two of its flagship beer brands at the National Restaurant Association’s annual “International Wine, Spirits and Beer Event” tradeshow. For the show Sackets Harbor Brewing Company exhibited the award winning, “War of 1812 Amber Ale”and “Thousand Island Pale Ale”, which have both received national attention for increasing penetration in select markets in the Northeastern and Southeastern United States. The stock remained under $0.01 for the week.
On the Wires: Forbes Medi-Tech Inc. (NASDAQ: FMTI) announced that Greg Anderson was appointed to the company’s Board of Directors and Dr. Joe Dunne was named as Chairman.
SPECIAL SITUATIONS:
Boo Koo Holdings, Inc. (OTCBB: BOKO) $0.30
When investing in small-cap companies, many astute investors recognize that it is the “jockey” not the “horse” that often defines success. Put another way, management often means the difference between success and failure for a small company. Boo Koo Holdings Inc., which develops, produces, markets and distributes alternative beverage category energy drinks under the Boo Koo and Gazzu brand names, just announced that an accomplished team of executives, who have successfully built major soft drink brands, recently joined the company’s Board of Directors. Why would executives who have achieved so much success in the beverage industry join a tiny company such as BooKoo? Read on.
Boo Koo’s brands, in early 2007 were ranked among the Top 10 in sales of more than 500 energy drinks as recently as the early part of last year. Even today, despite recent challenges, the company’s brands are in the Top 15 in energy drink sales. Net sales for the first quarter of fiscal 2008 were $501,557 compared to $2.4 million for the first quarter of fiscal 2007, a decrease of 78.8%. The company was negatively impacted by the loss of primarily Coca-Cola distributors, who dropped Boo Koo’s brands over the last six months due to absorbing additional Coca-Cola North America products. The company currently sells and distributes its products in parts of the United States and Canada through its network of regional bottlers and other direct store delivery distributors, including independent Coca-Cola, Cadbury Schweppes and other wholesale distributors. One of its beverages is sold exclusively to Circle K. Other products are sold primarily to mainstream convenience and grocery store chains, drug stores, gas stations and other retail outlets. The company’s objective is to transition from an energy beverage maker to a broader-based consumer beverage company focused on health, wellness and functional benefit beverages.
To accomplish its objectives the company has appointed three leading beverage industry executives to its Board of Directors. The company appointed Gil Cassagne, formerly Chief Executive Officer of Cadbury Schwepps Americas Beverages, Jack Belsito, formerly President of Snapple Distributors, Inc. and Joe Bayern, formerly Chief Strategy Officer of Cadbury Schweppes Americas Beverages, to its Board of Directors. The executives will also assume the role of consultants for the company, advising it on business opportunities. Each has played an instrumental role in building highly successful and admired beverage companies. Their expertise will be instrumental in growing the company and reaching objectives.
The company recently announced its intention to change its name to Performing Brands, Inc., reflecting its objective to transition from an energy beverage maker to a broader-based consumer beverage company focused on health, wellness and functional benefit beverages. With new and experienced executives at the helm who developed and managed brands that generated more than $5 billion in revenue, Boo Koo looks to refocus and rebrand the company. The experience the new executives have had in developing other successful beverage brands will play a key role in the company’s emergence as a leading beverage company. Boo Koo plans to exploit the substantial market opportunity by focusing on acquiring and developing promising brands that should allow the company to successfully participate in this rapidly growing industry. With a market cap of less than $15 million, a large market opportunity and an accomplished group of executives joining the Board, Performing Brands could represent a potential takeover candidate. Recently, brands like Glaceau, the maker of Vitamin Water and Fuse, another healthy lifestyle beverage, were acquired by larger companies. Could Boo Koo be next?
Sancon Resources Recovery, Inc. (OTCBB: SRRY) $0.48
With the focus on “going green” in the United States, what if the same focus on improving the environment came to China? Recently, perhaps because of the Olympics this summer, the Chinese government has made a concerted effort to improve the environment, which creates a compelling opportunity for Sancon Resources Recovery, Inc. and other companies in the sector. Sancon is an environmental service company that specializes in the collection, processing, and selling of processed material such as plastic, metal, paper, cardboard, and glass. The recycled materials are re-used by Sancon’s manufacturing clients to make a wide variety of new products that include: outdoor furniture, construction materials, building materials, packaging materials, and various other products. Sancon also trades in recycled materials originating from the United States, Japan, and various European countries to satisfy the growing demand for recycled materials by manufacturers in China.
Sancon China is one of the very few environmental companies with a nation wide presence in China. In 2007, China imported an estimated 50 million tons of recyclable wastes, worth approximately $6 billion. The company currently has recycling plants based in Melbourne Australia and China cities of Shanghai, Nanjing, Chengdu, Tianjin and Dongguan.
The growing interest in environmental services in China can be seen by the company’s impressive financial results announced last week. The company generated record 2008 first quarter revenue of $2.95 million, a 326% increase compared to $0.69 million in the 2007 first quarter. Revenue increased significantly due to strong growth in China. 2008 first quarter net income was a record $0.79 million, or $0.04 per diluted share, compared to a loss of $0.16 million, or a loss of $0.01 per share in the year ago period. Also the company’s revenue in 2007 grew 76% to $6.07 million from $3.45 million in 2006 due to continued growth from China. Revenue in 2005 was only $0.875 million.
Sancon appears to be in the very early stages of benefitting from a powerful secular trend in China. Already, it has proven the ability to generate significant growth as demonstrated by the 2008 Q1 results, and with demand in China for recycled materials showing no signs of diminishing, the strong increases in revenue and profits could continue. The company should further benefit from the environmental initiatives and policies set out by the Chinese government. There is currently a pending proposal to enhance tax benefits for the Waste Recycling Industry. Although shares recently surged more than 50% on the first quarter results, if one were to annualize first quarter earnings, Sancon would only be trading for 3 times 12-month earnings. With a sizzling growth rate, that could be a bargain.