Companies featured in the current edition of the newsletter: ACCY, AFMI, CACN, CGXP, ECOI, GCEH, GNBT, HJHO, HYTM, IASCA, ILNS, IVOT, MBND, MSHI, NSMG, PLKH, RVEP, SEE.V, SWVC, TAGS, TKO
The stock market was in rally-mode ahead of the Fed decision this week and got an added boost shortly after the headlines hit the wires. Market participants seemed pleased with the Fed’s announcement, but their focus Friday was primarily on the April employment report, which was better than expected on most fronts. However, the market succumbed to some week-end selling interest that pared its gains considerably. The S&P 500 jumped 16 points last week, cutting its year to date loss to 3.7%. This was a breakout week for the S&P 500 as it ended above 1400, its highest level since January. The Nasdaq Composite Index gained 54 points for the week, reducing its year to date loss to 6.6%. The Dow Jones Industrial Index posted a gain of 166 points, bringing its year to date loss to 1.6%. The Russell 2000 posted a small gain of 4 points and continued its positive gains in the last several weeks, paring its year to date loss to 5.3%.
The news Monday that Mars is going to buy Wrigley for approximately $23 billion and the news Tuesday that MasterCard had a blowout quarterly earnings report, and other items like the FDA shooting down a new cholesterol drug from Merck, led to some active trading in the beginning of the week, yet failed to significantly influence the market. The stirring action was reserved for the latter part of the week, which brought the Q1 GDP report, the FOMC meeting and the April employment data. In addition, it also brought some noteworthy movement in the dollar and some volatile activity in the commodity arena.
The Fed appeared to be feeling better about the economy’s prospects this week. After cutting the fed funds rate Wednesday another 25 basis points to 2.00%, it issued a directive that was different in tone from prior directives. In particular, the directive omitted a prior reference to the idea that “downside risks to growth remain.” The Fed’s statement acknowledged some indicators of inflation expectations have picked up, yet it stuck with its view that it expects inflation to moderate in coming quarters. Overall, the Fed’s directive implied it would now be in a wait-and-see mode and that the rate-setting committee would act in appropriate fashion to incoming data.
For the week the dollar index advanced 1.0% while the CRB Commodity Index, which tracks 19 different commodities, slipped 2.3%. The CRB Index had been down as much as 5.0% for the week at its low on Thursday. Oil prices, which nearly hit $120 per barrel last Friday, dipped to $110.30 on Friday before rallying back sharply to close the week at $116.32. Gold prices, meanwhile, fell 3.6% to $862.10 per ounce. Nonfarm payrolls declined 20K, the unemployment rate fell to 5.0% from 5.1%, hourly earnings rose just 0.1% and the average work week dipped a tenth of a point to an expected 33.7 hours.
What should investors look for during the week? Shares of both Yahoo! (NASDAQ: YHOO) and Microsoft (NASDAQ: MSFT) could be volatile this week after Microsoft said over the weekend that it would no longer pursue the acquisition of the Internet company. CMS Energy (NYSE: CMS), Great A&P Tea (NYSE: GAP), and Pilgrim’s Pride (NYSE: PPC) will report results Monday before the bell. Following later in the day will be announcements from Anadarko Petro (NYSE: APC) and McKesson (NYSE: MCK) Tuesday will feature reports from Barrick Gold (NYSE: ABX), Emerson (NYSE: EMR), MGM Mirage (NYSE: MGM), Qwest (NYSE: Q), Cisco Systems (NASDAQ: CSCO), and Walt Disney (NYSE: DIS). Coming before the bell on Wednesday will be announcements from Devon Energy (NYSE: DVN), Marsh McLennan (NYSE: MMC) and Transocean (NYSE: RIG). News Corp (NYSE: NWS.A) will report results after close on Wednesday. Thursday will highlight announcements from Cablevision (NYSE: CVC), Toyota Motor (NYSE: TM) and American Intl (NYSE: AIG). Clear Channel (NYSE: CCU) and Huntsman (NYSE: HUN) will close out the week with reports on Friday.
The economic calendar will once again be busy with April ISM Services being reported Monday at 10:00 a.m. Q1 Productivity and Labor cost will be released Wednesday morning, followed by March Pending Home Sales, Weekly Crude Inventories and the March Consumer Credit Report. Weekly Initial Claims and March Wholesale Inventories will be released on Thursday. Prior to the bell on Friday, March Trade Balance will be reported.
The conference schedule will be very active for the week and begins on Monday with the three day Deutsche Bank Securities 33rd Annual Health Care Conference in Boston, two day Goldman Sachs Third Annual Alternative Energy Conference in NYC, and the three day JPMorgan Energy Symposium in Texas. Tuesday will feature the Credit Suisse Group Basic Materials Conference in Boston and the three-day Merrill Lynch Technology Conference in NYC. The three-day Banc of America Securities BASics/Industrials Conference in NYC and the two day Merrill Lynch Global Industries Conference in London will both start on Wednesday.
Which stock was the best performing company on a National U.S. Exchange in April? None other than healthcare services company Hythiam, Inc. (NASDAQ: HYTM), according to a report in The Denver Post. Shares which had been sharply beaten-down, rallied 124% possibly due to expectations that the company could be nearing a managed care deal, which it mentioned on its 2007 fourth quarter conference call. Shares consolidated some of those gains last week, rising 4 cents to close at $2.71.
Drug delivery company Generex Biotechnology Corporation (NASDAQ: GNBT) said in a regulatory filing last week that it has received Special Access Programme authorization from the Therapeutic Products Directorate of Health Canada for a patient-specific, physician-supervised treatment of Type-1 Diabetes Mellitus with Generex Oral-lyn, the company’s proprietary oral insulin spray product. Health Canada’s Special Access Programme provides access to non-marketed drugs for practitioners treating patients with serious or life-threatening conditions when conventional therapies have failed, are unsuitable, or unavailable. The authorization could suggest that Health Canada has a favorable view of Generex Oral-lyn, which could make it easier for the product to be approved after the company completes its current Phase III clinical trial. Shares rose by $0.04, to finish the week at $1.08.
Multiband Corporation, (NASDAQ: MBND), the nation’s largest DIRECTV Master System Operator for Multiple Dwelling Units, announced that it has received a letter from the Nasdaq Staff indicating that the company has regained compliance with Nasdaq Marketplace Rule 4310(c)(3) and has received notification that Multiband’s securities will continue to be listed on the Nasdaq Capital Market. Shares fell by $0.28 for the week, to close at $1.05.
Rio Vista Energy Partners L.P. (NASDAQ: RVEP), an energy services master limited partnership, announced that it has scheduled a cash distribution to its common unit holders. The distribution, covering the first quarter ended March 31, 2008, is expected to be in an amount equal to $0.25 per common unit. The distribution is scheduled to be paid on May 15, 2008 to all holders of record of Rio Vista common units as of the close of business on May 9, 2008. The stock rose by $0.05 for the week, to close at $12.36.
Telkonet, Inc. (AMEX: TKO), the leading provider of innovative, centrally managed solutions for integrated energy management, networking, building automation and proactive support services, announced its latest contract win within the education market, following a successful high-speed Internet access pilot at Hillsborough County School District in Tampa, Florida “the nation’s 8th largest school district. The company’s advanced PLC technology platform, supplied by its value-added reseller HGB & Associates, will be deployed in mobile classrooms throughout 209 schools in Hillsborough County as part of an ongoing renovation program. Additional recent education projects for the company include energy management systems for Babson College in Massachusetts, and the Austin Independent School District in Texas. The stock fell by $0.11, to finish the week at $0.52.
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 its founders and executive officers, Gerard Guez and Todd Kay, proposed to acquire the outstanding publicly held shares of Tarrant for $0.80 per share in cash. The stock ended the week at $0.71, down one cent.
Affinity Media International Corp. (OTC: AFMI), a special purpose acquisition company, announced that it has negotiated an amendment to its Merger Agreement with Hotels At Home, Inc., an industry leading publisher of in-room retail catalogues and hotel-branded e-commerce web sites for luxury hotels and resorts worldwide. Pursuant to the Amendment, the shares of Affinity common stock payable to the Hotels At Home stockholders at the closing of the merger have been reduced by a value of $1 million from 2.5 million to 2.3 million. The parties have also agreed to reduce the cash pay out to the Hotels At Home Stockholders from $16 million to $15 million. Hotels At Home stockholders will also receive an additional 250,000 shares of Affinity common stock at each earn out level, for a total of 750,000 shares per earn out period. The company has also agreed to extend the date upon which the warrants issued in the IPO expire by one year, to June 4, 2011. In other news, the company announced that it has changed the record date of April 29, 2008 to vote on the merger to a date yet to be determined. The stock increased by $0.27 for the week, to close at $5.95.
Ceragenix Pharmaceuticals, Inc. (OTCBB: CGXP), a biopharmaceutical and medical device company focused on infectious disease and dermatology, presented data on its urinary catheter testing at the Medtech Insight conference held in Paris, France. Preclinical testing of the company’s CeraShield coated silicone urinary catheter showed that Cerashield catheters were able to provide complete protection against E.coli bacterial colonization for the entire duration of the 21 day study when challenged with daily inocula of 1,000 colony forming units of E. Coli. The study also examined the efficacy of two leading silver coated urinary catheters and one catheter that elutes nitrofurazone in the same protocol. These initial results are very promising. The company was able to demonstrate that Cerashield coated endotracheal tubes and urinary catheters provide superior preclinical performance compared to leading commercially available antimicrobial products. Shares fell by $0.05, to finish the week at $0.91.
Global Clean Energy Holdings, Inc. (OTCBB: GCEH), an emerging renewable energy company focused on the production of non-food based feedstocks used for the production of biofuels, announced that it had formed a 50-50 joint venture with Los Angeles businessmen Stewart A. Resnick and Selim K. Zilkha, both highly accomplished entrepreneurs who have developed successful agricultural & alternative energy companies. Zilkha was a member of the Forbes 400 in 2001. The joint venture’s mission is to acquire and develop non-food based land in Mexico to grow Jatropha curcas and commercialize oil and biomass derived from its fruit and seeds. The company and the joint venture partners have created a wholly-owned Mexican corporation to pursue these acquisition and development activities. Global Clean Energy Holdings, Inc. will manage the operations of the corporation and expects to consolidate the results for financial reporting purposes. Under the terms of the joint venture, the investors will provide the capital to acquire the raw land and fund operations. The land the joint venture will plant and grow Jatropha on is non-productive land that has never been used for food production or for other agricultural purposes. The stock fell by a penny for the week, to close at $0.10.
IAS Energy, Inc. (OTCBB: IASCA), which has acquired a promising Chinese Internet company, announced that Video1314.com has launched a new gaming portal as part of its Web 2.0 platform. The company will be introducing various online games designed to drive traffic to the web site. The first online game introduced is a free educational online game called Game1516. Game1516 is a Q&A game that requires users to answer questions from various topics ranging from history, geography, music, science and current events. Video1314.com is rapidly emerging as a destination site providing content, video-sharing, commerce and social networking for millions of users. The stock fell by a penny for the week, to close at $0.22.
The Board of Directors of 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, approved a binding term sheet pursuant to which the existing investors, who currently hold convertible promissory notes with an aggregate face amount of approximately $3.5 million plus accrued interest will exchange their Convertible Notes and will lend an additional $1.5 million to $2.25 million to the company for a new senior note and the right to participate in future royalties. Shares rose by $0.09, to finish the week at $0.62.
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 a process it describes as Recycled Tire Pod with Appliance Recess Guide, using Recycled Tires. The application supports one of the company’s new green platforms. The company recently decided to develop and acquire green technologies to support activities in large markets. Recycling used or scrap tires represents a multi-billion opportunity, due to millions of tires that exist and the significant health and environmental risks they pose. The company also entered into a non-binding Letter of Intent with Atire Technologies, Inc. for the purpose of discussing and negotiating a merger of Atire into a wholly owned subsidiary of the company. Shares stayed below $0.01 for the week.
MSTI Holdings, Inc. (OTCBB: MSHI), a carrier class communications technology company specializing in providing true quad-play services to residential, hospitality and commercial properties, announced that it has completed the first installation of Telkonet’s (AMEX: TKO) next generation Series 5 200 Mbps power-line communications platform, providing a complete turnkey communications package for legal support specialist Cobra Legal Solutions LLC at 370 Lexington Avenue in New York City. The Series 5 Platform, which uses the existing electrical infrastructure in office buildings, provides the company with a significant competitive advantage, as it allows MSTI/NuVisions to install a suite of communications services without incurring the costs associated with structured wiring of an entire building. The stock fell by $0.05, to finish the week at $0.25.
National Storm Management, Inc. (OTC: NSMG), a national construction company headquartered in Glen Ellyn, Illinois providing storm restoration services, announced that it has opened a new office in the city of Texarkana, located in Texas and Arkansas, to capitalize on an estimated $150 million in storm-related damage from a recent hail storm. The company recently hired a sales force to respond to the opportunities. The new office is part of its strategy to provide first-responder services surrounding storm activity. The company expects to open two new branch offices annually to capitalize on opportunities created by storm activity. Ironically, the new office could be well-positioned for not just cleanup work from the recent hail storm, but to handle the significant damage created over the weekend by tornadoes in Arkansas that killed seven people and caused havoc throughout the state. The stock remained unchanged for the week at $0.06.
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 Oak Quarry Golf Club now features the ProLink Solutions GPS system used at many of the world’s most famous golf courses and plans to participate in ProLink’s exclusive national advertising opportunity. Golfers at upscale courses now expect to see ProLink GPS on their carts, while course operators consider the system a necessity for management and revenue generation. The company’s unparalleled ability to reach high-end consumers viewing its screens makes it an integral element of comprehensive advertising campaigns. Shares rose by $0.06, to finish the week at $0.57.
SeaMiles Limited (TSX Venture: SEE), North America’s premier cruise loyalty provider, announced record fourth quarter and year-end results for the period ended December 31, 2007. For the 2007 fourth quarter, the company reported total revenue of $2.5 million, an increase of 22% compared to $2.0 million during the same quarter in 2006, as a result of growth in the cruise loyalty program. 2007 fourth quarter net income was $137,640 or $0.01 per share compared to a net loss of ($2.0) or $0.20 per share in the 2006 fourth quarter, primarily due to a loss of $1.7 million that was recorded on the sale of the company’s income producing properties during the fourth quarter of 2006. For fiscal 2007, the company reported revenue of $9.6 million, an increase of 55% compared to $6.2 million in 2006 due to growth in its cruise loyalty program and a full year of revenue being recognized in the loyalty program division. Since SeaMiles, LLC was not acquired until March 29, 2006, loyalty program revenue in 2006 only included SeaMiles revenue from March 30 to December 31, 2006. For the year ended December 31, 2007, the company reported income from continuing operations of $196,698 or $0.02 per share, compared to a loss of ($992,341) or $0.11 per share in the prior year. The improved results in 2007 were attributable to the growing and profitable cruise loyalty business. Shares rose by $0.35 for the week, to close at $2.10.
Seaway Valley Capital Corporation (OTCBB: SWVC), a company that makes equity, equity-related, and debt investments in companies that require expansion capital and in companies pursuing acquisition strategies, announced that it has merged its business with North Country Hospitality, Inc. The new company will have combined assets of over $31 million and expects to have annualized revenues exceeding $40 million per year. The merger agreement was completed late last week. This agreement will open opportunities for both companies to expand their core businesses and strengthen their ability to attract capital. The company also announced that its wholly owned subsidiary, Patrick Hackett Hardware Company, has executed an agreement to acquire the Gouverneur, NY RadioShack store and franchise rights from John J. Wetmore. The RadioShack store, currently runs as a part of Scooters Sales and Service outlet, will be moved from its current location and become the fourth RadioShack store-within-a-store for Hackett’s. Hackett’s will also be launching a new, more user-friendly website in mid-May. The site www.hackettsonline.com will offer 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 inemail 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.
SPECIAL SITUATIONS:
Alternative Construction Technologies, Inc. (OTCBB: ACCY) $2.50
The United States housing bubble burst sometime around September 2005 and since then the housing market has had to face the subprime credit crisis, foreclosures, and oversupply. The recent problems in the housing and credit markets have also threatened the construction industry and the robust growth it has experienced. The United States Department of Labor reported construction employment decreased by 39,000 jobs in February 2008 and has fallen by 331,000 jobs since it hit its high in September 2006. While the outlook appears to be grim for the industry as a whole, there are still certain niches that offer incredible earnings potential as well as growth. As governments implement green mandates and corporations seek to reduce their carbon footprint there has been a rise in demand for alternative construction methods and materials. The trend towards more energy efficient and environmentally friendly construction has created new opportunities. In addition, the government has begun to implement minimum requirements for utilities, requiring them to obtain as much as 33% of their electricity from renewable sources over the next decade.
Alternative Construction Technologies, Inc. is a company that has the unique advantage and opportunity to thrive in the current housing market conditions. The company possesses a unique and patented construction technology called the ACTech Panel System that is used in the design and production of state of the art buildings in commercial, residential, industrial and modular building applications. Generically known as structural insulated panels, ACT’s revolutionary, viable and efficient construction solution utilizes an inherently better galvanized steel skin SIP system to complete energy efficient, stronger, safer, faster, and more economical structure than conventional wood and brick based building products. Patented ACT SIPs are environmentally friendly and easier to construct, not only saving labor cost and cutting construction time, but also reducing recurring monthly heating and cooling energy bills by 30-50% or often more. Most importantly, ACT’s SIPs possess disaster tolerant strength and have tested stronger than conventional concrete block or wood frame construction.
Not only is Alternative Construction able to conserve energy and cut costs, but it is also able to provide a superior quality product, making the company a top choice for construction projects. Currently ACT’s restructuring and efficiency measures are 85% complete, making the company well positioned for leveraged profits on incremental sales gains. The company’s current revenue potential from manufacturing operations is between $40-55 million based upon current production capacity. Its other divisions have the potential to increase revenue by 100%.
The company reported a 53.4% increase in revenue to $3.9 million in the 2007 fourth quarter, compared to $2.5 million in the same quarter of 2006 due to the company’s transition from a product supplier to a systems provider. Gross margin increased to 44% contributing to diluted earnings per share of $0.07 for the three months ended December 31, 2007.The company also reported that its total revenue increased to approximately $13 million for the year ended December 31, 2007 from $8.6 million for the year ended December 31, 2006.
The company also enjoys the benefit of a fragmented industry with no industry leader, presenting consolidation opportunities. There are 67 known SIP manufacturers in the United States, many of them doing less than $2 million in annual sales. ACCY has good differentiation from conventional builders with a superior product that possesses many comparative advantages of use due to its wide range of attributes. The future growth of the company is projected to increase at a much higher rate in 2008, taking advantage of favorable market conditions and trends. With strong revenue growth and improving profitability, there appears to be significant upside potential at the current valuation.
ecoSolutions International, Inc. (OTC: ECOI) $0.40
Ecological issues around the world today are increasingly at the fore. Weather patterns and climate change are trending to extremes, and, increasingly, health related problems are being attributed to the toxins in our atmosphere and the products we buy and build with. Manufacturers are being subjected to increasingly negative scrutiny and pressure for contributing to the destruction of the ozone. Over 84 percent of municipal solid waste could be reused, recycled or composted instead of being buried or burned. An exception is plastic, which comprises about 7 percent by weight or 20 percent by volume of municipal solid waste. Due to technical and financial limitations, less than 10 percent of plastic is currently recycled.
The solution to the problem appears to be in the form of Bioplastics, which are environmentally friendly, because compared with traditional plastics their production does not materially contribute to global warming. Founded in 2004, ecoSolutions International has developed and sells a range of competitive to premium priced products that are environmentally attractive alternatives to more toxic and damaging materials such as PVC. ESI is building a brand around its ecoSolutions services and some of their specific product lines such as ecoPlastic and ecoFoam and will seek to co-brand product lines with its customers. With its strong suite of ecoSolutions that combine bioscience and nature, ESI is targeting and servicing the broadest market of applications that address toxic and environmentally hazardous products within the plastics industry. With its broader line of products, ESI offers ecological solutions in a way that non-diversified bioplastics companies cannot, which represents a unique growth story in this evolving sector.
ESI is on pace for outstanding growth in the next two years with sales projected to increase from $0.5 million in 2007 to $25.8 million in 2008 and $48.8 million in 2009, fueled by the inking of major sales contracts, along with continued growth from the potential near term acquisition of Vinyl Trends, Inc. The company has already taken important steps to increase growth by last year signing a sales and distribution agreement with an Asian pellet and foam manufacturer and presenting its products to Fortune 500 companies and other large potential customers.
With projected growth in sales close to 5,000% in 2008 alone, the company is poised to become a major market player in transforming the plastics industry into a more environmentally friendly business. In 2008, gross profit is projected to be $5.8 million on net sales expected to be approximately $25.8 million. At $0.40 per share, if the company is able to meet its revenue and earnings forecasts, the stock appears to be a bargain.