11/18/2007
VOLUME 326
Companies featured in this edition of the newsletter: AVGO, CGXP, CHIP, DOC, GNBT, GSHF, HJHO, HSOA, HYTM, IFSG, MBND, MLSC, NTRN, PBIO, PLKH, PLRS, SMGY, USAT, VQPH, XCPL
Except for the Dow, which gained a modest 1.03% for the week, the major indices ended the week little changed amid a marked increase in volatility. The Dow gained 134 points, raising its annual gain to 5.7%. The Nasdaq gained 9 points, nudging its yearly return to 9.1%. The S&P rose 5 points, equating to an annual gain of 2.8%, while the Russell lost 2 points, pushing its loss for the year to 2.3%. Over the last several months, the divergence between the performance of small and large-cap stocks has increased.
Despite numerous headlines throughout the week, stocks posted modest moves from last a week ago’s close. The Dow Jones declined below 13,000 for the first time since August before rebounding back above that threshold. The week began with IBM announcing its acquisition of Cognos Inc. for $5 billion. Leading retailers posted a conflicting outlook for the near term as Wal-Mart reported better-than-expected earnings and suggested that consumer spending may be stronger than anticipated for the holidays. On the other hand, Home Depot posted a drop in third-quarter profits of over 28% and commented that such difficult conditions should last for the remainder of 2007 due to a continuing soft market. Investors welcomed commentary from Goldman Sachs indicating it didn’t expect a significant write-down from the subprime crunch. JPMorgan Chase also indicated that the bank is fine on collateralized debt obligations and subprime exposure. On the flip side the volatile credit markets claimed two more victims as Barclays Capital took a $2.7 billion charge in the third quarter and Bank of America announced it will record a $3 billion write-off. Economic data did little to affect markets as the widely followed Consumer Price Index for October met expectations by rising 0.3%. Although a key OPEC member hinted that the oil cartel might increase output, worries over tight supply kept oil prices above $95 per barrel by the week’s end. With continued uncertainty as to whether the fallout in credit and housing markets will continue to take their toll on consumers, the Fed is monitoring the situation very closely. In it efforts to control overnight lending rates between banks, last week the Fed injected over $47 billion in temporary reserves representing the biggest combined daily infusion since September 2001.
The market has not been kind this year to small and micro-cap stocks. In addition to the strong preference by investors for larger-cap issues, the SEC eliminated the long-standing rule which prevented short-selling unless there was an uptick, a decision that further pressured smaller issues. However, small companies and investors received at least a modicum of good news last week, as the SEC pared the holding period for stocks under Rule 144, reducing periods to six months from one year and eliminating for non-affiliates the requirement to file Form 144. The move, which when published in the Federal Register will become effective, could reduce the discount that investors require for private placement transactions, as a shorter holding period could reduce investment risk.
What should investors look for this week? The stock market will be closed on Thursday for Thanksgiving, and will conduct a shortened trading session on Friday. Lowe’s Cos. (NYSE: LOW) and Campbell Soup (NYSE: CPB) are scheduled to release earnings before the opening bell on Monday, with Hewlett-Packard (NYSE: HPQ) reporting numbers after the close. Target Corp. NYSE: TGT) will announce earnings on Tuesday. Deere & Co. (NYSE: DE) and Gap Inc. (NYSE: GPS) will report on Wednesday, and Office Depot (NYSE: ODP) is due to report on Friday.
On the economic front, Housing Starts and Building Permits for October will be reported at 8:30 a.m. Tuesday morning, with commentary from the Fed’s Oct. 31 meeting being released at 2:00 p.m. Initial Weekly Jobless Claims will be announced Wednesday morning at 8:30 a.m., followed by the Leading Indicators for October, and the revised Michigan Sentiment for November at 10:00 a.m. Weekly Crude Inventories will be released Wednesday morning at 10:30 a.m.
There are no major conferences of note this week.
The debate about whether Pierce County, Washington will reinstate funding for Hythiam, Inc.’s (NASDAQ: HYTM) PROMETA continues on, as advocates and foes continue to debate the merits of the treatment for drug and alcohol addiction. Last week, Pierce County Executive John Ladenburg approved a measure Thursday that suspended current funding for the drug-treatment program, but said that he hoped to reach a compromise with the County Council that would provide $400,000 in funding for PROMETA in the county’s 2008 budget. The county spent $250,000 on PROMETA in 2007 and was supposed to spend an additional $150,000 before funding was terminated. Much of the debate seems to surround not whether the protocols work, but whether certain parties should have purchased small amounts of stock in HYTM. On October 23rd, the council voted 4-3 to suspend 2007 funding for PROMETA in a much debated decision. Ultimately, Pierce County represents a side-show to the main event, which is whether the company will now be able to use data from the first double-blind study on PROMETA to convince managed care providers that they should reimburse for the protocols. Shares ended the week at $4.10, up 10 cents.
Volume Alert: Shares of Ceragenix Pharmaceuticals, Inc. (OTCBB: CGXP), a biopharmaceutical company focused on infectious disease and dermatology, traded over 6.8 times average daily volume last week. The company has said previously that it is attempting to secure a licensing partner for EpiCeram, a topical non-steroidal skin care cream for the treatment of atopic dermatitis (eczema). Shares ended the week at $1.85, up 24 cents.
VeriChip Corporation (NASDAQ: CHIP), a provider of RFID systems for healthcare and patient-related needs, last week reported that its VeriMed Patient Identification System has expanded to Emergency Medical Responders. 27 American Medical Response ambulances in three counties in the Atlanta metro area have been equipped with Bluetooth-enabled scanners, enabling responders to quickly identify patients and their health records, medical personnel can immediately begin to care for these patients. The ambulances are the first in the country to be equipped with the VeriMed system for both emergency and non-emergency transport. Residents and patients can now have their portable electronic medical records available at all times from their facility to ambulance to hospital. The fleet currently serves residents and patients from more than 20 senior independent living facilities, assisted living facilities and nursing homes in Fulton, DeKalb and Clayton Counties. The company also announced that it participated in the American Diabetes Association-sponsored Philadelphia Diabetes EXPO this Saturday at the Pennsylvania Convention Center. VeriChip had a physician on site to offer the VeriMed Patient Identification System to conference attendees who sign-up for the voluntary procedure. Additionally, CHIP and sister company Digital Angel Corporation (AMEX: DOC) announced that that they will host events for the medical and investment communities on December 4-5th in New York surrounding the development of an implantable bio-sensing RFID microchip to measure glucose levels in the human body. Shares ended the week at $2.96, down 30 cents.
Digital Angel Corporation (AMEX: DOC), a technology company engaged in the development, manufacture, and marketing of visual and electronic identification tags and implantable RFID microchips, last week reported that one of its divisions has won a tender to supply the Slovakian government with 240,000 electronic ear tags over the next four years. This tender is part of an official identification program for sheep and goats per European Union regulations. In late August, the company announced a pact with Data Lab S.A. of Paraguay for visual and electronic livestock identification tags as part of a similar program to enhance overall food safety in South America, where it expects to sell more than 5 million tags this year. Further expansion into the EU could likely provide a revenue stream for years to come. Additionally, Digital Angel and announced that it will hold a call on Monday at 8:30 am eastern to discuss the company’s business and its merger with Applied Digital. Shares ended the week at $1.00, down 13 cents.
Volume Alert: Shares of drug delivery company Generex Biotechnology Corporation, (NASDAQ: GNBT) traded over 3.6 times average daily volume last week as the company got a favorable mention from television pundit Charles V. Payne, the Chief Analyst at stock market research firm Wall Street Strategies. Payne noted the recent approval by the Indian government, allowing the company’s flagship product Oral-lyn to be sold in India, should be one of the catalysts for the stock. The company is currently undergoing Phase III trials in the U.S. Payne believes that U.S. approval “would automatically make this a $5.00 stock, but once sales begin we think the stock could move even higher.” Shares ended the week at $1.75, up 15 cents, the highest level since mid-July.
Pressure BioSciences, Inc. (NASDAQ: PBIO), a company focused on the development of a novel, enabling technology called Pressure Cycling Technology (PCT), last week reported results for the three months and nine months ended September 30, 2007. For the quarter, revenue rose approximately 50% to $138, 052 compared to the same period last year. For nine months, revenue increased over 170% to $471,799. Sales of PCT products and services rose over 60% for the same period. The company also recorded grant revenue of $190,715 for nine months, versus zero in 2006. Net loss for the nine months was ($183,145) or ($0.09) per share, compared to a net loss of ($1,754,834) or ($0.72) per share for the same nine month period in 2006. The decrease in the net loss was due to gains from the sale of its remaining shares of Panacos Pharmaceuticals common stock and a gain of approximately $1.1 million on the sale of net assets related to discontinued operations of Source Scientific, LLC. As of September 30, 2007, the Pressure BioSciences had cash and cash equivalents of approximately $6.0 million. Shares ended the week at $5.86, down 14 cents.
USA Technologies, Inc. (NASDAQ: USAT), a developer of cashless vending and energy management products, last week announced record revenue for its first quarter ended September 30, 2007. The company reported revenue for the three months totaling $3.4 million, an increase of 67% compared with the same period in fiscal year 2007. Gross profit for the three months ended September 30, 2007 was $$0.5 million, compared with $0.6 million for the three months ended September 30, 2006, the decrease primarily attributable to the company’s initiative to sell the e-Port G-6 to MasterCard at reduced margins to help accelerate adoption of cashless vending. USAT now has an installed customer base of over 24,000 cashless terminals, and processed over 1.8 million transactions for the quarter, and increase of over 270%. As of October 31, 2007, the company had over had $25 million of cash and cash investments. The company also reported that its full e-Port cashless payment product line was featured last week at CARTES 2007, the world’s biggest trade show for the credit card and identification industry, held last week in Paris, France. The estimated 3.5 million vending machines in Europe represent a potentially lucrative market for the company, and the company’s participation signals the start of an aggressive marketing initiative. Shares ended the week at $6.53, down 3 cents.
A tenuous situation became even more so last week, after Home Solutions of America (NASDAQ: HSOA), a provider of restoration, construction and interior services to commercial and residential customers, said that it would further postpone the release of its 2007 third quarter results in order to take additional time to assess the impact that related party transactions have had on its results. The Rodman and Renshaw analyst covering the company suspended his rating, citing a lack of financial information to base his analysis on. We believe that the investment analysis hinges on the company’s ability to receive a near-term significant payment on its FIGA claim, a risk that is hard to quantify. A lack of financial statements could jeopardize its credit facility. The company could also receive notice in the coming week that it is not in compliance with Nasdaq listing requirements due to the failure to meet filing deadlines. With shares at their lowest level since June, 2005, any news that suggests that the company is not going bankrupt could cause the stock to rally. Shares ended the week at $1.39, down 92 cents.
Multiband Corporation (NASDAQ: MBND), a leading provider of video, data, and voice systems and services to multiple dwelling units (MDUs), last week announced results for its third quarter for the period ended September 30, 2007. The company recorded revenue of $3.7 million for its third quarter of 2007, compared to $4.5 million in the third quarter of 2006, and nine month revenues of $12 million, compared to $13.4 million in the same period in fiscal 2006. Despite lower revenue impacted by the sale of 28,000 owned Revenue Generating Units, the company decreased its net loss to $4.6 million, compared to a net loss of $6.3 million for the first nine months of 2006, an improvement of approximately 27%. The company also reported progress in efforts to complete its merger with DirecTECH, which is expected to close in the first quarter of 2008. The two companies had pro forma 2006 unaudited revenue of approximately $200 million. Shares ended the week at $3.54, up 49 cents.
Xcorporeal, Inc. (OTCBB: XCPL), a medical device company, last week reported that its Wearable Artificial Kidney prototype device (WAK) was featured in a Los Angeles Times story last week following a presentation delivered by Victor Gura M.D., the company’s Chief Scientific Officer, at The American Society of Nephrology’s Renal Week. The WAK is a revolutionary, portable device intended to enable patients with end-stage renal disease to achieve a quality of life closer to that of healthy individuals. According to one nephrologist, “A wearable artificial kidney would be an important step toward providing round-the-clock treatment. Dialyzing patients continuously with a miniaturized wearable device represents a complete paradigm shift from the way we treat patients today,” Shares ended the week at $6.50, down 65 cents.
Halcyon Jets Holdings, Inc. (OTCBB: HJHO), a luxury charter aircraft broker, last week reported preliminary net revenues for its third quarter ended October 31, 2007. Halcyon recorded revenues of approximately $2.9 million, a 102% increase over the second quarter’s $1.4 million, and a 725% increase over its first quarter, the company’s first quarter of operations. Although the company has not yet begun to market aggressively, recent agreements with NBA star Shaquille O’Neal, and NFL standout Reggie Bush appear to have generated significant word-of-mouth interest. Seemingly as confirmation of this, the company announced the launch of what may be the world’s most expensive gift card. The $5 million Holiday DreamCard may be used for one-way trips or round-trip travel, for a single flight or multiple trips, and like all Halcyon clients, will be assigned their own Halcyon certified Private Aviation Specialist and personal concierge to assist with the travel, dining and entertainment arrangements. Shares ended the week at $0.99, unchanged.
Pluristem Life Systems, Inc. (OTCBB: PLRS), a bio-therapeutics company dedicated to the commercialization of products for a variety of malignant, degenerative and auto-immune indications, last week reported it has completed the construction of its new state-of-the-art GMP (Good Manufacturing Practice) facilities in Israel. These facilities were designed to support the manufacturing process of the company’s PLX-I (PLacenta eXpanded) cells for its upcoming Phase I clinical trials, in which PLX-I will be used with cord blood as an alternative to bone marrow transplantation, as well enable large-scale commercial production of PLX cells. Large-scale commercialization could provide the company with revenue to support its upcoming clinical trials, research activities and pipeline of new clinical indications. The company recently announced that it would complete a reverse stock split in connection with applying for a listing on the Nasdaq. Shares ended the week at $0.03, unchanged.
Medical Discoveries, Inc./Global Clean Energy Holdings LLC (OTC: MLSC), a biofuel feedstock development and operations company, last week announced that it has completed a private placement of Series B Preferred Stock with Corporativo LODEMO S.A DE CV and Greenrock Capital Holdings LLC, for net proceeds of $1.3 million. The company will issue Series B Preferred Stock, convertible into approximately 11.8 million shares of the company’s restricted common stock, at an effective conversion price of $0.11, roughly double the company’s current share price. Global Clean Energy and LODEMO have already agreed to develop and operate a number of large commercial scale Jatropha farms throughout Mexico. The first farm is expected to generate revenue for MDI/Global during 2008. Proceeds from the transaction will be used for working capital and general corporate purposes. Shares ended the week at $0.05, unchanged.
Neutron Enterprises, Inc. (OTCBB: NTRN), a developer of digital media solutions, last week reported results for the nine months ended September 30, 2007. The company recorded revenue of $1.9 million, compared to revenue of $1.5 million for the same period a year earlier. The company also expects its revenue growth to increase, based on the expected successful completion of certain event marketing assignments, continued and growing revenues from Stock-Trak, and the expected growth in advertising revenue to be earned from its stock market simulation contests. Shares ended the week at $0.38, down two cents.
ProLink Holdings Corp., (OTCBB: PLKH), the world’s largest provider of Global Positioning System golf course management systems and on-course advertising, last week reported results for its third quarter ended September 30, 2007. The company announced record revenue for the quarter of $6.6 million, up over 13% compared to last year, and up over 20% from Q2 2007. ProLink also reported that advertising revenue tripled to $0.6 million, reflecting the company’s recent marketing pact with ABC Television Sales. Gross margins improved to 48.0 from the second quarter’s 40.1. Advertising revenue, which carries high margins, appears to be the key to the company’s near-term growth. On its earnings call, executives made favorable comments about the prospects for the business. Shares ended the week at $0.65, down 8 cents.
Avicena Group, Inc. (OTCBB: AVGO), a biotechnology company focused on diseases of the central nervous system as well as dermaceutical products, last week announced that the United States Patent and Trademark Office has granted the company U.S. Patent #7,285,573 for the use of the company’s proprietary drug candidates for the treatment of amyotrophic lateral sclerosis (ALS or “Lou Gehrig’s Disease”). Avecina’s present ALS drug candidates, AL-02 and AL-08, have been the subjects of an extensive body of clinical research including Phase II/III trials, and the company is preparing to initiate a confirmatory Phase III ALS trial in early 2008. This patent provides further protection for the Avecina’s growing portfolio of drug candidates for the treatment of ALS, and expands the company’s existing U.S. and international IP portfolio to 22 issued patents and 30 pending patents. The company is also currently in a Phase III trial for the treatment of Parkinson’s disease. Shares ended the week at $0.80, down 5 cents.
Smart Energy Solutions, Inc. (OTCBB: SMGY), developer and manufacturer of the innovative Battery Brain product line of vehicle and marine devices, last week announced it has signed an exclusive distributor agreement with Renaissance Pacific Energy Solutions (REPESA), an authorized distributor in the Philippines. The automotive aftermarket and services market in the Philippines was $2.5 billion and growing. REPESA has already placed a second order with Smart Energy for its Battery Brain product line, and with approximately 100,000 vehicles sold annually in the Philippines, the agreement should provide the company with a consistent revenue stream in the years to come. The Battery Brain is an aftermarket device designed to ensure a vehicle’s battery always retains enough power to start the engine. With applications for all kinds of vehicles including autos, SUVs/trucks, medium and heavy-duty trucks, military, buses, RV’s, boats, commercial vehicles and personal watercraft, the Battery Brain also offers a built-in anti-theft feature. Shares ended the week at $0.42, unchanged.
Volume Alert: Shares of VioQuest Pharmaceuticals Inc. (OTCBB: VQPH), a biopharmaceutical company focused on acquiring, developing and commercializing targeted cancer compounds, traded over 17 times average daily volume last week after the company Michael D. Becker as President and CEO. Mr. Becker has served as President and CEO of Cytogen Corp., a Nasdaq-listed biotechnology company, since December 2002. Perhaps the news caught the attention of investors, as it is somewhat unusual for an executive of a company listed on a national exchange to join a tiny Bulletin Board-listed biotechnology company. VQPH also announced that it expects to present interim data next month for VQD-002, which is focused on hematologic tumors, at the American Society of Hematology 49th Annual Meeting and Exposition in December and to initiate Phase II trials for Lenocta, an inhibitor of specific protein tyrosine phosphatases, VQD-002, an anti-cancer agent, and Xyfid, for Hand-Foot Syndrome over the next seven months. Shares ended the week at $0.35, up five cents.
Volume Alert: Shares of Greenshift Corporation (OTCBB: GSHF), a company devoted to facilitating the efficient use of natural resources, last week traded over 8.5 times average daily volume after announcing third quarter results for the period ended September 30, 2007. Revenues for the three-month period grew 144% to $14.5 million. Net income totaled $10.7 million for the three-month period compared to a loss of ($967,000) for the same period last year. New business initiatives coupled with reduced SG&A expenses/amortization charges helped drive such bottom line results. For nine months ended September 30, 2007 revenues totaled $25.1 million equating to a 46.1% increased compared to the same period last year. Net loss totaled ($12.7 million) due to the transitioning of technology development costs and expenses from previous financings. The company continues to focus on finding rapid and cost-effective ways to further streamline its corporate structure while maximizing its cash flow producing assets. In 2008, Greenshift anticipates significantly reducing debt and completely paying off all debt owed to YA Global Investments. Separately, the company released a very detailed letter to shareholders that can be found on the company’s website discussing the developments and challenges taking place as the company moves ahead with liquidating non-core assets, financing operations, consolidating subsidiaries and internalizing production capabilities. Lastly, the company announced the formation of a corn oil biodiesel joint venture between GS AgriFuels and Global Ethanol. As a result of this joint venture, the companies are expected to build a 30 million gallon per year corn oil biodiesel facility at Global Ethanol’s $100 million ethanol facility in Lakota, Iowa. The facility will be initially sized for 10 million gallons of biodiesel per year but will be designed to scale up to 30 million gallons per year in coordination with the onset of production of nearby corn oil extraction systems that are installed by GS AgriFuel’s parent corporation GS Cleantech Corporation. Shares ended the week at $0.038, up $0.013.
SPECIAL SITUATION:
Infosmart Group, Inc. (OTCBB: IFSG) $0.40
One of the proven keys to a profitable business has always been “location”, meaning either a favorable manufacturing site, or a favorable selling site. Every once in a while, these two come together to create an exceptional opportunity, and if explosive growth is any measure of success, Infosmart Group, Inc. has already begun to reap the benefits.
In 2002, Infosmart was ranked the 10th largest manufacturer of write-once DVDR’s (DVDR’s). Since then, it has become a versatile provider of electronic data storage media. However, the real story is the location of the company’s manufacturing facilities. State-of-the-art plants in Hong Kong, and a recently launched facility in Brazil, give Infosmart production capability in two of the largest, and fastest growing DVDR markets in the world. Worldwide DVDR demand is expected to grow 68% by 2009, to over 10.6 billion units. That demand alone should be considered as enough to expect impressive revenue growth.
Brazil is home to roughly half of South America’s 370 million people. Currently, its home video market is growing at a rate of approximately 20% per year, yet as of last year, the country’s manufacturers accounted for only 10% of the demand. In a country of 185 million people, the other 90% represents an enormous opportunity. A further advantage is the tax benefits of various state-and country-sponsored investment incentives, which provide the company with a lower Value Added Tax (VAT) it is required to pay for products, roughly 2.3% versus 12-18% in other parts of the country, as well as the elimination of tariffs on raw materials it imports for production in Brazil, which is equal to 70-100% of the cost of imported discs. These tax reductions and eliminations will remain in effect until 2016.
Infosmart has shown the ability in the past to quickly switch production from one product to another (DVDRs to CD-Rs) to account for swings in demand. While the demand for DVDRs is expected to be the primary focus of revenue growth, the company’s expertise should bode well in the future, as the company continues its development plans for forays into the HD DVDR market, as well as the FLASH memory market, which it hopes to incorporate into its product line by 2009. The vision to be an all-rounded provider of data storage media is another factor that continue fuel the growth of the Company as a leader in this field in South American market as being the pioneer in offering new and diverisfied up-to-date generation products in its field.
As if on cue, Infosmart Group Inc. last week reported results from its third quarter ended September 30, 2007. Net sales for the third quarter were a record, and totaled $25.6 million, a 239% increase compared to $7.6 million for the three months ended September 30, 2006. Gross profit increased 134% to $4.6 million from the $2.2 million reported a year earlier, while operating income was $3.4 million, a 119% increase from $1.5 million reported in Q3 2006. Net income for the three months ended September 30, 2007 totaled $3.4 million compared to a net loss of ($3.8) million for the same period in 2006. Earnings per diluted share were $0.02 compared to a loss of ($0.03). For nine months, Infosmart Group’s revenues rose 163% to $52.9 million, with earnings of $0.05 per share, versus last year’s revenues of $20.1 million, and a per share loss of ($0.02).
With all the favorable conditions necessary to create a “perfect storm” of opportunity, Infosmart Group Inc. appears to be riding well above the waves, and should continue to sail strongly into the future.
