Companies featured in the current edition of the newsletter: ACCY, CETG, CGXP, DRGP, ETGF, GSPG, HYTM, ICLK, ITUI, PFOB, PLKH, SWYV, TAGS, VYTR.
It was the kind of week that sent investors running for cover as the markets first sold off after the House of Representatives initially rejected the bailout package on Monday and then sold off again after the Congress approved the revised plan on Friday. The Dow Jones Industrial Average lost 818 points for the week, increasing its year to date loss to 22.2%. The Nasdaq dropped 236 points, giving it a year to date loss of 26.6%. The S&P 500 fell by 114 points, bringing its year to date loss to 25.1%. The Russell 2000 exhibited the most volatility with an 85-point loss, extending its year to date loss to 19.1%.
While many compare the Crash of 1987 to events that have occurred in today’s markets, few realize that the Dow was actually up in 1987. Even in 2001, when the tech bubble burst, the Dow only declined 7.7%, which was its worst performance in 20 years, while the Nasdaq fell 20%. One would have to go back to March, 1974, when senior White House officials were indicted in the Watergate scandal to find stocks in a freefall comparable to what has occurred today. There, the Dow fell 21% in the six months after the event, but rallied to erase one-third of that decline six months later.
Investors may enter next week relieved that a $700 billion financial bailout passed Congress, but still concerned about seized-up credit markets and a worsening outlook for the economy and earnings, as reporting season officially kicks off. On Monday, the Dow plunged 777 points, its worst point drop on record, after the House of Representatives turned down the bailout, while on Tuesday, the overnight Libor rate, the rates at which banks lend money to each other, surged registering a record one-day increase, reaching 6.875% from 2.568% on Monday. While overnight lending rates eventually came back down by Wednesday, money markets have remained nearly frozen as banks remain unwilling to lend to each other amid fear that more bankruptcies might be revealed. On Friday, the latest employment report revealed the economy lost another 159,000 jobs in September. The economy has now lost 760,000 jobs this year, providing further ammunition for the bears. Still, the market is currently oversold on a technical basis and with the positive news of the bailout’s passage could be due for at lease an intermediate rally.
What should investors look for this week? The earning calendar will include results from several heavy-weights as investors start looking to corporate results for clues on the overall health of the economy. On Tuesday, Safeway (NYSE: SWY) is expected to report earnings before the bell while YUM! Brands (NYSE: YUM) and aluminum giant Alcoa (NYSE: AA) announce results after the close. On Wednesday, Monsanto (NYSE: MON), Costco (NASDAQ: COST), and Progressive (NYSE: PGR) will all report earnings before the opening. Infosys Tech (NASDAQ: INFY) and Embraer (NYSE: ERJ) are expected to announce earnings after the closing bell on Thursday. Meanwhile, General Electric (NYSE: GE) will conclude the major earnings releases for the week with its expected announcement on Friday morning before the open. Investors are likely to also follow the ongoing saga in the acquisition of Wachovia (NYSE: WB), as a judge over the weekend granted Citigroup’s (NYSE: C) request for an injunction to prevent Wells Fargo (WFC) from completing the acquisition.
The economic calendar for the week kicks off with the release of the FOMC’s minutes from its September 16th meeting at 2:00 p.m. on Tuesday, followed by Consumer Credit for August at 3:00 p.m. Wednesday morning at 10:00 a.m., August Pending Home Sales will be reported at 10:00 a.m., followed by Crude Inventories for the week at 10:35 a.m. On Thursday, Initial Jobless Claims for the week will be announced at 8:30 a.m., with Wholesale Inventories for August expected at 10:00 a.m. Import/Export Prices for September and the Trade Balance for August will all be announced on Friday morning at 8:30 a.m. Investors should also keep in mind that financial futures markets in Chicago close early on Friday in observation of Columbus Day.
The conference schedule will be relatively light for the week with Independent Petroleum Association of America hosting its 3-day Oil and Gas Investment Symposium in San Francisco starting on Monday. Also on Monday, in New York, Brean Murray, Carret & Co. will hold its Consumer One on One Conference and JMP Securities will host its two-day Healthcare Focus Conference. Both William Blair’s Small-Cap Growth Conference and Maxim Group’s Growth Stock Conference will take place in New York on Tuesday.
Healthcare services company Hythiam, Inc. (NASDAQ: HYTM)’s business could get a boost from last week’s passage of the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008, which was approved by the House. While most focused on its impact on the economy, the bill includes a provision that mandates parity coverage for addiction and mental-health care. The parity bill does not require health-insurance plans to cover addiction or mental health, but insurers will now be barred from imposing any caps or limits on behavioral healthcare service that are not applied to other health conditions. Most insurance plans do include behavioral-healthcare coverage, and advocates say that past experience shows that passage of state-level parity laws has not led to insurers dropping such coverage. The bill could trigger insurance companies to seek out mental health disease management programs such as Hythiam’s Catasys, which has the potential to reduce healthcare costs and improve treatment outcomes. Shares ended the week at $1.50, up 2 cents.
Alternative Construction Technologies, Inc. (OTCBB: ACCY), a company that engages in the research, development, and marketing of proprietary products for the construction industry, is making a technical manual for its galvanized steel ACTech Structural Insulated Panel System widely available to architects, engineers and designers for the first time. The manual is designed to answer any of the questions asked by construction professionals intent on specifying materials that address the rapidly growing demand for energy efficient design and environmentally friendly building products. The Technical Manual is designed to provide detailed information to the architects, engineers and designers seeking the methods and materials that take advantage of the trends in green consumerism and the need for disaster resilient structures in the face of increasing severe weather phenomena. The stock ended the week at $0.22, up 2 cents.
Dynamic Response Group, Inc. (OTCBB: DRGP), an innovative strategic marketing company, announced that it has expanded sales of Riddex, the leading method for pest control, into the Hispanic market, through the launch of a comprehensive marketing campaign. The company has initiated a series of television infomercials in regional markets and national television networks including Galavision and Telefutura. In addition, it is advertising the product on leading Spanish cable television networks such as CNNE, Fox Sports Espanol, Gol-TV, Mega TV, Latino America, WAPA, and SiTv. Shares ended the week unchanged at $0.01.
Element 21 Golf Company (OTCBB: ETGF), the manufacturer of advanced Scandium Alloy golf and fishing equipment, announced record results for both its fourth quarter and fiscal year ended June 30, 2008. The company demonstrated impressive improvements in both its revenue growth and expense controls. Revenue for the full year surged to over $1.8 million, an increase of 705% from fiscal 2007, while fourth quarter revenue increased to almost $900,000, an increase of 686% year over year, demonstrating strong growth momentum expected to continue in fiscal 2009 and beyond. Additionally, the fourth quarter represented ETGF’s 6th consecutive quarterly sequential increase in revenue. On the cost control front, the company was able to slash general and administrative expenses by 21% in fiscal 2008 while leveraging existing marketing relationships to capitalize on significant growth opportunities. Despite a challenging economic environment, management remains confident that the company’s ability to deliver a unique experience for the golfer and fisherman will allow ETGF to continue its rapid growth. Speaking of a unique golfing experience, just last week Vijay Singh, who has been using Element 21’s Scandium shafts on an unendorsed basis since the summer of 2007, clinched the FedEx Cup after winning the Bridgestone, Barclays and Deutsche Bank Championships. Shares closed at $0.75, up 4 cents for the week.
Vyteris, Inc. (OTCBB: VYTR), the developer and manufacturer of the first FDA-approved active patch transdermal drug delivery system and a leader in active transdermal drug delivery technology, entered into an agreement with Spencer Trask Specialty Group, to amend the Working Capital Facility and the 2006 Promissory Notes, which the company has with Spencer Trask to extend the maturity date of the debt to June 30, 2010 and to obtain Spencer Trask’s agreement to subordinate certain rights with regard to certain collateral and future advances against the Phase III milestone payment which may become due from Ferring Pharmaceuticals under its License and Development Agreement with Vyteris. The amendment was given without Vyteris providing any consideration. Shares ended the week at $0.55.
GoldSpring, Inc. (OTCBB: GSPG), a North American precious metals mining company, focused in Nevada, with extensive, contiguous property in the Comstock Lode District, announced that it has been featured in an edition of “The Economic Report,” which will air on the Fox Business Network and on CNN Headline News and Regional News Networks in October and November. The feature program revisits the history of the Comstock Lode District, one of the greatest gold and silver discoveries of its time. The show also provides insights into the rebirth of this prolific mining area through GoldSpring’s recent consolidation of the land and mineral holdings of the district. The program explores the vast mining opportunities that still exist in the Comstock and how GoldSpring is positioned to capitalize on this unique situation. “The Economic Report” will air over the next few weeks with the scheduled airtimes to be posted on the company’s website. The stock ended the week unchanged at $0.02.
interCLICK, Inc. (OTCBB: ICLK), the fastest growing advertising network in the US according to comScore, has joined the Network Advertising Initiative (NAI), a coalition of industry-leading online advertising companies. interCLICK is one of a select group of vendors that have met the NAI’ss rigorous standards for protecting consumers’ privacy interests associated with online ad targeting practices. As a member of the NAI, interCLICK has demonstrated its ability to adhere to the principles established by the NAI and will ensure that consumers can continue to easily utilize opt-out functions associated with online behavioral advertising. Separately, the company has repaid the almost $4.4 million senior secured promissory note it previously issued to Longview Marquis Master Fund. The repayment of this note increases interCLICK’s financial flexibility and should improve its ability to secure a revolving credit facility to support working capital requirements as the company enters the seasonally strongest period of its year. As a result of the significant improvements to interCLICK’s balance sheet, management believes the company is well positioned to continue to invest in its businesses to support further growth. Shares closed at $1.50, down 22 cents for the week.
ProLink Holdings (OTCBB: PLKH), a leading provider of Global Positioning Satellite golf management systems, announced that Callippe Preserve in Pleasanton, CA, has become the latest upscale course to feature its GPS system already used at many of the world’s most famous golf courses. Callippe Preserve will also participate in ProLink’s exclusive national advertising opportunity. With ProLink’s large, high-resolution color screen, Callippe Preserve’s cart-mounted units display dynamic, easy-to-read graphics including distances to the pin and hazards, pro tips, pace-of-play timer and radial arc for cart-path-only holes. Golfers at Callippe Preserve will also be able to order food and beverage items with a touch of a button on the ProLink screen. The stock ended the week at $0.33, up 2 cents.
Seaway Valley Capital Corporation (OTCBB: SWYV), a diversified holding company, announced that its wholly owned subsidiary, Sackets Harbor Brewing Company, was a participating sponsor in Endless Summer, a fundraising benefit for the Cystic Fibrosis Foundation of Tampa, FL held on September 26, 2008 at the Tampa Yacht and Country Club. The event, which was hosted by Rick and Gabrielle Patterson, annually raises thousand of dollars for cystic fibrosis research, care and education. Shares closed unchanged at less than $0.01.
Tarrant Apparel Group (NASDAQ: TAGS), a design and sourcing company for private label and private brand casual apparel, announced that it received a Nasdaq Staff Determination Letter regarding failure to maintain the $1.00 minimum bid price requirement for continued listing. The company has already requested a written hearing before a Nasdaq Listing Qualifications Panel to review the Staff’s determination. Furthermore, in anticipation of the receipt of this the delisting notice, company’s shareholders approved a reverse stock split in early September, providing the Board of Directors with the discretion to implement the reverse stock split if necessary to maintain listing on Nasdaq. The company chose not to implement the reverse stock split immediately, in light of Gerard Guez and Todd Kay’s previously disclosed intent to acquire all of the outstanding publicly held shares of TAGS’s common stock for cash in a going private transaction. The proposed going private transaction remains pending and is being reviewed by the Special Committee of the company’s Board of Directors. The stock closed at $0.61, unchanged for the week.
On the Wires: Capital City Energy Group, Inc. (OTCBB: CETG) named Daniel R. Coffee as President of the company. Mr. Coffee joined CETG in 2007 as Chief Operating Officer responsible for locating and analyzing oil & natural gas companies for acquisition, in addition to the acquisition of oil & natural gas properties for the company’s portfolio. For the past 10 years, Mr. Coffee worked at Superior Well Services LTD as Manager of Business Development and Corporate Acquisitions, Wireline Division Manager and Corporate Radiation Safety Officer. i2Telecom International, Inc. (OTCBB: ITUI) secured mezzanine financing of $500,000 from 4 accredited investors by selling 12% Notes and 5-year warrants to purchase 5 million shares of the company’s common stock at $0.08 per share. The Notes mature on the earlier of November 30, 2008 or 3 business days after the closing of a minimum of $4,000,000 in new financing. Performing Brands, Inc. (OTCBB: PFOB), announced that Steve Solomon resigned as a director of the company to pursue other business ventures. Ceragenix Pharmaceuticals Inc. (OTCBB: CGXP) amended the terms of the $5 million-worth of convertible debentures sold in December 2006 to adjust the maturity date to December 31, 2011; adjust the conversion price and the exercise price of the accompanying warrants to $.80; and to increase the interest rate of the 2006 Debentures to 12% per year.
