Monthly Archives: November 2007

eFoodSafety: Transdermal Citroxin Gets Under My Skin

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More news out of EFSF this am on their newest product discovery. Just to review: Last week, EFSF announced a major breakthrough with a new application for Citroxin- their mold fighting product. In a clinical environment they proved Citroxin kills the highly publicized MRSA Staph better than the antibiotics currently used to treat it.

Today, just as the market opened, EFSF disclosed it has formulated a transdermal method for getting Citroxin into the blood stream. Transdermal does not work for all medications- molecule size has a significant effect on the compounds ability to actually get into the blood stream through the skin and be effective.

There are some questions that need to be answered. What is this new product’s path is to the store shelves? Does it require some sort of regulatory approval to be marketed, and what would be required to make the claim that it can be used to either prevent or treat MRSA Staph? My guess: EFSF will disclose its plan for a path to the store shelves over the coming weeks.

I was a bit disappointed last week when the market did not respond favorably to the revelation that EFSF had a potential all natural therapy for MRSA Staph. It’s a huge health issue, and a media darling. However, it’s another arrow in EFSF’s product quiver that could end up generating millions in sales under the right set of circumstances.

I believe investors are sending a loud and clear message to EFSF’s management- time to stop talking about products- time to start selling products. I’m sure management is listening and putting its best foot forward, but the market only appears to be ready to reward results.

Here’s the chart, and there’s not much to talk about:

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As you can see, after having a rough summer in ’07, the stock has been grinding in the $.23 to $.26 range. It needs some kind of major catalyst to getting it moving back up the charts once again.

While it’s true that the company is far behind where we hoped it would be in their sales cycle, there are some positives I believe the market is overlooking. The stock has remained relatively stable in price over the last month against a backdrop of the overall market blowing its brains out- there’s one positive.

Secondly, their extensive portfolio of very exciting products suggests it is inevitable they will have some sort of big commercial win at sometime in the future- probably about when investors finally lose patience and throw in the towel (we might be there now).

Thirdly, I don’t believe the company gets much credit for their darn good financial condition against a backdrop of disappointing top line revenues. Based on early ’07 forecasts, Cinnergen, Cinnechol, and PurEffect should have both been delivering millions in revenues by now. They aren’t. Cinnechol isn’t even commercially available yet, and PurEffect is in the hands of marketing company CK41.

However, despite the less than stellar top line numbers, EFSF is generating enough sales to have the required cash in the bank, no debt, and loses have been minimized to a virtual zero. In fact, I wouldn’t be surprised to see the company turn a profit in the current quarter.

In summary, I believe EFSF is a heck of a good speculation right now. While the sales haven’t come in as expected, the risk profile has been reduced considerably by the near break even performance last quarter.

After the drubbing the markets have taken in the last month, this stock is probably poised for a rebound of some quality in the not too distant future. This is a great level for accumulation.

Comments and questions are welcome.

Nighthawk Numbers: Theme Unch’d: Lower Risk

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When looking at any investment in any class there are always two parts to the formula- risk and reward- or upside vs downside.

Folks are continually canvassing my thoughts on NIHK- most want to know when the stock will have another of its annual run ups that really excite the inner “trader” in us all.

That’s the upside. I had a chance to review NIHK’s recent 10Q filing for the September quarter, and I was struck by one of the key themes of owning NIHK- the other side of the equation- the downside. For a stock which likes to trade between $.08 and $.12, there doesn’t appear to be a lot of downside from the fundamental side. There’s always market risk, but the company is delivering growth as promised.

Revenues for the quarter came in at $360k- not a big number, but a growing number. In fact, it was NIHK’s highest quarterly top line in four years, and 59% ahead of the same quarter in ’06.

Losses were way down from previous years, and shareholder’s equity continued to show improvement as well. In short, they are getting traction with their remote disconnect products in the Utility industry.

It is also important to recognize that the recent acquisition of the set top box business, which promises to deliver millions in revenues, is not reflected in this quarter. When we see their year end audited numbers, the balance sheet will have undergone a complete transformation. The top line for Q4? it depends on whether they deliver set top box orders in December- if they do, they will have an all time record quarter.

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As you can see from the chart, $.08 has been a low risk level to accumulate NIHK over the past year. Can it drop below that level? Sure. Perhaps the stock wants to trade between $.08 and $.12 for the next six months. I don’t know for sure.

However, I do know the company is delivering on the risk side of the equation. As their numbers improve quarter after quarter, the risk side of the equation diminishes. The stock seems to have upside around big events the company has pulled off in the past that have promise for investors. They are due to pull another rabbit out of their hat in the not too distant future.

With the market getting absolutely hammered over the past month, there is more of a buyers strike than a sell off in the stock. A great time to accumulate at the right price.

Comments and questions are welcome.

Planet: No Love From the Market

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I listened to the CPNE conference call from yesterday’s quarterly results, and went through the 10Q filing. Here’s my initial impression- the stock might be a buy, but you have to be willing to buy into the idea that they will be successful with a new business model.

As I read between the lines, in short- their old subscription based business model has run its course, and their future focus will be on evolving to a whole new deal- basically, they are going to offer their internet marketing expertise to a bunch of other companies.

The board has clearly recognized there is a problem- new CEO and new CFO- Despite the fact that there was no open question and answer session again, at least we didn’t have to hear Mike Hill’s techno babble. He is no longer the spokesperson for the company.

Here’s the best news I can come up with- they made enough money to have the cash to buy another company which could give them a new direction. Here’s one big problem- a lot of that cash is tied up in the $4.8 million the banks are holding against charges and problems with the fees they are collecting. I can’t tell how much of that they will collect for sure, but if they collect it all, they have a strong balance sheet and some room to maneuver.

CPNE’s stock is trading reflective of a company headed in the wrong direction. As I disclosed on numerous occasions in this BLOG forum, I had sold every single share we owned at or above $.70, so I’m glad to be out right now.

Revenues for Q3 dropped 29% from Q3 of ’06, which is not a good sign. The company $2.7 million in non recurring charges for their “poor quality and fraudulent” sign ups over the last 2 quarters, and to unwind the deal with the printing company they bought.

No wonder they weren’t willing to speak about Q3 numbers in their mid August call- they were very poor.

Much to my disappointment, there was also no disclosure with any numbers about what they actually bought with the Iventa acquisition, so it’s hard to evaluate what’s going on there. They spoke about their new Web 2 Dashboard solution, but no information to quantify what it could mean to the company.

I suspect the worst of the damage is done now that the cat is out of the bag. There will probably be some sort of brief rebound, then the stock will go back and retest the low.

Could be an interesting speculation at this level, but you have to buy into the new management team and new direction for the company. I am not prepared to make that plunge at this time. I’d like to see some hard evidence that there is a turn around in place before committing any capital.

In my view there should have been more disclosure about the “misfortunes” of the company back in the Spring when the stock was trading so poorly. Perhaps this new management team will have more integrity.

Think about Jeff Feinberg’s fund who bought millions of insider shares at $1.90 last winter. He got his brains beat out in this one. The management is now spending his money while the company was headed down the tubes. Wouldn’t be surprised to see a law suit on that one.

If you buy into the new and evolving business model, it might be worth a punt. My capital is going to stay away for now until I have more hard facts.

Comments and questions are welcome.

Pickle Quarterly Numbers: Who Cares?

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I wasn’t aware it was happening at the same time SPKL issued yesterday’s press release, but September quarterly numbers were announced, and the market didn’t seem to care that their top line is a small number and their bottom line showed losses as predicted. The stock is up 11.5% today as I write this, continuing the rebound phase that started at the end of last week.

Here’s the short look at the top and bottom line. SPKL delivered $261k in revs in the quarter, and lost $1.3 million or $.03 per share. Sounds like an awfully small company. You have to drill a little deeper to understand the value.

Three new stores opened during the quarter, and the company booked $60k in revs from franchise fees. The remaining $200k is the 7% royalty stream the company derives from franchise stores.

Here’ what this means- the stores underlying the $200k in royalties delivered about $3 million in revenues- That’s about $12 million in annual revs. Three new stores opened during the quarter, so the company didn’t experience a full 3 months of revenue stream for those.

One other issue to understand: In Q3 of 2006 SPKL had one small company owned store in Denver. That store has since closed and is being relocated. The new version has a fantastic location, will act as a nationwide training store, and contain the bakery and commisary. That new store is slated to open in mid December. All the revenues from that store will go to the top line, and the company is currently looking at other sites for company owned stores.

In short, if all 40 stores manage to get opened by year’s end, the revenues being delivered by those stores will be between $26 million and $30 million annually. At 8%, the company books about $2 million in annual revs- not including franchise fees and the top line from their company owned store. Then, you can start looking out to ’08 when SPKL moves past the 40 store threshold, and starts moving towards 100 stores.

You will see some top line increase in Q4 of ’07, and a huge top line increase in Q1 ’08. This is very predictable due to the nature of the business. In the interim, with the stock up nicely today, I would say the market gets the value in this case.

Comments and questions are welcome.

PNWIF Breaks Out On Costco Announcement

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PNWIF is in break out mode today. After a long period of silence, the company has knocked the cover off the ball today with big news.

According to a mid day press release, PNWIF has been awarded the contract to provide the online interface for all of Costco US’s (NASDAQ: COST) online photofinishing needs.

While on the surface this represents great news, there is even a stronger underlying theme here not covered in the press release.

This new contract represents Costco’s change over from Snapfish, owned by Hewlett Packard (NYSE: HP).

Hewlett Packard acquired Snapfish several years ago to get the company into the online photofinishing business. Snapfish came over with a number of large clients.

Today’s announcement represents a Costco defection over from HP to tiny, Canadian based PNWIF, a major coup. Other major HP customers could be close behind.

Here’s today’s chart:

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As you can see, the stock has broken a downtrend line from last Spring’s $5 peak, and at some point should now go on to make a new high.

There could be more business like this for PNWIF around the corner. Also, with the stock solidly over $4, look for a jump to the NASDAQ SC from the Bulletin Board. There’s probably your next step.
If you are wondering, I wouldn’t jump in and buy the stock right now. Give it a day or two to cool off. I have been saying this could be a $10 number. Stand by.

Comments and questions are welcome.

Is It Time To Take A Bite Out of the Apple?

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Apple- to buy, or not to buy on this big sell off- that is the $billion question out in front of us right now, and I’ve been thinking about it all morning.

Here’s why AAPL has gotten crushed in the last week- it’s a consumer stock, and Wall Street has decided after being continuously wrong for the last five years about the death of the consumer, the consumer is finally dead.

My personal unscientific survey does not agree. I have gone to a couple of malls of late and canvassed a few of my friends- the only ones curtailing spending were those associated with the residential building market- they are in a full blown recession bordering on depression- it will be tough sledding for some time. The malls I’ve been to lately have been jammed.

However, Wall Street feels that with oil prices rocketing, consumers overleveraged on their homes, and savings rates low (that’s a whole other issue- in my view, US consumers do not use savings account for savings- they put money in homes, 401ks, etc to create wealth. Not figured in the US Govt’s savings stats), the US consumer, who represents 82% of GDP, is dead. Hence, APPL isn’t going to sell as many iPods, iPhones, and Macs as previously thought.

So, is this a buying opportunity in a stock that has been extremely good to OTC Journal subscribers, or an ongoing problem?

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Here’s a chart of the big fall move in the stock- if you had jumped in when I did, you participated in a big way.

As you can see, the $161 level was the .382% retracement, which should be a good level to jump in.

This is just a seat of the pants analysis, but I believe there are a lot of investors who have lost a lot of money betting against the US consumer.

I am still holding my Jan 130′s calls I paid about $12 for. I just jumped into 10 Jan 155 calls at $16.60, which is probably way to much to pay for those options. If the stock trades back up, those options will probably move about $.50 for every $1 the stock moves.

Today’s 5 point drop below the 38.2% retracement level is a little troubling, but these numbers are not exact- they are ranges. If the stock trades down to $150, I’ll probably take my loss and sell. If not, I’ll hang in there for some positive news. Techs are getting hit a bit today as money is starting to roll back into the oversold financial sector.

This will allow me to hold those options to and through the Holiday season, which I suspect will be great for AAPL.

Pretty risky with all the negative press, but the sell off is no doubt being fueled by hedge fund managers desperate to make sure their gains are logged before the stock really hurts them. Remember, these guys live month to month, and their mantra is “don’t lose money”.

I’m jumping in, realizing I’m taking a bit of risk. Comments and questions are welcome. I might add to the position if the stock starts showing signs a health.

Southland/Palladin/Bad Toys: Screaming To a Crawl

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I know there are a lot of you waiting for an update on the Palladin (formerly Bad Toys)/Southland Health Services situation. I finally had a chance to chat with CEO Larry Lunan today, and very little progress is being made.

First of all- let me clear something up- I would not touch PLHI- the stock. There is no reason to own the stock right now, as Southland as a public company is still going no where. If you own it, sell it and take the tax loss. If you don’t own it, don’t buy it. My view could change in the future.

A lot of us own shares of Southland Health Services. We got it through a share dividend from the former Bad Toys. The shares have been registered and are free trading, but there is no trading in the stock yet.

I have suggested all along this stock would never find a reasonable level until Southland Health Services got out of hock with the IRS on some back tax issues that were inherited with the acquisition of the company.

Unfortunately, I have to report there has been zero progress on relieving the tax situation. The company believes it has a lender that will finance Southland with enough capital to pay off the back taxes, but CEO Larry Lunan says he cannot come to any reasonable settlement with the IRS. Very little progress is being made.

The company has chosen to engage in one manuever- it has put one of its subsidiaries on Chapter 11 bankruptcy. This allows the subsidiary to continue to do business, but provides protection from creditors.

This subsidiary only represents 11% of Southland’s sales, but according to the CEO, 100% of the back tax problem. Perhaps this tactic will give Southland some leverage.

The company itself is doing very well. Q3 revenues should be up along with profits, and the company appears to be in little danger of becoming extinct in any way for the time being.

However, management is making no progress on getting the stock trading, which is really all we care about. It’s not what we want to hear, but it’s the truth.

It’s not over, but it’s certainly disappointing. Anything can happen from here. There is really nothing to do but wait. We’ll see if our certs become money or wall paper.

Spicy Pickle- We’re Just About There

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Thanks to the big two week sell off in the market and the extraordinary run up in the stock, SPKL is behaving pretty much as predicted. Here’s what’s happening. Those same investors who bought the stock because it was going up without really looking at the company, are the same investors who are now selling it because it is going down.

If you took my advice and made either a complete or partial sale when the stock was up in the stratosphere, you should be getting excited about buying once we hit a bottom, which is rapidly approaching.

Here’s a look at the chart:

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As you can see, the 61.8% retracement for this stock is $1.13. That should prove to be a fairly low risk entry level. That’s not to say the stay might not go a bit lower, but your downside should be pretty minimal at that level. Today, we are trying to get down through $1.20, so we are very close.

Here’s what I find very noteworthy- as the stock continues lower everyday, the volume is also dropping quite significantly. This low volume sell off is just the kind of pattern that leads to a quick turn back up when conditions right themselves.

I wouldn’t mind seeing the stock trade sideways for a couple of days, but in here it could simply turn back around in a hurry.

It’s time to start looking to be a buyer. Personally, I couldn’t be more excited. I would like every OTC Journal subscriber to own lots of this stock. The last time I suggested it was a buy, the stock was $.90. We are very close now, if not there already. Sometimes, a little patience pays off.