Small Cap Network Blog

It may have only been a technical/legal hurdle to get over, but it’s still one that bulletin board company Voyant International (VOYT) is glad to have in writing rather than just in spirit. Harris Corporation - the creators and owners of the software that will make Voyant’s aviation broadband offer work - has officially inked a licensing deal with Voyant. Prior to the contract being finalized, there was only a letter of intent between the two companies.

I had little doubt it would happen, but now that it has we can all sleep a little easier.

As for what Harris “software-defined radio technology” actually does, well, you’ve got me… the connection technology is very advanced, and not really comparable to land-based broadband (nor even comparable to wireless connectivity commonly known as wi-fi). Aviation Broadband’s offer is truly high-speed broadband, delivering a fast digital connection through the air. Of course, the big difference is that the point of connection is always moving, and each connected device still needs to be handled by a router/modem-like device that can handle the geographical movement. Maybe that’s what Harris’ software does. Or, maybe what Harris is providing is the know-how for the entire technology, from start to finish. It doesn’t really matter - it’s a done deal.

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When’s the last time you saw a bulletin board stock get featured on CNN? I’m sure it’s happened before, though I can’t remember when. More important to us though was the stock in question…. it was our very own China Energy Recovery (OTCBB: CGYV). The company was the focal point for a two-minute clip regarding potential clean energy initiatives here in the United States. Roger Ballentine, a former Clinton advisor and a current member of China Energy’s board, was representing the company.

If you missed the original airing, don’t worry - there’s a clip available here on the CNN website. A short advertisement plays first, then the fearture starts up.

There was nothing particularly new in the clip for us; the point here is how this two minutes was a very important two minutes for the stock. CNN has an audience most companies can only dream about. Tell a good story to a large, profit-hungry audience, and the result is lots of focused eyes and ears. That’s what’s behind today’s 10% pop, though I think more will trickle in over the next few days.

The best part about publicity, however, is how it garners more publicity. I wouldn’t be shocked to see China Energy featured somewhere similar in the near future, once again in a forum usually reserved for the biggest of the big companies.

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I’m not entirely sure why it’s happened, but you might want to take a look at a chart of micro cap stock Spicy Pickle (SPKL) - the thing is up 21% today on very strong volume… the best volume in weeks. I wonder who’s buying so much; it can’t be entirely chalked up to bored Thanksgiving-ers who are steering clear of the malls.

The real short-term test still seems to be the 27 cent mark. We’ve only hit a high of 25 cents today, but SPKL hit a ceiling at 27 cents during most of November. Maybe getting to 28 cents will break this small stock out of its slump.   

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I realized after I had e-mailed Thursday’s introduction to Stratos Renewables (SRNW) I didn’t actually include a suggested stop price. Sorry about that - I was trying to calculate some last minute numbers, but didn’t get that one actually typed in. Anyway, I think 70 cents would be a good stop level. That’s what will appear on the trading parameters.

One thing I want to stress again is that Stratos is really more of a long-term idea. There’s probably some value to you if you’re looking for a short-term ‘trade’ (which is who the target and stop is for), but the big ’investment’ really isn’t on yet. We want to observe what kind of progress the company makes towards production. The projected numbers are huge though, so we weren’t kidding when we said this could be a big winner for 2009 and beyond.

Anyway, stay tuned to the blog tomorrow morning. There may be some volatility we have to work through or think about early in the morning for any traders. I’ll blog anything that may need to be decided.

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Maybe you saw this morning’s letter from Voyant International’s (VOYT) CEO Dana Waldman? If you didn’t, I don’t know that you missed a whole lot - it was a brief update on some of the current projects….white space radio, RocketStream, and Aviation Broadband. There was one new item that came up though.

Remember the name ‘RocketConnect’ - I suspect we’ll be hearing it more in the near future. As near as I can tell, RocketConnect is RocketStream for consumers. RocketStream was targeting businesses and organizations with massive data transfer needs. RocketConnect is targeting end users - ordinary people at their desktops and laptops - to accelerate the speed at which they send and receive information over the web.

I couldn’t perfectly tell, but it appears as if this product is going to be piggy-backed somehow with Internet services already being provided to consumers. Maybe there’s some sort of revenue sharing arrangement being forged with ISPs. The reason I say that is simply because Waldman said to think about the potential sales volume on the same scale as cable/telco volume.

It’ll be interesting to see what it is and how it plays out.

Everything else in the letter was fairly predictable.

By the way, did everybody see Voyant’s most recent 10Q? It quietly came out Monday, and was essentially what we were looking for… a little more revenue, but nothing life-changing. They pulled in $177K. For comparison, they did $133K last quarter. So, the increases are coming. (Any increase last quarter is impressive.)

What’s been fascinating for the last two quarters now is the massive gross margins we’re seeing. Their cost of sales was $30K last quarter, and only $13.3K this quarter. That’s a gross margin of more than 90% … which is why software is such an attractive business to be in. I think margins will head lower as the other business ventures ramp up. But still, that’s impressive. RocketConnect will be the same way - once developed, it costs nothing to share it, yet it still bears revenue.

The stock is perking up today, but I don’t think the letter is the reason.

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Some of you will know exactly what the FCC’s ‘white space spectrum’ headline means; most of you will probably have no idea what it means. All of you, however, should be interested in what it means. Why? Tuesday’s decision from the FCC is a proverbial green light to cultivate a whole new means of digital information delivery, like television, radio, and Internet connectivity.

If you happen to own Voyant (VOYT) shares, this is compelling news. However, it’s equally compelling if you also happen to own Google, Motorola, Dell, or Hewlett-Packard….all of those have an interest in advancing white space technology as well.

Here’s the deal - for those of you 40 years old or older, you’ll remember there was a point in time when there was no ‘cable’ television. You got true ‘channels’, where the number of the station was also the radio frequency of the broadcast. The channel numbers ran from 2 all the way up to 51. Well, channels 2 through 20 are still reserved for broadcast, even though using air waves is almost a thing of the past. Channels 20 through 51 though, they’re no longer used by anybody….but the FCC still regulates them.

Since radio frequency ‘real estate’ isn’t infinite, some new players recognized that UHF channels 20 through 52 are the only opportunity to establish new communication lines. The cool part is, modern technology can use these channels not just for television broadcasts, but for any digital message. THIS INCLUDES INTERNET, RADIO, SOME TELEPHONY, and of course, DIGITAL TV.

See the reason for the interest? This is a whole new playground that virtually anybody can enter; there won’t be conflicting or overlapping channels to limit competition.

Better still, it’s not like there are merely 32 channels up for grabs here. Digital equipment can be tuned to receive and transmit at fractional frequencies….like 20.1, 20.2, 20.3, and so on. I don’t know how many actual ‘channels’ can be set up, but I think it numbers in the thousands. In short, there’s really no limit now to what can be done, if it’s digital.

Now, I said all that to reiterate something we haven’t mentioned in a while - Voyant is jockeying to establish a major presence in the white space spectrum. They’re already building $2 million worth of white space frequency radios, but their technology could be adapted to use for WiFi purposes, or wireless communications. 

They’ve also been quietly developing Voyant Productions - the entertainment arm of the company. If you can control the delivery method, why not generate revenue by offering what’s delivered? This may eventually mean movie/television production and distribution.

Anyway, the FCC has officially opened up those white space channels for this kind of use. I thought it was a ‘done deal’ in the summer, but a few groups balked at the decision, and managed to get it delayed. The opponents were just groups that had something to lose though, like market share. The FCC is pro-competition though (usually), so this outcome was inevitable.

It’s good news for Voyant International and any VOYT shareholders. It won’t put money in the bank immediately, but this is a big victory that could open the door to literally millions of dollars.

I’ll let you know more when I know more.

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Well, as I alluded to in this morning’s newsletter, the actual announcement of the news is creating less buying inspiration for China Energy Recovery (CGYV) than we saw prior to the news. It’s not been a bad day - the stock is basically flat. However, volume is on track to be considerably lighter, and the upward momentum has obviously taken a break. So, as promised, I’ve got some direction for anybody who’s currently in a trade.

If your only goal was a short-term swing trade, and you got in on Tuesday or Wednesday, I suggest you go ahead and get out. There’s a bit of a market for you, but it just doesn’t look there’s much gas left in the tank for this trip. Take the bird in the hand and move on.

Why that stance? Like I said, volume is the key…there’s not much of it today, and there’s no bullishness either. If the news was going to spark further gains, it would have done it right out of the gate (on stronger volume). Just consider yourself lucky we’re basically where we left off on Thursday.

If you’re in a long-term position, I don’t think you need to bother doing anything besides preparing for some sort of minor pullback. There are profit-takers waiting in the wings. Though they aren’t taking action today, I still sense they’re out there. No big deal…they shouldn’t create too many problems.

If you’re still thinking about getting into a long-term trade, I don’t know that I’d bother just yet. See the previous paragraph for why. I’m not bearish per se, but I suspect we’ll see CGYV shares trade a little lower before too long, to burn off some of the froth left behind by a 76% gain in two days. A decent dip is a good entry opportunity (though it would be much easier to buy on the way up than on the way down).

As far as timing all of this is concerned, we’ll have to watch the chart one day at a time. ‘The dip’ may be Friday, or Monday, or maybe even later today. I’m also not sure how big it will need to be. The right dip is kind of like talent….you’ll know it when you see it.

However, I’ll also remind you that China Energy Recovery will be presenting itself at the Rodman & Renshaw Investment Conference on November 10th (Monday), and will be at the Westergaard Conference on November 12th (Wednesday). Both venues will introduce CGYV to some new potential high-level buyers, so don’t be shocked to see some more high-volume rallies next week…if those funds and money managers like China Energy as much as we do. That doesn’t exactly leave the ‘dip’ window open for very long, but that’s actually a good thing.

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I swear I’m not making this up. For all you who jokingly referred to the small cap company SpongeTech (SPNG) as the cartoon character SpongeBob (SpongeBob Squarepants), well, you may not have known how right you’d eventually be. As of today, SpongeTech is licensed to create a SpongeBob bath sponge. Like all of SpongeTech’s sponges, these children’s bath sponges are pre-loaded with soap…perfect for kids and easy for parents.

Yes, I promised to drop this company, and I will. I just thought this was too good to not mention. If there was ever a more appropriate product/licensing tie-in, I can’t think of it.

Frankly, I think this is one of the very first marketing venues I would have tried to tap. SpongeBob is huge; the cartoon attracts 70 million viewers every month. (And I admit it…I occasionally get roped into being one of those viewers by my two nephews. It’s not a bad show actually.) The target customer is the same for both the show and the sponge…2 to 5 year olds.

I wonder if this product line could be the one that really puts the company on the map. I can’t wait to see the product - should be pretty hilarious.

There’s also a ‘Dora the Explorer’ and a ‘Go Diego Go!’ sponge on the way, but those clearly don’t have the same brilliantly-ridiculous charm that you get when you turn a talking, cartoon sponge into a real, functional sponge.

I’ll see if I can get a picture.

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Not to keep dwelling on something we put to bed a couple of weeks ago, but you may be interested to know that small cap company SpongeTech Delivery Systems (SPNG) has raised its 2009 revenue forecast from $35 million to $40 million. The announcement was prompted by significant orders from new customers.

Concerns had been expressed that SpongeTech’s customer base was limited to two big ones, and really only three significant buyers. Adding some new ones will help stave off some of that isolation risk.

The stock seems to be responding a little, though it’s still not even challenging last week’s highs. Nothing new there. On the other hand, it’s been tough to distinguish between a stock’s organic weakness and the market’s overall bearish tide.

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I kinda’ wish I would have waited until today to officially end our coverage of micro cap stock pick SpongeTech Delivery Systems (SPNG), though I’m not entirely sure it would have mattered. CEO Michael Metter sent out what has become a fairly routine letter to shareholders. Once again, the company’s growth is mind-boggling. Yet, once again, the market doesn’t seem to care.

All the same, since we’re the ones who stirred the pot a little over a year ago by suggesting it, we’ll wind down our coverage of this micro cap stock by giving the company the next-to-last word. (We always get the final last word.)

Here are some of the highlights from the letter:

• The company is on pace to do about $11 million in sales during their fiscal Q2 (which they’re in now). They did about $5.5 in fiscal Q1, and about $4.0 million in last fiscal Q4.
• They still expect to do about $35 million for the full fiscal year.
• Earnings in Q2 will be equivalent (on a percentage basis) to prior quarters. Their net margin in Q4 was right at 30%, and about 18% in Q1. So, we’re assuming their net this time around will be $2.5 to $3.0 million.
• They’ve got a lot of new products and new venues yet to be tapped.

Our take? A year ago we would have been pleasantly stunned at any company’s ability to double revenues from one quarter to the next. However, we’ve seen big growth repeatedly from SpongeTech, and the stock didn’t budge once. The swing to a profit (a nice one at that)? Didn’t matter - the stock still didn’t budge.

The issue was two-fold, though each fold was related.

First, the market just couldn’t get past the dilution; nobody realized the dilution was more than worth it (i.e. the P/E and P/S got wildly lower).

The second issue was just the company’s lack of communication regarding said dilution. The management team just let investors find out about the dilution the hard way…by letting them stumble across it in the 10Q.

One or the other issue can be overcome. When you have to overcome both though, well, let’s just say I’m not entirely surprised the stock suffered.

Still, as we finish the final chapter on the SpongeTech story, I’ll repeat what I said a few days ago - this is one of the strangest occurrences of ‘undervalued’ that I’ve ever seen. I had faith that the market would eventually ‘get it’. And, they still might. They haven’t yet though.

As it stands right now, the forward-looking P/E is something like 2.16, and the forward-looking P/S is around 0.52. Just amazing. I have no reason to doubt they’ll get the results they’re looking for either; they’ve met or exceeded every forecast they’ve made since we’ve been covering them.

Another time and another place, SPNG may have been a monster winner. If you’re still holding it, I don’t think you’re crazy. We just have to move on (the site) to make room for some other ideas.

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I know we just recently ended our coverage of small cap company Applied DNA (APDN), but I told you I’d keep up to date on anything important. Well, this is important (at least according to some of your questions)…CEO James Hayward is putting another $500K of his own money into the war chest. That’s a pretty big cash infusion for a company like Applied DNA.

It wasn’t his first big investment in his own company. He put in $800K about a year ago.

The cash will come in handy now too. Applied DNA had been running a little lean, according to some of the more recent 10Q’s. Though they are bearing revenue - and winding down a lot of the R&D stuff - the company is still in that critical stage between ’start up’ and being ’self sustaining’. This money may well get them over the proverbial hump while they solidify a couple more big projects.

And on a side note, it’s always good to see a CEO putting his money where his mouth is. Let’s just hope this is the last time it has to happen - you can’t stay on life support indefinitely.

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Sometimes the positive details of a particular company are clear…the company will tell them to you. When the information comes from an unbiased and unprompted media source, those positive details mean so much more. So what? We’ve spent the better part of the last few months talking about the former for micro cap stock Bio-Matrix Scientific Group (BMSN). But, recent news of an Australian biotech breakthrough - heart cell generation from DNA found in fat tissue - has indirectly confirmed the need for a company like Bio-Matrix.

If the biotechnology sound familiar, it’s because Bio-Matrix has been gearing up to store massive quantities of adipose (fat) tissue for this very purpose – the possibility of creating any sort of cell for therapeutic purposes. Since all these treatments are tailor-made for a certain patient, each of these individuals has to store their healthy DNA (via fat tissue) if they want to be able to receive the cellular therapy later in life.

The underlying messages we’re getting from the Australian announcement are (1) the technology’s development is still going forward, and (2) the benefit of said technology may help treat heart problems…one of the biggest medical problems the world is constantly facing.

Bio-Matrix Solutions’ role in all of this is simply as the storage center for these millions of fat tissue samples; someone else will be developing the demand by advancing the science.

To be clear, the ability to cultivate therapeutic cells is not new – it’s the creation of heart cells that’s the breakthrough. So, Bio-Matrix won’t have to wait years for the technology to be completed before they can derive revenue. In fact, they’re ready to bear revenue now (and are actually in cell-storage negotiations).

Our point was simply to reinforce that the biotechnology of adipose/fat tissue isn’t just a quirky project. It’s getting more and more attention, and the bigger that industry becomes, the more money Bio-Matrix can make.

Here’s the link to the heart cell breakthrough news story. It’s a video clip.

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Though our coverage has officially ended for micro cap stock Applied DNA Sciences (APDN), we know a lot of you are still interested, and perhaps even owners. So, we’ll keep tabs on it for a while longer before taking it off the radar. For instance, we wanted to let those of you who are shareholders know the annual stockholder’s meeting has been rescheduled to take place in December.

The Applied DNA shareholder meeting will take place on December 16th at 11:00 am. The location is the Charles Wang Center in Stony Brook, New York.

Don’t read too much into our eventual discard of Applied DNA. We liked the concept when we first found the company, and we still think there’s a market for what they do. Between their slow growth pace and an unfriendly market though, we have to move on to bigger and better things sometime.

As for what you should do with any APDN, that’s up to your time frame and expectation for the company. However, based on our observations over the last year or so, we think it should be viewed as a long-term holding, if anything.

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I’m not entirely sure why, given the market environment we’re in, but Bio-Matrix (BMSN) shares seem to be working on a recovery. They’ve popped back above their 200 day moving average line again, with some pretty good volume behind the effort. Better still, they’ve done so without the benefit of any major news… and certainly in the face of a marketwide headwind.

Maybe it’s something, or maybe it’s nothing. I just find it odd (in a good way) that this bulletin board stock pick of all the small and micro caps we’ve looked at is the one that’s perking up. I have to wonder if there’s something going on that we’ve not heard about yet. I know real revenues and another license - the big tissue bank one - are pending. However, I’m not sure the promise of either is responsible for this rebound move. I like the push, but the volume is really intriguing.

In any case, it is what it is - who said the market had to be rational, particularly when it comes to trading small cap stocks? BMSN is pushing upward. Maybe there’s a trade in there.

For your convenience, I’ve added in the Fibonacci lines. We’re slightly above the 38.2% retracement line with today’s effort.

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Yes, you read the headline right - the newest breakthrough in intimate apparel technology is embedding skin care products directly into the fabric used to make the undergarments. Sounds crazy I know, but it might just be crazy enough to work. The intimate apparel market was worth $10 billion in the U.S. alone last year, and I’m sure it was proportionally bigger when adding in overseas markets. Even carving out a tiny segment of that market could be a multi-million dollar opportunity….even with something as novel as lotion-laced underwear.

What’s it got to do with small cap stocks? One of our following - Applied DNA (APDN) - is at the heart of the breakthrough. Remember the Dermal RX line of products they were working on? The venture we all knew a little about, but nobody knew much about? I think today’s news is the culmination of much of that work.

Here’s the deal - one of the Dermal RX products is designed to lock in moisture in the covered areas of the body, which in turn will preserve the appearance and health of the contacted skin. It’s called HydroSeal, and while it offers the same benefit that a lotion might, it’s much more permanent than that. HydroSeal can be embedded into the fibers used to make intimate apparel, so each time that garment is used it provides skin care to the person wearing it.

The product is being test-marketed right now. However, I can see it catching on well enough to establish a permanent space in the industry’s product mix.

I don’t know which brand of intimate apparel is co-venturing with Applied DNA on this deal. However, I’m guessing that’s a ’secret’ to be told later. Like I said though, it’s just a guess.

Will this get the stock moving? Probably not right away. The market’s got bigger things to worry about anyway, and there’s no immediate benefit to Applied DNA’s bottom line. It’s just another revenue stream for the company to cultivate. However, that’s been the case all along…the APDN story is about quality growth over five years, not overnight growth.

On that note, I do think the concept could be marketable beyond underwear. Healthcare, sports, and who knows what other venues may eventually see value in fabric that does something else as well.

Anyway, if any of you come across what appears to be HydroSeal-laden intimate apparel, please report back. I think we’d all like to learn more about how it’s being introduced to the consumer. The test market was simply described as ‘major metropolitan areas’, if you were planning on keeping an eye out for it.

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Part of me is excited to be looking at the latest news from this small cap company …they’ve more than delivered on the promise we hoped they would. On the other hand, China Energy Recovery (CGYV) has been hijacked like every other stock by the angry bear - the good news may be falling on deaf ears. Be that as it may, if Monday’s action really is a market reversal, then the news could mean a whole lot more tomorrow than it did today. In short, China Energy is already ahead of last year’s total revenues by $3 million, yet they’ve only reported for the first three quarters of 2008.

That’s called growth - the kind of growth we expected, and the kind of growth that was the basis for our suggestion. That growth hasn’t mattered much yet, but give it time.

For the first nine months of 2008, China Energy as taken in revenues totaling $19 million. For all of last year, they took in $16 million, putting the company three months and $3 million ahead of last year’s pace. We also estimated a full-year (2008) revenue total of $26 million, so we’re expecting another $7 million or so to flow in during Q4.

Take it for what it’s worth, but know that the company is doing their part. I can’t talk a small cap stock higher (though I wish I could). This is one of those tests of faith …a great bulletin board company, but so far a fairly unenthusiastic bulletin board stock. Like I said, I fully attribute that to the environment - not the company. If Monday was a true bottom for the market though - short or long term - then the story may well start to get traction with the market.

I suggested on Thursday to put CGYV on a watchlist. This is why - I feel we’re getting close to something big here in the way of the move, so stand ready to take some action if you’re not already in a trade.

It looks like whoever was selling has finally unloaded everything he/she needed to. The selling volume has dissipated, and we’re actually starting to see some buyers trickle in. A little follow-through on Monday’s action could get the ball rolling. Stand by.

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I trust you caught this morning’s newsletter edition, which specifically talked about Bio-Matrix, China Energy Recovery, and Spicy Pickle. All three had posted some good news, and all three stocks had a chance at a breakout. My strategy was a ‘wait and see’ approach though. (If you missed those comments, you can read this morning’s update by clicking here.)

Well, I’d be kidding myself if I said I wasn’t a little surprised that Bio-Matrix (BMSN) ended up being the biggest beneficiary today. The news didn’t illustrate any kind of immediate and tangible impact, yet shares are up 71% today. Volume is a little light, but still…

I don’t know where this will go, but my curiosity has really been spurred as a result. Follow through is the key from here, so the next few days will mean quite a bit in deciding if BMSN’s trade-worthy or not.

On the other hand, the move from a high above $1.20 to a low of $0.20 clearly was an overblown devaluation. At the current price of 60 cents, the market cap is still only about $14 million. That’s roughly the kinds of dollars we were expecting for revenue in their first twelve months of operation. Maybe the news was convincing that they’d actually become operational soon. Makes a little speculative sense.

As for Spicy Pickle (SPKL), this is the one I was surprised didn’t take off. The acquisition was accretive immediately, and it will have a very real benefit to the top and bottom line. You could cry ‘dilution’, but the upside far outweighs the downside.

I think 46 cents is the line in the sand. Shares have bumped into that ceiling - or close to it - several times during the consolidation phase over the last three weeks. If it can break out of that range (40 cents to 46 cents), we may finally get some much-deserved movement. That’s why I wanted you to put it on your watchlist.

And China Energy Recovery (CGYV)? What can I say that’s not obvious? This is by far one of the best fundamental stories we’ve covered in a long time. However, somebody has been trying hard to get out of a major position.

I’m personally surprised they don’t want to hold onto it - the stock is undervalued by most anybody’s standard. But, not everybody who owns a stock (no matter how brilliant they’re supposed to be) can see the big picture. I think these sellers will be kicking themselves in about six months, even if all of us want to kick ourselves in the meantime.

With that being said, it looks like all that selling volume is starting to dry up; hopefully the big seller is out of the way. I can still see this stock taking off in a flash. Like I said earlier today though, timing is everything. I’m keeping tabs on the chart for the right time….which clearly isn’t today.

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The rumors of coal’s death have been greatly exaggerated. That applies in every sense - the commodity’s price, the underlying stocks, and even coal’s place within the global energy machine. Coal’s not going anywhere, and like oil once was, coal could actually be a brilliant long-term idea.

Admittedly, part of the reason I’m now interested enough to bring it up is our recent profile of China Energy Recovery (CGYV). By prepping our coverage of the company, I learned quite a bit about how coal is used for energy creation by prepping our coverage of the company. Along the way though, it also became clear we don’t have a lot of choice in the matter - we need coal if we’re going to meet our growing energy demands. The fact that China Energy Recovery makes using coal cleaner and cheaper is just icing on the cake.

Anyway, given that so many coal stocks were so rewarding in the early part of 2008 - and so destructive in the latter part of 2008 - I think there’s enough of a reason to start looking at the commodity and the trading opportunities it presents. (Or, maybe I’m just tired of talking about oil.)

Here’s a chart of the spot prices for Appalachian coal, which is generally the standard for the coal commodity market. There are other types of coal, but they’re of lesser quality/heat yield. Any of the charts would work, as they all tend to move in unison. The Appalachian coal price seems to be the focal point though.

What’s interesting is how the underlying stocks in the coal industry trade in tandem with coal prices, much like oil stocks do with oil prices. The cool part about coal, however, is that it’s not exactly synchronized with oil. Sometimes, it’s totally disconnected from oil.

I just wanted to officially launch our newest addition to the laboratory/research arena. I’ll be adding forecasts and additional thoughts soon, because I really think coal’s going to become the next oil in the foreseeable future. That’s not to say alternative energies won’t eventually take over, but that’s decades down the road. Coal’s going to have to fill the gap.

Any thoughts? Leave ‘em below. Let me know what’s on your mind when it comes to our newest topic.

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We were surprised by how little response we got regarding Saturday’s thoughts about SpongeTech’s (SPNG) potential privatization. Maybe it was because the market was going to hell in a handbasket. Or, maybe it was just because we had no evidence or facts to back the idea up - it was merely an idea. Either way, we finally got a response back from a reader who’s been thinking about it. Since it’s a discussion worth putting out there in the public, we will….

Sir,

Concerning Spongetech, does the management not already control the stock/company? I believe they gave themselves the majority voting power/control in the July 8K:

“the Company agreed to issue an aggregate of 4,000,000 shares of Class B Stock to Mr. Moskowitz. Such Class B Stock is entitled to 100 votes per share on all matters for each share of Class B Stock owned”

My only concerns with the stock is if the big AR will be collected from last quarter, if a bank line to fund operations can be achieved to eliminate future dilution and the seemingly constant manipulation of the stock on the market through German exchanges and within OTC market. The volume has certainly been interesting recently as the price per share has dropped yet Accumulation/Dist line has gone up.

A new concern of privatization has surfaced with me too. As a shareholder of course, I dont want the company to be taken private now. It would be stealing the company away from me as I have invested for a year, been diluted to help grow the company, but have seen no Return on Investment (as far as the stock price is concerned). The company valuation in my book, is worth at least .10 a share (even if a $50 mil market cap) if not more based on future probable growth. As you have pointed out, it is definitely undervalued here. Please do NOT give the company any ideas about buying the long term shareholders out for pennies when this stock ’should’ be 25 cents (if not more) in the not too distant future.

Looking foward to a reply from you.

Thanks for the e-mail.

Yes, management already had a controlling interest in the voting stock, one way or the other. They didn’t really need to add any more voting shares in July, so it didn’t matter at that point. Still not sure why they did, but whatever.

I hear what you’re saying about actually collecting on that nice AR (accounts receivable) line. However, they’ve had a nice, fat AR line for a couple of quarters now, and haven’t seemed to have a problem collecting yet. So, I think we’re ok there…

I agree - if they can get some cash on hand and stop selling stock to finance growth, that would be huge. That’s the story I’ve been telling for close to a year now … as the company has continued to pile on dilution. (Geez.) Maybe the end of it is near though - they now seem to have more cash than ever before. Only the next 10Q will really tell us about more dilution, or lack of it. I assume nothing until then.

As for the manipulation, the more I think about it, the more I don’t think the shorts and the naked shorts are killing this stock. I just think the stock can’t get traction. That’s more market-related than company-related. Stinks. However, I do think Metter’s wrong on that matter. We’ll see. One way or the other though, this stock should be trading higher than it is.

I also noticed how the AD line was climbing while the stock was falling. That can persist for a while, but it’s lasted too long now. If it was going to ‘get right’ based on buying volume, it should have by now.

Don’t worry - I don’t think I planted any privatization seeds with the company they weren’t already thinking about. The rumor has been batted around before; it just seems more plausible now. That’s why I brought it up.

I’m with you on this thing being undervalued. SpongeTech is one of the few companies actually getting great results right now, and it just hasn’t paid off for investors. As bad as the dilution has been, the benefit has been even better. The market doesn’t get it though. So, even though we’re ‘right’, it doesn’t matter. I don’t mind losing money when I’m wrong about a company. But when I’m right and still lose? Irritating.

The only thing I can say is if the company does try to go private, hold onto your shares for dear life. They’ll probably be able to pay a nice premium, and I suspect current owners will be able to hold out for something well above five cents. That’s still a relatively big ‘if’ though.

In the meantime, I remain cautious but optimistic. I’m not buying any more, but I think SPNG could eventually take off if the market can get over its bigger problems.

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I just got off the Voyant International (VOYT) conference call. I hope you had a chance to listen in, but if you didn’t, there’s a replay available. I would summarize it here, but I didn’t get a chance to take notes. So, I encourage you to listen to the call. However, for those of you who are as busy as I am, there are a few highlights I think are worth knowing if you can’t do the replay. 

RocketStream is going well, and a fourth customer group is starting to solidify. They’d been focused on direct sales, sales through embedding, and sales through bundling. However, the fourth venue now coming into play is telecommunication carriers like Korea Telecom (KT). Basically, it’s a referral resource. KT’s customers who are dissatisfied with their Internet speeds are being told to purchase RocketStream.

If it were just one telco company in support of RocketStream, I might think little of it. However, a U.S.-based telco has also asked Voyant to possibly help them speed up their broadband connection. The deal, if it went through, would mean installing Voyant’s technology on 6 million modems (for starters). The sweetest part about the deal? Recurring revenue, and I guess a lot of it.

They didn’t say who the telco was, or where the technology trials were. Interesting, though, that they were approached.

Nevertheless, Voyant still feels embedding and bundling is the big-time venue for RocketStream.

Aviation Broadband - the much-awaited passenger-jet broadband service - is still in the works. They just completed their second test flight, topping the results from the first test, and exceeding their own expectations for this test. This 2nd test showed high capacity at an even greater distance from ground.

The concerns about existing competition came up (inevitably), and here’s what Voyant had to say…

Aviation Broadband will be better than current satellite services. Satellite connections are very expensive, costing about 100 x the cost of Voyant’s cost to deliver the same amount of data. As for current ground-based versions, those can’t scale up because they still have to share bandwidth. The more users they add to current ground-based services, the slower it gets. Voyant’s ‘pipe’ is bigger (and has higher capacity).

What about AirCell (Aviation Broadband’s big competition already taking on market share)? AirCell is priming the pump, but Voyant can steal the market once cultivated.

Voyant provides 10x more bandwidth than Aircell, and AirCell can only provide service in North America. Voyant is focused beyond the United States, and said Europe may be the first Aviation Broadband market. Plus, Aircell’s limited bandwidth is shared among all the planes in the sky. [It became clear the competition they were panning earlier in the call was AirCell.] Voyant plans to transmit at 35 Mbps to each plane, no matter how many planes are in the air.

Voyant also added they used RocketStream to deliver movie content from Voyant Productions via Aviation Broadband, integrating all their technology. We hadn’t heard much about Voyant Productions (TV and movie content) until now, but their interest in the business is becoming a little more clear - it fits well with the jet/broadband technology. Voyant Productions is still in formation, but there is some clear monetization potential here.

Harris Corporation is the partner they’ve got to help with testing and implementation. They now have a formal collaboration agreement in place, which wasn’t in place when the trials began.

Oh, and the wireless Internet radio deal - the $2 million contract from this summer - is ahead of schedule. They didn’t say what ‘ahead’ meant, so I still don’t know when they’ll be booking revenue from that.

All in all I learned a little. There wasn’t much discussion about numbers, but now we have some more framework in place to hang the dollars on when that data starts to flow in. 

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