Flora Growth (FLGC) is a startup Canadian cannabis producer with 95% of its operations in Colombia, including a cultivation facility.
The company was incorporated on March 13, 2019. Essentially FLGC is a roll-up of low quality, cheap companies. The key asset that is supposed to grow cannabis, Cosechemos, was acquired in October 2019 for a mere $80,000.
FLGC won’t be able to export cannabis to the US or most other major countries because politicians want their own countries to produce it. As well as interstate commerce laws prohibiting it.
FLGC claims to be able to produce cannabis at $0.06/g but has not produced any yet to prove it.
We sent an investigator to see FLGC’s cannabis cultivation facility in Bucaramanga, Colombia and found that it’s in the middle of nowhere on rocky terrain, up a steep, muddy mountain. It looks impossible for commercial production and only an all-terrain vehicle could make the trip to ship the cannabis.
No taxi or an uber driver in the area wanted to take the investigator up the mountain, he could only find a driver on a motor bike to do it.
Our investigator wasn’t allowed to do a tour of FLGC’s cultivation facility, which raises questions about whether the business is real.
Our investigator took pictures and video recorded everything, including the rough trip up the mountain, and an argument with an FLGC executive when he wouldn’t let him see the facility.
Our investigator went to the office addresses that FLGC showed in their filings, but found they didn’t exist.
FLGC’s co-founder and director, Stan Bharti, has recently resigned, right before a major unlock on 8/24/21, likely to sell his shares without needing to report it.
Bharti is a Canadian financier who is heavily involved in junior mining. In his previous endeavors in junior mining Bharti got sued for extracting money from companies that he was involved in and ripping off other investors.
FLGC has done several promotional campaigns before the lockup expiry on 8/24/21, which allowed insiders to dump over 8M shares.
Luis Merchan, the CEO of FLGC, is only 39 years old. He doesn’t have any CEO experience, and before this job he worked at Macys and Target since 2007 in a wide variety of positions. He lacks the expertise to compete in the small but competitive cannabis export industry.
Insiders bought shares in FLGC at average $0.76 per share price.
Intrusion (INTZ) bought a fake award from something called Global InfoSec as a marketing tactic.
In the Q121 earnings call, INTZ said that their customers haven’t paid for their Shield cybersecurity seats yet. This contradicts what management had told an analyst in a private email, and they earlier said that 90% of the companies from the beta testing became paying customers.
None of INTZ’s Q121 revenues were from the Shield product, despite INTZ promoting it since the middle of 2020.
B. Riley, INTZ’s sole IPO underwriter, key promoter and a supposed happy customer of the Shield, reduced its price target on INTZ to $13.50 from $30 after poor Q121 earnings results and a lack of guidance.
The amount of lies and deceit from INTZ’s CEO, Jack Blount, is amazing.
All of these lies will catch up to INTZ in their upcoming shareholder lawsuits, but the SEC might get them first.
We have investigative research on GreenPower’s (GP) “maufacturing facility” which shows it is simply a warehouse that stores buses imported from China and resells them in California.
GreenPower’s import records show that the EV Star is actually a re-logoed version of Chinese manufacturer Weichai’s Eurise electric minibus.
Revenues are significantly limited: Since GreenPower isn’t Buy America Compliant, it can’t receive federal subsidies. It can only receive state subsidies in California, but not in any other states such as New York.
We have reported to the SEC GreenPower’s material misstatements regarding its fake manufacturing business and Gavin Newsom and the Calfornia Energy Commission about GreenPower’s business misrepresentation.
A better positioned competitor that’s Buy America compliant, Phoenix Motorcars, recently got acquired for only $27M, implying 90% downside for GP stock.
GreenPower’s CEO has a shady history with penny stocks and stock manipulation schemes.
BioSig (BSGM) is a struggling medical device company turned recent stock promote that acquired an antiviral drug less than 30 days ago to capitalize on the coronavirus pandemic. This caused the stock to rally 100%+ off lows.
BSGM had only discussed acquiring Vicromax on 3/12/20, after the coronavirus was in full swing, and it was likely owned by BSGM’s CEO, Ken Londoner, and Director, Dr. Jerome Zeldis.
After acquiring Vicromax, BSGM has engaged in an aggressive stock promotion campaign, not to sell any products, but to sell their stock.
Recent investors seem to not realize that in buying BSGM stock, they are mainly investing in BSGM’s flagship product, the PURE EP device, which has nothing to do with treating or protecting people from the coronavirus.
BSGM and PURE EP sales have always been zero, and will likely continue to be zero for at least the rest of the year.
BSGM is almost out of cash and will have to raise money soon, insiders have exercised their options and we believe will be selling soon.
Vicromax, also named Merimepodid (“MMPD”), is a well-known antiviral but before BSGM, it hasn’t attracted any interest for coronavirus studies. It hasn’t been used for any other viruses either, such as Zika and Ebola.
Vicromax already failed to successfully treat hepatitis C and Zika.
Vicromax has nasty side effects, and BSGM’s own published report says animal and safety studies should be done.
Management acknowledged it will change the formulation of Vicromax, which we believe suggests there is something wrong with it in its current form.
Vicromax is likely worth whatever BSGM paid for it, which isn’t disclosed and likely wasn’t much.
BSGM’s management receives excessive compensation and is “double dipping” with its NeruoClear subsidiary for additional compensation.
Synthesis Energy Systems (SES) has a failed clean energy technology called coal gasification. After years of trying to make it work, the company generates no revenues today.
SES doubled in one week ahead of its 8 for 1 reverse split on 7/22/19, now is good timing for a short.
SES potential asset sale to Australian Future Energy (AFE) is non-sensical. AFE has no developed projects and was funded by SES.
Other stocks have recently been decimated after reverse splits like Neuralstem (CUR) did a 20 for 1 reverse split on 7/18/19, the stock ran up into it, and subsequently fell 60% to new lows in five days.
T2 Biosystems’ recent Breakthrough Device designation by the FDA isn’t an acknowledgement of the device’s effectiveness or clinical value proposition, only that it diagnoses life-threatening conditions.
The T2Dx Instrument adds additional hospital expense but provides little clinical value, hence the miniscule sales numbers.
The value of the T2Bacteria test is low because it does not measure bacterial susceptibility to antibiotics and, therefore, does not change clinical practice. Other similar technologies have been flops.
In every 2018 quarter, TTOO’s unsustainable research revenue was higher than its much more important product revenue.
TTOO has $44M in debt, paying interest at an usurious 12.5% rate.
Apyx is a provider of J-Plasma technology that has failed every medical application and is now only targeted for two off-label cosmetic applications.
J-Plasma use for dermal resurfacing has nasty side effects and heals very slowly – most cosmetic surgeons we have surveyed will not touch it with a 10-foot pole.
Apyx did not reveal the results of its clinical study on J-Plasma use for dermal resurfacing – a red flag that it may have missed its endpoints.
An almost identical product to J-Plasma called Portrait PSR has been a commercial failure for dermal resurfacing. J-Plasma appears to be following the same path.
Apyx’s new CEO, Charlie Goodwin, was allegedly engaged in fraudulent sales activities at Olympus/Gyrus, which include submitting fake claims to Medicare and making illegal payments to physicians and hospitals.
Generation Next Franchise Brands Is A House Made Of Frozen Yogurt That’s About To Melt
Generation Next Franchise Brands’ (VEND) $130M market cap is based on the potential success of its sole product, a frozen yogurt vending machine called “Reis & Irvy’s” or “Froyo Robot”.
As the company has only just begun delivering Froyos, its revenues are miniscule. The company also loses a lot of money, reporting a $5M loss in quarter ended 3/31/18, a $3.8M loss in 12/31/17, and a $4M loss in 9/30/17.
We conducted in-field research on the company’s new Froyo installation in Philadelphia. In the day we were there, we witnessed it made considerably less sales than the company is claiming it does.
Upcoming catalysts: 12.8 million VEND shares sold in a private placement at $0.50 apiece on January 2nd will have a lockup expiry on July 2nd. This will double the float. We believe most of these shares will be sold. Another negative catalyst is VEND has been trying for months to get investors involved in their next private placement at $1.50 per share. This private placement will happen any day now as the company is almost broke and has a negative shareholders equity.
The Froyo is not “the future of frozen yogurt” like the company claims. It was created in 2007 and has already been tried and commercially failed. There are several YouTube videos that are 5+ years old of almost the exact same Froyo robot as VEND is marketing today. VEND acquired Reis & Irvy’s intellectual property assets from its creator, Robofusion, in December, 2016. There are also many other frozen yogurt vending machines being sold today.
VEND’s healthy snacks vending machine business has commercially failed and was discontinued by the company in 2016. We believe the Froyo is an even worse vending machine idea and will also fail commercially.
VEND management was tried and convicted of fraud in regards to statements made to customers about their last vending machine.
VEND has only just begun delivering Froyos this month, despite having reportedly booked 1,000 units aggregating $41 million in deferred revenues, dating back to 2016.
In its 10-Q for quarter ended 3/31/18, VEND reported $36.3M in customer advances and deferred revenues in its current liabilities. Even though the company received $23M in cash received on the Froyo orders, the company has instead spent that cash on operating expenses as it’s almost broke. The company reported a stockholders deficit of ($17.7M).
VEND reported unrestricted cash of only $5.3M in quarter ended 3/31/18. At a $4M+ loss per quarter, not counting cash coming in from new orders, that would put the cash balance at a little over $1M by 6/30/18.
VEND has recently spent more than normal on R&D. It spent $1.7M last quarter, compared to $435K on quarter ended 3/31/17.
In the latest 10-Q it states: “Given our current cash position, we may be forced to curtail our plans by delaying or suspending the production and purchase of frozen yogurt robots until such time that we may be able to prepay for the robots.” What that means is if they can’t raise the money to purchase the robots that their customers pre-ordered from them, then the company will either have to raise more money, or declare bankruptcy and not fulfill their obligations.
The total amount of daily and monthly expenses to maintain a Froyo are very high, and make it a bad investment at almost any type of location. Additionally, 12% of franchisee revenues go to VEND as a franchise fee. We break down the expenses per Froyo in the report. In order to break even, each Froyo will have to generate $2,840 per month. At $6 per cup of frozen yogurt, that’s 15 cups sold every day. Not a realistic number in almost any location.
The company has a list of possible locations for the Froyo however most do not have the needed foot traffic of prospective customers to make it a suitable location.
There’s no institutional ownership in VEND. Just a bunch of scattered retail investors.
VEND’s only competitor, the Frobot, is the only other frozen yogurt vending machine company, has the same number of employees as VEND, about 43, and an estimated annual revenue of only $4.5M. VEND will likely not have significantly higher revenues than that over the long term, making the stock significantly overvalued today.
Nymox drug, fexapotide, to treat enlarged prostate, is about to have its marketing application decided in Europe within a few months, and we’re betting on a rejection.
Nymox did two phase 3 trials for fexapotide in the US with a total of 1,000 patients testing throughout one year. Both trials failed to show improvement over placebo.
Years after the phase 3 trials, Nymox reported follow-up studies with positive data to those trials, but evidence shows it is unreliable data.
For Nymox’s follow-up studies, there was no independent verification party, no pre-specified endpoints, and it’s unlikely that a drug’s efficacy would take effect years later, after having no effect at one year.
Nymox switched from trying to get approval in the US to Europe, but recent events show Europe might actually be tougher to get approval.
Although we started shorting Ampio (AMPE) in the high $3s, we continue to hold our short position. We don’t believe that Ampio’s osteoarthritis drug, Ampion, will ever get approved, and the company will likely be required by the FDA to do another trial to seek approval. Their next trial will likely have the same result as their previous Ampion trial, which failed to show improvement over saline injections. If our thesis is true, the stock will go sub $2 in short order. The following are 10 reasons why we are confident in our thesis.
In Ampio’s latest trial on its osteoarthritis drug, Ampion, it wasn’t compared to a placebo, as the CEO, Michael Macaluso, stated December 14, 2017 in this conference call at time 11:52. He states: “This was not a saline controlled trial.”
Ampio’s recent JP Morgan presentation on January 8th has no information about a path to approval, nor does it say the company is confident that it will get approved.
The CEO states about the Ampion trial in this conference recording in March 2017, that out of 9 trial options CBER (Center for Biologics Evaluation and Research) gave Ampio for an FDA-approvable trial, Ampion’s trial was none of those 9 options. He stated this at time 51:00 in the recording.
Ampion’s previous larger phase 3 trial, which was randomized, saline-controlled and done under real SPA, failed. This was announced in June, 2016.
On January 2, Adam Feuerstein published an article stating that saline is just as effective a treatment as Ampion. We trust Adam F’s judgement as a top biotech analyst.
This PR from May 1, 2017, announced the Ampion trial. It uses the words “unmet medical need” in parentheses, which in itself is odd, and the drug doesn’t have fast track with the FDA.
Ampio’s CEO has a shady background, he was CEO of a previous company Isolagen that had numerous transgressions against shareholders. They got hit with a shareholder lawsuit that they settled in 2008 as shown here.
Ampio was trading below $1 between February and October, 2017. That’s an indication that biotech investors didn’t take this trial seriously.
A scientific paper from the World Journal of Orthopedics, published here, shows that drugs have an exceptionally high placebo effect in osteoarthritis trials in particular.
As shown in its latest 10-Q, Ampio issued 11M units at $0.60 apiece for $66M in gross proceeds. Each unit represented one share and one warrant at a $0.76 exercise price. Some of those warrants are now being exercised, as stated in the December 14, 2017 conference call. This dilutes the outstanding shares, and the increased trading volume will more easily push the stock price down. Ampio’s fully diluted share count is roughly 100M.
At only 19% borrow rate on Interactive Brokers, we are fine holding our AMPE short position for 2-3 weeks as we expect the traders and weak hands to churn out of the stock as it declines to below $2 per share.
Position Update: We remain short AMPE. On 3/12/18, we published a follow-up article on Seeking Alpha in regards to the CEO’s conference call on 3/7/18, where he backtracked from claims of partnership negotiations. See article here.
ClearSign Combustion’s Duplex Technology Is A Commercial Failure, The Stock’s Downtrend Will Continue
ClearSign’s green energy Duplex technology has been tested by refineries for many years but has resulted in very few adoptions. This is because oil and gas companies care about profits, not pollution control.
Evidence suggests the Duplex technology sacrifices some production in order to decrease emissions.
We interviewed the inventor of the Dupex Technology and he had some interesting insights about the company.
ClearSign’s over 100% rally from Asia and Middle East expansion news is reversing as new locations likely won’t bring new success to an already failed technology.
With the Trump administration in power, the anti-pollution technology sector is out of favor.
PolarityTE is a reverse-merger, pre-revenue, pre-clinical tissue regeneration med-tech company with a main product that’s patent-pending.
PolarityTE’s first product, SkinTE, just got registered for commercialization through a non-FDA approval route. The company is ready to sell to physicians who will contribute to SkinTE’s clinical studies.
SkinTE has generated a lot of buzz, as COOL stock has skyrocketed over 800% since the beginning of the year to a fully diluted market cap of over $400 million.
Is this technology revolutionary, with a large addressable skin wound market, or is it ineffective or in a niche market? With sales and studies underway, the answers will come soon.
The company’s September preferred stock financings have price protection on the conversion price, which is akin to death-spiral financing and adds to our skepticism.
In October 2016, Everspin (MRAM) IPOed at $8 per share and traded there until a Barron’s article in May caused a strong rally. It is now fading back to $8.
Everspin’s MRAM is too expensive to compete with DRAM, as DRAM will continue to get cheaper and better, and Moore’s Law will continue for many years to come.
Everspin has overly high analyst estimates, and management has hinted that it will miss guidance.
Small companies like Everspin do not last in the memory chip business, economies of scale are essential for profitability, and system designers are reluctant to purchase from a small, and sole, vendor.
At $5M per quarter cash burn, Everspin will need to do an equity raise sometime next year.
At an adjusted book value of $0.066, GRST has limited downside, and is a potential 10x bagger over time.
Ethema Health owns two treatment centers, runs one, rents the other, and is currently acquiring a detox center.
Ethema Health’s treatment center in Delray Beach, Florida is breakeven at only 14% capacity.
There are only two other publically traded behavioral health companies – AAC Holdings (AAC) and Acadia Healthcare (ACHC) and they have gone on a strong uptrend recently. We expect GRST to go on a similar tear.
Management has the proper steps in place to fill up its facilities with patients and demonstrate superior treatment to its competition.
While there has been talk of doing away with private prisons for years, investors of private prison operator stocks GEO Group (GEO) and Corrections Corp (CXW) haven’t taken it too seriously. That is, until August 18, 2016, which was a dark day for privately run prison companies. Corrections Corp (CXW) opened that day at $27.06, and closed at $17.57 for a 35% loss. GEO Group (GEO) opened at $32.32 and closed at $19.51 for a 40% loss. Since then, GEO has recovered a little bit, and CXW has continually slid further down.
– We have a price target on TransEnterix (TRXC) of $1.20 by the end of the year. TRXC real goal is to sell stock to uninformed retail investors. The company, insiders, and institutional shareholders are selling their shares, or filing to, on this recent pump.
– TRXC has three products: their SPIDER surgical system, a failed product which they are discontinuing, and two surgical robots: the ALF-X and the SurgiBot. Evidence shows both are impractical and have little to offer surgeons.
– The ALF-X has already been a commercial failure. It has been on the market since 2012 with the plan to take market share from Intuitive Surgical (ISRG). The ALF-X didn’t sell a single unit in 2013, 2014, or 2015. TRXC acquired the ALF-X for $25M in cash plus stock in late 2015 for the purpose to parade it in front of uninformed investors.
– The SurgiBot is an impractical surgical robot that TRXC has done enough for it to likely gain FDA 510(k) clearance. It will also likely be a commercial failure like the ALF-X and SPIDER.
– In TRXC sponsored studies of the SurgiBot, surgeons say it “has potential” but isn’t quite there yet.
– TRXC management knows its products aren’t very good, one indication of this is the lack of patents. TRXC has only one US patent for its SurgiBot.
– Management aren’t robotics experts, but their competitors are.
– Johnson & Johnson has its own surgical robot company that will compete with TRXC.
– TRXC’s CFO, Joseph Slattery, former company was Trans1 which settled with the US Department Of Justice for $6M for medicare fraud.
Horsehead Holdings (ZINC) has risen 100% over the past two weeks from a spike up in zinc prices, which has created a ripe shorting opportunity.
If zinc prices don’t rise soon, Horsehead can go bankrupt in two years. Its zinc hedge expires after 2015.
Horsehead has had perpetual problems getting its biggest plant, Mooresboro, to half capacity. Its latest update on 10/1/15 wasn’t good.
Horsehead is in dire need of cash but can’t issue new debt, because its 2017 convertible bonds currently have a yield-to-maturity of 35%, way too high. Issuing equity will also be very hard in such an unfavorable commodities sector.
We agree with Goldman Sachs that the Glencore production cuts are “not a reason to get bullish” on zinc, and zinc will give back its recent gains on the Glencore news.
– VBL Therapeutics (VBLT) put out a PR for its ovarian cancer drug, VB-111 with the word “positive” in the title. However, the drug is a complete failure and the data isn’t positive at all.
– The word “positive” in the title mislead investors and is what caused the stock to rise from a close on May 13th of $4.08 to the mid $5 range today.
– VB-111 + chemotherapy combo has a worse response rate than chemo treatments alone. Avastin +chemo for ovarian cancer showed a much better response rate than both the VB-111+chemo combo and chemo alone.
– VB-111 didn’t show any improvement of reduction in muellerian (ovarian cancer) tumors , so had a 0% objective response rate.
– VB-111 is also very toxic, causing many serious adverse events, and even causing a death in the small 14 patient trial.
– VB-111 is ineffective and toxic, and should not be used in any more trials, for any type of cancer.
– VB-111 was VBLT’s last drug, and it has nothing more in its pipeline. The company is worth its cash value or less.
In the after hours on May 13th, VBL Therapeutics (VBLT), put out a PR with the title: VBL Therapeutics To Present Positive Phase 1 /2 Data for VB-111 in Recurrent Platinum-Resistant Mullerian Cancer at ASCO Annual Meeting.
Because the word “positive” is in the title, investors thought the trial was successful and the stock rose from a close of $4.08 on May 13th, to over $7 on May 14. The stock has now settled in the $5-$6 range. But the truth is, the data is not positive, it’s very negative. VB-111 is a complete failure. The data shows that not only is the drug ineffective in fighting tumors, but is also very toxic and dangerous and shouldn’t be used in any more trials. The stock should have fallen on the data, not risen. There should be some legal ramifications for the company to put such a misleading title. The following data points and trial comparisons with other drugs show why VB-111 is a failure and should be discarded.
CA 125 Is Not The Proper Response Criteria
Here is the VB-111 ASCO data for mullerian cancer (which is primarily ovarian cancer) that VLBT released on May 13th . VLBT used the biomarker CA 125 to state that VB-111 had a 57% response rate. This alone is a red flag. CA 125 is a protein that is commonly used as a biomarker to predict what kind of response certain drugs will give. It isn’t meant to be used as the final measure of a response. For example this report states the lack of reliability of CA 125: “Three patients would have terminated treatment prematurely had CA125 had been used.”
RECIST (Response Evaluation Criteria in Solid Tumors) is the golden standard to evaluate responses. RECIST shows ORR (objective response rates), while CA 125 just shows “response rates” that aren’t objective. RECIST measures the tumor level after the patient takes the drug. The RECIST partial and complete responses (both tumor shrinkages) are what really matters in evaluating the drug’s efficacy.
Using CA 125 criteria, VB-111 had a 57% response rate, and that’s probably what people think is positive and why the stock went up. However, using RECIST, VB-111 had a shocking 0% ORR. 8 patients out of 13 had a stable disease response from the RECIST criteria but in order to get an ORR, RECIST requires some improvements in shrinking the tumor. There were no partial or complete responses using the RECIST criteria. For an example of a better result from an ovarian cancer trial, here it states the results of Clovis (CLVS) treatment of ovarian cancer that showed a RECIST ORR of 65% and 40%.
But wait, the results for VB-111 get even worse. The patients in the study weren’t only on VB-111, but also on chemotherapy: paclitaxel. It’s a combination study. Usually some patients on chemo alone should get a RECIST partial response. Yet in combination with VB-111, none of the patients even got that. Patients also usually get a longer median progression free survival (PFS) on chemotherapy alone than with the VB-111+chemo combo. Here is a study from 2003 for mullerian tumors using a doxorubicin and paclitaxel combination. There were 4 patients with a complete response and 7 with a partial response out of 38 patients for an ORR of 29%.
Avastin Is Far Superior To VB-111
Here are the results of a phase III trial evaluating Avastin (bevacizumab) plus chemotherapy for platinum-resistant recurrent ovarian cancer. It shows the results using chemotherapy alone, and an Avastin plus chemotherapy combo. The following is a chart of the results:
The above column, CT, is chemotherapy alone, and BEV+CT is the Avastin + chemo combo. The fourth line down, the median, shows the progression free survival (PFS). For CT, it shows the median PFS is 3.4 months, and BEV+CT is 6.7 months. Now, looking back at VB-111 data, the median PFS is only 2.0 months. That’s less than the median PFS of the chemotherapy alone, which is 3.4 months.
Then, the next line down in the above chart is the ORR (objective response rate). The CT alone is 12.6%, BEV+CT is 30.9%. The VB-111 + chemo ORR is 0%. Again, further data shows patients would have been better off with chemo alone instead of in combination with VB-111.
Now, let’s look at the adverse events. When measuring the severity of adverse events, there are five grades. Grades 1 and 2 aren’t so bad, but grades 3-5 are really bad. In the BEV + CT data above, it shows that 14% of the 179 patients had grade ≥ 3 adverse events and no deaths. VB-111 data had 11 grade ≥ 3 adverse events with only 14 patients – and one death! This shows that VB-111 is a very toxic and dangerous drug.
Mullerian Cancer Is Primarily Ovarian Cancer
Some people get confused with the difference between mullerian and ovarian cancer. A mullerian tumor is a malignant neoplasm found in the female genitalia. Ovarian cancer is the major type of mullerian cancer. VBLT mostly enrolled ovarian cancer patients, as shown on clinicaltrials.gov. It says “Platinum Resistant Ovarian Cancer” for the VB-111 study, exactly the same as the Avastin study shown above. On VBLT’s website, it saysthe study was on ovarian cancer. It’s an appropriate comparison to the ovarian cancer studies shown above.
After VB-111, VBL Therapeutics Has Nothing Left In The Pipeline
With the failure of VB-201 in February, the only drug that VBLT had left, aside from some preclinical experiments, was VB-111. With such lack of efficacy in fighting mullerian tumors, and the dangerous toxicity of the drug, it should also be considered a failure and the trials shouldn’t be continued as VBLT planned for thyroid cancer or glioblastoma. Without VB-111, VBLT really has nothing left and needs to start over from scratch.The company reported $34.4 million in cash and equivalents on March 31, 2015. The market cap should be around cash level or slightly less since the company needs to start from ground zero. However, the company will likely be doing more fruitless VB-111 trials and burning lots of cash, which will decimate the share price with stock dilution and future trial failures.
It’s a crazy market we’re in. Hot money has pushed InterCloud Services (ICLD), an IT and network solutions provider, from a close of $1.52 on April 30th, to over $4.00 today, for no fundamental reason whatsoever! In time, the share price will return to below $2 per share, because the company hasn’t improved to any degree to merit a higher share price.
Two PRs the company released have fueled this 150%+ rally. It started on May 1st, when ICLD announced that its backlog has reached an all-time high of over $36 million. This is not an improvement in the company’s fundamentals. It had announced on December 17th, 2014 that its backlog was over $32 million. Another $4 million in backlog is no big deal. Backlog is not the same as future revenues. Backlog is just potential revenue, and often doesn’t ever convert to revenues. Capstone Turbine (CPST) is a good example of a company that boasts large, increasing backlogs that has trouble converting into timely business deals.
To fuel the hype even more, the very next business day, on May 4th, ICLD announced the launching of its NFVGrid, a Network Functions Virtualization Orchestration Platform. It was well known in advance that this product would be launched. It was discussed at length in ICLD’s latest earnings call on March 20th. ICLD has already been selling its NFV to its customers. NFVGrid is an upgrade to its NFV, but isn’t a big development change.
Catalysts That Will Knock ICLD Shares Back To Earth
Time. In time, as the hot money cools off and leaves ICLD, it will naturally revert to its correct price of below $2 per share. Nature will take its course as trading volume returns to a few hundred thousand shares per day. This shouldn’t take longer than a week or two.
Equity raise. On April 8th, ICLD filed a $100M mixed securities shelf. Now is the time for ICLD to use this shelf and issue equity with the stock’s current high volume and monster share price rally. Don’t expect the company to wait very long and let this opportunity pass.
Earnings report. ICLD will report its Q115 earnings soon. Expect it to be lousy. For the past two quarters, the more revenues ICLD receives, the lower its gross profit becomes. ICLD has huge losses every quarter. Expect this quarter to be no different, as its CEO declined to issue any form of guidance in its Q414 earnings call on March 20th.
Why ICLD Likely Won’t Be Another VLTC
We have read often in social media people saying they are buying ICLD because they think it’s the next VLTC. VLTC rose from under $2 to $21 last month. There are a few reasons why ICLD likely won’t repeat VLTC’s performance. First, VLTC was a wild card, a misunderstood company that legendary investor Carl Icahn increased his stake in. Crazy things can happen in a stock like that. Whereas ICLD is a well known IT network company that has been pumped and dumped many times before, and doesn’t have the backing of a great investor. Second, VLTC started its rally with a market cap of only about $15M, whereas ICLD had a market cap of $50M, which is harder to make rally. Third, VLTC is a once in a year anomaly. Nobody expected it to happen, and if you expect it to happen with a stock, like people are with ICLD, then it won’t happen.
– On that news, the stock only moved about 10% from the low $6s to the high $6s.
– It’s possible that major holders didn’t value the merger very highly, otherwise, they’d have bid the stock up higher before the merger happened.
– On April 13th, BLDR announced the buyout of ProBuild, for $1.63B, and the stock has almost doubled in two days.
– Could it be that the runup is overdone on expected news, or did the market think the buyout wasn’t going to happen?
Builders FirstSource (BLDR), manufactures and supplies construction products for residential home building. On April 13th, it announced that it’s acquiring ProBuild, a building products distributor. It’s clear there will be some big synergies from the merger, but there will also be lots of negatives that come from any acquisition.
What’s interesting is that the stock didn’t move up on the merger news until it was headline news. Major holders and those “in the know” likely knew this merger was coming. On March 27th, there was an article in Reuters saying the companies were in merger talks. Granted, it was a rumor, but BLDR had already made numerous acquisitions in 2014 so there was reason to believe the rumor was true. Yet the stock never rose over $7 per share as shown below:
This might be concerning for today’s shareholders as the stock has almost doubled since the merger announcement. The vast majority of the buyers today are uninformed investors who are just buying for the “story” and headline news. These types of investors have weak hands. Whether BLDR is overvalued or not will become apparent during and after the company’s upcoming $100M equity financing, which may be priced at far below today’s price.
– Ballard Power (BLDP) sold its fuel cell manufacturing patented technology to Volkswagen for $50 million.
– Selling assets is nothing new for Ballard as it continually depletes its cash, but it sold a core asset – its automotive fuel cell technology patents.
– Ballard has never made any money for the past 20 years.
– In a couple years, for the first time Ballard will be completely shut out of the automotive industry. All Ballard will have as customers are buses, stationary power, and forklifts, which don’t provide enough revenues for Ballard to be profitable.
– Signs indicate that BLDP will report missed earnings and/or guide down in its earnings report on 2/25/15.
Ballard Power Has Been Selling Its Assets And Technology For Years
Ballard keeps selling its assets and technology patents because it needs cash to continue and it has never been able to make a profit from its normal business.
In 2007, Ballard Power sold its automotive fuel cell business to Daimler AG and Ford. Today, it gets no business from those automotive companies or any automotive companies except for Volkswagen. Once Volkswagen’s contract expires, it will also likely part ways with Ballard, which is why it purchased the fuel cell patents.
Ballard even sold its tax loss carry forward in 2011.
Why Ballard Power Will Likely Report A Lousy Quarter on February 25th
On 2/17, Ballard reported that it expects to supply 10 fuel cell modules to buses for two projects that were already awarded funding by the US Federal Transit Administration (FTA). These projects were already awarded funding and investors already expected Ballard to supply the fuel cells. There’s no reason for Ballard to announce details of this deal a week before earnings because it’s an old contract.
It’s likely the reasons why this PR was released is to soften the blow from a disappointing upcoming earnings report on 2/25/15. First, the PR says that the orders and revenues are expected in the second half of 2015. Therefore, if Ballard misses on earnings, it’s telling investors that they have revenues to look forward to later in the year.
Second, the PR was released to make investors excited and keep the share price up after the stock rallied on the Volkswagen deal news. Otherwise, why not just let investors know the details during the conference call? Ballard has confused some investors into thinking that it’s a newly awarded contract.
Today, Aeropostale (ARO) announced higher than expected earnings. But it’s not what it looks like. The following developments indicate that ARO is on its way to bankruptcy.
1. In a PR today, ARO said the forecasted earnings don’t include asset impairments. This likely includes inventory right downs. That will show up in the GAAP earnings statment.
2. Bigger decline in same store sales than expected. Aeropostale said the holiday quarter same-store sales fell 9% after a 15% decrease a year earlier. Analysts surveyed by Retail Metrics were looking for an 8.8% decline.
3. They have hired a CFO replacement, David Dick, who was the former CFO of bankrupt Delia’s, another teenage clothing retailer like ARO. This is a sign the company is getting ready for bankruptcy.
4. Once a certain style goes out of fashion, it doesn’t go back. Aeropostale will likely be the next in a line of bankrupt fashion clothing retailers.
To expand on the above points:
1. Aeropostale doesn’t predict GAAP earnings when it makes its prediction. As stated here: This earnings guidance does not include the impact of any asset impairments, real estate consulting fees, lease buyout costs, severance, other accelerated store closure costs or restructuring costs.
With those included, ARO’s earnings will be a much worse loss than the predicted loss of ($0.06)-($0.01) per diluted share.
The biggest issue is asset impairments. For example, ARO could writedown a shirt from $10 to $3, and then sell that shirt for $9 and say that they made a $6 profit, when in reality it’s a $1 loss.
2. With a bigger than expected sales decline, that’s further evidence that ARO is NOT turning things around with making its clothes more fashionable and “cool” to wear. Especially if it’s having fire sale discounts in its stores, and people are buying their clothes to wear for when they’re painting their house or hiking in the woods.
3. Can this not be a worse omen? Why would they hire a new CFO that has experience working with retailers on the brink of bankruptcy? Expect some major cost cutting and a continual downward spiral for ARO going forward until bankruptcy.
Before today (1/30/15), Global Resources (GURE), a likely Chinese fraud, was trading at around half of net cash since September, 2014. Glaucus Research has reported that GURE is a fraud, and worth 0.
Today, GURE flew as much as 140% as it announced that it found natural gas underneath its oil well, but not how much.
Investors misunderstood it to read that it found 440.4 billion cubic meters, but actually that applies to a different company nearby.
We don’t know if there is any natural gas in GURE’s well from what’s said in the PR.
It even says in the PR: “Gulf does not know,” Mr. Liu added, “if this project will be commercially viable.”
– With the differences between GURE and GENE (yesterday’s high flier), expect a large fade today for GURE.
Global Resources (GURE) is a junky Chinese microcap stock that sells specialty chemicals. It might even be worth 0 according to a Glaucus Research report. It since changed its symbol from GFRE to now GURE. Evidence is pretty strong that GURE is a Chinese fraud. Looking at the historical share prices of GURE, it has been trading below $1.50 per share since September, 2014. This is a company that has net cash of $2.20 per share, and claims to make a profit every quarter. That’s a strong indication that the company is fraudulent. Legitimate companies would get bought up, at the very least by Chinese businessmen who know the company.
GURE announced a PR today, which was for the sole purpose of pumping the stock and without substance, yet in this crazy market, the stock flew to as high as a 140% gain. The PR says there were signs of natural gas beneath its oil well. We don’t even know if there is any significant amounts of natural gas there, but GURE said that a nearby company found a large amount of natural gas. Furthermore, natural gas prices are at lows, and it’s unlikely it will be commercially viable for GURE to start a natural gas well, even if it is there. But the story is not about natural gas, or even the facts in the PR. The stock’s uptrend today is simply momentum of a microcap stock, like what happened to Genetic Technologies (GENE) yesterday, which was up over 200% at one point.
However, GURE is different from GENE, so White Diamond Research doesn’t expect this rally to last today.
The following are the differences:
– GENE’s market cap was below $8M yesterday, GURE’s market cap is above $50M, so GENE is easier to move higher with a smaller market cap.
– Natural gas isn’t a hot sector right now, and has declined huge from its highs, like oil. Whereas with GENE, which sells breast cancer testing machines, cancer is a hot sector right now.
– In GURE’s PR, the CEO himself says he doesn’t know if the project will be commercially viable, whereas GENE plans on opening more centers.
– GURE is a Chinese company so has fraud risk, whereaas GENE is based in Australia.
– Long term investors are skeptical of GURE, because since it’s like a fraud from the historical share price and Glaucus Research’s report, the stock will likely sell off again at some point once the news goes stale.
– MD Anderson (MDA) has a lockup period of four months before it can sell its $115M of ZIOP and XON stock it received for selling them the license to its CAR-T cancer therapy, Sleeping Beauty.
– MDA’s Ex-VP of Research, Leonard Zwelling, wrote about a conflict of interest arising from the deal, in which it’s against MDA’s interest to report any negative findings of Sleeping Beauty and risk ZIOP and XON falling as a result.
– MDA’s engaging in this questionable deal likely means Sleeping Beauty will turn out to be an ineffective therapy.
– XON and ZIOP will likely do an equity raise ASAP while the hype is still fresh.
“False. It (MD Anderson) didn’t pick them (ZIOP and XON) over the others, the others are already partnered. Classic $ZIOP and $XON pump.”
As explained in White Diamond Research’s previous article on Intrexon (XON), XON aggressively promoted its stock at the JPM Healthcare conference on 1/14/15. XON announced that along with its partner, cancer biotech Ziopharm (ZIOP), they purchased the license of MD Anderson’s CAR-T cancer therapy called Sleeping Beauty, for a total of $100M in stock. XON wanted to get involved with the CAR-T hype and pitch it to investors at the conference so much, that it and ZIOP paid an extra $15M worth of stock, on top of the $100M, in order to expedite the deal to get it done in time for the conference.
Since then, a new revelation has come to light. MDA’s ex-VP of Research, Leonard Zwelling, blogged about how there’s a conflict of interest with the MDA deal. MDA was paid $115M, all in stock, half in ZIOP and half in XON, and MDA can’t sell its shares until four months from now. Since the cancer therapy was purchased very cheap ($115M), it’s a longshot for the therapy to be successful. Therefore, MDA will likely not do any intensive, revealing studies in the four months before its lockup period ends, because if any negative discoveries come to light about the therapy, that will make XON and ZIOP stock go down, which MDA is now heavily invested in.
Being part of The University of Texas System, MD Anderson Cancer Center is managed under a nonprofit structure; however, for-profit agreements have caused some to question the motives of the center.
MDA wanted that $115M, which is a small sum for a cancer therapy. The fact that MDA is willing to risk tarnishing its reputation over this deal shows that Sleeping Beauty is likely not an effective therapy. If MDA was sitting on something of great value, it likely would have passed on this questionable deal with XON and ZIOP, and waited to do the deal with a bigger pharma company.
Now is the time for XON and ZIOP to strike with an equity raise. XON investors are now very exuberant after the JPM Healthcare Conference, and the lockup period for MDA is a long ways away. XON won’t be able to promote its stock as well as it did at the conference from now until MDA’s lockup period expiry. At this point, the longer XON and ZIOP wait to do an equity raise, the lower the price they’ll have to sell their stock. For these reasons, it’s in both companies best interest to do an equity raise ASAP.
– Intrexon (XON) licensed a cancer therapy from MD Andersen which cost them $50M in stock.
– Intrexon paid an extra $7.5M to get the deal done quickly so they could present it at the JPM Healthcare Conference and hype up the stock.
– Intrexon might have joined the cancer immunotherapy party too late.
– That’s too bad, because the company is almost out of cash and likely about to have a huge equity raise.
Connecting The Dots…Short Intrexon
“Cancer immunotherapy has been a rising market. We have more cards to turn over in the coming days and weeks.”
– Randal Kirk, Intrexon’s CEO at the JPM Healthcare Conference
With the selloff of cancer immunotherapy stocks today, what if Mr. Kirk is wrong and the MD Anderson deal was a mistake?
Intrexon (XON) is a biotechnology company that operates in the synthetic biology field. It designs, builds, and regulates gene programs. It’s one of those companies with supposedly a “breakthrough technology” that never quite gets there. It has collaborations with many different small cap biotechnology firms, which ends up being very costly for XON.
The Hail Mary Pass – Licensing A Cancer Therapy From MD Anderson That Nobody Has Shown Interest In
XON caused a huge short squeeze on 1/14/15 and gained 30%. This happened because it announced a collaboration agreement with MD Anderson to license its CAR-T Cell cancer therapy called Sleeping Beauty. Here is an intelligent, bearish analysis on the deal by EP Vantage biotech journalist Jacob Plieth. Jacob Plieth previously wrote an article on December 9th, comparing the different CAR-T therapies shown at ASH.
Sleeping Beauty showed the least amount of efficacy.
CAR -T is a hot market right now, and that might be the only reason why XON did the deal. It appears that this particular CAR-T therapy isn’t very good from Plieth’s analysis and what we’ve heard from other biotech analysts.
All XON had to pay was $50M worth of its stock, and its market cap shot up $900M. According to biotech expert Adam Feuerstein, the therapy is similar to that of Bellicum Pharma (BLCM). XON rose more on 1/14 than the entire market cap of BLCM. The collaboration was also with Intrexon’s partner, Ziopharm (ZIOP) which also paid $50M worth of stock in the deal. Ziopharm rose about 50% on 1/14/15. So both companies gained a combined $1.2 billion in market cap from just spending $100M on the license agreement for the drug. MD Anderson has a 120 day lockup period before it can sell the shares.
Ziopharm is a cancer biotech that has repeatedly disappointed investors and hasn’t had any success with its drug candidates yet.
MD Anderson has collaborations with many different big pharma companies. It knows what its research is worth. If it had a promising cancer therapy, it wouldn’t have sold it for only $100M in stock with a lockup period. As the above analysis mentions, MD Anderson’s Sleeping Beauty CAR-T studies have been presented for the past two years at ASH conferences. MD Anderson had plenty of time to offer to license it to its other collaborative partners. MD Anderson has cancer immunotherapy collaborations with Amgen, Pfizer, Bristol-Myers Squibb and GlaxoSmithKline. If they were interested, one of them would have licensed Sleeping Beauty before XON and ZIOP did.
In order for XON and ZIOP to announce the deal at the JPM conference on 1/14 to pump up the stock, they paid MD Anderson an extra $15M in stock to rush through the process and get the deal done by then. This filing describes it. That is over 10% the price of the therapy, just in order to pump it at the JPM conference. That alone shows the amount of hype that went into this run-up, and the little value of the cancer therapy. MD Anderson has a 120 day lockup period on these shares as well.
At their JPM presentation, Randal Kirk, XON’s CEO, made many pumpish comments. This is a $3B+ company, too big to stay pumped off of promotional comments.
Some of his comments and my analysis of them:
“Cancer immunotherapy has been a rising market. We have more cards to turn over in the coming days and weeks.”
A CEO shouldn’t be saying this. Investors should figure it out on their own.
“Sleeping Beauty “impressive” and highly complementary to Intrexon’s tech, creating a leading platform and capability in the industry.”
If Sleeping Beauty were “impressive” then MD Anderson wouldn’t have sold it for only $100M.
“The MD Anderson deal is a wonderful alignment of the stars.”
You don’t pay $100M and have a guaranteed blockbuster cancer therapy. It doesn’t work like that, but the way Mr. Kirk talks it seems like he thinks it’s a sure bet.
High Cash Burn, Increasing Short Interest
Intrexon’s (XON) back has been against the wall. On December 15, 1.4 million more XON shares were reported to have been shorted over the previous month for an 11.26% increase in short shares. Why has the amount of short shares increased so much in one month? There could be a negative catalyst up ahead, I’m not sure.
What we do know is Intrexon has been performing badly the past couple quarters. For each of the last two quarters it had about $52M in losses. It also burned through about $40M in cash each quarter. With only $122M of cash and short term investments reported on September 30, 2014, Intrexon only has one or two more quarters to go before it needs to raise money again, and might do it sooner than you think.