Clean Diesel Technologies (CDTI): Heading To The Junkyard

by Sonya Colberg, Senior Editor - 4/25/2017 6:45:39 AM

As Clean Diesel Technologies (CDTI) attempts to leave a terrible earnings report behind, a series of slippery mudholes stretch out in the road ahead.

The Oxnard, California company focuses on emission control products for light trucks and cars.   

But TheStreetSweeper expects the stock to fall face down in one or more of the following five mud puddles:

*1. Burning Cash: Raise Ahead

The company is burning cash at the rate of about $3.5 million per quarter.

Cash coffers, at the end of last year, contained just $7.8 million.

At this point, Clean Diesel is practically running on fumes. It should have barely enough cash to operate another quarter.

The snapshot below summarizes the cash and declining revenue problem:

(Source: CNN Money)

So, Clean Diesel has to raise more money soon.

And since it historically operates in the red, it will continue to search for operating cash via debt deals or potentially dilutive stock sales well into the foreseeable future.

Average investors will find little or no relief from the company’s poor financial condition… a condition that resulted in negative earnings per share of $ -2.71 in 2015 becoming even worse at $-3.84 EPS last year.

*2. Big Losses, Going Concern: CEO Gets Raise

Indeed, the company lost $23.5 million last year and overall losses have accumulated to $223 million.

Auditors have expressed serious doubts about the company’s ability to continue as a going concern.

Yet guess what is on the stockholders’ meeting next month?

Shareholders will get a peek at the salary of the executives who are steering this wreck…

(Source: Yahoo)

The disclosure to shareholders includes the salary of CEO Matthew Beale … whose compensation has accelerated to $1.36 million.

(Source: Company SEC filing, TheStreetSweeper)

*3. Promotion: Bought-and-paid-for

Meanwhile, some incredibly kind-hearted soul is financing the creation of a pretty rosy picture of Clean Diesel. What amounts to a company advertisement was released just yesterday, April 24, in the form of a research report by RDI.

Below is part of the promoter’s disclosure:

 

“RDI receives compensation from third party organizations for advertising services provided in the form of email newsletters.

RDI and its affiliates, officers, directors and agents have been compensated for featured company coverage and therefore information should not be construed as unbiased.”

 

Solid companies worth investing in do not need … or want … such paid promotions.

This bought-and-paid-for promotion is even more concerning because an undisclosed third party paid for the report.

*4. Stock Is Up: Yet Chief Customer Says Goodbye

Driven by absolutely no news – but probably assisted by the promotion - Clean Diesel stock has shot up in the past month by about 27%.

Yet Clean Diesel is losing a major customer, Honda, as the carmaker phases out current vehicle models. Honda accounted for 96% of Clean Diesel’s coated catalyst sales in 2016.

The company depends on Honda for most revenue through this year.

Catalyst revenue will decline swiftly in the fourth quarter, the company reports … and cutbacks are already grinding earnings per share down to $-0.69, missing estimates by $-0.58 and cutting revenue to $8.55m or ~12%.

The company reports the worst is ahead:

The revenue will “end in the first quarter of 2018.”

*5. Trump Troubles: Emission Rules Relax

The environment for emissions control companies like Clean Diesel is expected to get worse.

President Donald Trump recently signed an executive order designed to reduce the previous administration’s climate change mitigation efforts. New Environmental Protection Agency chief Scott Pruitt has signaled the agency may apply the brakes to those vehicle emission regulations… creating a bumpier road ahead for suppliers like Clean Diesel.

*Conclusion

Clean Diesel is like a hopped up, over-heated jalopy that can putter only so far before grinding to a stop. Sometimes you’ve just got to leave the wreck at the side of the road and walk away.

TheStreetSweeper expects this stock to quickly drop by 30%, later driving off the cliff to $1 and change.

 

* Important Disclosure: The owners of TheStreetSweeper hold a short position in CDTI and stand to profit on any future declines in the stock price.

* Editor's Note: As a matter of policy, TheStreetSweeper prohibits members of its editorial team from taking financial positions in the companies that they cover. To contact Sonya Colberg, the author of this story, please send an email to streetsweepereditor@yahoo.com.

Overstock (OSTK): Overextended

Overstock (OSTK) shares look ready to get shot down.

Overstock set itself up for the big plunge after it doubled its stock market valuation by tossing out the words "alt-coins" and  “blockchain.”

Overstock is a Midvale, Utah retailer that sells unwanted furniture and clothing online. Now the company is overstocked with buzzwords and is presenting itself as a whole different kind of cowboy – and the market thinks it may suddenly be worth $1 billion.

Overstock is wading into a currency that the nation’s biggest banks and greatest investment minds warn is a dangerous bubble, rippling with illicit activity.

Yep, the wild, wild cryptocurrency West is jammed with scams…

* Overstock and Cryptocurrency Scams

Overstock’s crypto-fueled stock surge began in August, after the online retailer began allowing shoppers to pay with bitcoin and other digital tokens.

In September, the company announced plans for an exchange to trade tokens.

In October, the CEO announced a subsidiary, tZero, intends to hold an ICO – initial coin offering – from Nov. 15 until Dec. 31. Rather than shares of stock, digital tokens would be issued in the private placement.

One problem is that cryptocurrency is the latest weapon in the pump-and-dump and Ponzi scheme world

*Case in point:

The FBI busted the brother of a Morgan Stanley banker on Wednesday on charges he crafted a cryptocurrency scam that relieved investors of $300,000.

Federal prosecutors said businessman Maksim Zaslavskiy touted ICOs that were supposedly backed by real estate and diamonds. But it was all just a scam, according to prosecutors’ complaint. The New York Post reports Mr. Zaslavskiy smiled and winked at his brother, sitting in the back of the courtroom. He faces up to five years behind bars.

*Another case in point:

The SEC recently pounced on a gentleman who created trendy companies and allegedly misled investors into believing they would get rich quick:

*Yet another case:

OneCoin, which pitched itself as the next Bitcoin, has been denounced as a Ponzi scheme by multiple national authorities. It is believed to have moved over $350 million in allegedly scammed funds through a German processor.

*Warren Buffett: “A mirage.”

Meanwhile, none less than billionaire icon Warren Buffett thinks coin offerings will end badly.

“People get excited from big price movements, and Wall Street accommodates,” said Mr. Buffett.

He described bitcoin as a “real bubble,” adding: “You can’t value bitcoin because it’s not a value-producing asset.”

Mr. Buffet several years ago warned that cryptocurrency is “basically a mirage.”

(Source: CNBC)

 

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TransEnterix (TRXC): When The CEO Sells, We Sell

TheStreetSweeper releases a brand-new report on TransEnterix (TRXC)! The stock price has rocketed to perilous heights for this Morrisville, North Carolina company after its Senhance surgical robotic system received FDA approval. Risks that we believe will soon lead to a massive stock plunge include:

*When the CEO sells, we sell. Five days after Senhance's FDA approval, the CEO sold off a whopping 600,000 shares of company stock. 

*In four years, the company has notched two commercial failures on FDA-approved products, one FDA rejection and extreme shareholder dilution.

*The Senhance robotic system gained approval for overseas sales six years ago. But only three systems have sold in all that time.

*In contrast, Intuitive Surgical sold and shipped 149 of its da Vinci systems from last July through September; 20 more were shipped under operating leases.

*It's absurd to assume the bot that failed overseas can gain a US toehold by winning over the world's brightest medical minds while fighting giants like Intuitive and Johnson and Johnson/Google.

*The TransEnterix CEO says he doesn't expect a US sale for one year to 18 months.

*The three top officers’ compensation rose 36% last year to $4.9 million, despite overseeing the company's accumulated losses of $333 million.

*RBC’s raised price target may be bad news for TranEnterix investors.

*The stock costs around 100 times past sales. Shares are extremely pricey even under the most outrageously optimistic scenario.

*The easy part is over. Now the company has to build a business.

 

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IZEA Inc. (IZEA): 5 Top Reasons To Run From This Stock

TheStreetSweeper issues an alert for potential investors in IZEA, a momentary highflier that we believe is positioned to plunge.

In just five days the stock has rocketed a jaw-dropping 200%, merely amplifying the issues surrounding this chronic money-loser including:

1. Major Investor Sells

IZEA's desperation is palpable as a major investor reports on Tuesday that it has  dumped 450,000 shares of the company stock at $4 to $6.87 per share. The sale of nearly half-a-million shares sounds like a robust sell signal to us:

 

(Source: Company SEC filing)

AWM Investment owned 1,018,215 shares in February 2016. So the investor has trimmed holdings by a whopping 44%.

(Source: Company SEC filing)

*2. Desperate Recovery Attempt

After losing $4.1 million in six months in its business of connecting advertisers, freelance writers and other content providers with social media publishers - and learning the 10% owner was unloading IZEA  - the company needed to come up with a new, exciting story.

So 8 hours and 49 minutes before the investor filed the big stock sale, IZEA made an obvious attempt to deflect that bad news by rushing out a statement that it has landed a seven-figure contract with a big company over an unspecified period of time.

At the same time, CEO Ted Murphy announced IZEA is into artificial intelligence and augmented reality .. which just happen to be among the hottest sectors right now.

"We believe our commitment to service, bolstered by our technology investments in areas such as artificial intelligence and augmented reality, will lead to ongoing opportunity with the world’s leading brands,” Murphy stated.

So, IZEA's suddenly an AI  and AR force? Really???...

*3. AI, AR Not There

There's absolutely no mention in the company's SEC filings of AI or AR ever being part of IZEA's business.

Instead, the Florida-based company works with no patented technology in the fiercely competitive, low-barrier-to-entry field of pushing ads through Facebook, Instagram, Twitter and Youtube. The marketing message deliverery company also competes against direct mail, TV, radio, cable and print, which now incorporate social media. IZEA regulatory filings also have this to say about the company:

 

Our Mission
Our mission is to champion the world's creators by helping them monetize their content, creativity and influence.
Our Business
 
IZEA creates and operates online marketplaces that connects marketers with influential content creators. These creators produce and distribute text, videos and photos on behalf of marketers through websites, blogs and social media channels. Our technology brings the marketers and creators together, enabling their transactions to be completed at scale through the management of content workflow, creator search and targeting, bidding, analytics and payment processing.
 
The Company operates online marketplaces that facilitate transactions between marketers and influential content creators. These creators are compensated by IZEA for producing and distributing unique content such as long-form text, videos, photos, illustrations, and status updates on behalf of marketers through websites, blogs and social media channels. Marketers receive influential consumer content and engaging, shareable stories that drive awareness.
 
The most recent 10-Q states:
 
The Company's primary technology platform, the IZEA Exchange (“IZEAx”), enables transactions to be completed at scale through the management of custom content development, creator search and targeting, bidding, analytics, and payment processing. IZEAx is designed to provide a unified ecosystem that enables the creation of multiple types of content including blog posts, status updates, videos and photos through a wide variety of social channels including blogs, Twitter, Facebook, Instagram and Tumblr, among others.
 
In addition to IZEAx, the Company operates the Ebyline technology platform it acquired in January 2015. The Ebyline platform is a self-service content marketplace which was originally designed to replace editorial newsrooms located within newspapers with a “virtual newsroom” to handle their content workflow.

 

Now IZEA claims it is suddenly in the AI and AR business ... and the market rewards this silliness by running up the stock.

But IZEA sees that effort is levitating the stock and knows it needs recurring promotional activity to keep feeding the beast...

*4. Promote, Promote, Promote

So IZEA pops out another tweet, arguably inexcusable at this point as it pre-announces an announcement:

 

(Source: Twitter)

Meanwhile, professionals and novices troll the stock message boards, promoting IZEA in hopes of further fueling the stock rally and ultimately selling on the backs of unwary retail investors.

Professional promotions are probably happening now, considering IZEA's long history of paying professional promoters. These promotions began in 2011, when IZEA's net losses had nearly doubled to $-4 million that year alone:

 

All this pumping and story-switching is inexcusable - but not surprising - considering what IZEA will almost certainly pull next ...

*5. Potential Raise, Dilution Ahead

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Helios and Matheson Analytics (HMNY): TheStreetSweeper Demands Correction

TheStreetSweeper issues an investor alert regarding Helios and Matheson Analytics (HMNY).

The stock has rocketed as jaw-dropping discrepancies and other issues fly under shareholders' radar, including:

*HMNY’s CEO Ted Farnsworth served as president/CEO/CFO/sole director of Purple Beverage Company, a flat-lining stock. But HMNY's regulatory filings do not disclose this vital information to shareholders. TheStreetSweeper demands a correction.

*We’re also calling for HMNY to correct discrepancies in SEC filings – and preferably to issue a clarifying press release – regarding Mitch Lowe, CEO of MoviePass. People are buying HMNY stock partially because they think the chief executive of HMNY's acquisition co-founded Netflix. Lowe told TheStreetSweeper this notion is wrong.

*Lowe's experience as a director at SEC sanctioned Medbox needs to be disclosed in HMNY filings.

*The stock is heavily promoted via scores of tweets, including many from an apparent promoter who has been silent on Twitter for two years before suddenly tweeting about HMNY.

*Bugs have angered subscribers after the recent rollout of the new $9.95 pricing plan by MoviePass.

*MoviePass is under threat of lawsuit by the country's biggest movie theater. AMC also states the MoviePass plan is unsustainable and will lose money.

*Movie goers can find options for inexpensive movie theater experiences around every corner, from Groupon to Sam's Club.

 

 

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Helios and Matheson Analytics (HMNY): Shaking Down Shareholders

Helios and Matheson Analytics (HMNY) is an information technology company hooked on acquiring unprofitable technology, which it then mercilessly promotes.

The New York company merged with Zone Acquisition in November 2016, which ignited additional losses.

The stock has rocketed by 90% and is now TheStreetSweeper sees a riskier investment than ever:

*Financial Fumes

HMNY has been running on fumes …  $54.98 million in the red.

It’s burning $5 million in two quarters.

At the end of June, HMNY had just $1.4 million in available cash.

Here’s how dire the situation was, in management’s opinion:

“In management's opinion, there is substantial doubt about the Company’s ability to continue as a going concern through one year after the issuance of the accompanying financial statements.”

Losses are growing exponentially. Investors endured a stunning $-1.97 loss in June:

The inability to make money – and we don’t believe it will ever be profitable -  has forced HMNY to hurt shareholders, as shown below …

*Dilute and Destroy

HMNY’s apparent mission? Casual destruction of shareholders’ value.

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Adomani (ADOM): Hello? Anybody Home?

TheStreetSweeper issues an alert for Adomani (ADOM) investors.

Adomani is expanding its efforts to “enhance shareholder value” by hiring an IR firm that doesn’t return phone calls.

The world’s most overvalued company hustled out a press release early Friday morning, Sept. 1, announcing it has retained Hayden IR to “increase awareness.”

Eager to shine light on Adomani, TheStreetSweeper called Hayden for an interview. IR expert James Carbonara answered but upon learning TheStreetSweeper was calling, he took the number and said he’d call back on a better phone line. That return call didn't happen. And no one would pick up the phone, though we tried to reach investor relations again five times. Why is Adomani retaining a firm that isn’t doing its job?

We wanted to know …

Isn’t it irresponsible to attempt to get retail investors into the stock at this level?

After a ~2% rise with the IR announcement, the stock’s teetering at a market valuation exceeding $800 million.

Should Hayden really encourage people to buy high?

Wouldn’t a more responsible entry point be when the stock falls to around 75 cents per share, or around a $50 million market cap?

The Newport Beach, California company makes drivetrains to convert gasoline vehicles to electric vehicles.

But in five years, it has sold zero conversion kits and exactly two converted buses. Yes, in five years.

One sale was so unremarkable the CFO said in a telephone interview with TheStreetSweeper that he didn’t know how much money it generated.

The second life-time sale was a bus described by the CFO this way: “We got their deposit in 2015. Delivered the vehicle in ‘16 and recognized a whopping $68,000 in revenue in June of ’16."

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MGT Capital Investments (MGTI): And This Week's Business Is ????

MGT Capital Investments (MGTI) is flying high while the company tries to decide whether to focus on social casinos, fantasy sports, cybersecurity, mobile gaming or bitcoin mining. But now, TheStreetSweeper believes this indecisive company is positioned to plummet, thanks to issues that include:

*Insider Sales. The CEO just sold 100,000 shares of the company stock.

*Leadership Turmoil: Two weeks ago, the CEO displaced the ever-controversial John McAfee, who resigned as CEO and has been named the Chief Cybersecurity Visionary.

*Terrible Financials: MGT is low on cash and burns $2.15 million in two quarters. Losses in just six months hit $10 million. Substantial doubt exists that the company will be able to continue as a going concern.

*Poor Investor: Unable to finance a mining computer purchase order, MGT was forced to rely on UAHC Ventures, which reports a 12-month loss of 12 cents per share and trades OTC for ~88 cents.

*Institutional Disinterest. Big banks avoid owning this stock.

*Horrid Ratios. The stock sports unimaginably bad ratios, including Price-To-Sales of 132, Price-To-Book of 860 and investors’ negative Return-On-Equity of -1,251.

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Trembling Time at Tremor Video (TRMR)

Shares in New York-based ad tech company, Tremor Video (TRMR),  have shot up and are now at a trembling point, thanks to the following issues and more…

*Tremor stock will naturally realign itself with others in this beaten-down sector.

*Tremor is an indistinguishable non-contender in a space where even the best takeout deal is blah.

*Tremor’s platform is a far weaker performer compared with existing solutions.

*Insiders are selling their Tremor stock.

*Tremor consistently loses money and appears highly unlikely to overcome its financial issues and terrible returns to investors.

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Adomani (ADOM):Adamantly The Worst $800 Million Company Ever

Zero-revenue Adomani (ADOM) may have lured more investors Thursday with the release of the company’s take on a year-old announcement.

Below is the headline, which we consider highly deceptive:

ADOMANI Sees $2.9 Billion in Settlement Funds, from Volkswagen Environmental Mitigation Trust, As Unprecedented Product Funding Opportunity in its Goal to "Help Yellow Go Green!"(TM)

ACCESSWIREAugust 17, 2017

(Source: Adomani press release)

Investors couldn’t be blamed for concluding from this headline that Adomani might receive $2.9 billion in settlement funds.

But that would be wrong. Adomani dredged up an old Environmental Protection Agency announcement, in our view, in hopes of buffaloing investors and driving up the stock.

The VW settlement – announced in 2016 – resulted from the car maker using “defeat devices” to cheat emissions tests.

Among other actions, VW agreed at that time to pay $2.7 billion to fund emission-reduction projects across the country.

Adomani, which makes drivetrains to convert gasoline vehicles to electric vehicles (and mentioned the settlement in previous filings), is not named as receiving anything. But, in our view, this is the type of misleading information investors have been subjected to since the financially burdened Adomani went public via Regulation A in May and became the nation’s first Reg A to list on the NASDAQ in June.

The company has released three arguably promotional, unclear, suggestive press announcements in the past 10 days. This effort, along with those of professional promoters and chatroom folks who didn’t know or didn’t care about fundamental weaknesses apparently helped promote the stock to an absurd valuation of over $800 million.

TheStreetSweeper is convinced that this stock will never, ever be worth even $18 million much less $800 million.

Other issues include:

   *Adomani’s own CFO said he can’t justify the valuation.

   *Various options and warrants loom, including a stunning 21 million vested, exercisable stock options at 10 cents. A potential bloodbath may be launched once these shares are unlocked.

 *Untenable pre-IPO materials project the company could turn last year’s $11 million loss into a $7 million gain this year.

  *No sales last quarter, in fact no sales for the past two years.

    *Only two bus sales ever.

   *No sales of conversion kits.

   *No plant.

  *Virtual headquarters.

  *Just 10 employees, nine of those working out of their homes.

  *No institutional interest.

  *Net losses, no material revenue since inception in 2012.

  *Price-to-Sales ratio of 13,072

  *$31 million accumulated losses.

Check out the company’s viewpoint here, then consider the top reasons we believe this stock is headed for the junkyard:

*CFO Can’t Justify Valuation

In a July telephone interview with TheStreetSweeper, Adomani’s own chief financial officer said he couldn’t justify the stock’s valuation.

 

 

 

 

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Zion Oil & Gas (ZN): Cheap Warrants + Minimal Cash + No Revenue=Looming Dilution

 Dallas-based Zion Oil & Gas (ZN) is making a last-ditch effort to explore in the second of its two solitary leases in Israel. Shares shot up in a month by an unsustainable 200%. Yet this stock presents multiple layers of risk to investors, including:

*Engineers conducting an independent study of Zion’s final drilling prospect report low confidence in the project that is surrounded by dry holes.

*Zion states it has no economically recoverable reserves.

*Zion had to plug its previous multi-million-dollar exploration project.

* Cash is very low as Zion begins exploratory drilling.

* Production costs versus projected continuation of low oil prices further reduce Zion’s chances.

* More than 4 million fully vested stock options are exercisable at around $1.

* More potential stock dilution looms as exploration costs ramp up.

* Insiders are selling Zion stock and institutional ownership is very poor.

* Managers have departed; the CEO's management experience is very limited.

 

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Ominto (OMNT): Something's Wrong In Denmark ... And Boca

After the market closed Thursday and the stock settled at one-month highs, Ominto (OMNT) insulted investors by releasing a filing that shows its acquisition was even worse than everyone thought.

In an odd action last December, Ominto paid $10.2 million in stock, cash and debt expense for a 40% stake in Lani Pixels, a company at the brink of going under. Far removed from Ominto’s struggling Boca Raton, Florida-based online coupon and cash-back business, the Denmark/Dubai company is basically a father-and-son shop that focuses on computer generated animated films.

It turns out that Lani is an even bigger wreck than we originally believed. Ominto’s preliminary estimates of what it actually received for that outlandish price were bad. But the actual numbers are miserable:

(Sources: Company SEC filings here, here, TheStreetSweeper)

Lani’s pathetic revenue turned out to be 80% lower than the estimated numbers. Loss per share was 33% more severe.

Instead of paying 16 times estimated sales for an unrelated business, Ominto paid a jaw-dropping 77 times actual sales!

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Ominto: Revenue Depends On Recruits

Much of Ominto’s revenue depends on recruits. The unprofitable company says as much in SEC filings:

"Success of our DubLi Network business is dependent on the ability and productivity of our Business Associates.

 

Our DubLi.com revenues are generated through the efforts of our network of Business Associates (our independent marketing representatives) whose drive individual consumer traffic and business client's customers traffic to the DubLi.com shopping site. DubLi.com is the product of DubLi Network and, as such, requires the network to penetrate consumer registrations. To increase our revenues, we must increase the productivity of this network. Therefore, our success depends, in significant part, upon our ability to recruit, educate, retain and motivate our Business Associates and their ability to expand their organization network and to generate customers who shop at our shopping portal. Our operating results could be harmed if our existing and new business opportunities do not generate sufficient interest to retain and motivate existing Business Associates and attract new Business Associates; or if we fail to educate them about our products in ways that ensure their success or if we fail to properly support them in their efforts."

 **

 

“The increase was primarily due to an increase in: (i) business license fees from Business Associates as a result of a higher volume of registrations under the program; and (ii) membership subscription fees from increased sales of VIP memberships."

 

So let’s look more closely at last quarter’s revenue.

First, most revenue - $4.9 million – came in from “membership subscription fees” and “commission income.”

(Source: Company SEC filing)

Associates are required to buy promotional packages that are resold to customers … recruits also must buy “membership subscription products” to be resold to other associates. 

Ominto lumps in “commission income,” which is apparently miniscule and paid by merchants who use the company shopping website.

The second source of revenue is “business license fees.”

(Source: Company SEC filing)

Once again, associates pay these fees: “Business license fees are paid by our BAs and our Partner Program participants. The fees from BAs enable them to sell our products.”

Ominto also charges recruits a marketing and training “setup fee:”

 “Business Associates (BAs) pay an initial business license fee and Partner Program participants (excluding not-for-profit organizations) pay a setup fee for the marketing and training services provided by us which enables them to begin their sales of DubLi.com’s products and services.”

Third is “advertising and marketing programs.” ...

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Ominto: Multilevel Marketing … Or Possibly A Lot Worse

Ominto may be operating as a legal multilevel marketing business (MLM). But some characteristics resemble the classic illegal, unsustainable pyramid scheme.

The company’s 10-K acknowledges the pyramid risk:

“We are subject to the risk that, in one or more markets, our network marketing program could be found not to comply with applicable law or regulations. Regulations applicable to network marketing organizations generally are directed at preventing fraudulent or deceptive schemes, often referred to as “pyramid” or “chain sales” schemes, by ensuring that product sales ultimately are made to consumers and that advancement within an organization is based on sales of the organization’s products rather than investments in the organization or other non-retail sales-related criteria. The regulatory requirements concerning network marketing programs do not include “bright line” rules and are inherently fact-based, and thus, even in jurisdictions where we believe that our network marketing program is in full compliance with applicable laws or regulations governing network marketing systems, we are subject to the risk that these laws or regulations or the enforcement or interpretation of these laws and regulations by governmental agencies or courts can change. The failure of our network marketing program to comply with current or newly adopted regulations could negatively impact our business in a particular market or in general.

The Securities and Exchange Commission warns that some MLMs are really pyramid schemes.

SEC enforcement director Andrew Ceresney said complaints regarding pyramid schemes seem to be increasing.

Participants “profit not from the product they are selling but almost exclusively through recruiting other people to participate in the program,” said Mr. Ceresney.

While Ominto isn’t making a profit, most revenue appears closely tied to recruits, more fully described in our sidebar, “Ominto: Revenue Depends On Recruits.”

Mr. Ceresney continues:

“In these schemes, there is usually no genuine product or service. Instead, participants in these schemes frequently claim to own, or be developing, some sort of ethereal technology service, such as … Internet marketing through websites …”

“One common characteristic … is the increasing use of new technologies … The use of social media such

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Ominto (OMNT) : Seven Reasons We’re Not Buying

TheStreetSweeper issues an Ominto (OMNT) investor alert.

The Boca Raton, Florida company operates an online coupon and cash-back shopping site. The stock took flight after the struggling company uplisted to the Nasdaq in March. We believe the stock is absurdly overvalued and prepared to plunge. Issues include:

*This multi-level marketing business requires associates to pay thousands for an “accelerator program” to set up personal shopping web sites, followed by more fees to stay in the game. The focus seems to be on selling the multi-level plan to unemployed grannies, retired teachers and down-on-their-luck folks.

*Word is spreading that the multi-level program may not be a dream-maker for associates, after all.

*The plan is not a dream-maker for the company either. Losses rose a stunning 46.86% last quarter, hitting -$4.45 million. Horrible finances have already forced Ominto to close four facilities.

*Ominto spent over $10 million in stock, cash and debt relief for a stake in a Denmark father-and-son animation production company with ~$648,000 yearly revenue. So far, the company has accelerated Ominto's losses.

*Ominto is struggling against brand-name coupon companies and less interest among retailers to have another company handle their online coupons.

*Institutions are avoiding Ominto. Institutional ownership is 0.

*Law firms are lining up to investigate Ominto on behalf of stockholders.

 

 

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Cryoport (CYRX): Time to Ice This Stock

Cryoport (CYRX) is running investors down a path that’s getting colder and darker by the second.

The Irvine, California company provides refrigerated shipping containers for the healthcare industry’s vaccines and other biological items. It doesn’t make money doing that … Never has.

The company discloses: “ substantial doubt regarding the Company’s ability to continue as a going concern.”

The company’s viewpoint is here. Meanwhile, TheStreetSweeper lists the current Cryoport issues most likely to ice investment portfolios:

 

*1. Overdone Ballyhooing

When a small company isn’t busy making money – and Cryoport is losing millions – it’s tempting to brag about how things might be, someday, if only …

Cryoport, its fans and more blatant promoters are promoting what isn’t. And they seem somewhat successful in convincing others that Cryoport will benefit from any biopharma wins. Here’s a recent Twitter sampling:

*2.Taking The Bad

If Cryoport wants to try to align itself with what might someday be advances for drug developers (examples are here : Cryoport provides logistics solution and services for Kite Pharma’s lead clinical program in cancer immunotherapy, here : Cryoport to support ProMab Biotechnologies’ Car-T cell preclinical services and here : $CYRX clients $KITE and $NVS continue to push the envelope…), the company also has to take the bad.

Cryoport had been trying to convince investors that it could potentially supply refrigeration services at a commercial level for Kite Pharma.

But nobody hyped Kite’s May 8th disaster.

A patient died after taking Kite Pharma’s investigational drug. Though Kite’s KTE-C19 had been accepted for FDA review in April, the death may obviously doom both Kite and any associated hoped-for Cryoport benefits.

Cryoport has invested a lot of hope and hype in Kite and/or Novartis getting FDA approval for hematological cancer drugs. But Cryoport stock is way ahead of itself and the regulatory process.

It’s all too iffy as FDA approval is definitely not a given. Even if approval occurs, commercial manufacturing is still a very long, bumpy road. Manufacturing problems aren’t unusual and can plague even bigger companies. Portola’s anticoagulant drug solution looked like it was a shoo-in. But Portola was unpleasantly surprised last year when the FDA issued a CRL or complete response letter. The reason: manufacturing problems and the need for additional data.

Meanwhile, Juno Therapeutics serves as a chilling cautionary note. Last November, Juno voluntarily put a study on hold following two more deaths of patients in leukemia drug trials, bringing the total up to five.

Alongside tragic human consequences, Juno’s stock price plummeted and has not recovered. The former $54 stock now trades around $23.

(Source: Yahoo Finance, TheStreetSweeper)

*3. Ice Princess

Though Cryoport will likely see its own dramatic stock drop, the company may eventually cold-shoulder investors again by selling stock.

Just three months ago, desperate for operating cash, the company sold 5.5 million shares of stock ... For far less than what the stock was fetching.

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22nd Century (XXII) Announcements = Promos, Dilution, Institutional Selling

TheStreetSweeper issues a quick update for anyone caught up in 22nd Century Group’s (XXII) smoke.

The third-party promotions just keep on coming as this off-brand low-nicotine cigarette company attempts to justify its $165 million market valuation.

Now, the second-hand smoke from this Clarence, New York company (here) may be poised to kill the average investment portfolio, thanks to:

*Promotions, Promotions, Promotions

The company last Friday hyped a previously hyped meeting with the Food and Drug Administration … an announcement (here) ultimately tied to paid promotions and stock dilution.

We’ve seen these “very encouraging and productive” meetings before with other companies. This hype, in our view, amounts to nothing more than an effort to pump up the stock price. The press release concludes XXII will simply continue with its modified risk tobacco product (MRTP) application. This appears to be just self-promotion. No news.

The company's additional recent promotion came as an announcement about an XXII-sponsored survey on low-nicotine cigarettes.

That's not all, of course. More hype has been puffed out... via third-party promotions.

A hype-maker called TheStockExpert pumped out a series of late-week promotional emails, including:

“This could be your last opportunity to get in at these levels. Make sure to continue to closely watch XXII for today because we expect to see this one continue its trend of gains today.”

And this:

 

The real surprise is what some unbelievably kind-hearted third party has paid to get XXII pumped:

“TheStockExpert.com has been compensated $12,500 dollars by a third party (Sunrise Media, LLC) for an investor awareness campaign regarding XXII. TheStockExpert.com was previously compensated $20,000 dollars for an investor awareness campaign regarding XXII, which has expired.”

 

A week earlier and a month before that, hype outfits called Small Cap Traders and Road Runner Stocks reeled out more promotions:

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Hydrogenics (HYGS): Floating on Air, Ready to Drop

Hydrogenics (HYGS) stock has swooshed up by 47% in five days despite financial misses, lower revenue and more insidious issues.

This Canada-based fuel cell company is generally unprofitable, burns about $13 million yearly and experiences quiet sales of its stock by a major customer.

The company focuses on hydrogen fuel cells for stationary and mobile uses, and hydrogen-generating products.

The company’s viewpoint is here. Meanwhile, TheStreetSweeper alerts investors to six top issues ready to burst this overinflated balloon:

*1. Major Customer- Investor Sells Stock

CommScope – not only a one-time major shareholder but also a major customer – hits the HYGS sell button … repeatedly.

Since April 11, the firm has conducted more than 40 sell transactions at prices ~10% to 40% cheaper than today’s trading level.

Just since June 1, CommScope has dumped more than 170,000 shares of HYGS!

(Source: Company SEC filing, click to see entire list)

CommScope has seen fit to cut its approximate 1.6 million shares owned in 2014 (when it sold shares  for around $23 apiece) to less than 620,000 shares.

CommScope’s previous ownership exceeding 10% has plummeted dramatically:

(Source: Company SEC filing)

This may be the beginning of the end … this type of selling by a major partner – which is well-positioned to judge HYGS’ future.

*2. Analysts: No Room For Growth

The stock has recently attracted coverage of a paltry two analysts.

First, Cowen & Co., gives HYGS the rare rating of “Hold,” and a 12-month price target of $9.

Second, Roth Capital (whose coverage is generally not met with great enthusiasm) reiterated its “Buy” with an $11 price target, two bucks below the ratings given HYGS last year.

(Source: TipRanks)

According to TipRanks, Mr. Irwin has a 46% success rate and an average return of 2.2%. While Mr. Osborne has a 38% success rate and a negative average return of -17.2%.

HYGS stock is currently nearly at the analysts’ 12-month average price target of $10 … signifying over 3% downside …

So virtually no room for HYGS to grow.

*3. Analysts Consistently Overestimate HYGS

As pitiful as analysts’ expectations are, HYGS fails to live up to those predictions again and again.

The company has missed quarterly estimates over the years by 10% to 217%:

(Source: Etrade)

*4. Faulty Financials

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22nd Century (XXII): Why This Smoking Stock Will Get Crushed

If 22nd Century’s (XXII) idea of reduced-nicotine cigarettes worked as well as its paid promotions, the business might be commercially viable.

While it’s easy to blow smoke at investors, the Clarence, New York company is finding it’s a lot tougher to produce.

Investors may find the company’s viewpoint here. Meanwhile, TheStreetSweeper presents the top reasons we believe this smoking stock will get stomped out.

*Insiders Yell “Sell!”

Average stockholders have gotten what sounds like a sell signal last Friday from none less than the XXII president and CEO.

CEO Hery Sicignano exercised cashless warrants at $0.60 apiece for 300,000 shares… and sold off 98,631 shares.

Another executive may be preparing to sell, too. The VP of Research and Development exercised the right to buy 20,468 stock options at $2 apiece.

*Blowing Smoke: Excessive Promotional Activity

Professionals’ hype machines have gone into overdrive pushing XXII.

In the days leading up to the CEO’s stock selling, a couple of promotional outfits, BroadStreet Alerts and Small Cap Traders, have littered email inboxes with updated hype about the stock.

Another professional promoter, Research Driven Investing, pushed the stock June 7, getting the advertisement on Yahoo. The firm’s disclosure says in part:

RDI will not be liable to any person or entity for the quality, accuracy, completeness, reliability or timeliness of information in this advertisement

RDI adds: “WE ARE COMPENSATED AND ARE BIASED”

A similar outfit called Traders News Source also pushed the stock June 8. The firm discloses: “Our reports/releases are a commercial advertisement and are for general information purposes ONLY. We are engaged in the business of marketing and advertising companies for monetary compensation. Never invest in any stock featured on our site or emails unless you can afford to lose your entire investment.”

More promotions occurred in March and April, plus at least half-a-dozen times last year.

In fact, since March 2014, XXII has been the subject of at least 36 massive campaigns by various promoters. These “investor relations campaigns” are often paid by some incredibly kind-hearted third party.

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Cancer Genetics (CGIX): Genetically Predisposed To Drop

Despite massive losses, getting busted for Medicare fraud and red-flagged broker reports, Cancer Genetics (CGIX) is watching its stock shoot up.

 TheStreetSweeper breaks through the smoke and mirrors that obliterate the risky nature of this biological testing company based in Rutherford, New Jersey.  

Key issues facing Cancer Genetics include:

*$100 million stock shelf. The company just beat down the wall to begin selling a new raft of stock, posing a significant dilution hazard to current shareholders.

*Historical shareholder destruction. Depends on two stock sales yearly to keep the doors open. Since inception in 1999 – 18 years ago – the company has accomplished little beyond paying a $1 million Medicare fraud settlement and consuming cash.

*Multimillion-dollar losses quarterly. Stock jumps ~185% even though losses have continued, hitting $2.8 million last quarter alone.

*Product is nothing special. Giants like Labcorp, NeoGenomics offer similar tests.

*Rodman & Renshaw/Wainwright special. Sole coverage by troubled broker-dealer is a red flag; also foretold the recent stock offering. Prepare for potential watering down of current shares … and plummeting stock price.

Investors may find the company’s viewpoint here. Meanwhile, consider the top seven reasons this company appears genetically predisposed to destroy shareholder value:

*1 Massive Losses; Strange Stock Action

CGIX is one cash-chomping machine… as shown by the sharp drop in cash and equivalents over the past few years:

(Source: Bloomberg)

Operating income is precipitously dropping. The chart below shows operating income -  net profit after operational expenses - from 1Q 2015 to 1Q 2017. The tan blocks show estimated figures in the second and third quarters:

(Source: Bloomberg)

This situation puts CGIX in a tough spot. The company spends millions - about $4.45 million every three months - more than it makes.

So on March 22, the company had to run out and gather up some restructured heavy debt - $12 million-worth (costing up to 11.5% interest,  plus warrants for 443,262 shares exercisable at $2.82 per share) - just to keep the doors open.

And a funny thing happened. The stock rocketed over 74%, at that point taking the year’s full levitation over 200%, and left us wondering … why … why… why?

*2 Product Is Nothing Special, A Pain

Well, we can’t thank the company products for that stock action. Products include proprietary tests and services, plus non-proprietary tests and laboratory services.

The proprietary cancer diagnostic test is, unfortunately, very similar to tests produced by rich giants that have already scratched and clawed their way into the field … leaving little room for CGIX now or in the future.

The rivalry in this field calls forth a comment by Shark Tank’s Kevin O’Leary, aka Mr. Wonderful.

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New Age Beverages (NBEV): Investment Junk Food

New Age Beverages (NBEV) has turned into junk food for investment portfolios.

Right now, this functional beverage company is rolling. We don’t mean it’s rolling in cash. NBEV has indulged in rolling up other weak companies. We’ve written cautionary notes before about how roll-ups’ flashy announcements get everyone excited, then they briefly get to claim acquisitions’ revenue. Everything looks fine for a while.

Then bigger expenses and headaches hit … and often bigger losses … before long, the whole thing may wash into a roaring abyss. We’ll offer an example below.

This Denver roll-up has gone into a cash-starvation diet that may be resolved with a significant cash raise.

NBEV was once a little craft beer company that didn’t exactly produce the envisioned Rocky Mountain high. NBEV sold everything 1 ½ years ago for just $395,650 plus debt. So now it’s trying tripped out water – so-called functional beverages – in an attempt to compete against established name-brands produced by industry giants. Drinks include Live Kombucha, Xing Tea and Aspen Pure, which users can apparently only buy directly from the company.

NBEV’s viewpoint is here and here. Meanwhile, let’s look at why we think it’s time to stop guzzling the NBEV Kool-Aid …

*Poor Performance; Extremely Expensive

NBEV margins and cash flow to sales ratios are terrible.

Below, we compare key profitability ratios for NBEV versus peers.

(Sources: CFRA/S&P Global, TheStreetSweeper)

But the company’s peers perform far better. NBEV also loses money, while the others make money.

Nevertheless, NBEV’s price is 37% higher than competing drink companies.

(Sources: CFRA/S&P Global, TheStreetSweeper)

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Exact Sciences (EXAS): Exactly The Wrong Investment Right Now

TheStreetSweeper issues an investor warning for Exact Sciences (EXAS).

The Madison, Wisconsin company loses over $780 million as it focuses on a stool-based colon cancer test. The stock is up partially on news that United Healthcare will cover the company’s test, Cologuard, recently called “unproven” and “not medically necessary” by the insurer.

That coverage is great. Except now it’s factored into the stock price. And the pressure’s on Exact to show that its product plan makes the company worth its $4 billion valuation.

Investors may find the company’s viewpoint here or here. Meanwhile, consider the top seven reasons we believe Exact Sciences is exactly the wrong investment right now:

*Cash Burn: $13 Million Monthly

Exact Sciences is smoking cash; spending around $2.25 to $2.90 chasing each $1 in revenue. 

(Sources: Company SEC filing, TheStreetSweeper)

This quarter will be worse. The company expects operating expenses will increase about $5 million to $6 million. That boosts quarterly cash burn to around $38 million to $39.6 million… about what’s left in cash coffers.

As expenses ramp, EXAS could tap marketable securities. But why do that if the stock is trading at record highs? Selling stock now makes sense.

*Promotional Comment?

The stock rose even more Thursday following a Barron’s story stating company CEO Kevin Conroy sees a large addressable market.

The executive’s insinuation that Cologuard could get 30% to 40% of the patient population is ludicrous. And, in our view, such a comment is irresponsible considering rapidly changing technology, the field’s well-versed companies and colonoscopy’s indisputable dominance.

*Patients’ Resistance

The comment may be imprudent, too, because while volume is up, Exact’s poop-in-the-box testing faces resistance by a rather high percentage of patients.

Patient compliance – people who complete Cologuard tests that have been ordered for them - has dropped from 74% (2014) to 71%  (2015) to 67% (2016) to last quarter’s 67%.

That’s a notable 7% decline from 2014, when Cologuard became the first screening test to gain FDA approval and Medicare coverage.

Completed tests really matter as Exact’s first-mover advantage slips. Revenue comes upon delivery of a test result to the doctor who ordered it.

“Laboratory service revenue. Our laboratory service revenues are generated by performing diagnostic services using our Cologuard test, and the service is completed upon delivery of a test result to an ordering physician.”

Recent clinical guidance in the Southern Medical Journal compares Cologuard versus the quick, cheap, non-invasive test known as FIT or fecal immunochemical test. Cologuard is referred to as sDNA below…

"With sDNA, the patient must self-collect the entire stool and ship the specimen via delivery agency to the laboratory for analysis. In contrast, FIT requires only one stool sample. Patients seem resistant to sample their own stool. The requirement of collecting the entire stool and shipping the specimen for sDNA testing,” researchers wrote, "rather than taking a small sample for FIT and dropping it off at a local laboratory is concerning for many."

*Doctors’ Resistance

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Titan Machinery (TITN): Titanic Risks

Titan Machinery’s (TITN) challenges are exerting titanic forces against the North Dakota agriculture and construction equipment company.

The company’s struggles are evident in the lower sales and lower guidance reported in its pre-Memorial Day financial report.

It’s a good thing management doesn’t have to pitch Titan to the entrepreneurs on the TV show Shark Tank. We can imagine Mark Cuban squinting and scowling as he asks Titan how last quarter went…

*Another Miss

Last quarter wasn’t so hot. Neither was the previous one, Titan folks would have to say.

Though analysts consistently expect losses, quarter after quarter after quarter, in its pre-holiday report Titan actually missed estimates once again.

Analysts thought the company would lose 16 cents per share. Bad enough, of course, but not as bad as what Titan actually lost … 19 cents.

That’s nearly 22% worse than everyone thought.

In the past 6 quarters, Titan’s losses have been worse than the losses analysts anticipated.

(Source: Etrade)

 

* “The Money. You’re Not Making Any”

And since Titan lost money - US sales dropped 17% versus the prior year and overall revenue dropped 7% (with 14 more store closures expected amid restructuring cost savings that “will be less than previously expected”) – the stock can’t even be evaluated in the common method of trailing Price-to-Earnings.

So, turning to Price-to-Cash Flow, Titan is jaw-droppingly expensive:

Consistently making no money is, well, really unfortunate. So unfortunate that entrepreneur Kevin O’Leary might reiterate a blunt comment made on Shark Tank:

“The money. You’re not making any…  Do you think any investor up here wants to join you in that madness? Money’s binary.  Either you make it or you lose it.”

Titan is losing money and losing ground to the competition. While the company lost $5.9 million just last quarter … most rivals made money:

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Pulse Biosciences (PLSE): Shock Therapy Doesn’t Cut It

Pulse Biosciences (PLSE) churns out disappointing study results and accelerated losses, yet the stock has shot up over 400% as unwary investors follow a billionaire’s whims.

The Burlingame, California company is working on technology that shoots electrical pulses at cells in hopes of annihilating tumors. The materially weak company burned up $8 million last year alone as it flitted along its non-FDA-cleared, non-product, non-revenue wavelength.

Now, stockholders face shockwaves amplified by the baseless stock action.

Investors may get the company’s viewpoint here. Meanwhile, TheStreetSweeper weighs in, offering the current points that have this stock pulsing with risks for average stockholders:

*Billionaire Getting Boring?

The mundane Puse had trudged along trading in the $4 to $5 range since its May 2016 initial public offering. It became a rock star early last February, after the company announced billionaire investor Robert Duggan’s ~15% stake in the  company. He initially bought stock for $6.10 per share.

The influential executive has been adding to his stake and news outlets have reported his frequent filings since then. Below is the recent run-down:

(Source: Company SEC filing)

The stock gassed up to $30-plus in March and then cooled off to $20:

(Source: Yahoo)

Regardless, large institutional investors just do not care. Big institutions hold a miniscule 3% stake in Pulse as small investors follow along behind Mr. Duggan.

But now everybody seems to be getting a little bored.

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Universal Display (OLED): Horror Movie In The Making

Universal Display Corp. (OLED) fans focus on record stock prices and a commentator’s thoughts … as the company’s biggest commercial licensing deal fades to black and a major rival steps up.

TheStreetSweeper has seen horror movies like this before. And we don’t want to sit through another bad sequel.

So we’re sharing seven big risks associated with this company focused on a light-emission dust used in phone screens.

*1. Biggest License Deal Ends

The New Jersey-based company’s biggest commercial licensing deal … with Samsung … ends this year:

Currently, the Company's most significant commercial license agreement, which runs through the end of 2017, is with Samsung Display Co., Ltd. (SDC) and covers the manufacture and sale of specified OLED display products. Under this agreement, the Company is being paid a license fee, payable in semi-annual installments over the agreement term of 6.4 years. The installments, which are due in the second and fourth quarter of each year, increase on an annual basis over the term of the agreement.”

The deal put Universal Display on the map in 2011 and generated millions in revenue. But this year … it looks like a wrap.

*2. Patent Cliff: Barriers to Entry Drop

Patents owned by the company are at the brink of expiration.

Indeed, the company’s fundamental patent (“Transparent Contacts for Organic Light Emitters”) is scheduled to expire this December. Others hit their 20-year patent protection expiration date as early as next year, as indicated in the SEC filing here.

The patent cliff is significant because Universal Display’s barriers to entry will come crashing down. Anybody and everybody will then be able to use the technology.

*3. Major Competitor: Merck KGaA

Germany’s Merck KGaA (MRK.MI) is ready to shake up the organic light emitting diode (OLED) world.

The chief executive of Merck, the world’s largest maker of liquid crystals for flat screens, told Reuters late last month that the company will forge ahead with new technologies, “for instance OLED.”

Merck has been in OLED chemical production since 2009. Merck doesn’t like the light emitting diode margins - Universal Display makes pathetic 23% margins. But Merck’s renewed interest in light emitting diodes comes now that the company expects erosion of its dominance in liquid crystals.

Merck will naturally go after Apple, Samsung and every other biggie.

Merck is among dozens of OLED market players, including Dow Chemical and BASF. Merck plans to lead the market by 2018.

With $15-billion in sales and $900 million in cash (75 times more sales and 9 times more cash) the Merck monster can squash Universal Display like a bug.

*4. Commentator Spurs Stock

With all due respect to Jim Cramer, we disagree with him this time.

The stock price rose from about $90 on positive financials on May 4 to $116 in the days that two analysts reported on the stock, plus the CNBC commentator made positive remarks on May 5 and May 8.

 

(Source: CNBC)

(Source: CNN Money)

In the second commentary, with the stock around record highs, the TV personality said he wouldn’t “step in front of this… I would not short it.”

When the price is preposterously high, it seems rather odd - or maybe just a little tone-deaf -  to draw more people to the stock at that high point.

But just as importantly, Mr. Cramer isn’t always right.

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One Horizon Group (OHGI): Penny Stock Land On The Horizon

After a late April reverse stock split, One Horizon Group (OHGI) stock heated up and within days blasted upward by over 680%, following chatroom promotions and despite miserable financials. The stock, in our view, is now teetering at the brink of rapid decline.

Based in Limerick, Ireland (located at Limerick University where the government is now launching a probe into allegations of misconduct)   the company struggles within the intensely competitive voice over internet protocol field.

Five key factors amping the risk for stockholders include:

*1. Losing A Fortune

The company loses a fortune every year.

Last year alone, OHGI lost $1.3 million.

Only by deferring payments to vendors, the company softened its losses of $2.1 million from the year earlier.

And OHGI’s working capital deficit hit $1.9 million.

*2. No Cash; Dilution Ahead

Cash-burner OHGI rakes through $325,000 every three months.

(Source: Company SEC filings)

By the end of last December, cash coffers had fallen below the amount burned in one quarter … a miserable $260,000.

(Source: Company SEC filings)

As if that’s not bad enough, the company is indebted to related-parties to the tune of $2.3 million, due next year:

(Source: Company SEC filing)

The company will have to pay those loans as well as ongoing expenses ... meaning they will need to do something soon like selling more stock, complete with the looming potential to water down existing stock.

*3. Operating Plan: Shaky, At Best

The company expects “further losses in 2017” and “negative cash flows.”

OHGI can’t even borrow money. Its SEC filings say the company does “not have any available credit facilities.”

The financial situation is so desperate, auditors have expressed serious doubts about the company’s ability to continue as a “going concern.”

*4. Nasdaq: Delisting OHGI

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Clean Diesel Technologies (CDTI): What Goes Up On Paid Promotions, Must Come Down

TheStreetSweeper releases an update on Clean Diesel Technologies (CDTI). This Oxnard, California automotive emissions control company's stock has apparently reacted to a strange pump piece published yesterday.

The piece is particularly concerning because the promoter first says it received no compensation and at another point states that its pieces are bought-and-paid for. Federal regulators recently filed charges against firms and individuals connected with fraudulent promotion of stocks.

Below is the tweet from the paid advertiser, directing people to the advertiser's site:

(Source: Twitter)

The link to the promotional piece is here.

The promoter's report ignores substantial risks affecting CDTI, including:
 

1. CDTI is a cash-burn machine, running on empty. The burn rate is about $3.5 million per quarter. Cash sat at about $7.8 million at the end of the year. So at this point, it would have barely enough cash to operate another quarter.

2. A cash raise - perhaps stock selling or a debt tap - appears imminent. More raises are likely ahead, too, with the potential to water down existing stock.

2.Losses hit $23.5 million last year, accelerating total losses to nearly a quarter-billion bucks. Going concern issues threaten the business.


3.The stock rose recently - not on the merits of the company - but on paid advertisements.


4. Catalyst revenue - the chief source of revenue - has dropped as the chief customer backs away. CDTI reports that entire revenue will end next year.


5. Revenue faces additional risk as President Trump has clearly signaled he wants cuts to emissions control regulations, thus reduced need for CDTI products.

 

So we explain the downside risks associated with this stock. But the pump piece author talks unconvincingly about financial figures that seemed fine and finally concludes that they don't really know what's going on with the stock ... and ends with this telling bit of information:

 

"In any case, we encourage you to subscribe to our news alerts, as we believe that we may be able to explain the share price move soon. We will be updating our subscribers as soon as we know more. For the latest updates on CDTI, sign up below!"

 

It looks as though Insider Financial simply wants the reader to become a subscriber.

Oddly, Insider Financial states it has received no compensation for the piece. But the site disclaimer indicates otherwise:

DISCLAIMER

Disclaimer – This newsletter is a paid advertisement, not a recommendation nor an offer to buy or sell securities. This newsletter is owned, operated and edited by Archangel Media Consulting, LLC.  Any wording found in this e-mail or disclaimer referencing to “I” or “we” or “our” or “Archangel Media” refers to Archangel Media Consulting, LLC.  Our business model is to be financially compensated to market and promote small public companies.

 

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Akoustis Technologies, Inc. (AKTS): $200 Million Company Admits Patent Worth $114K

Akoustis Technologies, Inc. (AKTS) is now priced at an unsustainable ~$200 million valuation.

That kind of market valuation makes no sense for a risky no-product, old-patent, minimal-revenue, professionally promoted company whose key stockholder was investigated for manipulating stocks.

The Huntersville, North Carolina company is focused on an RF filter patent filed by CEO Jeffrey Shealy in 2000. The company hopes its older technology may eventually compete with well-funded, established companies whose products help wireless carriers reduce dropped calls.

Investors may find the website here of the company, which has not answered our numerous calls and emails requesting comment. However, the Securities and Exchange Commission is considering the information we've submitted.

In this second part of an investigative series (Part 1 is here), TheStreetSweeper presents additional reasons we consider Akoustis stock a major risk to investment portfolios.

*1. Company: Our Patent Portfolio Isn't Worth Much

Regulatory filings state just what Akoustis thinks its patent portfolio is worth ... $114,000!

 

(Source: Company SEC filing)

Yet this patent portfolio - worth about as much as a fancy pickup - is driving the whole company.

*2. Foundering Factory: Losing Millions

The stock has also recently risen on the wings of an Akoustis announcement of plans to buy an old upstate New York factory referred to as STC-MEM. The company trumpeted that a university owns the factory, which it claims historically brings in "about $3 million in revenue."

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Akoustis Technologies, Inc. (AKTS): Deal Guy, Paid Promotions, Discrepancies and Other Risks

TheStreetSweeper issues an investigative report on Akoustis Technologies (AKTS).

Executive bullet points:

*Significant voids. The company currently lacks a commercial product, filter plant, distribution plan and ready customers.

*Patently poor. The company is based on a 17-year-old patent for a filter designed to help carriers improve battery life and cut dropped calls. Current technology has left Akoustis’ patented technology in the dust.

*Mark N. Tompkins owns 14.8% of recent reverse merger Akoustis Technologies. Tompkins and business partner Adam Gottbetter were investigated for possible stock manipulation of reverse merged companies. Tompkins wasn’t charged but Gottbetter pled guilty to stock fraud and just got out of prison last November.

*Tompkins co-owned Akoustis and the Russian shell it jumped into, which took the stock public in over-the-counter trading.

*Major discrepancies exist between SEC filings and state legal records as to when Akoustis and its shell were incorporated. The dates are nearly two years off.

*Switzerland. Tompkins manages his Akoustis ownership from luxurious quarters in Switzerland, filings indicate.

*SEC interest. TheStreetSweeper has filed a verbal and written complaint with the Securities and Exchange Commission regarding Akoustis activities.

*Recent uplist. The lofty stock accelerated after the NASDAQ uplisting on March 13.

*Paid promoters. The stock price continued its flight path after several highly optimistic Akoustis reports by a paid promoter. 

*Current questions. News of a pending filter factory and incentive possibilities were misunderstood and apparently further pushed the stock price. Both are problematic.

*Insiders primed to sell. In our view the stock is about 900% overvalued, creating opportune timing for Tompkins and other cheap-stock-holders to sell their registered, freely tradeable stock … over 4 million shares.

*Offensive. CEO Jeffrey Shealy smiled and rang the NASDAQ closing bell March 22, 2017.  Three months earlier, he had joined other insiders who registered to sell their stock. He is prepared to sell 134,000 shares of his company stock. The company will receive no proceeds.

*Offensive II. Records show Tompkins is prepared to sell about 86% of his stake ... for about $20 million.

*More stock selling. Akoustis burns millions of bucks quarterly. In a couple of quarters at most, we believe there will be a significant dilutive stock offering in order to generate operating cash.

*Anyone home? Our repeated calls to the CEO went to an answering machine and weren't returned. This supposed $200 million company can’t hire an assistant who’ll answer the phone?

***

Recent reverse-merger, Akoustis Technologies, Inc. (AKTS), we believe is partially controlled by a hard-partying but secretive man once investigated for possible stock manipulation of reverse merged companies. This Canadian resident quietly rides herd over Akoustis from his luxurious apartment in Switzerland, SEC filings indicate.

But the market is unaware of that interest in this company with no meaningful revenue, no commercial product, a single patent and no clear execution route.

Indeed, the over-the-counter stock uplisted to the NASDAQ a few weeks ago and caught fire. The market valuation quickly ripped to around $200 million dollars and the ugly stick of misunderstanding began gently tapping on the market's front door.

The company did not respond to TheStreetSweeper’s requests for comment but investors may find the company website here. Meanwhile, we present 12 risks associated with this Huntersville, North Carolina radio-frequency filter developer for carriers.

*1. The Merger: From Russia With Love

Akoustis Technologies took the cheap and easy route to the public market in May 2015 by merging into a public shell company - a Russian shell dreaming of making mobile games for Apple.

(Source: Akoustis SEC filing)

The shell existed as a one-man band with Ivan Krikun at the lead. He juggled seven corporate positions while the band banged out a melody of zero revenue, big losses and auditors' warnings that "going concern" issues could kill the whole thing. The Apple games didn’t happen.The business plan fell apart.

The current rendition of Akoustis is very similar: Big dreams. Uncertain pathway to execution. Going concern issues. Big losses. No meaningful revenue.

Behind the scenes, a deal guy may be adding Akoustis to his collection of stock toys...

*2. Mysterious Deal Guy; Offshore Accounts

We believe the man behind the Akoustis curtain, Mark N. Tompkins, has been a moving force behind both the current company and the Russian-owned shell.

His involvement is not just interesting. It's a risk factor. In 2009, federal prosecutors in Manhattan investigated whether Mr. Tompkins and his business partner/lawyer/buddy had manipulated stocks.

(Source: YouTube, Adam Gottbetter)

The lawyer/business partner, Adam Gottbetter (pictured above, a key subject in TheStreetSweeper's report on reverse-merger Ekso Bionics here) pleaded guilty in 2014 to conspiracy to commit stock fraud and received a 1 ½ year sentence.

Mr. Tompkins wasn't charged but the investigation did shine light on Mr. Tompkins and his moneymaking system of promoting stocks.

Divorce proceedings in 2006 and investigators' subpoenas revealed a living-life-to-its-fullest, but cautious man who said he didn't maintain business records and warned associates never to email him. Mr. Tompkins reportedly owned 20 brokerage accounts at the time and nine offshore bank accounts.

 

 

 

 

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Pulse Biosciences (PLSE): Furiously Peddling Toward More Risk

TheStreetSweeper releases an investor alert regarding Pulse Biosciences (PLSE).

The company is working on a device that uses pulsed electric to possibly treat tumors and skin problems such as warts. Stock in the zero-revenue company began trading on the Nasdaq last spring.
 
Investors may find the company website here. Meanwhile, TheStreetSweeper presents Pulse's rickety basket of risks:
 
*1. Best Estimate of Pulse's Value: IPO Value
The Burlingame, California company conducted its initial public offering or IPO less than a year ago ... at a price per share of $4.
We were not thrilled to see that MDB Capital Group acted as co-underwriter. The riskiest of companies have to sign up with an investor like MDB because most other banks shy away from such teeth-chattering risk.
 
All too often, struggling companies are underwritten by MDB, enjoy a fleeting stock rise, then suffer a big drop back.

Second Sight Medical Product (EYES) is one example. The firm managed their initial public offering three years ago at $17 per share. Shares jumped out at $21 but have declined more than 90% to ~$1.20:

- mmmm(Source: Yahoo)

So Pulse is the same company it was on that warm, sunny day last May 18 when the stock first began trading on the Nasdaq.

Pulse has no source of revenue, no commercial product and has not made a dime.
 
(Sources: Company SEC filings, TheStreetSweeper)
 
And though Pulse touts its 510(k) submission, the submission is insignificant; the FDA has decided nothing and a study shows that candidates that make it to phase II rarely advance to phase III - only 31% move forward. Indeed, the company has shown no meaningful progress since the initial public offering.
 
So at this stage, TheStreetSweeper can't imagine the stock being worth even 20% higher than IPO price.
 
But the market has been running headlong, pushing Pulse over 500% since then ... to a price that we believe remains unjustifiable.

*2. Ripping Through Cash

Pulse has been digging the hole deeper and deeper because new medical device companies simply get doggone expensive just swaying in place. Much less stepping ahead.

Pulse is already over $12.6 million in the hole.
 
The company is ripping through cash at a rate of about $970 each hour... approximately $2 million in a quarter...

(Source: Company SEC filing, TheStreetSweeper)

So, thanks primarily to its IPO, the company had around $16 million in cash in December. If you add the $5 million made from the February private stock sale and subtract current cash burn, there's enough for a while.

But the real money-gobbling begins if the company ever progresses. Then it would have to add massive costs for everything from clinical trials, to making the device to marketing and distribution.

To get an idea of the money Pulse would need to approach the human trial stage, let's consider some  rivals...

*3. Competition: Clobbering Pulse

Competitors in the cancer market include Juno Therapeutics (JUNO) and Kite Pharma (KITE).

Research and development is the lifeblood of all the biotechs. But Juno spent 18 times more than Pulse on research and development. And Kite spent over 118 times more on R&D.

(Sources: SEC filings, Marketwatch, TheStreetSweeper)

Clearly Pulse will have to spend much more to catch up with Juno and Kite. And those two have barely stepped on the gas toward the accelerated spending required to fuel a biotech.

But even spending hundreds-of-millions on research and development can't assure success or profit.

These companies are doing much better than Pulse as far as revenue and cash. But despite their experience, Juno and Kite are still very risky and sickly, too.

(Sources: Company SEC filings, year's end cash, TheStreetSweeper)

Similarly, Pulse revenue, cash, earnings and R&D budget fall far short of a competitor in the targeted wart and dermatology field, Syneron:

(Sources: Marketwatch, Yahoo, TheStreetSweeper; ELOS last available 2015 numbers)

Biotech carries no guarantees, other than you can bet on burning plenty of cash chasing a product that may or may not ever become reality.

Case in point: Juno shares recently declined again when the company announced it would not progress its cancer treatment due to "unfortunate and unexpected toxicity." The stock reeled late last year after several patients died during clinical trials.

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Care.com (CRCM): Jaw-Dropping Insider Selling, Obscene P/E

TheStreetSweeper issues an alert for any investor considering stock in Care.com (CRCM).

The stock has recently ripped to an unsustainable level and is now dropping back a bit. We believe the current decline may be the beginning of a larger, well-deserved unraveling.

The Waltham, Massachusetts company connects caregivers, such as babysitters or tutors, and families through a website.

The stock ran way ahead of the company's true value, in our view, after Care.com announced it had beaten guidance expectations.

Though Care.com's operating losses were reduced, traders may have missed that the company lost $0.7 million in 2016 ... not exactly a hallmark of a booming business.

Here's the executive summary:

 

*Extreme Insider Selling: In a year, insiders have dumped 4.3 million shares! Officers sold > 53,000 shares last week, alone.
*Outrageously Expensive: The stock's P/E is 114!
*Outclassed By Competition: The chief rival makes 10 times more revenue and 2 ½ times more earnings. But Care.com is 2 ½ times pricier than the rival’s stock.
*Tripping Hazard: Care.com is a roll-up. Just one of its eight business acquisitions has resulted in ~$36 million in impairments.
*Risky Business: An attorney general is looking into complaints surrounding Care.com. Consumers have lodged more than 600 complaints against the company.

Investors may find the company website here. Meanwhile, TheStreetSweeper presents the top reasons we think Care.com might be ready to be renamed Care.bomb:

 

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Foundation Medicine (FMI): Perfectly Priced To Plunge

TheStreetSweeper issues an investor alert about the quiet furor blowing up around Foundation Medicine (FMI).

The Cambridge, Massachusetts company spun out its initial public offering in September 2013. Since inception eight years ago, the genomic profile testing company has lost money ... totaling ~$345 million.

Investors may find the company website here. Meanwhile, TheStreetSweeper highlights the top issues that we believe will soon crimp this stock.

*1. Stockholders' Earnings Disintegrate, Revenue Drops

Stockholders are suffering a significant decline in earnings from Foundation.

From quarter one to quarter four, losses increased a miserable 79.6%!

                                                                                                   1 Q 2016         2 Q 2016      3 Q 2016          4 Q 2016

(Source: CNN Money, TheStreetSweeper)

Along with these big losses, Foundation's revenue is declining, too:

                                                                                    1 Q 2016           2 Q 2016          3 Q 2016              4 Q 2016

(Source: CNN Money, TheStreetSweeper)

*2. Misunderstood “News”

Foundation's stock has recently flown despite the complete lack of meaningful news  (here) and its recent release of another disappointing financial report.

Along with lower revenue and higher losses, gross margins have plummeted ... from 57% to 39%.   

So why on earth have shares continued to levitate?

Well, Foundation's financial report chirped out old news regarding an August 2016 announcement that the company has applied for a combination Food and Drug Administration/Medicare process for premarket approval. And a website incorporated that old news (here) in a piece about Foundation’s financial report.

It may be that traders misunderstood this line: “advancing its universal, pan-cancer companion diagnostic assay through the FDA and CMS parallel review process to decision and launch in the second half of 2017.”

But Foundation actually said that the parallel review process will end in the second half of 2017, they think. That’s starkly different from a commercial launch … which would come far later after studies and other FDA requirements.

Bottom line: old, misunderstood “news” likely helped levitate the stock price.

*3. Stock Pump

Another factor in Foundation stock's rise may be promotional material spun out by Paul Mampilly's Extreme Fortunes newsletter sporting a $2,999 subscription rate.

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Pulse Biosciences (PLSE): Checking Its Pulse, Finding Nothing

Investors may soon find themselves checking the pulse of Pulse Biosciences (PLSE)... and getting nothing.

But right now the Burlingame, California company is managing to pull in unwary investors.

The company is working on a device that uses pulsed electric fields to possibly treat solid tumors and skin problems such as warts. Stock in the zero-revenue company began trading on the Nasdaq in May 2016.

Find other viewpoints here and the company website here. Meanwhile, TheStreetSweeper lists the top four reasons we believe the stock is at risk of suddenly pulsing downward:

*1. Around The Corner: Cheap Stock Sales

When the company IPOd last May, some stock was locked up but has been freely tradable since November.

However, a massive 4.5 million shares of stock is looming, waiting to be unlocked.

"Of the 12,565,451 shares of our common stock expected to be outstanding following completion of the offering, 2,996,253 shares will be freely tradable without restriction pursuant to Rule 144 following the expiration of the 180-day lock-up previously agreed to by those stockholders and 4,539,637 will be freely tradable without restriction pursuant to Rule 144 following the expiration of the 12-month lock-up agreed by those stockholders."

Especially if sold en masse, those millions of shares have the potential to significantly water down shares owned by existing stockholders.

The lock-release date is just around the corner and some cheap warrants are attached (worth 299,625 shares) that can be exchanged for stock for as little as $2.67 apiece ... so why wouldn't those investors sell off if the stock on the release date is anywhere near current levels?  The stock is set to be unlocked for sale the first week of May 2017.

The company recently sold $5 million worth of stock to private investors in a Band-Aid measure, bringing cash to around $5.7 million. But considering the $5.7 million three-quarter cash burn ...

 

...or ~$1.9 million per quarter ... while the company is just striding in place, that money will quickly vanish if Pulse intends to move forward.

So we expect many more stock sales in the future...and more potential for existing shares to get watered down.

 

*2. Bad News: MDB Capital Special

MDB Capital Group was the company's underwriter ... and the company has paid through the nose to get its stock before the public.

1. The underwriter got $1.8 million in discounts.  2. MDB installed its own director as Pulse chairman of the board. 3. The underwriter also got $1.4 million worth of cheap stock warrants.

(Source: Company SEC filing)

But does MDB's track record justify the high cost to Pulse and its investors?

Well, things have turned out poorly before for many stocks with strong MDB participation. Just a few examples include:

The firm handled Second Sight Medical Product's (EYES) initial public offering three years ago at a stunning $17 per share. TheStreetSweeper warned investors of Second Sight's risks here, when the stock traded at ~$6.93.

The chart below shows what has happened to the stock. Since MDB's handling of its IPO, shares have declined ~90%!

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Professional Diversity Network (IPDN): Offshore Investment Fund, Falling Revenue, Mad Customers

TheStreetSweeper issues a warning for investors of Professional Diversity Network (IPDN).

IPDN stock has gone Wild, Wild West following widely misunderstood investor announcements … including one regarding a Chinese investment group that we found lists its business address as a post office box on an island.

Now TheStreetSweeper believes this stock is positioned to get shot down to size.

Here's an executive summary:

*Whenever a company lists its address as a post office box on an island, as IPDN’s Chinese investor does, it’s a red flag … indeed it’s TheStreetSweeper’s skull and crossbones.

*Cheap $2 warrants for 246,445 shares of IPDN stock were set free on Feb. 14. The lender holding that stock may now sell any or all shares.

*If many of those cheap shares are sold, other investors holding more expensive stock face getting their share value watered down.

*Under Nasdaq delisting threat and eager to please a sell-happy lender, IPDN pulled a reverse stock split. Stock typically jumps initially before dropping back to pre-split levels or worse.

*Revenue is dropping, partners are walking away, customers are mad.

*Cash burn’s high, money’s tight and a dilutive stock offering or debt appears likely within a quarter or two.

Investors may find other viewpoints here and the IPDN website here. Meanwhile, let's examine five good reasons to dump this stock now:

*1. Warrants: Just Set Me Free.

IPDN has set up the paperwork so a stockholder, White Winston Select, can sell off the lion's share of its stock...Now.

White Winston loaned $5 million to the company in March 2016. In exchange, in one piece of the current dilution, the lender picked up some warrants for 246,445 shares of stock for just $2 apiece. Now the lender wants to unload some stock.

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Wecast Network (WCST): Scooting Into Oblivion

Wecast Network (WCST) has stumbled along since 1996, when the company was called Gallery Rodeo International, a Beverly Hills “art business” turned hotel/gaming business with $327 in cash.

After seven incantations over the decades, Wecast is now a mishmash of China-linked businesses, controlled by Chinese parties and overseen by a Chinese chairman toting 40% of the company’s common stock. Meanwhile, the company rips through millions of dollars, subtly pushing average stockholders closer to watching their shares get watered down in the future. 

Formerly called You On Demand Holdings, the video-on-demand provider operates primarily in China. After numerous business changes, Wecast now hopes to develop a consumer management platform for businesses and consumers ... or maybe headsets ... or whatever idea strikes their fancy tomorrow.

Here is an executive summary:

*Controversial underwriter Chardan Capital Markets helped take this company public through a reverse merger into a shell company… a less than auspicious introduction to the public.

*The stock has surged on two silly announcements of merger agreements … with companies owned by none other than Wecast’s Chinese chairman. One bogus “merger” is really a loan deal and the other bogus “merger” is a freebie thrown in apparently because it’s worthless and easy to hype.

*The chairman’s companies off-loaded to Wecast include a third-tier Chinese publication. The other company sells scooters and furniture ... not our definition of a leading “global supply chain” manager.

*The chairman who controls the company is a Chinese entertainment guru who has helped grind his former company into the ground.

*Wecast's Valentine's Day announcement sounds like pure promotion designed to drive up the stock. Wecast wants investors to believe that it's really a tech company ... rather than a failed video provider that just bought a scooter company.

*Wecast is more a tiny scooter-and-furniture maker than a global supply chain manager or video-on-demand provider … or a headset maker. This company can't decide on or focus on a business.

Investors may find other viewpoints here and the company website here. Meanwhile, TheStreetSweeper presents the top nine reasons Wecast is a monumental risk.

* 1. Rat's Nest of Related Party Deals

The stock ran up following two mergers with companies owned by Wecast's chairman.

*Merger 1: Wecast announced the Feb. 1 completion of a merger with Sun Video Group to buy 51% of M.Y. Products. The company name was changed from You On Demand to Wecast Network Inc.

The cost: 33.3 million shares of Wecast stock, actually a $50 million loan.

The hype: Sun says it will generate $15 million profit within 12 months of closing or return the shares.

The hitch: M.Y. Products is owned by Sun Video. Sun is owned by chairman Bruno Wu. This debt deal is off if Sun Video doesn't reach its target. If Sun Video were really able to reach $15 million profit in a year, no one would be able to buy it for a mere $50 million. The deal sounds fishy to us.

*Merger 2: Wecast on Feb. 2 acquires 55% of Wide Angle Group Limited.

The hype: Wide Angle is an industrial/trade media and commerce company. Wecast gets the Wide Angle shares from BT Capital Global Limited... which is owned by guess who? Chairman Bruno Wu and his Sun Seven Stars.

The cost: Nothing. "WCST will pay no additional monetary or stock consideration for the acquisition."

The hitch: Wecast's chairman threw in his company, Wide Angle, for free.

Why on earth would he do that? It could be that Wide Angle is worthless. It could be the chairman wants to promote the stock. Or maybe both.

*2. Who's Your Daddy And You Say He's Selling Scooters?

Let's look at the two companies, owned by the chairman, which are intricately bound to Wecast.

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Northern Dynasty Minerals (NAK) And The Trump Tales

Northern Dynasty Minerals (NAK) may be using Trump tales to hook investors.

The company appears to be allowing distribution of extremely aggressive and possibly misleading news - even suggesting the new administration has “a desire to permit” Northern’s stalled project. These claims appear to be nothing but hype used in an effort to pump up the stock. 

And it’s working. The stock darted upward about 75% after a couple of key stories hit in late December and January, spreading misconception about Northern.

Northern wants to mine copper and gold deposits along Alaska's Bristol Bay watershed which supports the world’s biggest sockeye salmon fishery. But the "Pebble" project has been stalled for three years amid a firestorm of opposition and a lawsuit with regulators. Northern sued the Environmental Protection Agency in 2014 after the agency used a rare veto initiative to block mine construction before the company had applied for a federal permit. Northern lost its funding partners a year earlier after half-a-billion-dollars in costs and  permitting problems. 

And the EPA indicated to TheStreetSweeper on Feb. 9 that the agency isn't ready to back down.

But let’s look closely at the Canadian company's claims:

*1. The Claim: Desire to Permit

Northern's public comments were used by Bloomberg for a Jan. 23 story in which the company makes a tall claim that sounds indefensible to us:

(Source: Bloomberg)

So the CEO said that Northern has Trump's backing and the new administration has "a desire to permit Pebble?" And they'll resolve the issue within 100 days?

Really?

The company has ignored TheStreetSweeper's numerous requests for comment. But a reliable source and a StreetSweeper research provider did talk to investor relations, confirmed through Jan. 31 and Feb. 1 emails.

Investor relations said no one with Northern ever spoke to the Trump team or the incoming EPA team.

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Superior Industries International (SUP): Hitting The Trump Wall

Superior Industries International (SUP) is finding itself within the crosshairs of President Donald Trump’s anti-Mexican policies.

The Southfield, Michigan company makes more than 80% of its inexpensive car wheels in Mexico. And operations have been expanding in Mexico as a brand-new wheel plant there reaches full production.

But after two whirlwind weeks into his presidency, Mr. Trump is cracking his knuckles over all things Mexican.

On Thursday, the president warned Mexico’s president that he might send US troops across the border: “You aren’t doing enough to stop (bad hombres.) I think your military is scared. Our military isn’t, so I just might send them down to take care of it.”

As US-Mexican tensions escalate, Superior is feeling the blows …

*1. Tariff Would Damage Superior

President Trump has just signed an executive order to build a wall along the Mexican border.

And he has announced plans to impose a 20% border tax on all imports from Mexico to pay for it.

A 20% border tax, or possibly even a 35% tariff, on parts made in Mexico would be a major blow to Superior.

While Trump’s plan to lower corporate taxes and dampen some regulations might help offset Superior’s additional potential costs, a 20%-35% tax could be overwhelming, considering:

*Margins are already very low.

*A big import tax on top of terrible margins would likely force Superior to cut its wheel prices.

*2. Uncompetitive Gross Margins

Indeed, the company’s gross margins are an awful 6.25%.

The company is ranked lower than 81% of the industry.

And margins have been in free-fall for years. The average yearly rate of decline is -4.7%.

So Superior enters the Trump era with deteriorating margins that prevent the company from a sustainable competitive edge.

And the risks just keep growing for this company whose strategic priority is to increase Mexican manufacturing capacity

*3. NAFTA Hit: Creating Profitability Mayhem

President Trump made dismantling NAFTA a central theme of his campaign, calling NAFTA "the worst trade deal in the history of the country."

But NAFTA smoothed the pathway for Superior to expand into Mexico, according to its website. “The passage of NAFTA led Superior to open its first manufacturing facility outside of the United States in Chihuahua, Mexico.” 

Now today’s auto parts makers are playing duck and cover for the sake of their plants that make cheap parts overseas.  

Within days, the president is expected to sign an executive order to renegotiate NAFTA. The agreement eliminated most trade tariffs between the U.S., Canada and Mexico.

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BioSig Technologies (BSGM) Shenanigans, Stock Promotions, Regurgitated News

Since inception eight years ago, BioSig Technologies (BSGM) has gone nowhere fast ... unless you count issuing stock, regurgitated news and stock promotions as achievements.

BioSig is a non-revenue, cash-gobbling Minneapolis, Minnesota company focused on a non-FDA-approved product. The PURE EP System is designed to display data during an electrocardiogram or EKG.

As the market completely misses the huge red flags snapping at BioSig, the stock has darted upward by ~18% in a month. Now this dangerous stock has reached a level that we believe leaves only downside ahead.

TheStreetSweeper presents the top risks that challenge a BioSig investment:

*1. Promote, Promote, Promote

Yesterday morning, many folks' inboxes were treated to this Bio Sig come-on:

The next BioSig promo surge came just a couple of hours later:

Here's more hype that landed in the morning's email:

And another one:

 

These emails are paid promotions. Just the kind of thing you'd never see trumpeting a stable company with viable products.

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Magellan Petroleum (MPET): $3 Billion Valuation? Indefensible!

Magellan Petroleum (MPET) stock has rocketed into treacherous territory as the market misunderstands the extreme risks ready to slam the shares.

The Denver, Colorado company has abandoned the oil business amid plans to reverse merge with Tellurian Investments and eventually build a liquefied natural gas terminal.

But TheStreetSweeper warns investors that Magellan is one of the most overvalued stocks we’ve ever seen. The ~$15.6 billion construction costs, $168 million lawsuit, misunderstood major investment, uncertain LNG demand, fierce competition, 5-year construction schedule – plus the current technical RSI indicator - all multiply the risk exponentially.

Investors may find other viewpoints here. Meanwhile, TheStreetSweeper shares the eight top risks expected to annihilate this stock:

*1. Grudge Company: No Revenues

Investors seem excited right now about the planned reverse take-over of private company Tellurian Investments into Magellan.

Tellurian is the grudge company created by Charif Souki shortly after Cheniere Energy kicked the former chief executive out the door in late 2015. Mr. Souki wants the merged company to build a multi-billion-dollar natural gas liquefaction plant in Louisiana.

Unfortunately, the combined revenue of Magellan and Tellurian over nine months just barely eclipsed what a fast-food employee makes - $31,000:

(Source: Company SEC filing)

Ironically, the measly revenue came from Parallax Enterprises, which has been sued by Mr. Souki's former company. Cheniere had loaned Parallax money as the two made plans for a liquefaction plant joint venture. Cheniere sued, according to the complaint, when Parallax (wholly owned by Martin Houston,  expected to become the newly merged company's executive vice chairman, alongside Charif Souki, chairman) didn't cough up payments.

Meanwhile, there has been substantial doubt about Magellan's ability to continue operating. Company filings say Tellurian is in bad shape, too.

"Because Tellurian’s assets do not currently generate revenues, the combined company is also likely to experience liquidity constraints."

*2. Magellan Stockholders' Ownership Decline

Under terms of the merger awaiting shareholder approval in February, each share of Tellurian will be converted into 1.3 shares of MPET.

Former Tellurian investors will walk away with almost the entire company ... about 96%.

Magellan stockholders will find themselves on the wrong side of this deal. They will be left with just a sliver of the company ... just over 3%.

*3. Unjustifiable After-Merger Valuation

As it turns company control over to Tellurian shareholders, the merger will dramatically increase Magellan's current outstanding share count of 5.88 million. At the current lofty share price, Magellan winds up with an unconscionable market valuation:

(Source: Company SEC filing, TheStreetSweeper assuming post-merger estimates)

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MassRoots Inc. (MSRT): Wannabe Pot Stock Going Up In Smoke

In the smoky world of marijuana, MassRoots (MSRT) shares have floated skyward as promoters puff out nearly three-quarters-of-a million-dollars worth of promotional campaigns.

The Denver, Colorado company has lost $20 million since shares in the marijuana-users social network first began trading on the OTC Markets in April 2015. Despite MassRoots' poor finances, the stock has risen 126% over the past three months... including a 6% one-day jump on Thursday.

The idea of connecting pot heads arose back in 2013 among a group of 20-something friends.

"I thought up MassRoots when I was smoking weed in my college friend's apartment," co-founder Isaac Dietrich told CNN Money of the idea of sort of a Facebook for pot smokers.

"I wouldn't want my grandmother to see a picture of me taking a bong rip every time she logs into Facebook," said Mr. Dietrich.

Investors may find other viewpoints here. Meanwhile, TheStreetSweeper presents the highlights as we begin to dig into this risky stock.

*Promotional Dependence

Third parties have shelled out about $700,000 since September to promote MassRoots. That figure is far greater than the $100,000 plus shares that MassRoots is paying for its acquisition, online ordering company Whaxy.

These incredibly kind-hearted third parties have paid for at least 48 campaigns to promote a penny stock company that lost $3.5 million just last quarter.

TheStreetSweeper has requested an interview with MassRoots and a couple of promoters to discuss who's behind the promotions and why. The companies have not responded.

Promoters pushed out 10 of these MassRoots "awareness" campaigns in December, according to data gleaned from stockpromoters.com. The snapshot below shows two recent promos.

(Source: stockpromoters)

And the hits just keep coming ... As recently as Thursday, Jan. 5, MassRoots promoters blasted out more email promos. The disclosure for the promo below warns that the promoters may hold and liquidate stock positions in the advertised company without notice, even after they have made positive comments about the company.

(Source: OTCtipReporter email)

Promoters sometimes play fast and loose with the facts in email newsletters designed to build excitement for a stock. Below are snippets from a Dec. 16 promotion.

***

(Source: stockpromoters)

Despite the promoter's claim, MassRoots app is not available on Google Play, as we explain in more depth below ...

*Dumped By Google Play

Google Play dropped the MassRoots app in November, effectively blocking one of the company's most vital access points to customers:

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Skyline Corp. (SKY): Falling Back To Earth

Boring ol' Skyline Corp. (SKY) has once again hitched a ride on the coattails of a flashy multi-billion-dollar UK company with nearly the same ticker symbol.

Booming Skyline stock is now swooning a bit as the market begins to understand that news of a plan to take over media giant Sky Plc may have been inadvertently advancing Skyline stock. 

Investors may find other viewpoints here. Meanwhile, TheStreetSweeper presents the top issues threatening those invested in the mobile home manufacturer.

UPDATE: Today's Sky Plc news did erroneously end up in Skyline's news feed, once again:

 

*1. SKY.L News Appears In SKY's News Feed

Skyline stock took off on a rollercoaster ride last Friday.

We believe the stock gained much of its strength that day because Skyline's news feed contained news that Rupert Murdoch's 21st Century Fox had made a bid to buy Sky Plc media ...


***

(Source: Yahoo, TheStreetSweeper)

Skyline's stock had been headed downward until about an hour after Sky's news erroneously appeared in Skyline's news feed, at which time the stock began to climb:

(Source: Yahoo Finance)

Investors who took a cursory glance at Skyline's news feed may not have taken the time to understand the vast differences between the two companies...or how extremely unlikely it would be for Murdoch to show the slightest interest in Skyline.

Skyline Corp. began manufacturing mobile homes in the 1950s in tiny Elkhart, Indiana, population 51,421. Skyline has $224 million in revenue and $8 million in cash. The ticker symbol is SKY.

But Sky Plc. is a British company whose parent company is 21st Century Fox and has $11.96 billion in revenue plus $2 billion in cash. The ticker symbol is SKY.L.

Sky Plc predictably shot up on the 21st Century Fox bid news:

(Source: Yahoo, TheStreetSweeper)

But the news that understandably spurred Sky Plc. has nothing whatsoever to do with Skyline mobile homes.

So the blurb is deceptive when it is part of the Yahoo Finance news feed for Skyline. Now it needs to be deleted.

We believe this is the second time a Skyline stock surge may be linked to the wrong story getting into Skyline's news feed.

Last summer, we wrote about investors apparently buying Skyline on the news that Sky media planned to launch a new TV channel in the UK. One line in the Yahoo story may have generated even more misplaced frenzy: "Fox - owned by Rupert Murdoch - has a 39% stake in Sky..." referring to Sky Plc, of course, not the mobile home company.

This morning, the Murdoch mistaken issues may have ended as 21st Century Fox announced it has reached agreement on a $14.8 billion offer for Sky Plc. And this time, the Sky Plc news is not in Skyline's news feed.

*2. Misconstrued Analyst Interest

Meanwhile, prior to the recent misplaced media buzz, Skyline's stock price had begun a general uptrend that seems to coincide with analyst commentary for Sky Plc media.

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Ingram Micro (IM): Leaked Documents Could Jeopardize Buy-Out

TheStreetSweeper issues an investor alert for Ingram Micro (IM).

Leaked Chinese government documents indicate the $6 billion acquisition of Ingram could be in trouble.

In February, Ingram Micro announced China-based Tianjin Tianhai Investment would pay $38.90 per share cash to acquire Ingram.

But now a Chinese company will not be allowed to acquire a company for $1 billion or more that is not in their core business, suggest new Chinese regulations leaked to the Chinese media.

Under the buyout deal, Ingram Micro would become a subsidiary of China-based HNA Group specializing in logistics, aviation, financial services and tourism. HNA is a major shareholder of Tianjin Tianhai, which focuses on shipping, logistics and financing.                

California-based Ingram Micro would be outside the Chinese companies' core business because it is an information technology company.

Below is a partial copy of the photographed document said to be from the People's Bank of China conference record, indicating the central government likely has already passed the regulation on to the bank. It's not perfectly clear whether the restrictions would institute an actual ban or more intensive scrutiny, but the economic issues demand that China reduce its capital outflow:

(Source:mt.sohu.com)

Translated, the relevant portions state:

This is primarily targeting six types of foreign investments through supervision and control. Filing and approvals are not permitted (unless with the approval of the appropriate departments).

The measures have been approved by the State Council, the Ministry of Commerce, Development and Reform Commission is responsible for the implementation of concrete measures will soon be issued.

Six categories of business include:

1) State-owned enterprises purchase or develop large-scale real estate with Chinese investment of US $ 1 billion and above; large-scale mergers and acquisitions of non-core businesses with Chinese investments of US $ 1 billion and above; and Chinese investments of US $ 10 billion and Of the large amount of foreign investment projects; investment in the amount of 1 billion US dollars (inclusive) or more non-main projects large M & A investment projects;

2. Direct investments of partnerships 

3. Purchasing of stocks under 10% of foreign companies 

4. Using subsidiaries to acquire foreign companies 

5. Chinese investment groups taking foreign listed Chinese companies private

..With regards to existing investment projects which are approved by the National Development and Reform Commission, the guideline mentioned above should be followed.

Our interpretation, along with that of reputable third-party Chinese speakers, is that other government departments must follow the "no filings" and "no approvals" guidelines. The exception would be if undefined "relevant departments" have already approved the foreign investment.

The South China Morning Post states the ban would be effective from now until September of next year.

The declining value of the yuan, as documented in numerous news stories, has pressured China to cut down on assets flowing out of that country.

Since the documents are in Chinese and have just been leaked, we believe very few U.S. investors are aware of the regulations that could doom Ingram Micro's acquisition.

*2. Other Chinese Buy-Outs Suffer

The leaked documents reached the ears of some investors in Changzhou, China-based Trina Solar (TSL), a billion-dollar company which sells solar products to power plants and grid operators.

The company had received a definitive agreement from the parent company to pay $11.60 for each American depositary receipt. Trina called a Dec. 16 shareholder meeting to vote on the merger that would take the company private. 

The stock had been trading around $10.33 over the past month but reacted quickly following a couple of tweets Nov. 28 about questions raised by the leaked documents:

 

(Source: Twitter)

... and the price is still down significantly.

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Airgain (AIRG): Epic Rise, Epic Decline

TheStreetSweeper issues an alert for investors of Airgain (AIRG), a recent IPO that is prepared to wipe away a ton of shareholders' stock value.

Investors bought into the wireless network antenna distributor when it first offered its stock to the public last summer. The stock has flown nearly 200% in the last three months.

But now the company is planning a massive follow-on offering. Yes, another stock sale already after the generation of $40.4 million from private stock sales, convertible notes and the IPO. Investors are witnessing the relative calm before the storm of shares hit the market and spark a stock price decline.

Below are TheStreetSweeper's top six reasons this stock is looking to get smashed:

1. No Thanks

Airgain filed a registration statement at 5 p.m. Nov. 23, shortly after most investors took off for the Thanksgiving break.

Airgain will be able to sell $20 million worth of stock, with another $6 million for the underwriters' option. Insiders will also be able to sell $20 million in stock ... and all those proceeds go to those stockholders rather than Airgain.

At the current price, about 2.3 million shares may be released into the market.

***

(Source: Company SEC filing)

*2. Why This Follow-On Offering Is Dangerous

The price of a stock typically drops after a secondary offering because IPO investors' level of ownership decreases with the increase in shareholder base.

The chart below demonstrates how a seemingly small jump in outstanding shares - from 7.6 million to the new estimated level of 9.88 million - makes a big difference in the early investor's value:

(Source: Company SEC filing, TheStreetSweeper)

Aigain's plans could conceivably change but based on the current situation, Airgain IPO investors' shares could face a jaw-dropping 23% devaluation.

And investors have just been exposed to the possibility of watered down shares ...

*3. Dilution Potential Begins Now

This secondary offering dwarfs Airgain's $12 million initial public offering at $8 per share.

For its IPO in August, Airgain registered 1.5 million shares and locked up another 5.7 million shares plus another 1.05 million in stock options.

Now the underwriter has just released the lockup restrictions, effective after market close Nov. 28.

So all those shares that would have been locked up a couple more months have been set free so those lucky shareholders - including officers and directors - can sell their stock

 

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Fenix Parts (FENX): Trouble, Any Way You Slice It

.

Fenix Parts (FENX) has now entered the realm of "The Walking Dead."

Indeed, Fenix is a little like the TV zombies who have taken over the world, mindlessly wandering from one horrifying cliffhanger to the next. 

The unprofitable Westchester, Illinois scrap metal/auto parts recycler is leading an apocalypse of not-quite-dead companies. While investors may find other viewpoints here, TheStreetSweeper releases the five top reasons to avoid this unfolding investor nightmare.

*1. The SEC Subpoena

The Securities and Exchange Commission has launched an investigation into Fenix's financial reports.

Fenix disclosed on Oct. 13 that it had received a subpoena from the SEC's Chicago office demanding that company documents be turned over.

The SEC seems to be scrutinizing the company's accounting methods, internal controls and recent change in auditors (on July 8, auditor BPO was dismissed, a red flag event).

"The SEC inquiry appears to be focused on the Company’s recent change in its independent registered public accounting firm, its previously announced business combinations and related goodwill impairment charge, the effectiveness of its internal control over financial reporting and its inventory valuation methodology."

The filing of a subpoena indicates the inquiry is now a formal SEC investigation, according to the SEC's "How Investigations Work." Such investigations are often drawn out and end poorly for the company.

 

*2. Late Financial Report

Fenix rolled up 11 companies into one and completed its initial public offering in May 2015. As TheStreetSweeper has described many times before, things don't always go too well with roll-ups.

Fenix hinted at big troubles ahead through its numerous notices of delayed financial reports.

In fact, since the summer of 2015, Fenix has filed notice that its yearly or quarterly financial reports would be late a total of six times.

The most recent - the delay of the third quarter financial report - was filed Nov. 15.

"The Company’s filing of its quarterly report on Form 10-Q for the quarter ended September 30, 2016 has been delayed due to the transition time necessitated by the Company’s recent change in its auditors. This delay could not have been eliminated by the Company without unreasonable effort and expense."
 
"More specifically, the delay is attributable in large part to the complexity of accounting for the Company’s multiple business combinations, the coordination of the transition of responsibilities between the Company’s prior and new independent registered public accounting firms, and additional procedures on purchase accounting and inventory following the Company’s recent receipt of a subpoena from the Chicago Regional Office of the SEC requiring the production of various documents."

That notice followed another bombshell notification ...

*3. Loan Covenant Bombshell

The financial report is also apparently on hold because the company was "not in compliance with a certain loan covenant." And according to the Aug. 16 late filing notification, the lender hasn't given Fenix the needed written waiver. Here's the broken covenant reference:

"The extension is necessary due to the transition time necessitated by the Company’s recent change in its auditors. This delay could not have been eliminated by the Company without unreasonable effort and expense."

"In addition, the Company was not in compliance with a certain loan covenant in its credit facility and had not yet received a written waiver from the lender for such non-compliance as of the due date of the Form 10-Q. The Company has been in discussions with the lender with respect to the written waiver, which the Company expects to receive."

So the covenant breach is a bombshell because investors are on notice now that Fenix's track record will likely make it more difficult for the company to borrow money.

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Northern Dynasty Minerals (NAK): Time To Cut Bait

Northern Dynasty Minerals (NAK) is interested in mining ... officially within the carefully conserved wild salmon fishery waters of Alaska. But the unofficial target is unwary stockholders.

Now that the stock is overbought amid a stream of hopes and dreams for a big mine, early buyers should be ready to cut bait.

Some significant investors have gotten fed up and dumped all of their shares in Northern.

So big sell-outs begin TheStreetSweeper's list of reasons we believe this stock is primed to drop long before the studies or permits are ever completed for the Pebble Mine project.

*Big Investors Back Away

Investors should not be fooled by this Canada-based shell company's flaunted "Pebble Partnership." The partnership consists solely of Northern Dynasty Minerals, now that Anglo American has backed away.

In fact, companies have backed out of the ill-conceived plan like crazy.

*Mitsubishi Corp.

In 2007, Mitsubishi became a major shareholder, even increasing ownership to 11% by 2009.

In February 2011, Mitsubishi divested every single share of Northern.

*Rio Tinto

In 2007, Rio Tinto became a ~19% owner when it bought 9.4 million shares of Northern for $10 apiece.

But Rio Tinto divested all shares in April 2014.

*Anglo American

After wasting more than half a billion bucks - $573 million to be precise -  Anglo American withdrew from the partnership.

Following its investment in 2007 and six years of paying for lawyers and studies for the Pebble project, Anglo gave up its half of all rights to the project in December 2013.

*Amber Capital; Cutter

More recently, Northern has been able to attract a few no-name investors. But even some of those are selling out. Grand Cayman-based Amber Capital Management sold out its 602,982 shares and Cutter & Co. sold its 10,000 shares the third quarter.

So Northern will find it difficult if not impossible to find large reputable investors after losing so many significant partners.

*Enough Losses To Go Around

While Northern has been unable to generate much more than litigation with the Environmental Protection Agency, it has generated plenty of losses. In the past four quarters alone, Northern's losses have approached a gut-wrenching $34 million.

The figures below are in thousands of dollars.

(Source: Company SEC filing, TheStreetSweeper)

Much of that money, about $1.9 million or ten times more than the previous quarter, went toward share-based compensation.

The company handed out 6.2 million stock options to insiders. The chairman, chief executive and chief financial officer also received compensation of ~639,000 restricted share units and ~458,000 deferred share units.

The company is important to insiders for another reason ...

*Contract: Scratching Backs

The company is paying millions to a private company owned by Northern's leaders.

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Trump's Obamacare Promise: Teladoc's Code Blue?

President-elect Donald Trump's dump Obamacare pledge could be Teladoc's code blue.

Obamacare has been a luscious target for companies like Teladoc (TDOC), releasing a veritable army of telemedicine companies onto Wall Street in the last few years.

Obamacare  "is certainly an accelerator for us," Teledoc CEO Jason Gorevic said in a September 2014 article.

In a press release titled "Obamacare creates greater need for telehealth innovations," Teledoc emphasized Obamacare or the Affordable Care Act (ACA) as a telehealth driver. The release announced new board members David B. Snow and U.S. Senator William Frist, M.D., who said the ACA “has infused an additional 8 million patients into the health care system ... Teladoc is an innovative and effective solution for addressing the current access barriers to primary care..."

And in its annual report, Teladoc wrote of the risks of ACA:

The impact of recent healthcare reform legislation and other changes in the healthcare industry and in healthcare spending on us is currently unknown, but may adversely affect our business, financial condition and results of operations.

Our revenue is dependent on the healthcare industry and could be affected by changes in healthcare spending and policy. The healthcare industry is subject to changing political, regulatory and other influences. The PPACA made major changes in how healthcare is delivered and reimbursed, and increased access to health insurance benefits to the uninsured and underinsured population of the United States.

But the catalyst is a "catastrophe," according to the president-elect. Mr. Trump pledged that after he won the election, he would convene a special session of Congress to repeal the ACA:

(Source: NBC News/YouTube)

"Obamacare has to be replaced. And we will do it. And we will do it very, very quickly," he said in a Nov. 1 healthcare policy speech.

The day after the election, Republican leaders promised that they will "hit the ground running." Getting rid of Obamacare is a top priority.

Investors may find other viewpoints on Teladoc here. Meanwhile, TheStreetSweeper takes a closer look at the Teladoc foundation that is precariously propped up by Obamacare.

*Cash Burn; Dilution Ready

Teladoc's business of connecting patients to doctors by webcam, app or phone has limped along for 14 years on loans plus private and public stock offerings - losing money since inception.

The cash burn rate is ~$14.6 million per quarter, which places a mighty squeeze on Teladoc's $44 million cash and equivalents.

And as many assumed Obamacare would be relatively safe with Hillary Clinton in the White House, company managers said that cash and borrowings would last "as we exit 2017."

Still, Teladoc prepared to plug any cash hole by issuing more stock.

The shelf of shares registered Sept. 20 may be sold in any amount from time to time, giving company the power to dilute.

 

 

 

 

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to time after the effective date of this registration statement.

So at the current stock price, Teladoc would be able to sell about 17 million shares. This means more than another third of shares outstanding could hit the market.

"We may offer and sell up to $300,000,000 in the aggregate of shares of our common stock identified above, and the selling stockholders may offer and sell up to 2,000,000 shares in the aggregate of common stock identified above, in each case from time to time in one or more offerings. "

The registration, declared effective by the Securities and Exchange Commission on Oct. 5, also cleared the path for unnamed selling stockholders to unload 2 million shares. Sellers will get all proceeds. Not one dime will go to the company.

*Losses: Analysts Expect More Of The Same

Normally optimistic analysts offer a rather poor prognosis for this year and next for Teladoc:

(Source: Marketwatch, TheStreetSweeper)

 

Those analysts apparently noticed that Teladoc got a big boost from its $163 million initial public offering last year and saw revenue grow from $26 million to $32 million last quarter (with a ~$4 million revenue assistance from the July 2016 HealthiestYou acquisition) ... while earnings have been mired in red since the beginning.

(Source: Seeking Alpha, SEC filings, TheStreetSweeper)

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Skyline Medical (SKLN): Going Down The Drain

While Skyline Medical (SKLN) hasn't turned a penny's profit in 14 years, it's sure learned how to dilute stockholders' shares.

Shares have blasted up recently, placing the medical device company's quivering finger on the trigger to continue draining share value.

The Eagan, Minnesota company - previously saddled with the gag-worthy name of "BioDrain Medical" -  offers a system that drains fluids from patients using standard surgical tubing.

Here's a bird's eye view of the reasons Skyline is a highly risky investment:

1. Skyline is low-cash, high-cash-burn and has sold only one unit since 2015.

2. It funds operations solely on a loan, convertible debt and stock offerings.

3. The company is under threat of being delisted from Nasdaq.

4. It recently filed a $20 million offering. Those shares can be sold at any moment, representing a significant dilution event.

5. The firm depends on reverse stock splits and professional stock promoters to boost the stock price.

6. Skyline repeatedly touts an unfortunate Polish-American partner; the market falls for it.

Investors may find other viewpoints here. Meanwhile, let's look more closely at the factors conspiring to dump this stock.

*1. Financial Despair

Skyline had always been in serious financial straits but things had grown much worse by the end of last quarter.

The company had been crippling along on ~$22 million in debt financing and offerings, including the public offering of August 2015.

Skyline had given up on even trying to sell its surgical drain product Streamway FMS. In the entire first half of 2016, they hadn't sold a single unit.

"There were no sales of STREAMWAY FMS units in the 2016 period, as sales efforts were curtailed in late 2015 due to our concentrated efforts on customer management. The ramp up in our sales efforts following our public offering have not yet resulted in sales of units."

Skyline's cash had predictably tanked and the burn was hot and high:

(Source: Company SEC filing, TheStreetSweeper)

Skyline must be getting used to such trouble ...

*2. Despair Deepens: Nasdaq Delisting

Skyline stumbled and fell at the very beginning.

The company first tried to sell shares in the public market in September 2014. But factors such as ongoing operating losses - Skyline lost $6.5 million in 2014 and lost another $4.4 million the next year -  delayed its  public offering until August 2015. 

Not long after Skyline's delayed offering, Nasdaq warnings arrived saying the stock was at risk of losing its listing.

That was no surprise because at times, investors could have picked up five or even 20 shares of Skyline for the price of a latte.

The stock was failing both Nasdaq's $1 per share price minimum and the $2.5 million minimum shareholder equity requirement.

Carl Schwartz, a dentist and then-interim CEO, said during a September update-proxy conference call that shareholders needed to approve three proxy items, including a proposed reverse split. The company simply didn't have the luxury of time:

"We believe the only practical way to meet the NASDAQ requirement in time, or to be eligible for an extension, is to get approval now for a reverse split."

Shareholders approved the measure. They understood all too well that a delisting would push the stock to the dreaded over-the-counter bulletin board where sickly companies typically go to die.

*3. Reverse Stock Split

So on Oct. 28, Skyline conducted what it fruitlessly hoped would be a Nasdaq listing-saving 1-for-25 stock split:

 

(Source: Yahoo Finance, TheStreetSweeper)

The desperate measure didn't change the value of the stock one bit. These reverse splits increase the stock price awhile and later serve as an ugly footnote to companies that go on to under perform.

The reverse split has pushed the share price to $1 or more for the past seven days (minimum requirement is 10 consecutive trading days).

But the stockholder equity rests well below the $2.5 million minimum:

(Source: Company SEC filing)

So Skyline appears to be perfectly positioned to weaken the value of stockholders' shares ...

*4. $20 Million Offering: Watch For Diluting Shares

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Robot Reboot Will Fail To Transform TransEnterix (TRXC)

Like the evil robotic transformer Starscream,TransEnterix (TRXC) just keeps transforming itself, returning to the battlefield again and again.

Each time the company switches course, it strings investors along for a long, thrilling build-up followed by yet another dramatic failure.

Though the experimental surgical robot company has been so busy rebooting, sales have been razor-thin and completely absent in 2015.

So we believe this newest transformation will ultimately send this Morrisville, North Carolina company flying into the trash heap, dragging unwary stockholders along for the ride.

Investors may find other viewpoints here. Meanwhile, catch the top eight reasons TheStreetSweeper would like to chuck this stock now...

*1. Hyped Stock

Posters on StockTwits and Twitter have been re-circulating baseless buy-out rumors or "something is cooking" hype and not one in ~75 dares to offer a less than bullish opinion on the stock:

  

(Source: StockTwits)                                                                                  (Source: Twitter)

Retail investors got pulled into the stock early in the year partially because, as one analyst noted, the stock was the subject of a "constant newsletter pump from January to March by Money Map Press (to be clear, TransEnterix was not behind the pump/did not compensate anyone for the newsletter pump)."

And this gag-worthy video probably pulled in a few folks:

(Source: YouTube)

Blue Horse Shoe Stocks, Penny Stock News and Biotech Insider Alert have all jumped into the promotional pandemonium.

Such promotions, often paid for by some mysterious third-parties, are always red flags. Real companies with real products or at least real promise don't depend on gags and hype.

*2. Multiple Failures

That sort of promotional effort is needed to draw in new, unwary retail investors when a company fails again and again and again...

Failure Number 1: The company entered the public market via a reverse merger with SafeStitch in September 2013 that cost ... prepare yourself ... $94 million. That stock-and-cash deal went for a company with virtually no sales, property or assets. TransEnterix booked an unbelievable $93.8 million to goodwill.

That's quite the deal, especially considering that TransEnterix actually said in a letter to the Securities and Exchange Commission:

"As previously discussed, the projections for SafeStitch show that a profit is never expected to be attained."

Failure Number 2: The company's Spider surgical system, a manual laparoscopic system, got cleared in Europe in 2011 ... and cleared by the US Food and Drug Administration in 2009.

But doctors didn't like the Spider and sales were almost nonexistent. Spider was discontinued on Dec. 31, 2014.

Failure Number 3: SafeStitch had received FDA clearance to market its hernia repair stapler, AMID HFD, in 2010, and also CE Mark approval in Europe. Sales began and stopped in 2010. After again getting FDA clearance in 2012, US sales resumed.

But no royalties were paid, implying no sales, in 2013 or 2014 under TransEnterix' watch. AMID was discontinued by Dec. 31, 2013.

*3. Another Failure: SurgiBot Rejected

The FDA recently handed Failure Number 4 to TransEnterix when it rejected the company's application to sell the SurgiBot robot system in the U.S. The company announced the rejection on April 20, 2016.

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Ekso Bionics Holdings (EKSO): Good Times Come To A Screeching Halt

Ekso Bionics Holdings (EKSO) has been involved with the colorful Adam S. Gottbetter, known for nimble PIPE financing, a quick song with British group Squeeze ...  or ...

(Source: YouTube video of Adam Gottbetter singing "Take Me, I'm Yours" with Squeeze)

... even a money raise for shock jock Howard Stern's favorite strip club.

Mr. Gottbetter became a key figure behind Ekso's private placement offering in January and February 2014 - Mr. Gottbetter's entity and sub-agents received ~3 million warrants exercisable at $1 per share, plus $3.03 million in commissions for handling the private placement.

But the good times came to a screeching halt.

Seven months after Ekso's PIPE, Mr. Gottbetter was sentenced to 1 1/2 years for stock fraud.

His guilty plea was in connection with schemes to manipulate three other companies' stock "with a view to selling his own shares at a profit." He's reportedly been involved with more than 160 companies but the  companies named in the SEC criminal complaint were Kentucky USA Energy (KYUS, bankruptcy), Dynastar Holdings (DYNA, now $0.05, little or no trading) and HBP Energy Corp. (HBPE, now $0.00).

(Source: SEC)

The Securities and Exchange Commission had this to say about Ekso's former investment banker:

"The SEC alleges that Adam S. Gottbetter orchestrated promotional campaigns that touted the prospects of microcap companies and enticed investors to buy their stock at inflated prices so he and his cohorts could sell shares they controlled and reap massive profits."

"During one meeting in New York City, Gottbetter complained about the difficulties of stock manipulation but conceded that robbing a bank was the only other way to make so much money so quickly."

When the trade publication QMed wrote about Mr. Gottbetter’s jail time for stock manipulation, the publication posted this comment from Ekso:

(Source: QMed)

But Ekso apparently did not break ties with Mr. Gottbetter's law firm after his plea.

In the company's April 2016 filing regarding Ekso's private offering, we see that Mr. Gottbetter's entity, Gottbetter & Partners, examined the validity of the stock offering.

(Source: Company SEC filing)

The SEC broke ties with the attorney last year due to the SEC complaint and Mr. Gottbetter's guilty plea. In a remedial action dated June 23, 2015, the SEC suspended Mr. Gottbetter from practicing before the commission as an attorney:

(Source: SEC litigation)

 

Investors may find other viewpoints here. Meanwhile, TheStreetSweeper presents an executive summary on the Ekso investment risks:

*The company went public via a reverse merger with a Chile-based shell, followed later by a reverse stock-split.

*Despite pleading guilty to criminal stock manipulation charges, Ekso's investment banker remained tied to the company through his law firm, an Ekso filing indicates.

*Potential dilution looms. In an August stock sale, Ekso greatly reduced the price of warrants and preferred shares, which may pose potential dilution following the Nov. 7 lockup release. Also, another 195,313 share unlock occurs on Dec. 1, 2016.

*Ekso partners are signing up with rivals.

*Ekso enjoys very little institutional interest and some institutions have sold their Ekso stock.

*Professional stock promoters are trying to increase the stock price.

*Executive compensation exceeds $3 million.

*Sales are low and plunging to just $1.6 million last quarter, while operating losses hit $9.4 million.

*The cash burn rate is ~$7 million or 4 1/2 times sales last quarter.

*Persistent negative cash flow.

 

Now we'll step back four years, when the investment risks were beginning to form.

*1. Background: Building Risk

Ekso took a rather unconventional route to getting listed on the Nasdaq.

It began with PN Med Group, a company operating out of its president's home in Santiago, Chile. PN Med initially sold shares for $0.02 in its May 2012 public offering. The two-person company planned to use the president's car to distribute medical supplies made in China to clinics in Chile. But by the end of fiscal year 2013, it had managed nothing more than $16,949 in losses and no revenue.

This sort of shell company is just what companies look for when they're planning the cheap, fast alternative to going public.

So Ekso spotted PN Med. On Jan. 15, 2014, the companies conducted a reverse merger into Ekso Bionics, with plans to develop and sell "bionic human exoskeletons." Concurrently, the company completed a complicated deal involving bridge notes and the Gottbetter-managed private placement resulting in a $1 per unit alternative public offering.

But the new Ekso stock didn't catch on and by early 2016 fetched only about $0.85 per share. So the company pulled a 1-for-7 reverse stock split on May 4, 2016, pushing the post-split price to $5.44 per share on June 1.

The share price plugged along at ~$6 through the terrible July 28 quarterly earnings report that revealed eight sales to rehab centers and a $10 million ($-0.61/share) loss.

Then the stock price got predictably hammered in the Aug. 9, 2016 follow-on public offering of 3.75 million shares at $4 per share. Though Ekso tried to soften the blow by leading the press release with news that the stock had been uplisted, the stock that traded for ~$6.22 plunged 37% to $3.94 in one day.

                                                        

                                                                                                 (Source: Yahoo Finance)

 

Now this Richmond, California exoskeleton maker just continues to heap risk on top of risk...

*2. Adjusted Prices Favor Insiders, Dilution Looms For Average Shareholders

That August raise generated about $14 million but came stacked with preferential treatment for some shareholders.

The company greatly lowered the price at which both warrants and preferred shares can be converted to common stock.

"Holders of our Series A preferred stock will be entitled to an anti-dilution adjustment as a result of this offering, which will result in dilution to the holders of our common stock, including the shares issued in this offering “ and “— The exercise price of certain of our outstanding warrants may adjust as a result of this offering, and the exercise of such warrants would result in dilution to our stockholders.”

So the conversion price of the preferred stock has been adjusted down from $7.07 to $3.74 per share."

And the warrants that would have carried an $8.75 exercise price were adjusted down to the bargain basement price of just $3.74 per share.

The filing includes this ominous note:

So these cheap shares owned by insiders will be released from the 90-day lock-up about Nov. 7, posing significant dilution potential for average shareholders.

*3. Partners Switch To Rival Technologies

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Investor Alert: Resolute Energy Corp. (REN) Downside Risk

TheStreetSweeper issues a critical alert for Resolute Energy Corp. (REN) investors.

The Denver, Colorado-based oil and gas company's stock blew up to the year's high, after announcing an acquisition and millions of dollars of new debt. 

TheStreetSweeper highlights the key reasons we consider this stock very, very risky right now.

*Outrageously Expensive Acquisition

It may sound ridiculous for a company reporting $424,000 in cash and a net loss of $-36.9 million ($-2.44/share) in June to announce plans in October to spend $135 million.

But that's exactly what happened.

REN on Friday completed the acquisition of oil and gas property in Texas for $135 million. The deal consists of $90 million cash and 2.1 million in common stock.

We might wonder where they came up with all that money. Well, REN is able to accumulated another 3,295 acres in the Delaware Basin by tapping its revolving credit facility and cranking out some new preferred stock.

The owners of the 62,500 shares of new preferred stock will be eligible for dividends that common stockholders will not enjoy. And those preferred shares are convertible at any time at ~$29.53 per share.

So the stock is currently trading above the initial conversion price, meaning dilution for existing shareholders.

*Blind Faith

REN is acquiring properties from Firewheel, a teeny oil company reporting only $4.3 million revenue over the six months ended June 31.

These properties "contain estimated proved reserves of 6.2 MMBoe with PV-10 of $45.8 million."

So REN has spent about three times the estimated value of reserves for production that may or may not pan out. This could be a very expensive disappointment for REN, whose own yearly production level has dropped ~4% to 7% from the previous two years.

*Short Squeeze

The enormous stock rally appears to be in part due to a short squeeze.

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22nd Century Group (XXII): This Smoking Stock May Be Bad For Your Health

The market must have been smoking weed when it ran up the stock in 22nd Century Group (XXII) to the highest levels of the year.

The cigarette company - which shares space in a Clarence, N.Y. office with a private cigarette company and a dentist -  lost a stunning $11 million last year and $2.8 million just last quarter.

The company is researching genetically engineered cannabis but focuses on genetically modifying tobacco to produce high and low nicotine products.

The main products include high-nicotine and low-nicotine cigarettes called Red Sun and Magic, very low nicotine cigarette Brand A and very high nicotine cigarette Brand B, Spectrum cigarettes used in research and the X-22 smoking cessation aid.

Despite the stock rally, XXII has been swirling within a smoky venue of paid promotions - a lawsuit blocking key market entrance - heavy cash burn - poor financials - looming warrants - failed study endpoint - likely inability to get modified risk tobacco product (MRTP) labeling - and expected inability to nab a partner for phase 3 testing.

Investors may find other viewpoints here. Meanwhile, TheStreetSweeper highlights the top reasons we think XXII will end up burning investors:

This stock has been stoked by a series of paid promotional campaigns at a cost of $15,000 to $30,000 per campaign... Paid for by third parties.

(Source: stockpromoters; click for full list)

XXII promotions consist of a stunning 14 campaigns this year, with most hype emailed to investors in May.

Many of these promotions suggest XXII could get MRTP labeling.That's modified risk tobacco product labeling from the Food and Drug Administration. The labeling would be a key marketing tool because a tobacco company can't legally make reduced risk claims without it.

Despite the promotions, much evidence suggests that XXII will not get MRTP labeling ...

*2. XXII Failed Study, Swedish Experience Foretell Doom

It's highly unlikely XXII will get that desirable labeling.

Why?

First, the company has failed to advance its one and only phase 2 study. The study of the smoking cessation product called X-22 has been inactive for five years:

(Source: US National Institutes of Health)

Yet Swedish Match, a Stockholm-based company, is in the midst of about 70 active or completed studies for its products:

Source: US National Institutes of Health)

But with all that data for the FDA to consider, even Swedish Match has failed to secure MRTP approval for its various finely ground smokeless tobacco products thus far.

So we can't imagine how XXII - without a single completed study - can possibly expect approval of its MRTP application.

*3. Partner? Study Results Say No

XXII realizes that MRTP label depends on getting at least one study completed. But that will take at least $25 million.

The company doesn't have that kind of money. Cash coffers contained just $2.8 million in June but added ~$5 million from a stock and warrant deal. Also the company runs through millions and millions of dollars every six months. Cash burn jumped 64% in the first half of the year versus the prior year to $5.9 million or ~$3 million per quarter -- without the costs of resuming the study:

Even with cash now around $5 million, XXII will have to find a partner if it wants to take the next step.

But that is unlikely.

A partner would want some legitimate hope that phase 3 might succeed.

Though most investors don't know it, the study was dropped years ago after phase 2 failed to show any difference in the four-week period between X-22 and conventional cigarettes:

(Source: 22nd Century, BusinessWire)

Anyone willing to bet $25-$30 million that phase 3 will produce better results than phase 2? We didn't think so.

Unfortunately, XXII's track record with investors isn't too hot, anyway ....

 

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Ocean Power Technologies (OPTT): Destined To Wipe Out

Ocean Power Technologies (OPTT) has been riding a wave of momentum trading activity. Since mid-July it's been a lot of fun.

But TheStreetSweeper has spotted ferocious waves swelling up on the horizon ... And OPTT is careening toward a teeth-jarring wipe out.

OPTT began operating two decades ago and still hasn't figured out how to commercialize its system of generating electricity from ocean waves.

On the surface, OPTT's virtually non-existent revenues appear to depend upon the government.

Really though, stock offerings and debt have kept the company afloat. It closed two stock deals last quarter but is left with no committed sources of equity or debt financing right now.

Meanwhile, OPTT has figured out how to attract a Securities and Exchange Commission investigation ... and become the subject of a class action lawsuit poised with potential stock dilution for loyal stockholders.

The stock is flying right now, partially because the market doesn't understand the insignificance of the September 13 announcement. The company hopes to develop a power buoy with the U.S. Office of Naval Research. The initial phase won't be complete until early June 2017. And OPTT is only getting ~$250,000 for that phase and maybe up to another $500,000 more if it's completed and Naval Research finds the funding....a whole lot of ifs.

Let's look at nine factors TheStreetSweeper believes will dunk this stock.

*1. Money Flies Out The Door Month After Month, Year After Year

In the most recent quarter, OPTT made just $200,000. And it took ~15 times that to operate the business ... a whopping $2.9 million.

(Source: Company SEC filing, TheStreetSweeper)

In the entire fiscal year of 2016, the company's revenue didn't even reach $1 million ... But losses hit the $13 million mark...

(Source: Company SEC filing, TheStreetSweeper)

The financials are so awful that auditors say it's highly doubtful the company can even continue to operate.

OPTT just stuffed its piggy bank with $3.6 million raised from a stock offering in July, raising the total cash to $9 million.

But the company makes ~$1 million hits on the piggy bank each month, bringing the cash to about $7 million.

That won't last long ...

*2. Investors On The Line

OPTT warns that it can't seem to stop burning up money and shareholders' investment may be lost:

"If we are not successful in our efforts to raise additional capital sufficient to support our operations," the company's latest 10-Q warns, "we would be forced to cease operations, in which event investors would lose their entire investment in our company."

In fact, the potential for diluting OPTT stock once again could happen as soon as November ...

*3. Tragedy, Lawsuit, Dilution Overhanging

The stock dilution threat is just around the corner, depending on a federal judge's approval of settlement terms of a consolidated lawsuit aimed at OPTT.

The company has been sued by a class of investors who bought the stock during the April 4, 2014 secondary offering at $3.10 per share. The lawsuit alleges untrue and misleading statements and/or omissions occurred around that time. 

At this point, it looks like OPTT will pay $5000,000 and its insurer will pay $2.5 million under the settlement.

Here's the kicker: OPTT will also hand over 380,000 shares under the current terms. That's about 12% of the 3.15 million shares outstanding.

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Everyday Health (EVDY): Quick, Call The Doctor!

Everyday Health (EVDY) is looking so pale that it may be secretly looking up its symptoms on rival website, WebMD.

Everyday had never exactly been the picture of health. The WebMD wannabe had racked up a $2.38 per share net loss when it went public in February 2014. The company made money in 2014 but slumped back to a $12 million loss or -$0.36 last year.

Housed in luxurious $4.5 million Manhattan suites far from Silicon Valley, Everyday is showing some disturbing symptoms exacerbated by its financial operations and the changing industry.

Here's how the prognosis looks to TheStreetSweeper:

Investors may find other viewpoints here plus additional risks and background here. Now let's look at why we think this healthcare search site needs to call the doctor.

*1. Google Changes

Ten years ago, WebMD was part of Google's experimental program to help improve health search results.

The experiment worked and WebMD became a popular site for consumers to diagnose their own illnesses. Before long, the Mayo Clinic developed its own well-recognized symptom checker.

Everyday Health and other content aggregators rushed in and began offering their solutions. The problem is that they must depend on Google searches because they aren't recognized brands.

Now a decade later Google wants to keep eyeballs glued to its own pages rather than rushing them away to the content aggregators.

Google began this effort in June, when it rolled out a new symptom search for Androids and Apple phones or tablets.

Now this mobile platform is pushing Google ahead of the game as more and more people switch from PC to smartphone searches.

*2. Looming: More Risk

Everyday Health and other content providers are dependent on Google, the No. 1 destination for health information: Get strong Google results or die.

Other risks are building right behind those posed by Google's new symptom search, including:

*The app is initially available in English in the U.S. with plans to expand over the months into other languages, countries and enhancements, thus introducing future challenges to Everyday Health.

*Google's symptom search eliminates the need to cross-check symptoms on WebMD or Everyday Health because cross-checking can be done on Google.

*Google is partnering on symptom search with institutions such as Harvard Medical School and the Mayo Clinic. Doctors are helping with Everyday Health's symptom lookup but most content is by writers who aren't doctors. Examples include:

(Source: Everyday Health)

*3. Mobile App Downloads Decline

Mobile is of growing importance to Everyday Health, which gets 75% of its total traffic from mobile.

Everyday's 2014 mobile revenues grew 82% to $68 million. But mobile has slowed drastically, with 2015 revenues hitting only $73 million or just 8% growth. However the company stopped breaking out mobile revenue after the third quarter of 2015, so we assume revenue growth has further declined.

The chief reason for the mobile disappointment is likely because iPhone users show far more interest in WebMD than Everyday. Everyday Health download rankings frequently fall below 1,500 in the health and fitness category:

 

(Source: App Annie)

That compares with WebMD's app which consistently ranks around the top 73 downloads:

(Source: App Annie)

An insidious threat has already taken a toll and is set up to kill much of the ability of sites like Everyday Health to make money from ads...

*4. Ad-Blockers Gobble Profitability Pathway

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Teck Resources Limited (TCK): Lurching Toward A Monstrous Drop

The soft, scraping sound behind you is becoming more urgent. Don't look back. Rest assured the source of that cacophony is a clomping pair of red-splattered boots worn by zombie stock,Teck Resources Limited (TCK).

Indeed, this stock appears to be one of those on the ragged edge of the looming apocalypse. Dying sales figures, horrifying commodity prices and grotesque earnings - a 96% second quarter decline - have been sucking the life out of Teck.

The trick will be walking away from Teck as it leads a swarm of undead toward a cataclysm of unspeakable terror. To aid in that effort, TheStreetSweeper offers the top 10 bumps in the night for this stock.

*1. Sales Decline

The Canadian mining company focuses on coal for steel-making, copper and zinc through assets in Canada, the United States, Peru and Chile.

But now the company is clearly struggling as quarterly revenues dropped 13%, which CEO Don Lindsay said was "primarily due to lower prices for all our principal products." First-half sales dropped 15%:

(Source: Company SEC filing)

The sales trend has been nothing but down, down, down for five years:

(Source: MarketWatch)

Revenue fell 4% in 2015 from the prior year. Since 2011, Teck has seen a staggering 28 percent drop in revenue.

The situation resulted in CEO Lindsay issuing a warning, "we have lowered our coal and copper cost guidance for the full year."

*2. Valuation Absurd; Profits Plunge

Yet the stock sports a ridiculously oversized forward price-to-earnings ratio of 25.44.

But Teck isn't even making a net income. Teck earning figures took an epic drop into the red in 2015 ... The company lost over $2 billion!


(Source: MarketWatch)

Shareholders continue to take it on the chin this year, too. In the second quarter, profit dropped 96.2%.

That's right. Teck management said adjusted profit declined to $3 million Canadian, or $0.01 per share, versus $79 million or $0.14 per share last year.

But rather than driving a stake in Teck's heart, the terrible July 28 financials fueled the rocket ship:

(Source: Benzinga)

The desperate company has been deferring capital expenditures, gradually laying off 1,000 of its 3,000 employees, selling assets and even shutting down its Coal Mountain project, a British Columbia mine once anticipated to produce 2.7 to 3.5 million tons of coal.

But even those efforts likely will not be enough for this commodity-dependent company. Such commodity businesses have taken a beating for a couple of years.

More trouble lies dead ahead...

*3. Commodity Prices Forecast: Demand Declines

Judging by the stock run, the market must have bought into the CEO's second quarter comments on his commodity business.

"While the commodity cycle continues to be challenging, we are starting to see some positive changes in the direction of zinc and steelmaking coal prices," said Mr. Lindsay in a statement.

But the world steel industry itself indicates the future appears gloomy.

Global steel demand contracted -3% in 2015 and the World Steel Association believes demand will decrease once again by -0.8%.

China has been Teck's chief customer. Yet the World Steel economics committee chairman, TV Narendran, said the greatest weakness in steel demand is expected to be in China:

“The economic environment facing the steel industry continues to be challenging with China’s slowdown impacting globally across a range of indicators contributing to volatility in financial markets, sluggish growth in global trade and low oil and other commodity prices...

"In 2016, while we are forecasting another year of contraction in steel demand in China, slow but steady growth in some other key regions including NAFTA and EU is expected. Growth for steel demand in all markets except China is expected in 2017."

 

(Source: World Steel Association)

Indeed, World Steel anticipates China's demand to drop 4% this year and another 3% next year. Annual steel product demand is expected to be 626.1 million tons ... a whopping 15% lower than in 2013.

*4. Negative: Free Cash Flow

Meanwhile, the company is already failing to generate cash. In fact, last quarter's negative free cash flow hit a stunning $-87.86 million.

That makes negative cash flow in each of the last three quarters ... adding up to negatives in 8 of the past 11 quarters (here).

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Airgain (AIRG): Looming Dilution, A Potshot From Its Own Underwriter ... And More!

TheStreetSweeper issues an alert for Airgain (AIRG) investors. This recent IPO has flown for no reason and now circumstances have aligned to suddenly take all the air out of Airgain.

*Development No. 1: Nearly 3 million shares registered late Friday

The wireless network antenna seller has taken advantage of the high stock price to set up employees for more gains. Almost two hours after the market closed on Friday, Airgain filed to register 2.69 million shares of stock available under various incentive plans ... 

(Source: Company SEC filing)

The issuance represents a cost to current investors ... looming potential dilution. And that's not all!

*Development No. 2:  1 million stock options pose immediate dilution

A second raft of potential dilution awaits investors, too.

Roughly 1 million options are exercisable immediately, according to the chief financial officer's comments during the earnings call 

Those options appear to be awfully cheap ... exercisable at just over $2 per share.

(Source: Company SEC filing)

But Airgain isn't finished diluting shares yet...

*Recent Development No. 3: Another ~5 million shares loom just around the corner

A third raft of potential dilution awaits investors in the form of ~5 million shares - in converted preferred shares, dividends and warrants. These shares have been held since the IPO in August and will be available for trading as soon as the 180-day lock-up period ends.

Imagine all the champagne-cork flying and caviar gulping at insiders' New Year's Eve parties as they begin celebrating their potentially huge payday around Feb. 7!

After all, the stock is trading ~94% higher than just six weeks ago.

(Source: Yahoo Finance)

And an odd circumstance has developed right on top of the dilution concerns ...

*Recent Development No. 4: Coverage only from its own underwriting firms ... and they're not even on the same page.

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Exact Sciences (EXAS): Flush This Stock!

Other than the out-of-whack stock price, nothing seems to be going exactly right for Exact Sciences (EXAS).

In the 21 years since the Madison, Wisconsin company began trying to develop and sell a DNA-based colorectal cancer screening tool, it has produced three failures and one product whose fate remains to be seen.

PreGen-Plus, Effipure and ColoSure initially attracted a partnership with commercial lab Laboratory Corporation of America Holdings (LabCorp). Just a few years after the 2003 launch of PreGen-Plus, Exact got slapped with an FDA warning letter noting "serious regulatory problems." The medical device couldn't seem to rise above that issue or a general lack of popularity despite the efforts of LabCorp's 1,100 sales people.

So LabCorp discontinued both PreGen-Plus and Effipure in June 2008. ColoSure was launched the following month, but soon suffered bad press and very disappointing sales, generating paltry royalties of $20,000 and $26,000 yearly in 2010 and 2011, respectively. Finally, in 2012, LabCorp reported "no sales," thus no royalties for Exact. Now LabCorp had its third failed product by Exact.

About half-a-billion dollars had gone down the latrine by the time the company launched its most recent DNA-based colon cancer diagnostic, Cologuard, in 2014.

But last quarter only 54,000 Cologuard tests were processed at $21.2 million revenue, generating two times more operating losses than revenue.

The company was so desperate it funded its own study in hopes of getting good test results from Cologuard.

But disappointment struck this time, too.

Researchers recently released results showing the more traditional screening is both less expensive (FIT's ~$30 versus Cologuard's ~$600, though covered by Medicare and some insurance companies)and, in apparent conflict with an earlier study, more effective than Cologuard (referred to as MT-sDNA.)

(Source: gastrojournal)

In fact, researchers found Cologuard would only be comparable with FIT (fecal immunochemical test) if consistent participation by users jumped 68% or Cologuard's cost fell a whopping 60%.

But Exact can't discount Cologuard 60%.

Why? Because Exact spends so much to generate revenue. The company reports spending 62% of revenue to capture those sales.

The self-funded study bummer is just part of what is not exactly right with Exact. Investors may find other viewpoints here, while we consider other risks that could send their investment straight down the water closet.

*1. Clinician's Guide: Patients Resist Cologuard Requirement

Cologuard costs some 20 times greater than other stool tests. And it turns out that patients resist the stool sample collection and preparation required by Cologuard (referred to below as sDNA).

That's according to doctors who wrote a clinician's guide to fecal blood testing that was published last April in the Southern Medical Journal:

"With sDNA, the patient must self-collect the entire stool and ship the specimen via delivery agency to the laboratory for analysis. In contrast, FIT requires only one stool sample. Patients seem resistant to sample their own stool. The requirement of collecting the entire stool and shipping the specimen for sDNA testing ..."

                                           

(Photo source: Cologuardtest.com)

"rather than taking a small sample for FIT and dropping it off at a local laboratory is concerning for many," researchers wrote.

In fact, Exact has noticed the ewweeww factor with Cologuard - which still requires the "whole stool" collection used by its previous failed products. Patient compliance for Cologuard was already low at 69% in the first quarter ... but fell even more in the second quarter to just 68%.

*2. Dangerous False-Positive Results

Another concern is Cologuard's high level of false-positive results.

That's according to final recommendations from the US Preventive Services Task Force (USPSTF). The group noted that FIT-DNA (Cologuard) found 92% of cancers versus FIT's 74%, however Cologuard correctly identified 8% fewer true negatives than FIT identified.

The stock had moved on hope the panel's update to its earlier report would remove Cologuard from "alternative" testing to "recommended" testing. But the final recommendation simply dropped the terms alternative and recommended.

The USPSTF provided the table below, summarizing various screening techniques.

(Source: USPSTF, TheStreetSweeper note, click to see more)

The task force also wrote that FIT-DNA (Cologuard) produces "... more false-positive results per screening test and an increased probability of harm from diagnostic colonoscopy."

(True negative means the disease being tested for was not found. False positive means the proportion of people who are actually free of the disease but test positive.)

The task force added that the FIT-DNA (Cologuard) false-positives mean "a higher likelihood of follow-up colonoscopy," an invasive procedure which has downsides of anxiety, discomfort and even morbidity.

*3. Expensive Direct-To-Consumer Marketing

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Resolute Energy Corp. (REN): Primed To Decline

 

Resolute Energy Corp. (REN) stock is primed and just one down-tick away from disaster.

TheStreetSweeper issues this quick alert on this Denver-based oil and gas company that is still the same miserable money-loser it was a couple of weeks ago ... except now the stock is even more dangerously overpriced.

Here are TheStreetSweeper's top five reasons that we believe this stock is begging to tank:

*1. Nothing New: Management Cheering

The company's production is substantially declining:

Not surprisingly, financial results for 2Q were just as horrible as the production figures. Revenue declined and negative earnings persisted. "Resolute recorded a net loss of $36.9 million, or $2.44 per share, on revenue ...  of $35.4 million during the three months ended June 30, 2016.  This compares to a net loss of $259.1 million, or $17.30 per share, on revenue ... of $48.4 million during the three months ended June 30, 2015."

The company placed that vital information on page 4, well below the company cheerleading statements that began with: "Production guidance revised upward by thirteen percent."

During the month following the release of those financials, the stock climbed from $8.35 to $22.88, an astounding 174%. Why? Because REN guys felt optimistic. And others piled on more unfounded optimism...

*2. Pumping: Chat Rooms, Fool

Chatter within chat rooms such as investorshub has heartily promoted REN to retail investors. Such attention is often a hallmark of a stock groomed to be a highflier one day, and doomed to be a lowdown loser the next. Note that nobody talks about the company's financial condition or potential. It's all about the stock movement.

(Source: investorshub)

Briefing.com threw REN onto the radar, too:

(Source: briefing.com)

Motley Fool also published a bullish piece (here) which helped rocket the stock, while the author suggested the company's optimistic production guidance was the primary driver.

*3. Big Investor: Selling REN Stock

A major investor - SPO Advisory managed by John Scully - has found reason to sell REN stock.

SPO dumped 10 million shares in late April, severely trimming the investment firm's ownership:

 

 

(Source: Company SEC filing)

Indeed, institutional investors were selling out, pre-reverse-split, at nearly three times the rate of those taking new positions:

(Source: Nasdaq)

*4. Analysts: Mixed

Meanwhile, as a testiment to absurdity, REN is way above analysts' average one-year price target:

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Rentech (RTK) Kryptonite Slams Investors

Like a diabolic superhero, Rentech (RTK) has tried to leap tall financial issues with a single bound.

But now a ton of kryptonite is headed its way, promising to decimate the company stock in one fell swoop.

TheStreetSweeper's executive bullet points summarize the superhuman problems that will chop this wood fiber company's stock into splinters:

*A one-time tax gain creates an illusion of profitability.

*Revenue drops 20%; EPS falls 486%.

*Negative and extremely low margins doom profitability.

*The natural gas industry presents indomitable competition.

*Key plant reaches only 40% of capacity, three years after acquisition.

*Nearly $19 million in contract penalties and plant modification costs pressure cash coffers.

*Interest in low-performing nitrogen sector further weighs on Rentech.

*The company loses $153 million in 2015; executives make millions.

Investors may find other viewpoints here and the company website here. Meanwhile, here's a closer look at Rentech's stock slayers:

*1. Not So Super, After All: One-Time Gain

Rentech's second quarter turned in a $358.6 million book gain. But an overly excited market rushed to pop up the stock without taking time to understand what's really behind that number.

The figure is just an illusion of profitability caused by a one-time tax gain.

During the Aug. 10 2Q earnings call, chief financial officer Jeff Spain said:

"We recorded a pretax gain on the sale of Rentech Nitrogen of $358.6 million which was booked in discontinued operations. This gain was comprised of cash proceeds of approximately $60 million in common units of CVR Partners valued at $202 million based on CVR’s closing price on March 31. These values were compared to Rentech Nitrogen’s net book value excluding the capacity in holdings which was a negative $97.6 million."

Completely misunderstanding the book gain, the market sent shares soaring more than 20% in a day and over 50% in seven trading days.

*2. Revenue: Can't Save The Day

People didn't understand that Rentech's second quarter revenues actually swooped lower!

 

 

 

 

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Resolute Energy Corp. (REN): Overloaded And Ready To Tank

TheStreetSweeper issues an investor alert for Resolute Energy Corp. (REN).

Considering this stock's flight to a mind-blowing $20 per share early this week, investors would never guess the pathetic condition of this Denver-based oil and gas company's finances nor its junk status nor its huge 2Q loss of $-2.44.

The stock jumped following the Aug. 8 2Q report that the board had approved continued drilling in 2016 and average daily oil production improved from 9,016 barrels the quarter earlier to 11,865 barrels. What wasn't announced is the recent production level is a ~4% to 7% drop from the previous two years.

The market pushed up Resolute and other oil companies' stock with the crude oil rally on Aug. 15.

In a heartbeat, everything changed.

Oil prices tumbled yesterday and, after the closing bell, Resolute filed notice that Nicholas Sutton will retire as CEO.

Mr. Sutton owns 2.1 million shares of the company stock. Considering the stock price has nearly tripled this month, TheStreetSweeper thinks it wouldn't be a bad idea if he chooses to sell a bunch of shares and ride off into the sunset.

It's unclear how smoothly the company can replace the man who has been CEO since the company's founding in 2004. Mr. Sutton will stay on as executive chairman but the new chief executive will be Richard Betz, a manager since 2004 and chief operating officer since 2012.

Below are five more big reasons TheStreetSweeper is warning investors that this stock will almost undoubtedly suffer a rapid, tooth-rattling drop from the current ridiculous levels.

*1. Reverse Stock Split: Stock Flies

Resolute stock looked like one big empty oil tank when it pulled a 1-for-5 reverse stock split effective just  two months ago, on June 8.

The maneuver worked better than anyone might have imagined, rocketing the stock nearly 3,000%.

(Source: Nasdaq)

The stock split put Resolute in compliance with the $1 per share minimum requirement. The reverse split also helped improve the valuation following its latest New York Stock Exchange delisting notification received last November. The company had been out of compliance because market capitalization and shareholder equity have each dropped below $50 million. The exchange will continue to monitor those factors.

*2. Wandering In: Wunderlich, Etc.

Within days after this stock split, investment analysts began lining up to put in their two-cents worth about Resolute.

Barclays analysts on June 14 maintained an "underweight" rating and raised the price target from $1 to $4.

On July 11, Wunderlich Securities upgraded the stock from "hold" to "buy" and set an $8 price target, up from $4. The very next month, the firm raised the PT two more times ...

On Aug. 10, Wunderlich raised the price target again... this time to $15.

Despite no Resolute news (and bad news about oil prices and the CEO departure just two days away), on Monday, Aug. 24, Wunderlich raised Resolute's price target to $25, triple the July figure.

Other firms' Resolute ratings are shown below.

(Source: MarketBeat)

Wunderlich, Barclays and Johnson Rice each shared underwriting responsibilities for the company's 16.25 million share offering at $8.22 back in May 2013. We can only imagine that these firms would also be interested in handling any future underwriting duties.

*3. Downgraded: Junk Status

Resolute had already been suffering from a junk rating when its deteriorating credit quality spurred Standard & Poor's further downgrade ... just four months before the reverse stock split and the odd glut of analyst attention:

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Zagg (ZAGG): Why Investors Should Zag Away From This Stock

We couldn't blame Zagg Inc. (ZAGG) if it's quietly suffering buyer's remorse.

But the cell phone accessory company will really be in trouble when investors understand the reason for the disappointment ... and that buyer's remorse rubs off on them.

The troubles can be traced back to shortly after February, when Zagg bought Mophie, maker of an iPhone battery case called Juice Pack Air. Mophie's pretty battery cases seemed to be flying off the shelves. So Zagg, looking to diversify, rushed in and bought out Mophie for $100 million.

It was supposed to be a fire sale.

Enter the PokemonGo craze. The augmented reality game launched July 6 and immediately became a phone battery hog.  Zagg's stock ran up 38% on hopes that Zagg could help address the need with its Mophie battery-extending case.

But now Zagg is positioned to run out of steam.

Investors may find other viewpoints here and the company website here. Meanwhile, TheStreetSweeper examines why Zagg's stock is now incredibly risky.

*1. Set Up For Failure

As it turned out, Mophie had been losing multi-millions. As competition has grown, business has deteriorated, handing Mophie last year a loss of $29 million.

So Zagg management justified the $100 million cash-and-debt acquisition by touting sales and growth figures.

"Mophie’s 12-month sales are estimated to range from $210 million to $230 million, or sales growth of 3% to 13% compared to 2015 estimated sales of $203 million," said chief financial officer Bradley Holiday during the March 9 earnings call.

Then two months later, after everyone had forgotten about management's estimates, the pro forma numbers came out. Sure enough, Mophie sales grew only slightly to about $186 million. ... The reality was $24 million to $44 million less than those fancy touted numbers.

(Chart 2 Source: Zagg SEC filing)

Those exaggerated numbers have set Zagg up for failure ....

*2. Touted Growth Despite Deteriorating Business

Since 2015 sales turned out puny compared to those touted by management, the Mophie segment will have to sell a ton of cases this year:

The Mophie segment must be gulping over those expectations ... because the business has been deteriorating over the last couple of years.

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Magellan Petroleum (MPET): Gas Mask Needed For This LNG Plan

Magellan Petroleum Corporation (MPET) threatens to become the poster child for the "good deal" gone bad.

Teetering at the brink of bankruptcy, MPET is an old time oil and gas company that executed a reverse split last year, then recently fell into a reverse takeover on hopes of floating an $8 billion idea that won't be operational until 2025. The plan is to build a liquefied natural gas terminal on 477 leased acres in Louisiana. The idea is stoked by a man who has been vilified by activist investor Carl Icahn.

The stock has rocketed on this plan ... but is now precariously positioned for decline.

Investors may find other viewpoints here and the company website here. Meanwhile, TheStreetSweeper presents the immense risks facing MPET investors.

*1. Billions: Cost of MPET Plan

At the core of the MPET merger is Driftwood LNG. Former Cheniere Energy CEO Charif Souki filed a request in May with the Federal Energy Regulatory Commission (FERC) to begin an environmental review process for Driftwood.

The new, as-yet-unnamed company hopes to produce and export 26 million tons per year of LNG in facilities in southwest Louisiana. Construction is hoped to begin in 2018 and will likely take seven years, with the first plant operational in 2022. 

Company officials expect the project to become fully operational the second quarter of 2025. The project is expected to cost $8 billion.

In contrast, Denver, Colorado based oil and gas company MPET has turned into a shell of a company forced to sell its assets to fund operations. The company operates under the cloud of going concern issues and earnings have been negative. Over the last 12 months, the earnings per share have been in the red at  $-9.17.

(Source: E-trade)

At the end of March, MPET's available cash had fallen to $131,000.

*2. "This Is Insane"

Yet this odd pairing of a dying company with a startup anticipating billions of dollars in expenses has captured retail investors' imagination and pushed MPET shares up over 400% since the Aug. 3 merger announcement.

The reverse takeover of MPET will allow Mr. Souki to take his new company public, Tellurian Investments, with business partner Martin Houston.

Just last December, billionaire shareholder Carl Icahn ousted Mr. Souki from Cheniere.

He said Mr. Souki was “taking $80 million out, and any stock he could sell, he sold."

Mr. Icahn continued his comments on Mr. Souki, according to Bloomberg:

“So here he is doing this, going in with one idea after another. I looked at this and said, ‘This is insane. This is the problem.’”

“I’ll tell you know what he knew -- he knew how to go almost bankrupt, because that’s what happened to him.”

Cheniere approached bankruptcy in 2008 as Mr. Souki developed a multibillion-dollar plan to import liquefied natural gas into America, but the U.S. had become awash in gas production from shale drilling. Cheniere was left with huge, expensive LNG tanks and nearly empty pockets, as Forbes wrote.

Then Mr. Souki pushed an even more expensive idea of exporting some of that U.S. gas overseas. But the collapse in oil prices came as the costly plan was slowly unfolding.

(Source: Yahoo Finance)

Cheniere shares fell by more than half in 2015, attracting Mr. Icahn's stake in the company in August 2015, two seats on the board and an interest in examining Mr. Souki's ideas. 

According to Bloomberg's April 2016 article, after Mr. Souki was fired, Mr. Icahn commented that Mr. Souki had “harebrained ideas.”

Under the MPET deal, each share of Tellurian will be converted into the right to receive 1.3 share of MPET. The company will issue about 122 million shares of common stock to Tellurian shareholders - about 95% of MPET's outstanding stock. This dilutive deal is expected to be completed in the last quarter of 2016.

Yes, that's 122 million shares added to the 5.8 million outstanding. So at around $5 per share the market cap exceeds $600 million ... for a company that has nothing but an idea.

*3. Oversupplied: Gas

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Northern Dynasty Minerals (NAK): Looming Dilution Potential, 6 More Downside Risks

After a decade of controversy over its proposed Pebble mine, Northern Dynasty Minerals (NAK) is still absolutely nowhere.

At first glimpse, unwary investors might expect significant news because the stock has practically doubled over a month to unsustainable levels.

The Pebble property covers 153 square miles of land in Alaska, taking in at least 15 square miles for the proposed mine operation and tailings ponds. The project would place one of the world's largest copper and gold mine against the world's largest salmon fishery and environmental concerns.The project has not yet entered the permitting phase.

So there's no real news now and this stock has no upward trajectory left. Investors may find other viewpoints here and the company website here. Meanwhile, TheStreetSweeper highlights seven key downside risks to NAK investors:

*1. Hello, Momentum Traders

Momentum traders keyed in on the stock on Monday, July 11, when Insider Monkey noted that Sprott Asset Management disclosed a 5.45 interest in NAK. Volume jumped to 5.8 million, more than double the shares traded the Friday before - the day of the company's Sprott filing. The share price closed 29 percent higher at $0.54.

(Source: Yahoo)

But by July 29, Sprott had already begun selling part of its NAK stock. The firm disclosed its ownership had dropped to 3.9% or 10,490,200 shares .... a sale of 4,234,300 shares.

*2. Pushing NAK

Then - and we have to extend congratulations here on the apparent huge following and ton of money made -  Rick Rule, with Sprott Resource Corp. and Sprott Holdings, suggested the stock during a BNN interview on Aug. 11.

(Source: BNN)

According to his comments on BNN: "It is an ultra-high risk optionality play. One of the biggest, and highest grade copper gold deposits in the world, it is subject to a legal and political dispute. In our opinion, a political resolution with Alaskan Indigenous owners would solve the legal dispute, and both sides have ample incentive to reach a mutually beneficial agreement. This will be a binary outcome, a huge win, or a substantial loss, and the time frame is indeterminate."

Some of the air had gone out of the stock from the time of the Sprott disclosure a month earlier until Mr. Rule's suggestion last week ... But NAK again rose - notwithstanding the fact that Sprott Resource Corp. itself extended its losses recently, reporting $17.5 million net loss in the second quarter. Traders apparently also didn't notice Sprott's stock chart:

(Source: Yahoo)

Indeed, the suggestion from Sprott advanced the NAK stock runup.

Congratulations to those who got in on the momentum trading over the past four weeks or so.

Congrads to Sprott ... likely poised to sell more stock right now.

Keep in mind that this trade activity is based on - indeed in spite of - the same old, same old ...

*3. Same Ol' Losing Company

NAK is the very same company it was on Aug. 12.

The day after Mr. Rule included NAK among his investment suggestions, NAK finally had some real news. On Aug. 12, the company reported it had lost millions again.

NAK filings also disclosed it is quickly burning through its minimal cash stash:

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Energous (WATT): Don't Get Shocked ... Big Downside Risks

Judging by the stock buoyancy of Energous (WATT), you'd never know that the developer of wireless charging technology just announced it lost $10.3 million. And on a per share basis the loss hit $0.62.

It seems the market missed the Santa Jose, California firm's comment near the bottom of the press release that it has a new investment ... which is dilutive.

Maybe the market is beginning to get bleary eyed at yet another overly optimistic spin: "With the new investment from Ascend Capital and our first silicon and royalty revenues expected before the end of this year, our financial position is secure. We are poised to expand our company and accelerate the pace of licensee expansion to make our vision of a ubiquitous WattUp ecosystem a reality and solidify our position as market leader."

Investors may find other viewpoints here. Meanwhile, TheStreetSweeper alerts investors to four good reasons this stock is poised to wreck investment portfolios:

*1. WATT: More Money, More Money

WATT keeps running to the stock trough in search of more cash. And each time the company goes back for more, the quality of the stock offering declines. Consider:

*Dec. 10, 2014: Secondary offering. $7/ share. Raises $21 million. (Oppenheimer, Roth, National Securities)

*Nov. 17, 2015: Secondary offering. $6.90/share. Raises $19 million. (Ladenburg Thalmann, Roth, National Securities) Note: lower share price, lower raise, second-tier bank compared with 2014.

*Aug. 9, 2016: Ascend Legend private purchase. $12.36/share. Raises $20 million. Note: Generally undesirable PIPE (private investment in public entity) deal results in warrants good for 5 years, each worth $6.80/share, according to a Black-Scholes calculator. The deal participant makes money if he can sell the common share at $6, which has a dilutive effect on current shares.

*2. Puff-Puff: High Claims; Delivery's Tougher

WATT doesn't need the fluff pumped out by professional promoters, such as those who hyped the stock in 2014 and 2015 (here). It can be overly optimistic all by itself, thank you very much.

Claim: "Ascend is a multibillion-dollar hedge fund based in California," CEO Steve Rizzone said during the Aug. 9, 2016 earnings call.

"The second consideration is the investor, receiving an investment of $20 million from a $3 billion hedge fund like Ascend is a strong validation point for Energous," Mr.Rizzone added.

Reality: Ascend isn't a multi-billion company. Bloomberg shows Ascend is valued about 230% lower:

(Source: Bloomberg)

Milestone Claims: WATT managers consistently talk (as SA author Paulo Santos notes) about commercialization being just around the corner...

* Q1 2014 earnings call: "We believe that we will have actual consumer product in the market in the third quarter of 2015 and as a result we should start to see our royalties flow in the fourth quarter of 2015."

*Q4 2014 earnings call: "... we now intend to have WattUp technology full integrated into products from strategic partners supporting the internet of things at the 2016 CES Show and available to the consumer by the end of the first quarter, beginning of the second quarter of 2016.

*Q2 2015 earnings call: "... our technology will be incorporated into their products and as a result they will make the call on terms of timing ... we believe it's a technology through either our strategic partners that we will sign in the coming months who may have accelerated product cycles who will likely will be available towards the end of 2016, the first part of 2017 and it will have a broader expansion into markets in the latter half of 2017."

*Q4 2015 earnings call: Did not push out product time line. But changed the topic from full scale WattUp transmitter to mini WattUp transmitter.

*Q2 2016 earnings call: "We are also reconfirming our projections that consumer products from our licensees of the Mini WattUp transmitter technology will be shipping late this year or early next year. The WattUp enabled Midsize transmitter applications will be shipping in late 2017 and the Full-size WattUp transmitters will be shipping in early 2018."

For some reason ... well, many reasons...WATT bears an unfortunate resemblance to Second Sight Medical Products (EYES).

*3. WATT: Reminiscent of EYES

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Image Sensing Systems (ISNS): What Goes Up Must Go Down ... And Fast

 

TheStreetSweeper issues an investor alert on Image Sensing Systems (ISNS).

The company focuses on software-based detection products for the transportation industry. 

Incredibly, the stock is flying following a dull announcement that it is expanding its product offering (here).

But investors need to be alert to the company's extreme risks at this point, including:

*1. Cash Poor

ISNS reported as of June 30, it had about $964,000 in cash. That's too little to run a company, and well below the (also paltry) $2.6 million reported in December.

*2. Extreme Cash Burn

ISNS is burning the cash. In just a quarter, it rips through around $1 million to $1.2 million. This suggests a capital raise may be imminent.

*3. Poor Earnings

In six months ended June 2016, net income was $0.18 or $0.10 higher than in 2015. However, company revenue declined from a year earlier, while cost of revenue increased:

(Source: Company SEC filings)

Unfortunately, the year's revenue was the lowest reported in 8 years.

(Source: Morningstar)

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Investor Alert: Odyssey Marine Exploration (OMEX)

TheStreetSweeper issues an investor alert for Odyssey Marine Exploration (OMEX).

The shipwreck exploration company is rapidly turning into an epic shipwreck that will leave unwary investors drowning in its wake.

The company faces massive issues, including:

*Virtually no cash left.

*At the brink of Nasdaq delisting.

*Likely bankruptcy or major dilution looming.

*Professional promoters, chatrooms hype the stock.

*Don Diego project application is dead.

*Recent announcement apparently meaningless; actually a lost opportunity.

*OMEX loses millions while executives make millions.

Financial distress has forced this Tampa, Florida company to essentially give up salvaging shipwrecks in December 2015 to re-focus on mining underwater phosphates in Mexican waters. But that plan was derailed six months ago when the Mexican government rejected the company's environmental application to dredge in the "Don Diego" deposit.

Let's look more closely at OMEX, most likely the worst company we've ever considered...

*1. Virtually No Cash Left

Today's investors might be surprised to learn that OMEX has operated as a hobby for the past decade, as shown by consistent yearly net losses.

(Source: Company SEC filings, here, here, here)

Those losses reflect OMEX' ongoing predicament of cash burn exceeding available cash:

(Source: Company SEC filing)

The company managed to add to cash and cut debt by selling its exploration boat, headquarters building and shipwreck inventory in December 2015. Company filings say now there's no remaining inventory.

And by the end of September 2016, barely assisted by a $2.4 million contract, OMEX was likely almost down to its last dollar. But Epsilon Financing agreed to amend a note to give OMEX its final $3 million infusion - at a draconian 10% interest rate. The loan allows OMEX to limp along another quarter until the wolves line up at the doorstep again ...

*2. Finance Or Delist

So OMEX is left with two choices: It must get significant financing, likely via convertible shares ... or go to the dreaded over-the-counter bulletin board.

When the stock goes to the bulletin board, the show's over. Everyone moves on. And the stock we believe is left to trade for about 50 cents apiece.

*3. Nasdaq Delisting

OMEX is, indeed, at the brink of being delisted from the Nasdaq because its market valuation has been below the required $35 million level for the past six months.

The delisting notification boils down to this...

To hit that valuation, shares need to trade for about $4.65 per share and remain at that level for 10 consecutive business days by Nov. 21.

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Broadwind Energy (BWEN): Miserable Margins, Horrific History Sweep Away Potential

Broadwind Energy's (BWEN) chief executive recently commented, "I am tempted to say everything went wrong."

The CEO referred to production problems when she made that comment during a recent earnings call.  Issues such as paint spatter resulted in $4 million worth of unusable wind tower sections and left an important wind tower order unfulfilled.

But those words beautifully sum up Broadwind's past and present condition.

The executive behind those words is Stephanie Kushner. She settled SEC charges just last year - along with Broadwind and a former CEO - related to allegedly keeping investors in the dark about Broadwind's financial deterioration.

Today, the Cicero, Illinois wind tower support manufacturer remains a disaster, with operating losses 253 percent worse than a year earlier.

Regardless, Broadwind stock has risen ... and is now precariously positioned to fall apart.

Investors may find other viewpoints here. Meanwhile, TheStreetSweeper presents the top eight reasons we believe an investment in Broadwind will soon be gone with the wind:

*1. Historically Peak Production: Still Losing Money

Broadwind's business is so poor that even at near-peak production of 450 towers in 2015, the company still lost money hand over fist.

 

(Source: Marketwatch)

In 2015, Broadwind whipped up the following:

*Lowest revenue in 5 years. A 17% drop from prior year.

*Worst net income in 3 years. A 99% drop from prior year.

*Worst return to stockholders in 4 years. Earnings per share dropped 220% from prior year.

Broadwind is twisting and flailing like a mosquito in a tornado, thanks to some basic problems...

*2. Smashed: Margins

One massive problem is that Broadwind is selling a commodity weighed down by terrible gross margins.

Margins for the year hit the lowest level in 4 years ... 3.95%:

(Source: Bloomberg)

So out of every $1 Broadwind makes in sales, it gets to keep less than 4 cents.

The company did manage to cut costs and raise the margin slightly last quarter. But cost cutting can go only so far.

Sales, general and administrative costs were 8.9% (9% for the year) of revenue. Broadwind can't make a profit with yearly gross margins of just 4% to 7% - the range the company has reported over the last five years.

*3. Wind Tower Production: Not Like Canning Beans

A bull somewhere may find hope in Broadwind's announced $137 million contract over three years or about $45.6 million per year. But the challenge will be dealing with the combination of terrible margins and production problems.

Ms Kushner talked about those production killers during the fourth quarter 2015 earnings call (here):

"We produced only 450 towers, although we had sold 500 and we paid dearly for this miss in cost overruns, efficiency losses and customer penalties."

Ms. Kushner went on to describe the roughly $12 million cost of production mishaps.  She added:

"There was clearly too much variability in our production results. The majority of our problems are in two key areas: the paint process and managing an increasingly complex supply chain."

Additionally, she suggested the Abilene, Texas plant layout was poor and cramped, and the workers were relatively inexperienced. The CEO added:

"And I think if we were making cans of beans or something, it would be great."

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Ocean Power Technologies (OPTT): Expanded SEC Probe, Promotions, Revenue Decline

Ocean Power Technologies (OPTT) is creating waves alright ... just not the right kind.

Over 32 years, the company has failed to turn electricity-generating ocean wave power into a real business.

But the company has created waves over the years by recycling old "news." All backed by a veritable brigade of promoters eager to push the old news and thus keep the company on investors' radar.

Ocean Power has turned into swamp gas, racking up over $177 million in losses but no commercial product.

Yet the stock recently lifted off and floated to price levels not seen in over a year.

TheStreetSweeper alerts investors about what's really behind this rally ... and why the stock is precariously positioned to sink into the deep blue sea.

First, the executive bullet points:

*SEC investigation expands

*No cash set aside for SEC investigation losses

*Regurgitated news

*Oddly timed stock promotions

*Losses rising

*Nearly $1 million cash burn monthly

Investors may find other viewpoints here. Meanwhile, below are TheStreetSweeper's details surrounding  Ocean Power's stormy seas:

*1. Agreement: Just Rehash

On June 1, the stock shot up some 300 percent on a company press release announcing Ocean Power's lease agreement with Mitsui for a power buoy "planned to be deployed off Kozu-island..."

(Source: Yahoo Finance, TheStreetSweeper)

All well and good, right? Except that Mitsui deal is not new. The companies began working together eight years ago.

But in October 2013, Ocean Power reeled out a strikingly similar press release which said the company agreed with Mitsui "to cooperate in the development and commercialization" of the power buoy.

Ocean Power's habit of recycling old news goes back several years. In 2012, the company announced it clinched a deal with Lockheed Martin for a demonstration project in Australia. here.

That worked so well, it spun out the same news two years later here. The company didn’t even bother to change many words. But guess what? The deal fell dead in the water in 2014.

*2. Amazing: Pitiful Sum, Many Years In The Making

One thing about the recent, much-trumpeted Mitsui deal is amazing. It has taken Ocean Power three years to progress from agreeing, to agreeing some more and planning to deploy a power buoy. All that time and effort for an engineering services and licensing contract expected to be worth only $975,587 over half a year or so...

Mitsui apparently considers this arrangement no more than a science experiment; the Mitsui website doesn't even mention Ocean Power and its ballyhooed agreement.

(Source: Mitsui Engineering and Shipbuilding)

Alarmingly, Mitsui's sub-million-dollar contract is Ocean Power's "one revenue producing contract."

Lately, Ocean Power has needed to lean heavily on its one viable deal...

*3. Critical Timing: July 14 Press Release

Ocean Power's July 14 press release should have been considered skeptically.

You see, the very next day, the company was scheduled to release its fiscal year financial report. And that report was filled with shockers.

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Vuzix Corp. (VUZI): Dismal Business, SEC Inquiry, Habitual Stock Offerings

Looking through Vuzix (VUZI) eyewear, we see a future clouded by an SEC inquiry, paid promotions, more stock-diluting raises and more investor money thrown down the drain.

Executive bullet points for Vuzix include:

1. Company is a glorified stock promotion

2. Operates a minimal, declining business

3. Under SEC inquiry.

4. Has nothing to do with PokémonGo.

5. Faces stock dilution which we believe is imminent.

Here are details on the top five reasons that TheStreetSweeper wants to toss out Vuzix and its goofy, not-that-smart eyewear:

*1. May 24: SEC Launches Vuzix Inquiry

On May 24, the Securities and Exchange Commission notified Vuzix that the company is under inquiry.

"On May 24, 2016, we received a letter from the SEC, dated May 19, 2016, notifying the Company that the SEC is conducting an informal inquiry relating to the Company, and requesting that the Company produce certain documents relating to the Company’s internal control over financial reporting. If, in connection with this informal inquiry, the SEC determines to take action against the Company, the Company’s financial position could be adversely affected."

 

On July 6, Vuzix finally mentioned the SEC inquiry. Instead of immediately disclosing this crucial matter in an 8-K, the company waited six weeks to disclose the news near the bottom of its prospectus.

Why? First, let's look at recent events and then we'll put it all together ... Read on ....

*2. Promotion: After The SEC Notification

On June 9, professional promoters pushed a video news release promoting a so-called collaborative agreement between Vuzix and an undisclosed party.

(Source: CEOLive)

The CEOLive host quickly mentions that no licensing agreements or technology transfers have happened; but the parties have agreed to work toward a prototype; and that this "big" announcement is really just a follow-on effort.

So this hype appears to be an oddly timed regurgitation of an old, small, tenuous deal. Regardless, this information helped fuel the stock rally.

*3. Investors Remain In The Dark

Incredibly, that June 9 promotion hit about two weeks after Vuzix got the SEC inquiry letter. At the time of the promotion, apparently only Vuzix managers knew about the SEC's inquiry.

But investors were in the dark.

Likewise, many didn't realize the company had been struggling and stumbling along since before it ever began selling smart glasses in late 2013. Losses altogether had flown to more than $61 million. Losses last quarter alone hit $3.8 million.

The company also reported dismal losses and gross margins for 2015 versus 2014:

(Source: Company SEC filing)

And Vuzix sales - which were already pathetic - have continued to deteriorate:

(Source: Company SEC filing)

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Odyssey Marine Exploration (OMEX): A Shipwreck of Titanic Proportions

Odyssey Marine Exploration (OMEX) dives to recover treasures from shipwrecks.

But its current project may be the most challenging yet ... a desperate dive to recover its own shipwrecked company.

While investors may find other viewpoints here, TheStreetSweeper sees one titanic disaster in the making. Here's why:

*1. Poof: Cash, Assets, Don Diego Hope

The company reported, as of March 31, operating cash had fallen to $2.8 million ... At the same time the company is burning through $2.7 million in just one quarter.

So OMEX appears to be operating on fumes.

At the same time, OMEX is struggling with debt deals and owns virtually no assets.

Filings state: "we have pledged the majority of our remaining assets to MINOSA, and its affiliates, and to Monaco, leaving us with few opportunities to raise additional funds from our balance sheet.”

OMEX's financial lifeboats recently have been anchored on expectations that Mexico approve the Don Diego permit. But Mexican authorities denied this critical application.

The Don Diego represents a Hail Mary business restructuring for OMEX and, in our view, another reason for investors to brace for failure. Read on….  

*2. Mexico: Application Denied

Way back in 1994, the company began navigating the thrilling but choppy waters of undersea excavation and recovery.

OMEX found five major shipwrecks over those 22 years but lost $123 million in the process, Bloomberg reports.

In 2007, the company began a very public 5-year battle with Spain over gold and silver recovered from the "Black Swan" warship. OMEX lost the loot and a federal judge ordered the company to pay $1 million for "bad faith and abusive litigation."

In the midst of that public drama, the company restructured operations in 2010 to focus on deep water seabed exploration of minerals.

Much hope went into the Don Diego seabed deposit off the Mexico coast - considered the restructuring centerpiece -  and shares ran up around $9 in early April.

Then on April 11, Mexico denied the company's environmental permit application amid concerns about the environmental impact on sea turtles. OMEX plans to dredge Don Diego's phosphate rock lurched to a halt and the stock took a 55% dive.

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Digital Ally (DGLY): Why This Stock Will Get Chopped

TheStreetSweeper issues an investor alert on Digital Ally (DGLY).

Shares in consistently unprofitable Digital Ally have rocketed following last week's shooting rampage that left five police officers dead and more fighting for their lives.

As the gunman blasted away and the crowd panicked, police body cameras supplied by Taser International (TASR) captured video of the scene. With the nation focused on Dallas and other shootings, it's not too surprising that Taser shares soared 5.9% to $27.30.

Flying in under Taser's wings, DGLY surged from ~$4 to $7, bumped along and then topped out July 13 at $6.23 per share. This morning, the stock opened at $5.49 as people begin to realize DGLY is a poor copycat focused on an antiquated product.

TheStreetSweeper's executive bullet points below summarize why we expect the stock to plummet back to earth:

1.    DGLY stock is up after the market has mistakenly aligned the stock with body camera market leader Taser International.
2.    The vast majority of DGLY's revenue - 43% - comes from DGLY's in-car videos, not from body cameras, as the market wrongly assumes.
3.    Compared with Taser, DGLY's product costs nearly two times more and offers inferior resolution, battery life and field of view.
4.    DGLY's revenue has been dropping over the last 4 quarters; earnings remain negative. In contrast, Taser offers positive earnings and revenue is nearly 10 times greater than DGLY.
5.    DGLY has attracted very, very little institutional ownership, only ~5%.

 

TheStreetSweeper's full details follow:

 

*1. No Comparison: Taser Owns The Market

The company's nemesis Taser International initially gained attention with its stun guns. But now the company has catapulted into the market-leading position for body cameras, controlling three-fourths of the body camera business in the United States.

Cops in cities from Dallas to Los Angeles to Washington wear Taser's state-of-the-art Axon body cameras. A key component is Taser's "Evidence.com" site ...

(Source: Taser Evidence.com)

Taser's Evidence.com allows police to log on and manage their body camera video.

Meanwhile, Digital Ally is focusing on a different product. Though the company began in 2003 as a bow-hunting product company, in 2006, it began shipping what is still its primary product - the old-time, in-car video camera. These DVMs or digital video mirrors make up the vast majority of company sales at 43%.

*2. Digital Ally: Product Miss

Yet investor and consumer interest is clearly focused on high-tech body cameras.

Somehow Digital Ally has gotten swept up in the excitement even though its body worn camera called "FirstVu HD" and "FirstVu" is a tiny portion of its business.

Digital Ally has found that its body camera sales are seriously lagging behind its old in-car products. Worse yet, last quarter, the body cameras lost even more ground:

 

(Source: Company SEC filing)

Though Digital Ally is a minor player in the body camera business, its cameras cost surprisingly more than Taser's:

(Source: bodycamerareviews)

(Source: bodycamerareviews)

According to company filings, Digital Ally's body cam costs nearly two times more at $795.

Digital Ally's specs fall short, too. These cameras depend on an external battery which provides less than half the battery life of Taser's camera.

Taser's video resolution and field of view also dwarf its small competitor's specs.

So it's no surprise that police departments don't want to pay nearly twice as much for a Digital Ally product that offers features about half as effective as Taser...

 

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RadiSys Corporation (RSYS): Racing Toward A Radical Drop

All the good news has already been priced into RadiSys Corporation (NASDAQ: RSYS), creating a perfect jumping off point.

Now RadiSys looks poised for a radical hit.

The Hillsboro, Oregon-based computer server company has turned in consistent net losses for years. But the stock went ballistic recently when the company named Verizon as the customer that earlier placed a DCEngine trial order. RadiSys had hinted at the identity at least four months before. But the June 7 announcement kicked the stock out of sight.

(Source: morningstar)

So ... the announcement is the first reason TheStreetSweeper believes RadiSys has become radically overpriced and doomed to drop (other viewpoints here):

*1. Good News: Already Acknowleged

RadiSys investors had kicked the stock in the pants following its quarterly financial report released in May.

Investors were not pleased to learn that gross margins had dropped again year-over-year and sequential earnings losses had worsened.

So the customer announcement weeks later about the DCEngine server for the phone company worked beautifully to juice the stock by about 70%.

But RadiSys can't hold up under such a frothy valuation.

*2. Legacy Biz: Help Me, Help Me!

The RadiSys rise is unsustainable as sales continue their perilous downward spiral. Part of the problem is that 75% of the company's revenue comes from its old-line server business.

Unfortunately, this legacy business segment is dropping, dropping, dropping...

(Source: Bloomberg)

The sales dropped 15% in 2015 and 21% the year before. 

Hmmm. What if Shark Tank's Mark Cuban scratched his chin and blurted:

"What's your margins?"

RadiSys would have to stammer out something like:

"Our margins are declining... Like crazy."

This chart below is a snapshot from a company presentation.

(Source: RadiSys presentation)

 

The chart shows that the company's legacy business "Embedded Products" has been enduring 24% to 20% margins for 1 1/2 years. And last quarter's margins dropped all the way down to 15%.

*3. Paltry Help: New Kid, DCEngine

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Copart (CPRT): Five Reasons To Terminate This Stock

Copart (Nasdaq: CPRT) has barely felt the losses now running cyborg-like through auto stocks after the British exit vote.

But that will quickly change.

As soon as the Copart double-digit exposure to the United Kingdom market becomes evident, even the Terminator himself could be expected to turn tail and run from this stock.

Copart is in the online junk-car business. The Dallas-based company sells recycled scrap cars to the public, vehicle dismantlers, exporters, etc. in the United States and elsewhere, including Britain.

Britain voted Thursday to exit from the European Union. Stock losses are extending as global markets consider the potential economic turmoil and the uncertainties. Now Copart is vulnerable ...

 
 
(Source: imdb.com)
 
Indeed, Brexit has conspired with other issues to prepare Copart for - not a rise of the machines - but a brutal fall.
 
Investors may find other viewpoints here. Meanwhile, consider the top five reasons TheStreetSweeper believes Copart investors might want to run for safety.
 
First, here are TheStreetSweeper's executive bullet points:

*About 18.7% of Copart revenue faces exposure to European concerns.

*Brexit is expected to exacerbate Europe’s declining used car sales.

*Any economic squeeze can cut driving, accident claims and Copart’s business.

*A sluggish economy also creates more uninsured drivers who typically just fix their cars, meaning fewer cars for Copart to salvage out.

*Since the Brexit vote, other auto stocks have suffered double-digit declines.

*Copart has ~$137m in cash … and a $96 million “demand for payment” of back taxes and penalties.

* Insiders are selling their stock.

 

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StraightPath Communications (STRP): Investors Beware

StraightPath (STRP) fans haven't recognized it yet, but the Federal Communications Commission Chairman dropped the "C" bomb right on top of StraightPath.

"C" as in competition. Chairman Tom Wheeler told members of the National Press Club that America needs to "open up vast amounts of spectrum for 5G applications."

But Mr. Wheeler's interest in kickstarting the 5G frontier actually rips away some of StraightPath's mojo.

"...competition in the supply of backhaul remains limited and that can translate into higher prices for wireless networks and higher prices for consumers," he said.

So the big picture is that plans are to increase competition for licensed and unlicensed network providers.

Additionally, 5G networks won't even be available until 2020!

Enthusiasm over the possibilities of 5G high frequency spectrum has irrationally stretched StraightPath's  stock price.

Now, the latest 5G excitement is actually a huge disappointment to the company. When investors realize this, we believe the price will quickly reverse.

Some key issues facing StraightPath:

*The company has a history of poor-to-no earnings.

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SolarEdge Technologies (SEDG): Insider Selling, Rival Actions Cool Off This Stock

Just beneath investors' radar, SolarEdge Technologies (SEDG) is fighting a feud worthy of the infamous Hatfields and McCoys. There will be no "hog trial" this time around but today's revenge-fueled struggle would make those rival clans proud.

(Clan leaders William "Devil Anse" Hatfield, Randolph "Rand'l" McCoy. Source: tourpikecounty)

Indeed, SolarEdge's chief rival, Enphase Energy, is heating up the feud with the launch of a potential game-changer. One solar contractor predicts Enphase's new battery backup system for homes will make SolarEdge technology virtually obsolete.

And risks just keep piling up against this solar power systems inverter. (Inverters change solar panels' DC electricity into AC or alternative current for use by in-home appliances and community electricity grids).

When the gunsmoke clears this time, a most unfortunate loser will stumble out ... current SolarEdge stockholders.

Investors may find other viewpoints on Israel-based SolarEdge here. Meanwhile, TheStreetSweeper presents a brief executive summary, followed by details on the top reasons we dislike this stock.

Executive bullet points:

*Extreme insider selling exceeding $25 million. What do they know that the market has missed?

*Singularly focused rival Enphase pressures SolarEdge with new technology and severe, continuing price cuts.

*SolarEdge has been forced to cut prices. And its new rollout has been delayed by as much as half a year.

*Chinese vendors are crowding into the commercial side of SolarEdge’s business with bargain rate products, likely forcing more price cuts.

 

*1. Smart Insiders: Bid SolarEdge Stock Goodbye

Insiders have been unloading their company stock. Year-to-date, insiders have sold well over $25 million worth of stock - an action that could be a sell signal for other investors, too.

(Source: Bloomberg)

Indeed, insider buying is virtually nonexistent compared with insider selling:

(Source: Nasdaq)

Maybe insiders know something the market has missed ... something like the following huge risks....

*2. Grudge Match: Old Nemesis Plots Revenge - Aggressive Price Cuts, New Tech

Not long ago, Enphase Energy (ENPH) was a big ol' boy in the business.

The maker of solar microinverters claimed bragging rights until SolarEdge came along with a cheaper alternative and stole away market share.

A grudge match ensued. Now Enphase is determined to shove SolarEdge aside by introducing new technology and aggressive price cuts.

*3. Kicker: "Rolls Royce" Enphase Ups The Game

"Enphase ... is the Rolls Royce of all inverters in the industry," according to a solar contractor who spoke with TheStreetSweeper.

He said Enphase has introduced a battery backup for homes that is incompatible with SolarEdge.

The SolarEdge technology involves DC current that must be converted to usable energy before it can charge a battery. Enphase's microinverter, however, has already converted DC to usable AC energy that charges the battery. 

(Source: Enphase)

The new AC battery is part of the Enphase system, including microinverter, networking hub and an energy tracking system that lets homes and businesses monitor how much solar energy they are generating and using. Then the system determines whether the solar energy should be stored or used.

(Source: Enphase energy storage system)

Enphase launched the AC battery last month in Australia and New Zealand as part of its international expansion. The United States launch is planned later this year.

"We expect the initial demand to be driven by installers looking to retrofit existing residential solar PV systems," Enphase executive Nathan Dun told PV Magazine. "Emphase expects the next wave of demand to be driven by new solar PV system owners enticed by the elegance and simplicity of our solution"

If people like the new Enphase system well enough, SolarEdge could lose serious market share...

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Kemet Corp. (KEM): Perfectly Tuned To Break Investors' Hearts

If Kemet Corp. (KEM) were a country crooner, it would be singing "There's A Tear In My Beer" as its heartthrob walks out the door.

Indeed, informed investors couldn't be blamed for walking away as downside risks mount up for this South Carolina manufacturer of capacitors - battery-like gizmos that store electric energy.

Kemet entities have been slapped with investigations or inquiries into alleged anti-competitive actions by: *The United States; *China; *Europe; *Brazil; *South Korea; *Taiwan; *Singapore; *Japan.

Yet the stock turned upward as Kemet reported a quarterly earnings miss and $183 million revenue down 5% year over year; as well as settlement of one of these investigations.

This misunderstanding-fueled rally grows more ludicrous when we consider three factors.

*First, filings show lawsuits, verdicts and investigations - for March 2015-March 2016 alone - cost Kemet about 6.1 billion yen or $58 million. 

*Second, price-fixing probes are not over yet. The company and subsidiaries are defendants in multiple ongoing global investigations into price fixing and bid rigging conspiracies by capacitor manufacturers.

*Third, Kemet may be on the hook to pay ~$400 million to acquire the "one who done him wrong."

While investors may find other viewpoints here, TheStreetSweeper's top executive bullet points on Kemet's downside risks include:
*Falling sales
*Low margins
*Numerous rivals scratching and clawing for the same business
*Unreasonably expensive planned total acquisition that faces more price-fixing inquiries/investigations
*Uncertain future costs associated with its planned acquisition, which has already pleaded guilty to criminal price-fixing
*Junk bond ratings
*Excessive executive compensation
*Insiders yell, "Sell!"

Below, TheStreetSweeper presents details on why we believe Kemet stock is perfectly tuned to fall back toward sanity.

*1. Calling Dr. Phil: Troubled Relationship Begins

Kemet paid $50 million three years ago for a 34% stake in Nec Tokin - the partner it intends to buy in its entirety.

But Nec Tokin has pled guilty to criminal price fixing. The US Department of Justice determined that from April 2002 to December 2013, Kemet's partner had been "conspiring ... to fix prices" for capacitors in America.

FBI Special Agent David J. Johnson stated: “For over a decade and through various financial crises, NEC Tokin has exploited American consumers and fixed the price of capacitors..."

Investigators said the company had set prices using code names and misleading justifications "to cover up their collusive conduct."

Nec Tokin pleaded guilty Jan. 21, 2016 and was sentenced to pay a $13.8 million criminal fine.

Also, Taiwan slapped fines on Nec Tokin and other Japanese companies involved in an alleged price-fixing cartel, while EU, South Korea, Brazil and Singapore continue investigating such allegations.

Despite the market's misunderstanding, Kemet continues to defend itself and its entities (pages 20-21) in ongoing antitrust lawsuits.

But how much has Nec Tokin gotten to Kemet thus far? .... Read on ...

*2. Antitrust OOPS: When "Good" Investments Turn Bad

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GenMark Diagnostics (GNMK): Seven Signs of Sickness

GenMark Diagnostics (GNMK) stock is just about to get a shot of reality. And the jab will go straight into stockholders' hearts and wallets.

GenMark is a never-profitable Carlsbad, California company that sells diagnostic testing equipment used to sniff out viruses, bacteria and problems such as sensitivity to Warfarin. The company is struggling with:

*Financing is already registered and dilutive stock selling could be imminent.

*Event fueling the company's stock rally - CE Mark designation - is now worthless.

*A common, virtually indistinguishable product.

*Wealthy dog-eat-dog competitors, more favorably valued.

*Highly compensated, low-performing management.

Investors may find other viewpoints here. Meanwhile, TheStreetSweeper provides details of the top seven reasons we believe risky, expensive GenMark stock is supremely poised to swoon.

*1. Wait For It, Wait For It: Stock Offering

The last thing investors want to see is a big stock offering that will dilute the shares they're holding.

But that's exactly what GenMark has ready to go. Stock worth $30 million (over 3 million shares) may now be sold at any time:

(Source: Company SEC filing)

Shareholders won't have long to wait to feel the sting of dilution...

What's more once those 3 million or so shares are sold, GenMark can always go back and clean off the shelf. An overhang of another $95 million worth of potentially dilutive stock - about 10 million shares or so - is just waiting to be sold at the drop of a hat.

The timing is perfect to sell stock because shares have been flirting around the year's record.

Why has the stock popped?

Ah, that's another story. It's a story that ultimately turned on GenMark like some sort of mad scientist ...

*2. Company's CE Mark: Now Worthless

The company desperately needed good news after investors fled the stock in early May. People were irritated by the earnings report showing revenue had slightly beaten consensus as it sluggishly moved to ~$11 million. Earnings had missed consensus, falling more deeply into the red at $-12.96 million.

The stock reflected company struggles as the price dropped from around $5.70 to $5.25 per share.

(Source: Yahoo Finance)

GenMark had been chasing the CE Mark since 2012. Managers could have expected CE news to drive up the stock as it cleared the way for ePlex testing system sales in Europe.

Seemingly fortunate at the time, GenMark announced on June 8, 2016 that it had received its CE Mark designation. Sure enough, the stock smashed above $9.40 per share.

 

(Source: Yahoo Finance)

Then the unexpected happened. Less than three weeks after GenMark got its CE Mark, Britain shocked the world by voting to exit the European Union.

The historic trade barriers previously knocked down by the CE Mark have now jumped back up. GenMark wasted all those years and millions (~$3 million) pursuing the designation.

Unfortunately, Britain hasn't negotiated a trade deal since the European Union materialized in the 1970s. So now the sovereign state is scrambling ... at wit's end, apparently ...    

       to negotiate new trade arrangements. 

(Source: The New York Times)

So everyone had pinned great hope on the newly CE Mark-approved ePlex launch in Europe in the third quarter.

But the CE Mark is now worthless to GenMark.

*3. The Big Sting: Executive Compensation

While the company loses millions, executives are raking in millions. Our chart shows top executives' compensation.

(Source: Company SEC filing)

Nearly $9 million - including $3 million for the chief executive alone - seems generous.

After all, GenMark lost more than that last quarter ... nearly $13 million.

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Surgery Partners (SGRY): Overpriced Stock Poised To Become Tomorrow's Laggard

Surgery Partners (SGRY) may look like it's dressed to party. But when the lights come on the stock will reveal its true common, indistinguishable gawky self. And investors will want to run the opposite direction.

So today's wildly overvalued SGRY is poised to become tomorrow's laggard.

The company stock hit the Nasdaq last October, opening at $17.55 per share, far below the expected $23-$26 range. The disappointed company focusing on short-stay surgical centers needed every penny possible to help repay more than $1 billion in debt.

We've been looking at what you pay for the stock versus what you get for it.

Indeed, SGRY appears to be the type of stock billionaire investor Carl Icahn referred to when he issued a recent warning. He said stock prices have been pushed artificially high but lack the economic fundamentals to support those prices.

The guy who grew up on the mean streets of Queens recently rattled cages of the nation's shareholders when he predicted a "day of reckoning" will correct this imbalance (video here).

(Source: YouTube)

Investors may find other viewpoints here. Meanwhile, check out TheStreetSweeper's top six reasons we consider SGRY a "day of reckoning" poster child...

*1. Overpriced Today: Laggard Tomorrow

SGRY sports an outlandishly high valuation ... A price-to-earnings ratio of 639.

That's right.

Stocks with high valuations are shouting to investors, "We're really expensive. You can bet it'll be tough to live up to these expectations!"

The Wall Street Journal reports that the most expensive stocks - measured by various valuation metrics - have underperformed the S&P 500 by 5 percentage points yearly, lagging in 25 of the last 35 years.

Rivals Surgical Care and AmSurg are bargains compared with SGRY. In each of four critical measurements, SGRY comes out in the red:

(Source: Yahoo Finance, here, here, here)

We can't imagine how anyone can justify paying 25 or 42 times more for a company that offers a fraction of competitors' value .... and is unprofitable to boot.

*2. Earnings: Extremely Inefficient As Competition Rises

Small surgical centers are popping up all over the country. Competitors are vying for every other street corner and every doctor who wants to perform surgery on every hurt knee or misaligned jaw.

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Command Security(MOC): Beware The Hype

TheStreetSweeper issues an alert on Command Security (MOC), a security stock that blasted off Monday morning on misunderstood hype.

Here are five top reasons TheStreetSweeper believes this stock is poised to kill potential investors' portfolios:

*Contract Noise Is Nonsense.

Though the stock is settling down a bit now, shares skyrocketed early June 6 when MOC announced what seemed to be a new contract.

Here's how the stock reacted:

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Relypsa (RLYP): Eight Reasons We Wouldn't Run Away & Join This Circus

Relypsa (Nasdaq: RLYP) is a misunderstood dog-and-pony show that shines a light on its one and only trick pony, Veltassa.

Relypsa fans keep the show going by sticking a carrot out in front of investors. Indeed, the company's oh-so-benevolent stock promoters - plus a short squeeze that we believe is now over - have managed to push the stock to nosebleed levels. Now there's nothing but air left in the stock.

Investors may check here for other viewpoints on the Redwood City, California-based chronic money-loser with one lonely drug to its name and a cash burn rate of ~$300 million. Meanwhile, here are TheStreetSweeper's top eight reasons this stock is riskier than a colicky circus pony:

*1. Sole Drug: Cheap Castoff

The market has missed a telling issue regarding Relypsa and its only drug.

The company acquired the potassium-lowering drug, Veltassa, for just $12.5 million, according to the SEC filing.

But the seller, Ilypsa, didn't even bother to keep a percentage of any royalties:

"We do not have any royalty obligation under the IP License Agreement with respect to Veltassa, and in March 2013, we satisfied our sole milestone payment obligation with respect to Veltassa with a payment of $12.5 million...

"While the IP License Agreement does require that we make certain royalty payments on sales of covered products, other than in respect of sales of Veltassa, we are not currently developing any covered products under the IP License Agreement."

If the developer had any faith in Veltassa's intellectual property, it would have never sold that property on the cheap ... especially without hanging onto at least some royalties.

Ilypsa just wanted to unload the drug.

Relypsa's sales indicate the seller was smart to take the money and run... Read on ...

*2. Free Drug, Doc? Thanks, Not Really

Veltassa got cleared last fall to treat excessively high blood potassium or hyperkalemia. But not before the FDA had attached the dreaded "black box" warning label. The agency concluded the drug dangerously binds with other oral drugs, thus decreasing their effectiveness.

The stock got crushed because the FDA's strictest warning greatly limits the drug's possible uses - specifically not in critical life-or-death situations. Relypsa has rushed to submit more data in hopes the FDA might lift the black box warning.

The company began shipping the drug late last December. But Relypsa can barely give the drug away:

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Mitek Systems (MITK): Looking For A Nose-Dive

 

We occasionally see company insiders sell shares to pay their massive tax bill (Facebook guru Mark Zuckerberg's 2014 tax bill hit an estimated $2 billion plus).

Or they sell stock to fund their big fat Greek weddings. Or to settle their messy divorces (oil tycoon Harold Hamm settled with his ex for $974,790,317.77).

But Mitek Systems Inc. (Nasdaq: MITK) insiders have steadily unloaded massive amounts of stock since November - when the share price began rocketing by some 170 percent to the current ~$9 per share ... ah, yes, maybe the peak before the plunge.

Altogether in that timeframe, Mitek insiders have dumped about $9 million worth of company stock. 

That's right. And that's why insider selling tops TheStreetSweeper's list of seven good reasons we think Mitek stock is poised to flip faster than Madonna in her famous on-stage nose-dive. Investors may also find other viewpoints on Mitek, the San Diego-based mobile imaging technology and software provider here.

*1. Insiders Yell: "Sell! Sell! Sell!"

Insiders' trading trigger fingers started getting itchy when the stock run really picked up speed back in November 2015:

(Sources: Company SEC filings; Nasdaq.com)

It's always a concern when company leaders start selling their stock.

But selling of this magnitude is extreme.

It could suggest that insiders may be losing faith in their company's future, may understand something the rest of us don't or may be wanting to sell at the peak before the stock breaks down.

*2. Company's Intellectual Property: Weak

A chief worry about Mitek goes straight to the foundation of its business. The intellectual property is weak.

Here's why ...

A. The company thought so little of its own IP that it withdrew its patent infringement lawsuit.

"Let 'em have it," Mitek essentially said in 2014 after dropping the lawsuit against Top Image (TISA), explaining that "the cost of litigating the case would be higher than any potential financial benefit to Mitek."

Both parties agreed to cover their respective legal costs. That was it. Settlement reached.

Top Image stated: "Mitek realized that their case against TIS was weak and their patent portfolio was ineffective."

B. A patent infringement lawsuit bloodies Mitek's nose - and damages a major revenue source.

Mitek and former client USAA had been battling it out in court for years.

Then Mitek suffered a major blow in mid-2014 when a federal court threw out its infringement claims against USAA.

In lockstep, Mitek's chief technology officer suddenly departed "to pursue other opportunities."

A couple of weeks later in September 2014, the company settled with USAA with devastating results. The whole mess frustrated investors who exited Mitek stock, crushing the price by 60 percent.

The sucker punch: Under the settlement, USAA now gets to use Mitek's check deposit software for free.

So Mitek has forever lost part of a revenue stream.

While Mitek sustains this revenue loss, the company finds itself in the midst of a growing tangle of fierce competitors all vying for the very same customers.

But first, guess who proceeded to show up Mitek? Ol' nemesis USAA ... Read on...

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Vuzix Corp. (VUZI): Let The Caterwauling Begin

 

 

Struggling Vuzix (VUZI) reported losing millions last quarter on revenue that dropped 55% from a year earlier. Yet stock in the video eyewear company quickly returned to absurdly lofty levels - - afloat on paid promotions and a lingering misunderstood story.

TheStreetSweeper believes the 26 cents per share losses might not look too bad compared to what may come next.

Investors may find other viewpoints here. Meanwhile, consider TheStreetSweeper's top eight reasons why all the screaming about this stock will likely soon turn into caterwauling:

*1. Hype: Paid Stock Promoters

Vuzix stock has fallen into the unfortunate hype-fest category. It has been promoted by at least 21 professional campaigns.

Paid promoter MicroCapResearch pushed out a lengthy Vuzix promotion just last week, on May 17. On Tuesday, May 24, various posts linked to the promo.

At the bottom of the long newsletter promotion, a disclosure shows some generous third party dished out big bucks to promote Vuzix:

Click on the disclaimer/terms of use and investors will find: "Since MicrocapResearch.com may sometimes receive compensation from, and its owners, operators and affiliates may hold stock in, the profiled companies, there is an inherent conflict of interest in MicrocapResearch.com statements and opinions and such statements and opinions cannot be considered independent."

(Source: MicroCapResearch)

Also, out of the goodness of its heart, Star Media paid $15,000 for another recent "investor awareness campaign" hyping Vuzix.

(Source: Stockpromoters.com)

Paid stock promotions like these offer an excellent way to spot a desperate, often troubled company. Stable companies with real products and a real future don't need or want such stock promotions.

Indeed, some of the recent fluff picked up by investors came from the company itself ...

*2. Misunderstood: Hyped Announcement

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MGT Capital: Heading Retail Investors To The Slaughterhouse

MGT Capital Investments (MGT) just may be the most self-promoted, worthless, risky stock we've ever observed.

Now, in our opinion, the company is poised to lead retail investors gently to slaughter.

You see, MGT stock is flying on tweets and Facebook page promotions from controversial wild man, John McAfee. The fallen icon will become the company's "proposed Executive Chairman and Chief Executive Officer," the company announced.

And MGT has bought Mr. McAfee's old anti-spy asset, D-vasive. Though the press release doesn't explain this, D-Vasive is a product of Mr. McAfee's Future Tense Secure Systems,, the company which will now be consulting for MGT. MGT paid $300,000 cash and millions of cheap-o shares for the questionable privilege of taking Mr. McAfee's languishing property and try to breathe commercial life into it.

Now Mr. McAfee is hyping his new company. And unwary stockholders are buying into tweeted comments that we believe are material - and deserving of Securities and Exchange Commission attention.

In a nutshell, it becomes clear who benefits from this deal:

*Mr. McAfee gets paid for something he already owns.

*The company pays for D-vasive, Mr. McAfee's anti-spy property that has been virtually ignored.

*Mr. McAfee gets a job.

*Newly issued shares increase value for Mr. McAfee.

*A low-value app gets some fleeting attention.

But this MGT combo is now perfectly priced for a tooth-rattling drop when investors realize the massive risk they're holding onto right now.

*Wild Man Becomes CEO

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MGT Capital: Retail Investors To Get Herded To Slaughter House

TheStreetSweeper almost hopes the MGT Capital Management (MGT) pump will hold. If it does, we'll tell investors all about one of the most incredibly over-hyped, useless stocks we've ever observed.

MGT stock is flying on word that the world's most controversial once-super-wealthy man who's essentially hit the skids - John McAfee - will become the company's "proposed Executive Chairman and Chief Executive Officer." 

The stock is hyped by formerly super wealthy McAfee who watched his net worth of more than $100 million nose dive to about $4 million in 2009.

You see, MGT paid $300,000 cash and 4.76 million cheapo shares to take McAfee's property off his hands.

The company has going concern issues and even filed a late 10-Q ... blazing red flags that suggest the company is headed down and out.

So it's no surprise this desperate duo - McAfee and company - are promoting the heck out of McAfee's old "D-vasive" asset.

But it seems they can hardly give D-vasive away. We'll get into the miserable downloads ... and oh so much more.

Stay tuned....we're working up a full report explaining how unbelievably risky this stock is at this level.

* Important Disclosure: The owners of TheStreetSweeper hold a short position in MGT and stand to profit on any future declines in the stock price.

* Editor's Note: As a matter of policy, TheStreetSweeper prohibits members of its editorial team from taking financial positions in the companies that they cover. To contact Sonya Colberg, the author of this story, please send an email to scolberg@thestreetsweeper.org.

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Coeur Mining (CDE): Debt-ridden, Overvalued Miner Just Discloses New $75 Million ATM

Coeur Mining (NYSE: CDE) shareholders may have missed a series of under-the-radar actions that pose additional significant risk to their investment.

Coeur netted $367 million in losses last year and reported half-a-billion in debt. Nevertheless, the junior miner managed to dig its way into stock portfolios of everyone from the next-door-neighbor to teachers' funds to retirement funds.

The Chicago-based silver and gold miner and its peers have risen over the last few months in concert with improved metal prices.

But let's step back in time to about an hour after the closing bell rang on Friday, May 13th. Most traders had just loosened their ties and begun enjoying their weekends when ...

 

Bam! At 5:11 p.m., Coeur filed a surprise ATM document with the Securities and Exchange Commission.

*The Late-Hour Stock Offering Notice

We knew they needed capital but it came even earlier than we had anticipated. Indeed, that after-market notification cleared the way for Coeur to sell up to $75 million worth of stock using the at-the-market filing.

What the ATM filing (here) means is this: Coeur and BMO have joined hands to raise cash through stock sales.

The more stock that hits the market, the more dilution to the stock already in shareholders' hands.

*Hungry Gorilla

And that $75 million offering? Unless the stock price falls out of bed and disrupts Coeur's plan ... it's likely just the beginning of the dilution coming at shareholders.

Coeur is like the hungry gorilla you try to feed just one banana. The beast pounds his chest and shrieks for more ... and more ... and more.

So the cash-hungry miner will demand far more, we believe, to stay in the game after the entire $75 million-worth of stock sales is shot.

The company will probably require three or four times more for current operations and expansion (two recent acquisitions cost ~$480 million).

Coeur will likely go on diluting stock until investors fall out of love with the story.

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Trupanion (TRUP): This Dog Insurance Stock Is Begging To Drop

Trupanion's (TRUP) recent stock rally may have the market wagging its tail but we've begun digging into the fundamentals. Consequently, we're yelling "Bad dog!" at the wayward pet insurance company.

Seattle-based Trupanion is a pet insurance company founded in 2000 by young technical school graduate Darryl Rawlings. Mr. Rawlings initially started selling cigars from his car to aficionados in western Canada. After a few years and a retail presence, he snuffed out the cigar biz and began selling pet insurance. The company went public in 2014 and has accumulated $74 million in losses since then.

Investors may find other viewpoints here. Meanwhile, TheStreetSweeper offers seven good reasons to send Trupanion back to doggie obedience school:

*1. Over 2 Million Shares: Looming Stock Sale

Within 60 days of April 1 – that would be June 1 - insiders will be able to sell ~2.19 million shares of stock. That boatload options poses a potentially significant risk of dilution and tremendous pressure on the stock.

Our chart breaks down warrants, options, restricted stock units and convertibles that executives and directors will be allowed to convert to common stock and sell within a month:

(Source: Company regulatory filings)

That stock release is a negative catalyst for current shareholders. But still more stock-selling issues dog Trupanion ...

*2. Insiders Yell, "Sell!"

Trupanion's own CEO pushed the "sell" button just last week. Under his auto trading plan, CEO Darryl Rawlings sent 3,500 shares to the public market at just about $12.63 per share.

(Source: Company SEC filing)

In fact, Mr. Rawlings has dumped 17,500 shares of Trupanion just since March:

(Source: Nasdaq)

The next graphic indicates insiders' massive selling sentiment:

 

Since February 2015, insiders have stayed busy selling stock. Stock sales have sometimes been heavy single transactions, such as the 290,620 shares unloaded by chief investor Highland.

(Source: Bloomberg)

Why is this selling happening? Along with the stock's recent high price enticing them to sell even more, insiders may also be considering the company's position. And it's really not encouraging at all ...Read on ...

*3. Google Search: Trupanion Fares Poorly

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Adamis Pharmaceuticals (ADMP): Compounding Risk

A private company that is a walking liability has been acquired by Adamis Pharmaceuticals (Nasdaq: ADMP), posing an incredible danger to the public.

Yet when Adamis announced it was paying ~$9.7 million in stock for the little Arkansas drug store dogged by a big product recall, the uninformed market cheered.

Incredibly, fevered buying continued, sending Adamis shares this morning to a multi-year high of over $9 per share.

TheStreetSweeper presents six key risks poised to hammer this stock back down to sanity.

*1. Terrible Acquisition

Shares blew up on news that Adamis would be acquiring US Compounding in a stock deal worth nearly $10 million.

What investors didn't understand was what Adamis got for its investment.

Adamis has acquired a company that recently recalled ALL of its sterile products nationwide, at the request of the Food and Drug Administration. In fact, the recall is ongoing (here) for more than 70 veterinary products.

(Source: FDA)

Click here to see the recall list affecting patients, clinics, providers and hospitals nationwide.

All US Compounding sterile products were recalled because the FDA is concerned about sterility.

The recalled human and veterinary products were distributed from March 14, 2015 to September 9, 2015. Before the recall, customers had filed 108 formal complaints with the FDA about US Compounding products.

When the FDA walked in one day last August to inspect the little drug store, agents uncovered their own long list of issues. The problems they discovered spanned 11 pages, here.

Nevertheless, under the acquisition agreement, Adamis will pay the US Compounding CEO more than 866,000 shares plus a $300,000 yearly job with Adamis.

And what will Adamis receive for its investment?

In return, Adamis has gotten $5.7 million worth of debt, the challenge of trying to squeeze some revenue from a troubled drug store, plus a huge dose of liability exposure ... as evidenced by that company's recall "due to deficient practices."

If Adamis had been serious about building a compounding business, it would not have bought a company with deficient practices, sterility concerns and a massive recall under its belt.

*2. Why US Compounding Put Itself Up For Sale

US Compounding found itself in a pickle. Its name had been indelibly tainted by last winter's recall.

Every recalled item from injectable aspirin to injectable testosterone had begun piling up in the little drug store at 1270 Jims Lane, in Conway, Arkansas.

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Great Panther Silver (GPL): Perfectly Priced To Cave In?

Great Panther Silver (NYSE: GPL) stands at the brink of a teeth-chattering stock decline.

Over the course of the past year and a half, stock in the Canadian silver mining company settled in below $1 per share, sometimes falling to 30 cents.

Then shares suddenly blew up. Did this happen because the company hit a rich vein of silver?

Not at all. Rather than Panther suddenly hitting on fortune and reversing shareholders' negative return on equity, the stock has been shored up by ambitious stock promoters. Now Great Panther appears perfectly priced to drop.

Here are the top six reasons TheStreetSweeper is shouting, "Look out below!"

*1. Why Great Panther's Stock Is Up: Jonathan Lebed Special

After seven months of trading between ~40 cents and ~$1 per share, Panther stock suddenly blew up in late April:

(Source: Nasdaq)

What happened? Well, Panther can primarily thank a well-known stock promoter.

Indeed, last Thursday, on April 28, 2016, National Inflation Association sent out a stock promotion to thousands of email recipients. The hype began like this:

(Source: National Inflation Association)

Despite the name of the sender, this email and others like it have nothing to do with the organization's purported mission of fighting inflation. NIA is not some quasi-governmental agency sworn to help people but instead is all about enriching the NIA.

Jonathan Lebed is the main man standing behind the NIA's flimsy curtain of respectability. Mr. Lebed attracted national attention in 2001 when the Securities and Exchange Commission accused the then-teenager of manipulating stock in a pump-and-dump scheme. Without admitting any wrongdoing, he settled for $285,000.

Mr. Lebed commented:

(Source: New York Times )

Mr. Lebed has been a key figure in stories by TheStreetSweeper and publications such as The New York Times, which wrote of Mr. Lebed's stock trading activities:

"This type of stock fraud is hardly victimless. When a stock price rose from $1.38 to $4.69 on the strength of his false recommendations, then fell to $1.88 after his manipulation stopped, there were winners and losers."

The recent NIA/Johnathan Lebed promotion on Panther is merely the latest in a long string of hype that has inflated the stock.

Mr. Lebed has been cheerleading Panther periodically since 2014. Back in August 2014, Lebed.biz emailed a promotion to thousands mentioning Panther under its Toronto Stock Exchange trading symbol of GPR. The hype said in part:

There's a huge fundamental problem with promoted stocks, arguably most especially those promoted by Mr. Lebed.

Such stock promotions themselves push up the share price. So the stock price increase typically is not a reflection of any good business practices or even good luck experienced by the company.

That means the share price will virtually always drop. Because there's nothing but fluff supporting the price.

*2. Kiss Of Death: Rodman & Renshaw

Panther investors need to understand two unfortunate, crucial actions by investor Rodman & Renshaw.

First, Rodman & Renshaw - which was a key institution investigated during the Chinese stock fraud issues of 2010 to 2013 - raised its target price for Panther from $1.10 per share to $1.50 on April 14.

Panther stock rose.

Next, on April 20 - six days later - the firm inked a deal with Panther for a $10 million at-the-market (ATM) facility.

By that time, the stock had jumped 33 percent from the day of the price target upgrade to $1.48 on the day Panther and Rodman & Renshaw signed the deal.

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Back To Earth For Skyline Corp. (SKY)

 
An odd case of mistaken identity has sent Skyline Corp. (SKY) stock on a thrilling flight upward ... where it is perfectly poised for decline.
Skyline shares have traded around $4 for the past year or so. That price looked high for a mobile home company that has lost money for the last seven years and offered shareholders a negative equity exceeding -14%.
But one day, the share price jumped about 89 percent and then rose another 28 percent to around $11 per share.
What is most stunning is why the price apparently took that leap.
And that reason is a key point in this StreetSweeper alert that highlights Skyline's seven most seriously misunderstood and overlooked negatives:
*1. Mistaken Identity
Skyline shares took off the very day that a completely unrelated company issued big news.
On March 9, a news report hit Skyline's news feed on Yahoo Finance with a story headlined, "Vice's new TV channel Viceland will launch on Sky TV in the UK in September."
Bam! People bought Skyline stock.
There was just one problem.
Skyline is a trailer and module home seller ...
 
(Source: Skyline website)
And ...
Sky is a UK entertainment company ....
(Source: Sky news website)
 
Skyline and Sky have nothing to do with one other.
 
The story was based on Sky's announcement that it will launch a new TV channel in the UK and Ireland this fall. Good news for those folks. But a United Kingdom-based TV channel is about as far removed from an Indiana-based mobile home seller as you can get.
 
This line in the story picked up by Yahoo Finance stirred up things even more:
 
"Fox — owned by Rupert Murdoch — has a 39% stake in Sky and a 5% stake in Vice."
 
As shown here, Mr. Murdoch does hold a stake in Sky, the entertainment company.
 
But rest assured, the billionaire who oversees a vast media empire, has no ownership in a mobile home company named Skyline, which trades under the symbol "SKY."
 
The story just got tangled up in Skyline's news headline feed, shown here. The article should be taken down.
 
Once the dramatic mix-up dies down, Skyline investors will be left with six more sobering realities poised to further drive down the price of this dull mobile home company...
 
*2. Skyline Loses Millions Yearly
Skyline has struggled for years to create net income and in fiscal year 2016 finally netted a meager $352,000.
The stock resumed its trajectory after the recent earnings report showed slightly improved finances.
But net losses have historically exceeded $10 million for each of the previous five years.
 
 
 
(Source: Marketwatch)
 
 
*3. Industry: A Big Dud
Skyline's losses aren't entirely unexpected because manufactured homes make up one of the market's most disappointing industries.

Manufactured home purchases are continuing to decline in market share.

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Almaden Minerals (AAU): Six Reasons Why This Stock Is Fool's Gold

Almaden Minerals (AAU) stock has shot up on misconceptions surrounding a highly speculative gold mine projected to cost more than $1 billion, while the company has only a measly $2-or-$3 million in the kitty.

Meanwhile, promotions have pushed the unprofitable company’s stock even as losses race on beyond $59 million.

Before any more investors put another penny into this kettle of fool’s gold, we present these executive bullet points that point to downside risks:

1.The company kitty contains only several million dollars, yet its sole mine prospect, the Ixtaca project, would cost over $1 billion total; $28 million for construction alone.
2.Ixtaca’s large pits appear to be economically marginal or unfeasible, suggest notes by authors of a preliminary study.
3. The company justified a likely pending stock offering by pitching its $6.5 million option deal to buy a Nome, Alaska mill as a way to reduce Ixtaca expenses.
4. Unaware of the likely stock dilution, the market actually pushed up the stock price ... primarily thanks to professional stock promoters.
5. Some institutions have recently sold out of their Almaden holdings.
6. Almaden's largely inferior financial position, low return on equity and other notable weaknesses spurred a recent and rare "Sell" rating.

TheStreetSweeper offers the following six reasons that Almaden appears precariously poised for a huge decline:

*1. Ixtaca Project: Risky $1 Billion Bet

Hype surrounding a study indicating possible gold and silver reserves at its Ixtaca project in Mexico escalated the stock price some 70 percent almost overnight to a 52-week high. But the market doesn't realize that any Ixtaca mining is projected to bust the budget.

Construction costs alone, according to the pre-feasibility study, would take $28 million. And total initial costs could reach or exceed a whopping $100.2 million.

Stunningly, construction costs plus sustaining costs associated with the Ixtaca project are expected to exceed $1.1 billion (table 1-5) - practically a thousand times greater than Almaden's cash reserve.

Yet Almaden's cash is a tiny, tiny sliver of that amount.

(Source: Company SEC filings)

Our estimates are based on cash reserves falling to just $6.2 million on December 31, and a burn rate of about $2.47 million a quarter.

Projecting those assumptions over 1 ½ quarters, cash has now probably dropped to between $2.5 million and $3.7 million …  about 10 percent of construction requirements, about 2 percent of needed initial capital and a fraction of a percent of the sustaining expenses, assuming mining ever takes place.

*2. Non-Cherry Picked Pit: Negative Financial Returns

Ixtaca’s large pits - which were not selected for study - appear to be economically marginal or unfeasible, suggest notes by authors of the preliminary feasibility study.

While the pits that were selected for study may produce minerals worthy of mining and could perhaps pay back in 2.6 years, authors say it’s all very risky …

“The economic results are based on the potentially mineable tonnages in the selected ultimate pit…The reader is further cautioned that the preliminary economic assessment is preliminary in nature, and that there is no certainty that the preliminary economic assessment will be realized.”

Most importantly, authors wrote:

“The selected (undiscounted) ultimate pit limit is chosen where the incrementally larger pits produce marginal or negative economic returns.

So in a nutshell: the larger pits likely will pay off very little or won’t pay off at all.

*3. Previous Action: Dilution Looms

Just last October, Almaden announced what amounts to three years of stock dilution required to buy a mine that was mothballed over seven years ago.

The company pitched a $6.5 million option deal to buy the Nome, Alaska mill (closed in part due to “problems with mineral reserves”) saying that the deal would reduce costs to get Ixtaca rolling.

“The Rock Creek mill only operated for several months before the mining operation was curtailed in 2008 and has been kept in excellent condition during subsequent care and maintenance.

The old equipment will be dismantled (Almaden contends in an email to us that the equipment was used six weeks and has been on “care and maintenance” since it was mothballed back in 2008). Then the equipment will be barged 4,300 miles from Alaska to Ixtaca east of Mexico City, Mexico, for possible use at Ixtaca.

Almaden’s corporate development vice president, Donald McDonald, told TheStreetSweeper that the company has depended on stock offerings and joint venture-sales deals to operate for 30 years. And “continued development activity at Ixtaca is subject to our ability to raise capital from equity, debt and/or other traditional sources…”

So the deal is poised to dilute shares if Almaden proceeds with the option to buy Rock Creek by 2018.

Yet the market happily bought into the story.

Here’s why …

*4. Hello: Stock Promoter

Almaden’s stock recently went crazy after the market bought into an e-newsletter campaign launched by professional stock promoter Broad Street Alerts.

On April 7, 2016, a release headlined, “Compelling Gold and Silver Project at Almaden Minerals,” promoted the company report, here. The author was paid up to $250 a shot for redistribution rights and Broad Street cautions:

“Our reports/releases are a commercial advertisement and are for general information purposes ONLY. We are engaged in the business of marketing and advertising companies for monetary compensation.”

TheStreetSweeper asked if Almaden managers were aware of the Broad Street promotion or made any sort of payment to the firm or its associates.

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Why Real Industry (RELY) Can't Turn Net Losses, Recycled Aluminum and Face Cream Into Gold

Real Industry’s (NasdaqGS: RELY) mishmash business of selling face cream and recycling aluminum is unreal in and of itself. Then mix in its price-to-earnings ratio…

And investors will find a ludicrous 1,037 P/E, while the scrap metal industry's P/E is just 11.

Stocks trading at extremely high P/E ratios are great stocks to avoid. Overvalued stocks are more likely to suffer future losses than stocks trading at lower P/Es.

Add the enormous P/E ratio to recent insider selling and investors begin to get a glimpse of numerous downside risks piling up against Real.

Investors may find other viewpoints here. Meanwhile, let's consider those ramping risks:

*1. Net Carry Forward: Not Real Revenue

A couple of promotional pieces, here, have apparently been misinterpreted, resulting in support for Real’s stock price. The piece comments that the company operates on a plan of taking tax advantages based on net operating losses (NOLs).

An NOL is not the way to build a business.

Only a truly troubled company would try to build a reputation on taking a tax advantage based on losing millions of dollars.

Yet someone holding shares of the stock has gone out and promoted that effort on the Seeking Alpha financial website.

The author added: "We are happy with the performance so far. We didn't buy the stock only for its aluminum business, we bought it because of the NOLs, and the management's disciplined capital allocation."

Racking up losses and calling them tax benefits - and then having someone crow about it - may work for a little while.

But to take advantage of those losses, the company has to have a positive operating income - something Real has missed in three of the last four years.

The overarching issue is this: Organic growth is the lifeblood of solid companies. Any growth – and all planned growth for Real – depends on acquisitions and NOLs. That's not a great growth plan.

*2. The Foundation: Rollup Company

At its very foundation, Real is a rollup company.

And Wall Street is strewn with battered remnants of rollup companies much like Real. Studies show that 70 percent to 90 percent of mergers and acquisitions fail. Failures are undoubtedly even greater for rollup companies with acquisition after acquisition after acquisition.

What happens is that all too often, companies simply choose the wrong candidate, pay too much and don’t know how to integrate the new business, suggests Harvard Business Review.

Unfortunate mergers include Daimler-Benz and Chrysler, which culminated with Daimler-Benz spending hundreds of millions to sever the deal after management realized lower-income folks didn’t fit with the luxury car business; and Kmart and Sears, a mishmash of poor inventory investment and sub-par locations that has left the retailer's stock price whimpering to an all-time low.

*3. Former Subprime Lender: Operating Losses Grow

Since emerging from bankruptcy proceedings initiated in 2010 under the legacy business called Fremont – a subprime loan lender - the company has reported significant net losses from business operations:

(Source: Company SEC filings)

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BioPath Holdings Inc. (BPTH): Why A Bad Golf Company Won't Make A Good Gene Therapy Company

BioPath Holdings Inc. (Nasdaq: BPTH) has swung and sliced to the right. Now it hopes investors will run after the ball. 

The company spent six years fruitlessly trying to make a buck selling ugly pants, clashing shirts and other golf paraphernalia. It eventually made the unlikely transformation into ...  gene therapy.

But BioPath is still missing the ball and almost certainly will continue to do so as this company attempts to produce a drug delivery platform.

Indeed, the new company presents these massive risks for investment portfolios:

* Reverse Merger; Inexperienced Management: The CEO/CFO/Treasurer/Chairman/President reverse merged a golf company to create a biotech. He is among the company's four leaders with virtually no experience in biotech. 

* Unfortunate Supporter: Recent support from Rodman & Renshaw is good reason for investors to avoid BioPath.

* Uncertain Revenue Generation: Any possible product sales are distant dreams. The top drug candidate is only in Phase II study. The second candidate is approaching Phase II. So the prospects must get through one to two more phases of study before even going after FDA approval to market the drug. 

* Fierce Competition: No one knows whether the drug candidates will succeed and some experts are skeptical. Meanwhile, many established companies are developing strong therapies for the same patients.

* Low Institutional Interest: Five institutions have sold out, including a particularly noteworthy investor.

* Stock Dilution Looms: BioPath's cash has fallen to an estimated $7.65 million. At a $1.25 million quarterly burn rate, it will take a significant cash transfusion to proceed with trials and business operations. A big ATM brimming with share dilution potential is poised.

Investors may find other viewpoints here. Meanwhile, here are details on the top six reasons TheStreetSweeper is convinced BioPath's drug game will be no better than its golf game.

*1. Odd Beginning

So it all began in 2000 when Ogden Golf Corp. opened and began selling golf items in Ogden, Utah.

After six straight years of losses and nothing to show for it but over-tapped friends and family, the board apparently realized the golf course would not drive the company straight to wealth and happiness. So managers registered with the Securities and Exchange Commission, began selling shares for 50 cents apiece and looked around for business ideas.

They found that idea in the most unlikely of places ...

*2. Reverse Merger; Inexperienced Management.

Two years after Ogden Golf closed, the CEO/CFO/Treasurer/Chairman/President decided to reverse merge his golf company to create BioPath Holdings in 2008.

But, while Peter Nielsen may know golfing, he lacks biotech or healthcare leadership experience. Yet here he  is - the CEO, CFO, treasurer, chairman and president of a Bellaire, Texas biotech - albeit a biotech that has failed to advance a product as far as Phase III in eight years.

Peter H. Nielsen. Mr. Nielsen is a co-founder of Bio-Path, serving as its Chief Executive Officer, President and Chief Financial Officer/Treasurer and Chairman of the Board since 2008. Mr. Nielsen has developed a close working relationship over the last six years with key individuals at The University of Texas MD Anderson Cancer Center and its suppliers. Mr. Nielsen has a broad management background in senior management, leading turnarounds of several large companies.  He also has experience in finance, product development, cost and investment analysis, manufacturing and planning.  He has also worked with several other biotech companies developing and executing on strategies for growth and previously served as a director of Synthecon, Inc., a manufacturer of 3D bioreactors.  Prior to joining Bio-Path, Mr. Nielsen served as Chief Financial Officer of Omni Energy Services Corp., a NASDAQ traded energy services company.  Mr. Nielsen was a Lieutenant in the U.S. Naval Nuclear Power program where he was Director of the Physics Department and was employed at Ford Motor Company in product development.  He holds engineering and M.B.A. finance degrees from the University of California-Berkeley.

But Mr. Nielsen's biotech experience is so light that the second line of his biography highlights his friendship with folks at The University of Texas MD Anderson Cancer Center.

While the bio states he led "turnarounds of several large companies," it mentions Synthecon, a company that seems to be a Houston Technology Center incubator product with little public presence since 2010. And it mentions an oil services company, Omni Energy Services Corp., where he became CFO in September 1999.

But the oilfield service company priced at  $11 per share in its initial public offering in 1997 soon fell into financial disarray.

Mr. Nielsen's presence there could hardly be related to any "turnaround." According to this release on a lawsuit, his predecessor claims to have been hired as part of a turn-around team because "its stock price was depressed and the company had narrowly avoided delisting."

Indeed, Omni reported gross profit worsened from $-2.7 million when he arrived to $-3.6 million, when Mr. Nielsen apparently left as he signed his last amended annual report in April 2000.

BioPath co-founder Douglas P. Morris also lacks prior biotech experience. The company director left his BioPath executive position in 2014.

Douglas P. Morris. Mr. Morris is a co-founder of Bio-Path and has served as a director of Bio-Path since 2007 and served as an officer from 2007 to June 2014. Mr. Morris currently serves as a co-founder, Managing Member, and Secretary of nCAP Holdings, LLC (nCAP), a privately held technology based company. Between 1993 and 2010, Mr. Morris was an officer and director of Celtic Investment, Inc., a financial services company. Since 1990, Mr. Morris owns and operates Hyacinth Resources, LLC (“Hyacinth”), a business-consulting firm and is also a Managing Member of Sycamore Ventures, LLC, a privately held consulting firm. Mr. Morris has a B.A. from Brigham Young University, and attended the University of Southern California Masters program in public administration.

Chief operating officer Ulrich W. Mueller (page 51) and director Dr. Amy P. Sing (page 52) both have some biotech experience. But out of six BioPath leaders, four have no significant biotech experience.

And, considering how little the 11-person company has advanced in nearly a decade, executives are generously rewarded. The two top executives haul in around $1 million yearly.

(Source: Company SEC filing)

Now, let's look at an investor that was, in our opinion, unfortunately attracted to BioPath.

*3. Unfortunate Support: Rodman & Renshaw

One reason for investors to be cautious is the April 18, 2016 $5 buy rating from Rodman & Renshaw. The note apparently helped push up the stock but a price increase is temporary ... and could suddenly reverse course. 

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Why The Virtual Reality Biz Likely Won't Become Himax Technologies' (HIMX)Reality

As virtual reality fans geek out over the latest goggles hitting the market, Himax Technologies (NASDAQ:HIMX) stock is shooting over the moon.

Himax shares have rocketed as much as 45 percent in the last couple of months. This rally came in lockstep with mass hysteria over the late-March shipping date for the "Oculus Rift" virtual reality goggles and the preorder date for "Microsoft HoloLens" goggles.

Taiwan-based Himax is a chip company focused on the driver IC used in TV and cell phone panels. The hype is tied to its second-tier product, a display piece used in virtual reality and augmented reality (VR and AR) headwear.

Yet when investors understand how Google Glass hype failed Himax previously - and how many other issues are chewing at the company - this stock could quickly get booted back to reality.

Investors may find other viewpoints here. Meanwhile, TheStreetSweeper presents the top eight reasons Himax shares are  so risky:

*1. Rift: Weak, Largely Unpromising Sales Impact

The opportunity presented by Oculus Rift is weak and of little financial significance to Himax.

The Himax product used by Rift is the timing controller. Other Himax components could conceivably be used but the most prevalent piece by far is the timing controller, a chip that sells for about $1 apiece.

Some analysts estimate that 12.2 million virtual reality headsets may be shipped in 2016, according to Fortune.

Let's assume the unlikely scenario that Oculus Rift sold all of those headsets and Himax provided the timing controller for each one. The best gross revenue would be ~$12 million or a mere 1.75 percent of 2015 sales. Considering the current 3.64 percent profit margin, then, Rift would be worth less than half a million in net income.

And some analysts say that scenario is highly optimistic...

(Source: oculus.com)

In fact, primarily thanks to issues explored in "Product Reviews" below, some analysts expect only around 3.6 million Rift sales in 2016.

Again applying the company's low profit margin, that would make the Himax opportunity unworthy of a mention at somewhere around $131,000 - yes, $131k - for the entire year.

So the case for a reality check goes deeper yet as we consider ...

*2. HoloLens: Too Expensive

The company's opportunity with HoloLens is also limited and very speculative.

Himax provides two LCOS display engines at $25 apiece and an array lens at about $100 apiece for HoloLens. However, Microsoft is uncertain about the mass market and few applications exist for the headset. So Microsoft is selling only a prohibatively expensive edition for developers... Indeed, the headsets sell for a whopping $3,000 apiece.

Too rich for most folks. And that price tag is reminiscent of Himax's snake-bitten Glass experience.

*3. Lesson Learned: Google Glass Gone

Himax remembers all too well the good and bad of Google Glass. The good news for Himax was that it supplied LCOS microdisplays for Google Glass. The bad news is that Google Glass has shattered.

In one click of the Google Glass website, investors can quickly grasp that the "smart" eyewear, as we knew it, is gone:

(Source: Google.com)

That's right. Despite Glass appearances on actors on the red carpet, on models in Vogue fashion spread and in the imaginations of fans who thought the devices would inexorably change their lives forever - everything fell away in one horrid swoop.

Glass faced massive criticism and legislative efforts aimed at safety and privacy concerns. But the final blow came in the form of a viral video of a middle-aged, not-all-that-fit-looking tech blogger wearing Glass ... as he took a shower.

Gasp! Glass is for geezers??

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Odyssey Marine Exploration (OMEX): Seven Reasons This Stock Is A Shipwreck

Odyssey Marine Exploration’s (NASDAQ:OMEX) dumping its shipwreck business is like rearranging the deck chairs on the Titanic.

And - like members of the orchestra valiantly playing as the ocean water laps at the hems of their trousers - Odyssey is playing sweet tunes designed to convince investors that the inevitable won’t happen.

Odyssey is a Tampa, Florida company that has changed course from shipwreck recovery to undersea mineral exploration. In light of a messy controversy over the HMS Victory shipwreck, a former UK official calling the company a "scam," and a consistent record of losses other than one small net income blip in 2004, the company finally determined that its shipwreck recovery business was a wreck. So now the company hopes its unproven mineral idea will someday tip the ship upright.

TheStreetSweeper is not buying it. Investors may find other viewpoints here, as we look at seven reasons investors should expect more troubles before Odyssey can ever get to work on a single seabed mineral deposit.

*1. Cash Poor

The company is running out of cash fast. Cash and equivalents had dwindled down to $2.2 million at year's end. And Odyssey burns through more than $17 million per year.

That means Odyssey burns through about $4.3 million in cash each quarter.

At the same time, Odyssey's working capital deficit has hit $21.1 million. And, while revenue did increase to $5.3 million in 2015, net losses hit $18.2 million and a "going concern" issue still dogs the company. The snapshot below indicates the ongoing financial disappointments.

(Source: Company SEC filing)

*2. Looming Dilution 

With cash burning, financial burdens mounting and just fresh from a Nasdaq delisting threat, the company recently had to ink a quick, draconian deal to borrow $3 million from Epsilon Financial at 10 percent interest. 

Odyssey received $1.5 million on March 31 and will receive the remainder on April 30.

While the deal addressed cash burn for one quarter, it actually poses a noteable risk to existing stockholders.

That's because it gives Epsilon the right to convert every penny outstanding into Odyssey stock at $5 per share.

Here is the relevant part of the agreement:

"At any time and from time to after Epsilon has advanced the full $3.0 million to OME, Epsilon has the right to convert all amounts outstanding under the Note into shares of Odyssey common stock upon 75 days’ notice to OME or upon a merger, consolidation, third party tender offer, or similar transaction relating to Odyssey at the conversion price of $5.00 per share..."

A default by Odyssey would halve the conversion price to $2.50. So, if Epsilon converted the full amount into shares, the lender would receive about 600,000 shares. If Odyssey defaulted, the lender would get more than 1.2 million shares.

So as the company tries to stay afloat with its mineral dredging attempts, investors could very soon face diluted shares.

But even more ominous dilution potential looms ahead, as we explain in the "Extensive Stock Dilution" section below.

*3. Blame Game

Solid companies seldom blame others for their troubles. Not so with Odyssey.

When the company submitted its 2014 annual report, the US Securities and Exchange Commission responded with questions about its initial business of shipwreck excavation. The commission asked about recent UK Telegraph reports that the Maritime Heritage Foundation had only 65,000 pounds and that the HMS Victory site where Odyssey had planned to excavate is believed not to have a treasure.

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Resonant Inc.: Big Troubles Could Send This Bad Boy To Penny Stock Land

Merely 11 months ago, we marched hyperactive Resonant Inc. (NASDAQ CM: RESN) right to the time-out chair for bad behavior. Since then, Resonant has been tottering along without making one penny in revenue, just digging a hole deep enough to hold $30 million in debt... and it's still digging.

Goleta, California-based Resonant, developer of radio frequency filters for mobile devices, held its initial public offering in May 2014 at $6 per share. That IPO generated $16 million or just enough to survive a couple of years. But the stock has zigzagged like a youngster hyped up on sugar, even as the company has failed to commercially launch its filters.

Today, Resonant is in big trouble... probably the worst ever.

Investors may find other viewpoints here. Meanwhile, we’ll hop back into Resonant’s playground to check out the five latest issues spatting the company's fingers.

*1. No Cash: How To Make Payroll?

With no way to generate revenue, Resonant's operating losses rose about $4 million in 2015 to hit almost $10 million.

Now Resonant is hurting for money. In December 2015, its cash and equivalents dropped to $2.5 million:

(Source: Company SEC filing)

But that was one quarter ago. And the company burns cash at a rate of $2.3 million per quarter.

So Resonant may have already run out of cash.

*2. Surprise! Going Concern Issues Tucked Into Holiday Filing

It was 6:32 p.m. on Good Friday eve. The markets were closed and most traders were consumed with thoughts of Easter egg hunts or religious services or simply enjoying a long weekend break from the stock market.

That’s when Resonant managers chose to file a stunning disclosure.

And Good Friday had dawned before the US Securities and Exchange Commission could file the company’s annual report containing that "going concern" disclosure tucked away on page 38. The disclosure included a revealing note from auditors to directors and stockholders. Auditors wrote:

"... the Company has earned no revenue since inception through December 31, 2015 and has incurred significant losses from operations since inception. In addition, the Company’s operations have been funded with initial capital contributions, proceeds from the sale of equity securities and debt. The Company's principal sources of liquidity as of December 31, 2015 consist of existing cash balances and investments of $5.5 million. These events and conditions raise substantial doubt about the Company’s ability to continue as a going concern."

Clearly now, auditors doubt the company will survive.

*3. Now What? Potential Stock Dilution Looms

In addition to the going concern notice, the company filing warned:

“We have determined that additional capital from the sale of equity securities or the incurrence of indebtedness and, ultimately, the achievement of significant operating revenues will be required for us to continue operations through the second quarter of 2016 and beyond.”

As any self-respecting 10-year-old might say, “Duh! They’ve gotta sell stock or get a loan. Because you can’t squeeze pennies out of an empty piggy bank.”

So, considering the rapid cash burn rate, only a white knight or a $9 million-plus stock offering could slap a Band-Aid on Resonant at this point and keep it breathing for one more year.

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US Concrete: Ready To Crack Under Pressure

Investing in US Concrete is like investing in a pair of concrete shoes for your investment portfolio.

The stock, (NASDAQ CM: USCR), is set to go down, down, down, in our view. And US Concrete investors could soon find their portfolios swimming with the fishes.

US Concrete sells ready-mixed concrete principally to customers in its home state of Texas, plus northern California and New York/New Jersey.

The company hasn't responded to our request for comment but investors may find other viewpoints here.

Meanwhile, let's look at an executive summary followed by details on why stock in this concrete company is ready to crack under massive pressure.

*Executive Summary
*Ridiculous valuation.
*Insider selling of company stock.
*Quarterly revenue slip.
*Nothing proprietary.
*Sensitive to economic stagnation, a housing bubble or just an economic hiccup.
*Very low cash, suggesting the need for a raise such as a stock offering.
*Excessive executive compensation equal to nearly one-quarter of the company's entire net income.

*Numbers Would Scare Even Crazy Joe

TheStreetSweeper has seen more than our share of crazy ratios over the years. But one key Concrete ratio absolutely floored us.

US Concrete's trailing Price-to-Earnings ratio hit an incredible 544!  That means people are paying 22 times more for US Concrete than the average 24 P/E seen within the industry overall.

Why? A P/E of 544 is just as outlandish as the nearly $1 billion market valuation placed on a company that is not curing cancer or selling the fountain of youth ... rather a company that sells cement. And it sells cement primarily in just three regions of the country.

That bizarre ratio hasn't gone unnoticed by the folks that investors look to for guidance ... insiders.

*Insiders Yell, "Sell!" At Well Below Today's Price

US Concrete insiders have taken shares on a brisk walk to the auction block time and again over the last three months. In fact, insiders apparently had enough questions about the future of the stock that they didn't bother making even one open market purchase from December through today.

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Why You Could Go Broke Buying Broke Out

When two UK twenty-something buddies - who sold "streetware" and "head ware," in 2014 and greeted customers with "Yo Peeps" -  swing a stock deal with a Belize company owned by a guy in China, what can possibly go wrong?

Plenty.

First of all, that unlikely team has actually formed a publicly traded company called Broke Out, Inc. (OTC Pink: BRKO) and sold stock in the company. Now people are actually buying the highly risky over-the-counter "pink sheet" stock.

Unfortunate investors have no idea that this is a company that has gone $81,559 into the hole as it holds only $3,762 in cash.

Yet, levitated by a heavy promotional campaign over the last couple of days, Broke Out is now teetering on a market valuation of not $1 million ... Not $10 million ... But $100 million.

Incredibly, Broke Out soared on news that it has acquired an app called "Secret Menu for Starbucks™." 

The company is trying to tie itself to the popular international coffee store. But there's every reason not to buy into this stock.

Broke Out has not responded to TheStreetSweeper's request for comment and there's really nothing beyond blatant promotions offering the bull case to this company which just may be the biggest financial disaster we've ever covered.

But let's look at the top reasons Broke Out will likely leave investors broke:

*1. Background; Switch-eroo

Broke Out started as a way for a young UK man to express himself and perhaps make some extra bucks.

Here's Broke Out founder Jason Draper modeling one of his line of eight pieces of clothing, as well as a snippet from his thoughts penned on the Broke Out website:

 

(Source: brokeout.co.uk)

But Broke Out was, well, broke.

So, on January 27 this year, Broke Out issued 4.6 million shares to a Belize company controlled by Chinese resident Chan Set Kuan; Jason Draper also sold 15 million shares privately to Mr. Kuan. Mr. Draper and the other officer backed away, leaving Chan Set Kuan as the sole executive and director.

The stock offer wrapped up assets of Megapps Ventures, a company that had existed three months and spent the entire time not building apps but buying them.

Overnight, the struggling fashion company became a struggling app company operating out of a home office in Berlin, Germany.

Should something go wrong - and it will - this China-Germany combination will make it very difficult for investors to find recourse, as filings spell out on page 11.

*2. Absurd Acquisition

So how did a little two-man operation selling eight items of street wear become a two-man app company wrongly valued in the multi-millions?

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KEYW Holding Corp.: Five Key Challenges Pose Significant Downside Risk

An embarrassing acquisition and declining gross margins are among the issues poised to kill the stock price of KEYW Holding Corp. (KEYW).

Indeed, while a rally is temporarily holding up the share price for the holding company, massive challenges have set up prime conditions for a dive. These hazards are tied to the company's failed attempt to jump from a declining government contract business into the cyber security business and back out again.

The Hanover, Maryland-based company hasn't responded to TheStreetSweeper's request for comment but investors may find various viewpoints here. Meanwhile, we present the top five reasons KEYW faces big troubles.

*1. KEYW Must Dump Embarrassing Loser

The company had plodded along as a boring government contractor until it captured investors' attention by forming the Hexis Cyber Solutions product line and beginning to remake itself into a cyber security company.

Investors bought into KEYW's expectations for Hexis. They were under the impression that the new business was brimming with hope, based on the company's revenue projections:

(Source: Company SEC filing)

But Hexis has fallen far short of expectations. The segment generated $7 million revenue less than anticipated in 2014. And the expected $40 million contribution to revenue in 2015 turned out to be under $14 million:

(Sources: Company SEC filings and earnings call)

So KEYW wants to put this major misstep behind it by trying to sell all or part of Hexis. In the last earnings call, CEO Bill Weber said:

"KEYW will not continue to invest in the unconstrained way it has in the past. As a public company, we have the utmost obligation to shareholder value. And as such, we initiated a process a few months ago for a strategic alternatives for the Hexis business. Those alternatives include an investment or sale of our Commercial Cyber Solutions business in one or more transactions to buyers."

But dumping Hexis means that KEYW could get dumped, too.

*2. Bye-Bye Hexis; Bye-Bye Investor

We've asked KEYW if managers are worried that selling all or part of the glamorous cyber security segment could give investors a reason to sell the stock. We haven't heard back. But let's consider why we believe looming stock selling is a clear and present risk to current investors.

The situation revolves around KEYW's activities as a risky roll-up - a company that chases after revenue by conducting acquisition after acquisition. All too often, these deals produce far less revenue than hyped and consume far more money and management attention than expected. We've frequently warned investors about roll-ups such as Revolution Lighting (RVLT, $4.08 on publication day, $0.77 now) and InterCloud Systems (ICLD, $3.15 then, $0.54 now).

In the case of KEYW, the company wanted the Hexis acquisition to propel the company into a sector showing some life - cyber security.

So the company's entry into the cyber security field in 2012 must have seemed perfect for a fund called PureFunds ISE Cyber Security ETF (HACK).

PureFunds bought in. KEYW became a tiny 1.24 percent of PureFunds' portfolio (here). For perspective, here's a snapshot of PureFunds' top holdings in cyber security leaders.

(Source: PureFunds)

Indeed, the KEYW holding is small - the fund's third smallest holding. Yet the 1.8 million shares of KEYW means the fund holds a meaningful 4.5 percent of outstanding shares.

But PureFund now has an issue. The former glamour fund is now a bummer carrying homely, if not downright ugly, returns.

(Source: Bloomberg)

With both the impending divestiture of Hexis and PureFunds' quarterly portfolio rebalancing right around the corner, KEYW is likely in trouble. PureFunds may well sell all or at least a massive amount of KEYW stock once KEYW boots its cyber security business.

That poses a screaming threat of stock dilution for today's investors.

*3. Undependable Government Contract Business

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Broke Out II: Unbelievable Hype, Crushing Drop Ahead

Broke Out (OTC-Pink: BRKO) has been floating on hot air from a well-oiled hype machine over the last few days but the inevitable is just ahead: This stock is ready to deflate.

TheStreetSweeper sent a detailed email to securities regulators late last week about the actions surrounding Broke Out.  The company appears to be in the "pump" stage of what in our opinion will ultimately become a particularly egregious pump-and-dump tactic. We believe this tactic is poised to leave many Broke Out investors flat broke.

We've seen many pump-and-dump tactics over the years but seldom have we seen anything quite this appalling.

The apparel retailer with just eight different articles of clothing last year made a desperate pivot to offering apps. But loses have continued to rocket, leaving the company with only $3,762 in cash at the end of the year.

Yet nearly 100 times that amount - $315,000 to be precise - has gone into a four-day Broke Out promotional campaign. And who is the sugar daddy who paid promoters big bucks in recent days to hype Broke Out?

The group shelling out over $300,000 to promote a company with about $3,700 in cash is a two-man fund called Bullseye Asset Management. We can assure you we'll be keeping our eye on this incredibly generous Denver hedge fund.

Primarily thanks to those promotions, the stock exploded by more than 146 percent, handing Broke Out an unbelievable market valuation of $105 million.

 

(Source: hotstocked.com)

The company has not responded to TheStreetSweeper's request for comment. Meanwhile, let's look more closely at the ridiculous hype and other issues investors must consider with this stock:

*1. Most Promoted Stock

Broke Out now holds the dubious distinction of becoming the most heavily promoted stock in March, according to Hotstocked. That's right.

Subscribers were treated to 25 emails by a group of newsletters that form Elite Penny Stock. Elite is the same outfit that promoted CLOW ($0.07), EURI ($0.09) and AREN ($0.01), all of which started at pennies, briefly exploded, then collapsed when the promotions stopped.

The Broke Out promotions over the last few days included:

"BRKO's moment to shine is right now and if you don't buy shares of it today you may look back in regret once its shares are trading at around 10 dollars," crooned SmartStockChoices in a widely distributed March 9 email.

The fine print at the bottom of the email explains, "We do not publish research or due diligence and only publish favorable promotional information about the Profiled Companies because we are paid to do so."

And ... this:

"BRKO is the stock you want to buy now!" shouted BestAmericanStocks.

Noting its $70,000 payment from Bullseye, the March 7 email warned investors: "The Newsletter is a one-sided advertisement that only provides positive information... we do buy and sell during campaigns. We even sell shares of Profiled issuers during the dissimenation of the Newsletter while the Newsletter recommends that you buy the same shares we intend to sell.

"Individuals should assume that all information contained in the Newsletter is not trustworthy, accurate or complete ..."

And this from Finest Penny Stocks:

"Here is why this company could go up from $3 to $20."

The email is signed by Keith Richie, Editor. But the fine print says he's a fake!

"Any first, middle, and/or last name referring to our "editor," ... or any other title or name is purely fictitious."

Kind of rips away that warm and fuzzy feeling, doesn't it?

*2. Ranking: Skull And Crossbones

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Second Sight Medical Products: Eye-Opening Risks Ahead

Two eye-opening announcements over the last couple of days jumped shares of Second Sight Medical Products (EYES) above $6 per share.

The first boost came after the company announced its prosthetic eye will be featured in an episode of HBO’s “Vice” titled “Beating Blindness.”

Though its implantable visual prosthetic isn’t specifically mentioned in the show airing Feb. 26, EYES product appears to be visible in a preview.

The second boost came when EYES announced five-year data from its Argus II clinical trial will be unveiled today, Feb. 24, during the 39th Annual Macula Society Meeting in Miami Beach.

EYES will of course happily accept all promotional effects.

But those 15 minutes of fame won’t change the very real issues that will drop this stock.

Here are TheStreetSweeper’s top four reasons investors should keep eyes wide open on EYES:

*Dual Promotions Signal Potentially Dilutive Stock Offering

As the promotional efforts mentioned above attest, EYES has stayed unusually busy lately churning out press releases.

They’ve produced eight press releases since Nov. 24, with four of those released this month. The snapshot below highlights the company's latest promos:

(Source: Company website)

While the "Vice" episode may be serendipitous, the vigorous promotions are not. Instead, we believe there's a method to their madness. The company needs to push out a potentially dilutive stock offering. Read on to understand all the signals pointing that direction.

*Cash Down, Losses Up

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Celator Pharmaceuticals: Eight Key Risks Threaten To Chop This Stock

Celator Pharmaceuticals (NASDAQ: CPXX) has finished cherry-picking and left the ladder against the tree. Now stock promoters have climbed up and begun tossing investors the pits.

The small New Jersey company with negative earnings and no revenue has been focusing on a drug targeting a rare cancer called acute myeloid leukemia.

Investors may find other viewpoints here. Meanwhile, here are the top eight reasons TheStreetSweeper expects Celator stock will quickly wither and die.

*1. Failed Phase II Trial Endpoint

Celator actually failed to meet a key endpoint in its phase II trial of VYXEOS (formerly CPX-351). That’s right.

In the May 2014 edition of Blood Journal, researchers wrote that they studied the response rate (complete remission + incomplete remission), plus survival.

The drug overall produced response rates of 66.7% versus 51.2%, as shown here.

So there wasn’t a lot of difference between what happened to patients who took the Celator drug compared to those in the control group. But the survival measurement is key. Researchers wrote …

Differences in survival “were not statistically significant.”

Data analysis of the entire group showed the dreaded crossed lines:

(Source: Study published in Blood Journal)

In the charts above, the red line indicates the Celator drug. The blue line indicates the standard of care, chemo. When those lines cross, results of the two therapies are no different.

As an OncLive author wrote: "The study did not meet its primary endpoint of a statistically significant OS improvement at 1-year posttreatment. However, there was a statistically significant OS benefit with CPX-351 among the protocol-defined EPI poor-risk subset (HR = 0.55; P = .02). A higher response rate (39.3% vs 27.6%), EFS improvement (HR = 0.63; P = .08), and lower 60-day mortality rate (16.1% vs 24.1%) were also observed with CPX-351 in this poor-risk subgroup."

Then something unusual happened. Researchers examined data for a small group within the original group of 126 patients. This cherry-picking produced a special subgroup of patients with secondary acute myeloid leukemia. That subgroup produced better looking results.

Those lines did not cross. Of course, the Food and Drug Administration would have likely preferred a wider distance between the lines, which would indicate the drug was likely working. But at least the lines did not cross:

Indeed, researchers found response rates compared more favorably: 57.6% versus 31.6%. They also found slower cytopenia recovery and more infections but thankfully infection-related deaths didn’t increase.

Even in light of the more favorable data in the smaller group, the response rate isn't the measurement that matters most. Oncology doctors consider overall survival the ultimate measurement of cancer drugs. But, as we've said, researchers found Celator failed the overall survival measurement in phase II.

So the company had what it wanted in the smaller sampling.

What’s so bad about that? Well, read on …

*2. What’s Wrong With Cherry-Picking?

This cherry-picking is contentious enough that both the FDA and EU have weighed in and set up guidelines. The FDA says subgroup “analyses should be interpreted cautiously.”

Authors reported the fascinating observation that:

“…no drug has so far been approved or not-approved either in the US or in the EU on the basis of subgroup analysis.”

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Globant S.A.: Beautiful Words Won't Halt The Looming, Ugly Decline

Globant S.A. is living proof of the old adage, "Beauty is only skin deep." Just scratch the surface of this Luxembourg company and you'll find enough Quasimodo-esque characteristics to send this stock running into an ugly, rapid decline.

Indeed, Globant's SEC filings are unique as it conjures up beautiful - and vague - visions of the business: "Globant  (NYSE: GLOB)is a digitally native technology services company. We dream and build digital journeys that matter to millions of users. We are the place where engineering, design, and innovation meet scale."

Plow through all that dreamy stuff and investors find a company with a bank of computer programmers and design support people primarily working out of the main office in Argentina.

Investors may find other viewpoints here. Meanwhile, diligent investors can see growing risks are tarnishing Globant's glowing digital dream, including:

*1. Limited Recurring Revenue

Though it has attracted customers such as Coca-Cola and LAN Airlines, Globant must operate within an atmosphere of transient customers and short-term contracts.

What happens is that Globant wins these one-time projects but once they're done, they're done. The customer says "Thanks," pays up and takes the project in-house to save on costs. Globant clearly concedes that risk to revenue on page 21 as it describes "a decision by that client to move work in-house."

Alternatively, Globant says the customer may decide to move work "to one or several of our competitors."

Company filings describe the risky short-term nature of most contracts:

"...most of our client contracts are limited to short-term, discrete projects without any commitment to a specific volume of business or future work, and the volume of work performed for a specific client is likely to vary from year to year, especially since we are generally not our clients’ exclusive technology services provider. A major client in one year may not provide the same level of revenues for us in any subsequent year."

Globant has been handling some Google projects, including the recent hardware related project trial called Project Ara. This trial has no time table attached and provides a pretty good example of how companies use Globant on a project basis.

In a recent note to BWS Financial investors, Hamed Khorsand beautifully explained Google's project-based use of Globant ... and the associated risk:

"The project based approach leads us to believe that the Street is not valuing the business risk concisely and leaves investors vulnerable to the downside especially when the competitive landscape is changing.

"It also does not mean GLOB would be able to sustain 20 percent or 30 percent growth in an industry that grows at less than 10 percent a year," wrote Mr. Khorsand.

So Globant's services, in our opinion, cannot generate the kind of recurring revenue that is so crucial to a viable future.

*2. Reinventing The Wheel

So the short-term nature of the technology services business is forcing Globant to find new customer after new customer.

Unfortunately, this constant grinding away each day to reinvent the wheel is beginning to show on the company.

Globant says so itself.

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TransEnterix: Nine Top Reasons TRXC Is An Operational Disaster

Today's TransEnterix Inc. (NYSE: TRXC) came into being through the most reckless of actions - by casually plunking down $94 million for a tiny company offering virtually no sales, no prospects, nothing really beyond multi-millions in losses.

In finalizing the reverse merger, the experimental surgical robot company magnified the absurd acquisition of SafeStitch with this jaw-dropper:

"As previously discussed, the projections for SafeStitch show that a profit is never expected to be attained."

The company hasn't responded to TheStreetSweeper's request for comment but investors may find other viewpoints here.

Meanwhile, here are TheStreetSweeper's top eight reasons investors might want to consider running away, screaming from this operational disaster:

*1. Worst $94 Million Ever Spent

We're still examining TransEnterix' unbelievable payment of 12,350,000 shares at $7.60 per share for a company so far removed from the surgical robotic field.

SafeStitch focused on small, disposable devices targeting hernias, obesity and gastroesophageal issues. And, in the days before the September 2013 reverse merger, it became clear that SafeStitch's financial health was no more attractive than the surgical stapler that generated miserly sales:

 

(Source: Company SEC filings)

SafeStitch recorded $35,000 in sales in 2012 and zero the year before. Total net loss had risen to $29.5 million. Not surprisingly, the financial statement included the warning below.

"It is uncertain as to the length of time the Company can sustain continued operations without the availability of additional funds. This uncertainty raises substantial doubt about the Company’s ability to continue as a going concern. "

Auditors were dismissed soon afterward. TransEnterix continues to struggle with its own going concern issue.

And as if the merger price didn't seem crazy enough, the company placed $10,000 under intangible assets and $93.8 million under goodwill - thereby keeping almost every penny of the SafeStitch acquisition out of the income statement.

The US Securities and Exchange Commission apparently thought this was, well, odd. Absurd enough to be included among 41 TransEnterix questions posed by the Commission.

The company responded that it conducted the reverse merger primarily because it was desperate to raise capital. Another frantic action came months later, in March 2014, when the company conducted a reverse stock split. That split was necessary to jump the stock price enough to meet NASDAQ listing requirements.

So, how carefully has TransEnterix handled operations since then? Let's see ...

* 2. Absurd Numbers

TransEnterix' operational functioning continues to be abysmal. The company has not made a penny since inception and analysts are expecting a 12 cent per share loss in the coming quarter.

Even though analysts should be getting used to the ongoing miserable negative earnings, TransEnterix last quarter delivered a negative 34 percent surprise. That's right. Instead of an earnings loss of just 4 to 12 cents, the company suffered an earnings loss of 16 cents per share.  As the chart indicates, investors can expect more pain in the future:

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Simulations Plus: Top 11 Reasons SLP Stock Will Deflate

The stock price of Simulations Plus (NASDAQ: SLP) looks ready to slip, slip, slip away.

Shares in this Lancaster, California drug software and contract research group have recently risen like a gigantic, luminous balloon. But this dirigible has been floating on old hot air,(more hot air today) interesting accounting methods, dropping cash flow, looming payments and insider selling – and is just about to deflate.

TheStreetSweeper presents the top 11 reasons we expect SLP stock will soon slip its mooring and head down, down, down.

*1. Goodwill Hunting

First, let’s focus on the accounting surrounding the $7 million acquisition of Cognigen in September 2014.

SLP's initial payment of $5.2 million consisted of $2.08 million in cash and over 491,000 shares ultimately valued at $3.277 million. (SLP will need to pay the remaining $720,000 cash and 170,014 issued shares in July.)

This transaction would normally prompt a pretty big hit in the income statement.

But the company did something that’s perfectly legal yet quite surprising.

The company allocated almost $4.8 million of the acquisition cost to "goodwill." So goodwill – the premium SLP paid over Cognigen’s book value – accounted for over 90 percent of the initial payment. By allocating it this way, SLP kept the vast majority of the cost off the income statement.

 

And goodwill appears as an asset:

(Source: Company SEC filings)

Of the total purchase price, then, a whopping 66 percent was placed in goodwill. Somewhere around 30 percent is more common.

If we looked at goodwill in relation to assets, we find SLP recorded $8.4 million in Cognigen assets. Goodwill came in at 57 percent of that … So the ratio of goodwill to assets also comes in much higher than with many firms.

 

TheStreetSweeper asked SLP's CFO John Kneisel to do a little goodwill hunting with us.

Our question: Why allocate so much to goodwill?

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The VirnetX Holding (VHC) Rocket Ship: Failure To Launch

Shares of VirnetX Holding (VHC) have ridden an unfortunate rocket to the moon based on a court decision that Apple infringed on VirnetX’s patents. But we believe the share price will crater as soon as the market understands the massive risks:

1. The Trend: No Settling

Patent trolling firms used to nab larger companies by the tail. But now these companies are beginning to fight - and win - these lawsuits filed by patent trolls. Case in point is Better Mouse Company's patent suit against SteelSeries.

Better Mouse apparently attained the title of “patent troll” because the company began buying up patents and launching patent lawsuits shortly after it was formed, according to Forbes. Before long, Better Mouse's chewing paid off as companies eager to push aside the pesky little troll coughed up $1.2 million just to settle matters.

But jurors jerked away Better Mouse's cheese on Jan. 14. They rejected the company's patent infringement claims against SteelSeries.

So will Apple really meekly hand VirnetX $625 million? That's unimaginable.

In fact ...

2. Many Years Before VirnetX Pockets A Dime – If Ever

Apple immediately filed for a mistrial after last week’s verdict of infringement on four VirnetX patents in products such as FaceTime and VPN services. And VirnetX’s attorney said he thinks it could take several more years to resolve the case that began six years ago, not near VirnetX's Nevada headquarters but in Tyler, Texas, "the patent litigation capital of America."

Meanwhile, VirnetX knows all too well that after spending countless hours and dollars litigating, cases sometimes go the wrong way. The company filed a $258 million patent lawsuit against Cisco in 2010 with what may have seemed to VirnetX astonishing results. In a stinging 2013 verdict, jurors determined Cisco had not infringed on VirnetX patents. VirnetX investors raced to the exits and shares plunged 28 percent.

     3. Microsoft Outcome Disappointing

Even when a lawsuit ends up being settled to VirnetX's favor, the results aren't as beneficial as we would hope. VirnetX won a March 2010 $200 million settlement against Microsoft. Yet, the lead counsel whacked away $20 million plus expenses; taxes took $34 million; and partner Science Application International Corp. $59.24 million, with more obligated.

Ultimately, the Microsoft windfall turned out to be a gentle breeze resulting in VirnetX receiving only about $63 million... Though the settlement did manage to push the negative earnings into a positive 91 cents, the company ended up with just 31 percent of the settlement.

   

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Amedica Corporation: More Painful Drama To Come

Amedica Corporation’s (AMDA) reverse stock split is the latest and perhaps the most desperate measure taken thus far. But more painful drama will follow.

On the verge of getting delisted from the NASDAQ, so it pulled as desperate 1-for-15 reverse stock split on Jan. 25 with the stock trading at just 11 cents per share.

The split technically propped up the stock into compliance for now, much like another desperate stock TheStreetSweeper just warned investors about … Authentidate Holding Corp. (ADAT,$5.04/share on publication date, $2.94 now). But Amedica’s desperation is even more palatable with its higher cash burn, nearly as severe accumulated losses and more frequent recent promotions.  

Just last November, professional stock promoters were paid to conduct a two-day promotional blitz of Amedica stock. Paid stock promotions have always provided one of the surest, quickest tipoffs that a company is desperate … and likely doomed to take a trip to penny stock land.

Real companies with real products and real promise simply don’t need the hype….unlike Amedica.

Investors may find other viewpoints here. Meanwhile, let's proceed with the jaw-dropping risks aching to pummel this stock.

*Bought And Paid For Hype

In Amedica’s case, a third party paid cash through a wire transfer to hype the company for a two-day campaign.

The more desperate the company, the greater the hype and tens of thousands in hype-money is just the opening act. The greater danger to investors is that stock promoters can buy huge quantities of potentially worthless stock and pitch it to their subscribers. Those subscribers’ purchases rocket the stock price, triggering the promoters to dump the stock … and the stock price dives.

Investors can see details of the Amedica hype-fest below:

(Source: stockpromoters.com)

*Amedica Promoters’ Record

Still tempted to follow promoters’ advice to buy Amedica?

Let’s check their track records first.

Penny Stock Locks, responsible for the majority of the Amedica campaign, cites two recent “winners,” Golden Star Enterprises (GSPT, no revenue, $207 cash, $-119,500 operating cash flow), which was heavily promoted this weekend and Monday by another newsletter writer, and Excalibur Resources Ltd. (EXCFF, no revenue, $3,620 cash, $-142,700 operating cash flow).

The promoter discloses: “PennyStockLocks.com and its officers, partners, affiliates, employees, etc. are compensated for covering and profiling these companies in cash and/or stock and as such there will be a conflict of interest and our profiles and other dealings are not arms length transactions. The party that pays us usually has a position in the stock they will sell at anytime without notice. Their selling and our selling of shares could have a negative impact on the price of the stock, resulting in losses to you.”

Even humor can’t deflect the risk: “We will not be held liable for any investment decisions you make when that is the case. (Hey Folks, these are high risk stocks).”

If the financials and disclosures aren’t eye-popping enough, check out the stock charts of the promoter’s self-proclaimed winners:

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Turtle Beach: Apparent Default, More Undesirable Ingredients For This Turtle Soup

Turtle Beach Corporation (HEAR), the moldy headset company TheStreetSweeper wrote about less than four months ago, continues to turn into turtle soup. Our update includes the latest unfortunate ingredient - an apparent loan default - atop a heaping serving of undesirables:

*Debt hole deepens.

  The company burned through $11 million in just the first nine months of 2015. Cash now rests at about $7.2 million.

   All totaled, debt is $84.2 million.

   Available cash has dropped by over 50%.

 

 *Loan default threat.

  *Turtle Beach appears to be in default of its Bank of America loan, due to horrid EBITDA. Lenders renegotiated the loan terms late last year, as the 8K shows here.

  *Company must raise at least $10 million by Jan. 29, 2016.

  *Company faces strict EBITDA targets, requirements which indicate an additional business decline …

So, as the chart above shows, as of Dec. 31, 2015, lenders required Turtle Beach to reach $8 million EBITDA.

But EBITDA was in the red … a  miserable $-3.3million.

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Authentidate Holding: Delisting, Massive Challenges Wreck This Runaway Rollercoaster

 

The Authentidate Holding Corp. (NASDAQ: ADAT) rollercoaster has hurled investors along a teeth-jarring ride made all the more excruciating now that trading is expected to be shifted from the NASDAQ to the lowly OTCQB ...tomorrow!

The company announced today, Jan. 28,  that ADAT has lost its NASDAQ listing.

Indeed, this crucial event has been in the works for years and was forewarned by numerous issues, including:

*Primary customer lost.

*62% drop in revenue to $398,000.

*Losses totaling almost $10 million in 2015 alone.

*Two stock promotion blitzes.

*Two reverse stock splits.

*Just one US patent and one patent pending.

And the warnings simply got worse:

*Auditors' substantial doubt that ADAT will continue as a going concern.

*Cash position drops to a fraction of $1 million.

*An SEC cease-and-desist order against ADAT’s biggest shareholder, Lazarus Management, an investment company desperate enough to actually write about ADAT in a Seeking Alpha article.

Yet, even despite today's confirmation that ADAT has lost its NASDAQ listing, ADAT wants investors to sit tight in their coaster seats.

TheStreetSweeper has not gotten a response to a request for comment from the web-based software applications company but investors may find other viewpoints here.

Meanwhile, let’s look at the grimy undercarriage of this rollercoaster.

*Cease-and-Desist Order Involves ADAT And Four Other Stock Issuers

ADAT is seriously obligated to two pairs of brothers. The SEC sanctioned entity is linked to the first pair.

Lazarus Management owns a 29 percent stake in ADAT and its related entity holds a recently extended $500,000 ADAT note with a searing 20 percent interest rate attached. Lazarus is managed by the brother of company director Todd Borus, who owns ~192,000 shares of stock and cheap options.

The US Securities and Exchange Commission saw fit in September 2014 to fine Lazarus Management $60,000 and order it to cease and desist securities violations. A portion of the litigation document is below. The full document is here.

(Source: SEC)

The order specifically names violations revolving around five issuers, with ADAT listed first.

In 2013, Lazarus Management blatantly promoted ADAT through a management interview published on Seeking Alpha.

*Stock Promotion Blitz

Six months before the SEC order, a promotional campaign focusing on ADAT launched. This desperate first effort by professional stock promoters barely moved the stock price above the $1 per share range.

But a promotional blitz launched Aug. 26, 2015 succeeded in one respect, sending the stock up a blistering 18 percent:

Source: stockpromoters.com)

This promotion came exactly one day after Authentidate announced plans to merge with the small private testing lab Aeon Clinical Labs. The double-digit stock rise helped push shares …

To 34 cents per share.

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LightPath Technologies: Heavy Promotions, Lame Fundamentals, R&D Budget Slash Add Up To Potential Dilution

LightPath Technologies (NASDAQCM: LPTH) promoters and an infinitesimal glimmer of income have nearly quadrupled the stock from its 52-week low of 82 cents per share.

Now, the maker and assembler of molded optics, light-focusing components and glass lenses is overbought and extremely risky.

TheStreetSweeper didn't get a response to our request for comment but investors may find other viewpoints here.

Meanwhile, let's throw some light on LightPath before this stock can burn investors.

*Heavily pushed by professional stock promoters

Stock promoters orchestrated a blitz promoting LightPath some 34 times, ultimately priming the stock most recently on June 2, 2015, June 3, 2015 and June 9, 2015. And in June 2013, another company pushed LightPath, along with CLSN (~$7.50 then, ~$1.40 now) and SONS (~$16 then, ~$5.90 now).

Here’s a snapshot of some of the latest promos:

 

(Source: stockpromoters.com)

LightPath message boards have become the stomping ground of penny stock promoters, as indicated below:

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American Superconductor: Relentless Storms Break Up This Wind Turbine Company's Turn-Around Effort

The chief executive of American Superconductor Corp. (NASDAQ: AMSC) nailed it when he told a reporter that China wanted “to kill the company.”

In fact, shares collapsed under China’s pressure, plunging the market valuation by 87 percent virtually overnight in 2011. And despite misunderstood hype that has breathed a quiver of life back into AMSC in the past few weeks, the stock appears poised for another hammering.

In a 60 Minutes segment broadcast Sunday night, CEO Daniel McGahn said AMSC lost over $1 billion in valuation when China looted its wind turbine technology in a high-stakes game of industrial espionage.

Back in 2007, AMSC agreed to supply the computer brains for wind turbines made by small, China-based Sinovel. Two years later, AMSC announced a $100 million follow-on contract with Sinovel. In 2010, the year it hyped a partnership expansion, AMSC broke its string of losses and knocked down $16 million in net income, thanks to the Chinese company.

*Business Disappears Overnight

But in March 2011, those celebrated contracts fell apart. Sinovel, a 70 percent contributor to AMSC’s revenue, suddenly refused contracted deliveries of the company’s turbine controls.

Oddly, it seemed Sinovel turbines were spinning when they should have been shut down during testing. That’s when the company began investigating. It seemed an employee had secretly copied AMSC's intellectual property, including source code. Six months later, Superconductor filed suit claiming it had been left in a lurch and its IP stolen.

Lured by promise of a $1.7 million contract and other perks, a Superconductor insider agreed to steal the technology for Sinovel, according to a criminal indictment.

In June 2013, a federal grand jury returned an indictment charging Sinovel, two former executives and a former AMSC employee with theft of trade secrets.

*The Kicker

Incredibly, the FBI discovered stolen technology right under AMSC’s nose.

FBI agents found a Sinovel wind turbine - complete with AMSC’s heisted technology - just 40 miles away from company headquarters in Devens, Massachusetts.

The Massachusetts Water Resources Authority had purchased the turbine from Sinovel for $4.7 million  - in federal stimulus money.

Undaunted, Sinovel punched back with a $190 million counterclaim in China over issues including failure to meet contract standards.

So the civil proceedings between AMSC and Sinovel rest in the court in Beijing, another complicating factor for the American company.

“It’s a very complicating factor, I think evidenced by the fact it’s been four years and we’ve haven’t seen much movement at all,” Brion Tanous, AMSC investor relations, said in a phone interview with TheStreetSweeper.

Of course, AMSC's four civil lawsuits remain unresolved - one initial trial date has been set for December - and the ultimate  expenses remain unknown.

One thing is certain, though. In one fell swoop, AMSC lost its best customer … and control of its technology.

TheStreetSweeper believes there’s a nagging danger that other companies may be willing to take a turn at kicking AMSC in the chops, too …

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SolarWindow Technologies: After 18 Years, Still No Product, No Revenue, No Rainbow Ahead

The Wizard of Oz could not have conjured up a company less likely to deliver a financial rainbow to investors than SolarWindow Technologies (OTC: WNDW).

The Columbia, Maryland company has three full-time employees, $29 million in losses, has never made a penny in sales, depends upon backing by a promoter formerly sanctioned by the Securities and Exchange Commission. The whole mess is overseen by a chief executive whose 2014 compensation package is bigger than the company's entire R&D budget.

And, as the wicked Witch of the West warned, this “little party’s just beginning.”

The company has not responded to a request for comment but investors may find other viewpoints here.

Meanwhile, let’s look at the reasons TheStreetSweeper believes this party will end badly, no matter how many times the company clicks its ruby slippers together.

*After 18 Years, Still No Product

The public vehicle has been in existence for two decades – since May 1998.

In those 18 years, the company has changed names three times, changed focus a couple of times but never commercialized a single product.

At inception, the company called “Octillion” rolled up two asset-free companies into subsidiaries. The first idea was to develop a spray window coating designed to convert sunlight into electricity. The second idea surrounded pursuit of technology to regenerate optic nerves.

But without a product, the company had no way to make money. So operations depended on selling stock and getting loans from its now-past president, Harmel S. Rayat. Investors will learn more about Mr. Rayat's background below.

(Source: harmelrayat.com)

*Dorothy: “My, People Come And Go So Quickly Here!” And So Do Names, Symbols And Ideas

The company latched onto the name SolarWindow in March 2015. Previously, it was known as Octillion (OTCBB: OCTL) from 1998 until 2008, when the name was changed to New Energy Technologies (OTCBB: NENE).

And its product ideas changed quicker than you can say, “Create a couple of subsidiaries and spin off the ‘nerve regeneration’ loser.”

The spun-off nerve regeneration business reports $0 revenue, $0 cash flow and a share price that plummeted from an awful 43 cents to an atrocious zero:

Meanwhile, the parent company relied on Mr. Rayat while it desperately tried to connect the dots between a report in 2007 and its idea:

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Digging Into NovaGold Resources: Big Risks, Massive Costs Ahead

There may be “gold in them there hills” but investors better not count on NovaGold Resources (NYSE: NG) digging it out.

NovaGold owns 50% of two exploration properties, consisting of the Donlin Gold project in Alaska and Galore Creek in Canada.

Expected expenses are massive. The prospects are iffy. The risks are enormous. And the excavation route goes straight through investors’ wallets.

The company hasn’t responded to our request for comment but investors may find various viewpoints here.

Meanwhile, here are the chief reasons TheStreetSweeper believes this blinding stock rally – up 11 percent in three months - is merely a flash in the pan:

*Donlin Gold project:

No operations. No revenue. The project awaits government approval for over 100 permits. The open-pit mining operations aren’t expected to start up until 2020.

          *Proven and potential gold reserves: While NovaGold reports reserves of 7.7 proven metric tons and probable reserves of 497, no precise data exists showing how much gold may be there or whether any is recoverable, and company expectations are not statements of fact, as stated here and here.  Additionally, acid mine drainage, possibly thousands of pounds of mercury releases, cyanide effects and increased river barge traffic top the project’s environmental risks.

         *Cost to design & build Donlin Gold: $6.679 billion.       

         *NovaGold’s portion of costs:  $3.34 billion.

*Galore Creek project:

No gold recovered despite numerous attempts since 2003. NovaGold and its partner ran out of money for the copper-gold-silver project and suspended construction in 2007 when they discovered construction would cost around $5 billion.

          *Current status: In February 2011, the former president declared, “Galore Creek is one of the most significant copper-gold projects in the world.” Eight months later, NovaGold began trying to sell its 50% stake. In 2012, the company said it expected a sale by the end of the year. Still waiting.

*Unfortunate promotional activity:

No obvious recent professional promotions; but the stock trader prosecuted for stock manipulation at age 15 -  Jonathan Lebed - successfully hyped NovaGold through his Lebed Biz in 2010 to $11.62 per share. Red Chip also promoted the company in the same time frame.

(Source: stockpromoters.com)

Alliances with such promoters are huge red flags for investors.

*Recent announcement:

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Universal Display: Patent Cliff, Analyst Thumbs Down, And A Baseless Rumor

The essence – the thing that makes Universal Display what investors have come to believe it is – falls apart in 2017.

Universal Display trades under the symbol “OLED” and depends upon key patents for the technology that the company sells. This technology pertains to essentially an organic light-emission dust used in screens for smart phones or television sets.

But here’s the key problem: The company’s fundamental patent is scheduled to expire in 2017.

And other patents appear to face an expiration date of 2018 and later.

Here is the pertinent information from Universal’s 1998 SEC filing: “In December 1997, the first patent, titled "Transparent Contacts for Organic Light Emitters", was issued to Princeton University by the U.S. Patent and Trademark Office …  In January and February, 1998, two additional patents relating to Multicolor Organic Light Emitting Devices were issued to Princeton University. Princeton University and USC have filed approximately 30 additional patent applications relating to the OLED technology in the United States, and have filed for intellectual property protection internationally.”

Patents typically expire 20 years after application:

When these patents hit the patent cliff starting in December 2017, the technology falls into the free-for-all known as the public domain.

Princeton technology licensing experts have not gotten back to TheStreetSweeper with a comment.

Likewise, the company has not responded to our request for comment but investors may find other viewpoints here.

Meanwhile, check out these additional killer risks poised to hammer Universal stock:

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The9 Limited's Battle Accelerates: Tragic Timing, Gamer Use Declining, Partnership Blunders

Just when it seemed The9 Limited’s (NCTY) timing of the Cross Fire shooter game couldn’t get much worse – it did just that.

Less than two weeks after the mass shootings in Paris, The9 announced a deal on Nov. 25 to distribute the Cross Fire 2 sequel in China.

Incredibly, Cross Fire 2 is set for release in China today. Though the website provided a countdown to launch of Cross Fire 2 last night, it states the site is under maintenance this morning. But the game was tragically scheduled for release today to Chinese online gamers just a couple of weeks after the Colorado Springs shootings – and just eight days after the San Bernardino massacre.

Though the latest massacres didn’t happen in China, the government is known for cracking down on societal ills.

Indeed, the Chinese government can – and has – shut down websites deemed socially destabilizing. In fact, China’s Ministry of Culture outlawed godfather and mafia games in 2009 because of the potential negative impact on young people.

So the Ministry may look even more critically at shooter games like Cross Fire2 in the aftermath of the recent massacres. See a sample of the graphics below.

(Source: crossfire.z8games.com)

Yet the stock has somehow managed to stay aloft.

Shares rose after The9 announced it will operate Smilegate Entertainment’s CrossFire 2 sequel in China for five years at a stunning cost of about $500 million -$50 million upfront, $450 million in milestone payments plus more in royalty payments.

Even if investors push aside the unconscionable timing, significant questions still loom.

How will the Shanghai, China-based company - with a nearly $21 million net loss - pay for something so expensive and uncertain?

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Paycom: Nervously Patching Leaks?

Iconic investor Warren Buffett once said, "Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks."

Indeed, Paycom Software (PAYC) investors may be getting tired of patching leaks in this company that provides payroll software-as-a-service for small and medium sized businesses.

One leak will become a veritable torrent in a matter of weeks, when current investors' shares could face major dilution. That's because of the Dec. 28 release of about 18 million shares that Paycom insiders have had locked up for months.

That's right. Millions of Paycom shares will become eligible to hit the public auction block, according to the prospectus supplement.

See more information here and below:

“The date of this prospectus supplement is November 12, 2015.”

“After this offering, our officers, directors and selling stockholders will be subject to lock-up agreements with the underwriter or us that restrict their ability to sell shares of common stock until 46 days after the date of this prospectus supplement. After the lock-up agreements expire, an additional 18,441,518 shares of common stock (or 17,766,518 shares of common stock if the underwriter exercises its overallotment option in full) will be eligible for sale in the public market…”

The selling shareholders may be seen here:

Clever insiders can now more easily back out of their investment in Paycom – a company they probably realize is poised to feel the effects of a fading revenue driver - the Affordable Care Act.

In fact, a major investor, Welch, Carson, Anderson & Stowe, deserves our golden plastic wheelbarrow prize for dumping stock more rapidly than any we’ve ever before witnessed.

The private equity firm and entities have unloaded some 5 million shares. In one day.

On Nov. 24, the firm sold almost every single share of Paycom stock:

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Zagg: Glass Screen Protector Company Shattering Under Pressure

Zagg (ZAGG)shares have rallied near 52-week highs, all the more perfectly poised to shatter amid numerous lawsuits, market deterioration, an ongoing SEC investigation, an executive resignation, insider selling and a recent $100 million shelf filing which could bring excessive dilution.

Formerly known as the fumbling Chinese academic regalia manufacturer Amerasia Khan Enterprises, this Salt Lake City, Utah company makes screen protectors for smartphones. The company has turned in one of its worst net income reports since 2011:

(Source: SEC filings)

Though Zagg is currently expected to increase earnings about 13 percent to 68 cents next year, TheStreetSweeper believes it will not hit that figure. In our view, the market share will continue to fracture as customers turn to the vast number of cheaper alternatives.

Zagg has not responded to our request for comment but investors may find other viewpoints here. Meanwhile, here’s a look at the red flags indicating Zagg is poised to disappoint:

*Major Dilution Looming With Recent $100 Million Shelf, Insider Selling

Now that Zagg is trading high, insiders can’t wait to get out. The company just filed a $100 million shelf registration that could bring extreme dilution to current shareholders, available here. At the same time, seven insiders have been set up to sell their shares, further increasing that dilution potential.

Here are the lucky seven insiders who may now dump their shares:

(Source: SEC filings)

In October, CEO Randall Hales jumped out with the most recent insider selling with the disposition of 43,000-plus shares, shown here.

Both of these selling activities are fairly good indications that Zagg has approached peak price.

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magicJack VocalTec: The Disappearing Business Trick

Any smidgen of magic left in magicJack VocalTec (CALL) is vanishing quicker than street magician David Blaine can make a new quarter disappear.

Now the former star of annoying, late-night TV commercials only wishes it could make its core business model reappear.

MagicJack offers a device that is plugged into the computer to allow consumers to make local or international phone calls for about $40 per year, plus $20 for service. Its second offering is VoIP or voice over Internet protocol for small or medium enterprises, an area dominated by the AT&Ts and Verizons of the world.

Though magicJack enjoyed an early out advantage in 2007, the benefits have fallen apart like a busted magic trick.

After an earlier reasonably-upbeat article, PC Magazine revisited magicJack in 2011 and rated it “fair,” adding: “(W)hen magicJack debuted, nothing else like it existed. That isn't the case anymore. In the face of competition, magicJack's poor interface, pushy attempts to up-sell you, on-screen advertisements for its own product, and general lack of support make it hard to recommend now.”

MagicJack faces numerous other issues that make the stock impossible to recommend now, including:

*Horrid consumer reviews

*Perilous declines in users, activations and app users

*Deteriorating core

*Consumer market is disrupted by free alternatives, unlimited talk phone plans.

*Latest “enterprise initiative” features inexperienced businessman, limited overall potential

Investors may read other viewpoints here. Meanwhile, TheStreetSweeper breaks through the smoke and mirrors to reveal magicJack’s risky reality.

 

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Voltari Corporation Alert: Buyer Beware

Ridiculous: $VLTC enters real estate biz, stock up over 100%. Growth? NO! With only $2.5m cash, need raise. BUYER BEWARE! We’re short

Here’s what the company states: In addition to our entry into the real estate investment business as described above, the Company intends to explore additional strategic opportunities from time to time, which may include opportunities with respect to its intellectual property, investments in various industries or acquisitions.

 August 2015, Voltari Corporation (“we", “us”, “Voltari” or the “Company”) committed to and began implementing a transformation plan pursuant to which, among other things, we exited our mobile marketing and advertising business and entered into the business of acquiring, financing and leasing commercial real estate properties. The Company intends to lease such properties pursuant to so-called “double net” or “triple net” leases.

Investors must watch out with this stock. Voltari needs cash and will likely take advantage of this run-up to issue stock. Dilution appears imminent. Don’t get stuck holding de-valued shares.

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Titan Machinery: Titanic Downside Risk

:

As it struggles to steer around revenue and cash flow icebergs, Titan Machinery (TITN) is beginning to look less like a league of strong mythical Greek gods … and more like the “unsinkable" Titanic.

North Dakota-based Titan operates a dealership network focusing on agriculture and construction equipment. The stock has bounced around like a seasick landlubber, with shares rallying from ~$10 per share in early September to the recent $12.33-$14.40.

That stock rally is despite Titan turning in two quarters of the lowest sales numbers the company has seen in three years.

Indeed, second quarter revenue of $334 million represented a 25.9% year-over-year plunge - the worst revenue drop within the entire industry, according to Thomson Reuters.

The mighty decline – which hit all four revenue segments - resulted in earnings of zero. That $0.00 in earnings caps off eight straight periods of negative earnings.

Here are highlights of the choppy waters Titan is trying to navigate:

*Misstated losses, but no amended 10-Q

*Related-party connections worth $100 million-plus

*Industry’s worst revenue drop; recent low-to-negative earnings

*Industry’s worst inventory buildup

*Struggles to pay off floor plan debt; lay-offs and store closings likely to continue

*Historical habit of revising guidance; then missing numbers significantly

*Low analyst ratings

*Among the industry’s worst performers

The company has not responded to a request for comment but investors may find other viewpoints here. Meanwhile, let’s look at why this is a good time for Titan investors to start looking for lifeboats.

* Losses Misstated: Titan Calls 50% Understatement “Immaterial”

Among all Titan’s reported losses, two instances stand out above all the rest.

First, in April 2014, Titan managers quietly disclosed that the company had released a quarterly report containing drastically inflated assets and understated losses.

Astute investors had to dig up that news - not in a standard amended quarterly report – but in a note near the bottom of a financial report issued five months later in September.

The net loss turned out to be far worse than the stated $4.2 million. The loss was actually $6.5 million.

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Badger Meter: Digging Into Major Downside Risk

After three down quarters in a row, Badger Meter (BMI) will have to dig like mad to suppress another big profit decline next quarter.

The water meter company reported year-over-year earnings dropped off a cliff – a teeth-rattling 18.6 percent. Clearly dismayed company leaders called financial results “disappointing” four times during the last conference call.

No wonder. The chart below shows Badger’s year-over-year earnings performance.

(Source: Badger SEC filings)

But even more disappointments loom ahead. In fact, normally optimistic analysts expect a 14 percent decline in 2015 earnings versus last year.

The company has not responded to a request for comment, but investors may find other viewpoints here.

Before we focus on several highlights, let's look at some additional downside risks for the Milwaukee, Wisconsin-based water meter and flow-measuring technology company:

*Shares trade at a ridiculous 14.6 times EBITDA and 33 times Earnings Per Share.

*Stock currently trades near analysts’ top price target.

*Normally optimistic analyst firms downgrade Badger or rank it a “hold.”

*Insiders are dumping company stock.

*A history of earnings misses.

*Badger blames Itron for its recent revenue miss.

*A cash position of only $4 million.

*Risks are exacerbated by razor-thin margins, fierce competition, economic softness, continuing supply and inventory problems, bad weather and poor flow-measuring technology demand for oil rigs during the oil patch malaise.

* More Disappointments Poised To Spill Over Into Next Quarter

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Turtle Beach: Recall, Seven Other Issues Pose Significant Downside Risk

After living on Easy Street for a month, Turtle Beach Corporation (HEAR) is now quietly recalling $6 million in next-gen products.

The recall of almost 60,000 China-manufactured gaming headsets began last week, according to the US Consumer Product Safety Commission. The recall came after consumers reported mold on gaming headsets that poses a health risk.

The XO FOUR Stealth headsets were sold in stores and online this year from June to September.

Here’s a snapshot of the government notice:

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MagneGas: A Zombie Fest Bursting With Hype, Horrifying Financials, Downside Risk

MagneGas Corp. (MNGA) activities and outlandish hype remind us of those lurching, snarling, misunderstood zombies populating the horror film “Night of the Living Dead.”

At the center of the Tarpon Springs, Florida company is founder, Ruggero Santilli. The controversial nuclear physicist has been called everything from brilliant to a fringe scientist.

In a manuscript, “HHO gas” was presented as a new form of matter by Mr. Santilli shortly before he started the company.

A Brown University professor wrote in the International Journal of Hydrogen Energy of Mr. Santilli’s “many serious misinterpretations and, misunderstandings of the “data” presented in this (Mr. Santilli’s) manuscript.” Mr. Santilli responded to the professor’s criticism here and built a reputation as a scrappy scientist who used the legal system to attempt to force detractors to take his ideas seriously.

MagneGas is built on Mr. Santilli’s machine designed to gasify pig manure or other liquid waste into fuel.

This “Magnegas” results when the waste is passed through an electric arc and heated. The alternative fuel is primarily used in welding.

But the technology is unproven on a large-scale industrial basis and might not work well on that basis – according to regulatory filings - or produce a fuel able to compete against standard acetylene.

MagneGas has only been able to claim revenue of ~$584,000 last quarter after acquiring Florida welding gas distributor, Equipment Sales and Services, in 2014. Today, the company announced the subsidiary “Lands Largest Single Customer in Company History.” But it is just so much more hype. The touted $400,000 per year customer “has indicated they will be purchasing all of their industrial gases and welding products throughout the year from E.S.S.I and their initial orders have been placed and delivered.”

There are only two months left in this year. Running the math, then, that order for the entire year would amount to just about $66,000 revenue.

And there’s no guarantee the order will be renewed.

While investors may find other viewpoints here, TheStreetSweeper presents in an ongoing investigation the first of six reasons MagneGas hands out downside risk like candy.

*Bought and Paid For Hype

MagneGas is so overvalued and its prospects so low, wise investors would normally run as if zombies really were after them.

So the company buys investors’ love.

In the last few years, MagneGas stock has been hyped by stock promoters an astounding 52 times at a cost to MagneGas and a third party of over $260,000.

Indeed, our analysis of stockpromoters.com data reveals eye-popping details.

*MagneGas itself paid stock promoters roughly $59,000 and 650,000 shares of its own stock.

Yet those payments are just the beginning.

*MagneGas friend ACS Financial Consulting Group pitched in hundreds of thousands of dollars for these stock promoting sites to hype MagneGas through newsletters and other means.

Here’s a snapshot:

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MeetMe: Seven Great Reasons To Stay Away From This Meat Market Stock

The meat cleaver is poised to come down on MeetMe (MEET), likely chopping those shares very sharply.

MeetMe is a cringe-worthy dating app that recently agreed to fork over $200,000 to settle litigation with the San Francisco city attorney’s office. The office alleged the way MeetMe allowed users to meet new people through their mobile devices violated California law for 13-to-17-year-old users.  

While the city accepted MeetMe’s revisions, we think MeetMe promotes a “meat market” mentality and should be closed to anyone under 18.

We’ve found many other reasons to avoid this company.

Below are TheStreetSweeper’s top seven reasons we believe this stock is excruciatingly risky.

*FLAT TRAFFIC

MeetMe’s mobile downloads are not growing, according to App Annie data, suggesting the user base is likewise probably not growing. So it’s ridiculous to pay a high multiple for this stock.

(Source: App Annie)

And compared with larger rivals, such as Tinder, MeetMe greatly underperforms, as shown below:

(Source: App Annie)

While MeetMe’s mobile users are increasing slightly, look at the striking decline in revenue per user:

(Source: SEC filing)

*DISPROPORTIONAL EXCITEMENT

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Anavex Life Sciences: Biotech Pump Goes On ... II

The Anavex Life Sciences (OTC: AVXLD) chief executive told TheStreetSweeper that he has no idea who was so kind as to pay $200,000 to a penny stock newsletter to hype the company stock.

“Absolutely not by us. That’s crazy!” CEO Christopher Missling told TheStreetSweeper in an Oct. 13 telephone interview. “We only do very ethical work. Let me tell you this. We really don’t want any association with anything like that. It’s absolutely inappropriate.”

The Stockpalooza email was reproduced in a Hotstocked newsletter here, and sounds like a paid promotion:

Importantly, Stockpalooza removed all doubt about whether the hype was bought and paid for. The newsletter said in its disclaimer that it expects $200,000 for promoting AVXLD:

“StockPalooza.com.com  expect to be compensated Two Hundred Thousand Dollars Cash via Bank Wire Transfer by a third party for a 1 Day Marketing Program regarding AVXLD. This compensation/expected compensation, expired or not, is a major conflict of interest in our ability to be unbiased. Therefore, this newsletter should be read as a commercial advertisement only. The third party, company, or their affiliates may wish to liquidate shares, which has the potential to hurt share prices.”

The complete disclosure is below:

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Boingo Wireless: Why This Stock Will Soon Swoon

Boingo Wireless (NasdaqGS: WIFI) is all dressed up for the ball, jitterbugging in white loafers while the competition coolly waltzes away with the belle of the ball.

Try as it might, the Wi-Fi hot spot provider has been slightly out of step since its founding in 2001.

Indeed, Boingo has racked up ~$63 million in losses and faces these investment risks:

Shelf Registration: Boingo recently cleared the way so it can sell millions of shares, posing looming dilution of current stockholders’ shares.

Insider Selling: Executives are selling company stock like mad. The chief executive and chief financial officer alone have unloaded about 150,000 shares in the last four months.

Accelerating Risk: Free mobile Wi-Fi offered by airports, coffee shops, hotels and telecom companies pose an ever-growing risk to Boingo’s business.

Nothing Special: Boingo depends on open-source software and unlicensed spectrum to provide Wi-Fi – both available to everyone.  

Terrible Finances: Shareholders’ 2014 losses of $0.55 per share are expected to worsen to $0.77 per share this year.

Institutional Disdain: Top institutional firms ignore Boingo, as even insignificant institutions are selling out their Boingo positions.

Cushy Compensation: Despite investors’ horrible returns, Boingo executives hit multi-million dollar jackpots.

Excessive Complaints: Boingo suffers from extensive customer complaints reported on consumer complaints website

Boingo declined TheStreetSweeper’s request for comment, but investors may find other viewpoints here.

Meanwhile, let’s look at the reasons we’re convinced overvalued Boingo is poised to dance away current stockholders’ hard-earned money.

*Angry: Customers

Many upset customers have logged complaints about Boingo on consumer complaints website complaintsboard.com, here. A few highlights:

** “When it comes to Boingo, it's way way worse than "accidental" charging.
I paid for their one-day pass, out of desperation since I usually don't give out my credit card details online, one year ago.
ONE YEAR AGO. Since then, I have clicked "Cancel" and closed down the GoBoingo! pop-up whenever it shows up. Since there was no setting for disabling the pop-ups (fishy fishy!), and since I had no intention of using the service ever again save for emergency, I went into my computer settings and made sure Boingo wouldn't automatically start up.
So you can imagine my surprise when, going over my account bills for the past three months - this would be about 10 months after originally using the Boingo "service" - I see four separate charges from Boingo Wireless.”

** “I have just discovered that I have been charged $9.95 on my credit card for 3 YEARS.
ONCE I used Boingo in an airport in Houston, TX. I had to think very hard to even remember this. I have been charged every month since that time.
When I called Boingo to discuss, they acted as if this was the first time they'd ever heard of such a ridiculous thing happening.”

**”Boingo is deceptive and makes fraudulent charges. Boingo deliberately conceals aspects of the "As you Go" $7.95 24-hr. access charge for web connection at U.S. hotspots.”

** “After signing up to use boingo wireless for one day at an airport, I continued to incur charges of $7.95 on my credit card bill. They claimed that I continued to use their service, which was false. This appears to be a common complaint. No one should use boingo wireless. Hopefully boingo.com will be held accountable.”

**” … they did the same thing to me and refused to refund the extra charges. I live in FL, but "Bogus" Boingo Wireless is based in South Santa Monica, California. I wrote the attorney general there and asked him to investigate Boingo business practices. I've also filed a complaint with the FL state attorney and the CA Better Business Bureau. That's not all, I am on a mission. I bought www.ihateboingo.com I am currently working on the website. Boingo needs to be exposed, they are conducting the same business practices that Blockbuster had attempted and looked where it took Blockbuster.”

*Killer: Competition

Boingo’s business primarily revolves around “DAS.” DAS or Distributed Antenna System is an antenna network installed in convention centers, office buildings, etc. to access the wireless network at peak times. Competing venue-based options include small cells.

AT&T and Verizon are the DAS giants. AT&T annually installs hundreds of its systems in stadiums such as the Dallas Cowboys stadium, campuses, airports and other venues across the country.

Verizon used its own DAS recently at the Daytona International Speedway, as well as various football stadiums.                             

T-Mobile and Sprint are other rivals, along with competitors such as Proximity, ExteNet Systems, Accu-Tech, SeamlessCellular and many more.

Here’s how CEO David Hagan described the way Boingo works in the DAS segment – a lengthy process he said is usually a 12-month cycle:

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Anavex Life Sciences: Biotech Pump Goes On And On And ...

If we didn’t know better, we’d think Anavex Life Sciences Corp. (OTC: AVXL) enthusiasts had ripped off a “Saturday Night Live” sketch featuring pump-you-up guys Hans and Franz.

Picking up three patents and one patent application, Anavex conducted a reverse merger in 2007 and switched from a digital-to-photo-print business targeting corner stores into a biotech company targeting Alzheimer’s.

Today, the company has no commercial product, hasn’t earned a penny since inception and does “not anticipate earning any revenues” until it can convince some other company to come aboard.

The company has lost $61.8 million  over about 12 years of operations and is living on the ragged edge of survival.

And don’t let the stock price fool you. Though it sports an astonishing $230 million-plus market valuation, this stock is worth a fraction of today’s price.

The company has not responded to TheStreetSweeper’s request for comment but investors may find other viewpoints here.  We’re just scratching the surface with this first look at a batch of highly promotional biotech stocks poised to dive.

*”We’re Here to Pump (clap) You Up!”

The 25 top biotech giants such as Johnson & Johnson and Novartis and Eli Lilly do not rely on hype to push their stock.

But Anavex has everyone from the CEO to pump sites to message board fans clapping their hands and cheering on Anavex with, “We’re here to pump you up!”

The chief executive officer, Christopher Missling, had this to say in a recent interview:

“Anavex has now a team of big pharma and biotech experts, doubled the number of Scientific Advisors which is mostly Medical Doctors, raised a company's record amount of $10M in one funding transaction, advanced after that quickly into Phase 2a, licensed additional promising compounds into the company. Anavex is significantly more advanced than in 2007.”

Yet Anavex filings say it operates with just “four (4) full-time employees, and we retain several independent contractors on an as-needed basis.” (Don’t miss the section below titled “Executive Compensation” to put employee compensation into perspective.)

Other concerning promotional efforts include:

The CEO sounds highly promotional - talking about reversing the disease and stopping the disease today (despite having its experimental drug just barely in the human testing stage involving dose toleration of just 32 subjects) - in this one video of four Anavex videos on Wide World of Stocks. WWOS is a site Timothy Sykes connected with Viral Genetics and one that also discloses that its employees sometimes receive investments in companies it features.This series just begged for a dose of the brash objectivity of SNL character Roseanne Roseannadanna.

B. Additional promotion on Stock News Now, here, a rather well-known microchip promotional site.

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Torchlight Energy Resources: Six Reasons This Former Pole-Dancing Company Is Running Out Of Energy

Hang onto your G-string. Torchlight Energy Resources (NasdaqCM: TRCH) – formerly a pole dancing studio – appears positioned to shimmy down to reality.

The oil and gas company danced onto the public stage as Pole Perfect Studios (OTC Bulletin Board: PPFT), a business built around “a fireman’s pole often found in gentleman’s clubs” ala the one-time fitness fad reminiscent of strip clubs. Pole’s founders invested less than a penny per share to start the biz and raised a few thousand dollars in 2008 by selling shares for 7 cents apiece.

But Pole teetered. So in 2010, the pole dancing company pulled off its fake eyelashes, changed its name and ticker symbol, and emerged as an oil and gas company.

Now operating out of a small office leased from a Plano, Texas travel agency (shown here), Torchlight today claims five projects in Texas, Oklahoma and Kansas. Much like its predecessor, Torchlight exists as an un-productive, money-chewing entity that hands investors a minus 360 percent return on equity.

In fact, financial despair has forced Torchlight to offer an extremely liberal interpretation of its oil reserves in an apparent attempt to attract investors.

Torchlight was unavailable for comment by deadline, but investors may find other viewpoints here. Meanwhile, here are the top six reasons TheStreetSweeper would never own this stock.

1.*Outlandish Oil Reserve Estimates

Torchlight’s estimates of the value of its oil reserves – oil still in the ground – are completely out of touch with reality.

Why? The company bases estimates on $91.48 oil prices! That’s right.

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Clearsign Combustion: Ready To Implode On Losses, Hype, Looming Dilution and More

Clearsign Combustion (CLIR) shares have virtually exploded but research suggests the company itself may be on the brink of implosion.

TheStreetSweeper offers this quick hit report highlighting the top risks poised to burn up the stock value.

The Seattle, Washington-based company is working on technology to improve emission performance and efficiency of combustion systems. The technologies are called Duplex and Electrodynamic Combustion Control or ECC.

But Clearsign has forgotten investment guru Warren Buffett’s advice: “Rule Number 1: Never lose money. Rule Number 2: Never forget Rule Number 1.” The company consistently loses money, offers zero-revenue, no significant sales since inception in 2008, no analyst interest, little real institutional interest, an uncertain future and depends on penny stock promotions to keep the stock fired up. A stock offering may be needed before long just to fuel company operations.

While other viewpoints are available here, we present details of the chief investment risks:

*Looming Dilution - Clearsign will likely conduct another stock offering within six to 12 months.

The company has always depended on stock offerings to stay in business. The finance-reviving stock offerings are shown in filings, here, and include:

  1. April and May 2012 – Initial public offering of 3.45 million shares at $4 per share. Cash to Clearsign: $11.6 million.
  2. March 2014 – Direct offering of 812,500 shares at $8 per share. Cash to Clearsign: $5.8 million.
  3. February 2015 – Public offering of 3 million shares at $5.85 per share. Cash to Clearsign: $16.3 million.

The chart, below, graphically shows how dilutive stock offerings keep Clearsign on its feet. The share count continues to rise while the cash burns.

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Fenix Parts: This Automobile Parts Seller Could Be Headed To The Junkyard

Fenix Parts (Nasdaq: FENX) resembles the Johnny Cash hit describing the Cadillac put together "One Piece at a Time," from parts he and an auto-worker buddy gradually steal from the assembly line and eventually cobble into a "Psycho-Billy" heap.

It took the determined workers about 24 years to create a weird Caddy at a cost estimated to exceed the price of a showroom model. But Fenix took only four months to roll-up a dozen companies into a money-losing jalopy arguably worth a fraction of its ~$190-million market valuation.

Westchester, Illinois-based Fenix operates like a legal chop shop. The company buys broken-down heaps from automobile auctions, pulls them apart and then sells the parts and scrap metal. It operates more like a junkyard at several locations, where the company buys junkers from individuals. Customers range from body shops and car repair shops to "shade tree mechanics" and hobbyists.

Fenix has not responded to our request for comment, but investors may read various viewpoints here. Meanwhile, TheStreetSweeper presents the executive summary highlighting Fenix investment risks:

1. Losing Money - Fenix is running in the red. It's almost out of cash.

2. Risky Rollup - The company IPO'd four months ago as a rollup and has already acquired a dozen companies. These rapid acquisitions result in distracted management and accelerated costs associated with buying, integrating and running very different businesses.

3. Directors Flee; Management Overwhelmed - The chief executive apparently lacks experience in the auto parts business and has installed equally inexperienced former co-workers as directors. Those two directors recently departed under rather odd circumstances.

4. Messy Financials - Fenix is also challenged by messy financials, apparent inability to file financial reports on time and a Nasdaq deficiency notice. All may well suppress or kill investor interest in the stock.

5. Dilution Looming - Fenix will likely soon sell stock - ultimately diluting current shareholders' stock. In fact, the Securities and Exchange Commission has already approved the paperwork to sell more stock at any time.

6. Pending Insider Selling - Insiders will be able to sell currently locked up stock beginning Nov. 10.

*Risky Rollup - Running In The Red; Running Out Of Cash

A risky rollup, Fenix acquired its first 11 corporate entities for ~$93 million cash plus about 3 million shares of stock just days after the company's initial public offering in May 2015. The CEO had prepared for that moment with a series of private stock offerings that cost insiders 10 cents apiece for some stock and $10,000 to $13,000 apiece for other stock, which ultimately underwent a 2,000-for-1 stock split.

Fenix had to lower its hoped-for $10 offer price to $8 per share and increase the share count to 12 million shares. Fenix was forced to borrow millions to pay the full $93 million acquisition expense plus a little left over for operating costs.

Fenix soon rapped its own fingers with a rusty wrench once again. It seems the acquired companies began reporting unexpectedly lower revenues - dinged and dented by lower scrap prices.

Fenix Parts most recently submitted, first quarter, financials are shown below:

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Flotek Industries: An Oil Patch And Cosmetic Counter Mess Poised To Drop

Flotek Industries (FTK) strives to make money in oddly different areas – the oil field and the cosmetics counter. And it is failing miserably.

The company just reported an astounding $12.5 million quarterly loss or negative 23 cents per share.

This odd business got an even odder reaction to its earnings report. The stock price rocketed!

That’s right. But we’ve drilled into Flotek filings and other publicly available information only to find a dry hole… and a broken perfume bottle.

TheStreetSweeper presents a quick hit zeroing in on the top reasons we think FTK stock should plummet. However, investors may read bullish viewpoints here and financial details on pages 3-7 here.

*What Is Flotek?

First, Houston-based Flotek sells products primarily to oil and gas companies. The flagship “Complex nano-Fluid,” or CnF, is a chemical added to water in hydraulic fracturing operations used to make it easier to pull oil and gas from below ground. Energy Chemistry Technologies accounted for $11.9 million income last quarter. Rig counts and oil prices keep this division on a short, cruel chain.

Second, Flotek buys citrus oil to process and sell to the oil, flavor and fragrances industries. Consumer and Industrial Chemistry accounted for $2.7 million income.

Third, the company builds downhole drilling equipment. Drilling Technologies accounted for a $21 million loss last quarter.

Fourth, Flotek assembles equipment such as rod pump components and valves. This Production division dinged Flotek with a $1.6 million loss last quarter.

 *Why Did The Stock Price Recently Rocket?

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Energy Focus: Massive Risks Coming Into Focus

TheStreetSweeper alerts investors that the latest risk associated with Energy Focus Inc. (EFOI) stands to hammer the stock price.

EFOI stock went ballistic today – jumping by $2 in early morning trading to settle in the $16-$17 range. The rise coincided with Roth Capital Partners’ snap decision to raise EFOI’s price target 7 bucks to $23 per share.

While bulls may argue EFOI’s business and margin improvement sparked the analyst’s write-up, we believe something less obvious may be going on here.

Here’s why.

EFOI has in its back pocket $25 million worth of registered stock that it can freely sell to the public at any time.

With its eye on a potential stock offering and seeing the stock price trading around record levels in recent days, we believe Roth saw an opportunity to help push EFOI higher.

Indeed Roth analysts had provided an update the day after EFOI released positive earnings on Aug. 5. So it seems odd that Roth would provide a new release two weeks later with unchanged sales and EPS estimates. No real new information. Just a new head-scratcher price target.

Now that the already over-valued stock has rocketed even higher, Roth figures it’s sitting pretty in the cat-bird seat.

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GTT Communications: Seven Reasons To Avoid This Las Vegas-Style Bet

The market has grabbed GTT Communications (NYSE: GTT) under one arm and a fake Elvis under the other and headed for Las Vegas.

Managers have undoubtedly watched in shock as the market slapped a nearly $800 million value on the telecommunications services provider. Never mind that GTT is losing money and its forward price to earnings is an unbelievable 37 to 1. The market still insists on betting on GTT,  humming “Viva Las Vegas” all the way.

But trouble lies ahead. Really, there’s so much trouble all around that a half-dozen happy Elvis impersonators couldn’t even beat the affects of investing in GTT at its current price of ~$22.

Investors may read other viewpoints here. Meanwhile, here are the top seven reasons GTT is due for a haircut and sideburn trim:

*1. From Shell To Risky Roll-up

Many of GTT’s financial issues can be traced back to its very foundation.

The company, formerly called “Mercator Partner Acquisition Corporation,” was simply a shell in 2005, looking for a business to run.

After it settled on providing telecommunications and Internet services, GTT began acquiring companies. It created 45 subsidiaries as it rolled up about half-a-dozen companies into its portfolio - including a division of MegaPath just last February that cost a whopping $144 million plus $7.5 million in GTT stock.

This undoubtedly difficult-to-manage assemblage of small companies has found itself scrambling to compete for a sliver of cloud-based business against established companies such as AT&T, Xo Holdings, Verizon and Microsoft.

TheStreetSweeper has seen many roll-up companies and despises most of them. We have warned investors about the fluctuations and risks associated with roll-ups such as Tangoe (TNGO $19.55 then, now ~$7), Swisher Hygiene (SWSH $8 then, ~$1 now) and Revolution Lighting (RVLT $4 then, now ~$1.).

So now we're inducting GTT into our Rock'n Roll-up Hall of Fame. But, first, let's look at the financial issues that GTT can thank for their help in making this unfortunate honor possible.

*2.Neck-Deep In Debt

GTT depends on a mountain of debt to keep the doors open – and feed its appetite for acquisitions.

(Source: SEC filing 1; 2, 3)

The company is now shouldering $215.6 million in debt. Cash has dwindled to just $19.4 million. So the company's debt is over 10 times the cash in its piggy bank.

Now GTT is loaded with debt and losing buckets of cash.

*3. Net Losses Become Substantial

Indeed, GTT hasn't seen six months' worth of operations in the black since ... yikes! ... 2010.

The chart below, based on SEC filings, shows how GTT has consistently disappointed investors:

So GTT’s losses dramatically deepened beginning in 2013.

In fact, SEC filings indicate the company just suffered the second worst 6-month loss since the company’s inception a decade ago.

*4.Historical Earnings Misses

Last quarter, management credited GTT sales improvement primarily to acquisitions. But investors actually lost 32 cents per share – an enormous miss since Wall Street expected a loss of only 6 cents.

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Vonage: Five Top Reasons We're Short This Stock

Billionaire investor Warren Buffett once said, “Price is what you pay. Value is what you get.”

We argue that Vonage Holding Corp. (NYSE:VG) is not delivering on the value as beautifully described by the Oracle of Omaha.

TheStreetSweeper offers this quick hit report on Vonage, provider of a VoIP (voice over Internet protocol) service that uses a customer’s Internet connection to make and receive phone calls via phones or devices. The company’s market cap is $1.37 billion and its price-to-earnings ratio is a stunning 62. Other viewpoints are available here.

Why the stock price jumped

Vonage shares jumped Monday, when Canaccord Genuity initiated coverage on Vonage with a “buy” and a $7.50 price target. The report boosted the already highflying shares about 4 percent to ~$6.49.

Suddenly, Vonage found its stock price in this situation:

Vonage shares are currently beating the consensus price target of $6.31 per share, according to marketbeat.com data!

So Vonage could be in a nearly perfect position to plummet at this very moment.

Why we expect the stock to plunge

*Ridiculous insider selling

They say you can judge a man by the way he wears his hat or the shoes he kicks off at the end of the day. We don’t know about that, but we do know that you can usually tell a lot about a company by who is dumping its stock.

In Vonage’s case, company officers and directors are selling their company stock like crazy.

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Trupanion: We're Sending This Pet Insurance Company To The Dog House

Stock in Trupanion (NYSE: TRUP) has transformed in recent weeks from a bad, bad dog into the Lassie of the pet insurance world.

But hold onto your leashes. This Seattle, Washington-based company has been quietly growing enormous pit-bull fangs and looks ready to turn on shareholders.

Our executive summary highlights why TheStreetSweeper is bearish on this stock and believes TRUP will ultimately bite those loyal shareholders.

* Hello, 2021: Unraveling TRUP’s numbers reveals up to 23 quarters to wait for the possibility of any meaningful profit.

*TRUP’s insurance product: Negative reviews dog the company.

*Dog-gone bad 16-17 percent margins: Why we shouldn’t be surprised.

*TRUP's “recast” numbers: Can't fix customers' value-to-cost ratio.

*States’ insurance commissioners: Let’s jump TRUP.

*Sell, sell!: Insider unloads company stock.

*Company headquarters: Just embarrassing.

While the company has not responded to TheStreetSweeper’s request for comment, investors may read bullish viewpoints here.

* TRUP’s pet enrollment numbers revelation: Wait ~23 quarters for scale up, any possibility of meaningful profit.

TRUP went public in June 2014 and has suffered significant net losses since inception 16 years ago. But shareholders will sometimes hang in there with a company awhile as long as they can imagine light at the end of a rather short tunnel.

When we ran the numbers, however, we were shocked at how long TRUP investors apparently will have to wait.

Cash flow break-even should happen by mid-2016, CEO Darryl Rawlings said during the May earnings call. But he indicated anything resembling meaningful profitability will come only when TRUP can scale enough to reach 650,000 to 750,000 enrolled pets:

“We manage our business base on cash flow and we are on track to achieve cash flow break even by the middle of next year. Once we achieve operational scale of 650,000 to 750,000 enrolled pets our intention is to have our fixed expense scale as a percentage of revenue and our discretionary margin should continue to expand.”

So the obvious questions are: How many more pets will TRUP need to enroll in its insurance program before they hit the target?

And how long will that take?

TRUP currently reports 241,808 subscription pets enrolled. If the company can stay on track at around 12,500 net additions per quarter (which, if even possible, will likely mean gobbling up millions more in marketing), it should take TRUP somewhere around 14 quarters to 23 quarters to hit the target.

Yipes ...That’s about three to six years.

That means TRUP should reach the target sometime between the years 2018 and 2021!

At that rate, TRUP is expecting investors to be phenomenally patient.

Particularly if we factor in the stock performance (down ~30%, depicted by the blue line) versus the Dow (up ~2%), NASDAQ (up 5%) and S&P 500 (up~14%) over the past year, as shown below.

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Tucows: Why Its New Internet Business Will Hand Investors A Cow Patty

You’ve almost gotta love Tucows (NASDAQ: TCX) for its humor, as demonstrated by the company reportedly taking a real cow to a conference, plus its depiction of two cows in its logo:

But the negatives inherent in Tucows’ business plan utterly outweigh its funny personality.

The stock for this Toronto, Canada-based domain name registrar and wireless service provider has been running wild and crazy the past two months. Indeed, Tucows jumped over the moon at $32 on July 21 and then began declining somewhat. The stock is now on the brink of turning around and trampling investors before they can jump out of its path.

Before Tucows hooks another one, check out our executive summary briefly describing the top reasons we think Tucows’ stock price is ready to drop.

*Executive Summary

*Troubled Trio – The company reports two operating segments - domain services, consisting of domain name registration, and network access services, consisting of both retail mobile phones/services and Internet service over fiber networks. Tucows faces growing challenges in all areas.

*Faltering Fiber – The stock rallied on announcements of Tucows’ entry into the Internet business. But Tucows lacks the multi-millions to build a fiber network. And our research shows the Ting fiber business won’t produce meaningful revenue now … and probably not ever.

*Yelling “Sell!” – Insiders have been hitting the sell button on Tucows’ stock.

*Crumbling Core - Tucows’ core Internet domain name business is flat and poised for further decline. The business has become vastly more competitive and commoditized, so customers buy principally on price. 

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Glu Mobile: Kim K Trips, New Games Disappoint, Key Insider Sells Amid Crazy P/E

Her stilettos flashing and iPhone snapping selfies, Kim Kardashian is  racing out in front, with Deer Hunter close behind, and Racing Rivals bringing up the rear. But wait … No, no. It can’t be…Yes, yes, America’s dashing diva is slowing now as, in one fell swoop, she whips out a tiny mirror, smears pink lip plumper on that famous kisser and checks out the scenery behind her. Slowing, slowing, slowing. Stumble…

In the wacky world of mobile game making, Glu Mobile (NASDAQ: GLUU) is in a constant mad dash for gamers’ hearts and fingertips.

But Glu’s top three games “Kim Kardashian: Hollywood,” “Deer Hunter 2014,” and “Racing Rivals” are now declining, according to App Annie data.

And that decline is just the first warning flag amid a mile-long parade of red flags viciously snapping at Glu.

The company has not responded to TheStreetSweeper’s request for comment, but investors may find other viewpoints here.

Meanwhile, here’s a quick executive summary:

*Executive Summary

*Hopped up on hype. Glu Mobile’s stock is up on hoped-for hits and the company’s enthusiastic guidance.

*Declining stars. Glu’s three top games drive the bulk of past and current revenues. But they are in a slow decline.

*Recent games disappoint. Games launched so far this year are turning in disappointing numbers. And games currently in soft launch are getting surprisingly poor rankings, too.

*Key insider selling. A director who was an original investor also manages a fund that is now dumping the majority of its shares in Glu.

*Crazy P/E: Glu’s price-to-forward earnings is an outlandish 74, while the P/E is about 20 for two competitors and the industry as a whole.

*Should guide lower: Overall, we expect Glu leaders will need to lower sales guidance for the third quarter and potentially the entire year.

Indeed, we believe Glu shares are poised to decline faster than a broken stiletto can drop any dashing diva. Here’s why:

*Current Stars Decline

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La Jolla Pharmaceutical: Lost Opportunity, Insider Questions Should Chop Valuation By Well Over Half

*Executive Summary

*The stock primarily owes its price to enthusiasm over insider buying. However, that insider’s large block trade orders sparked a market manipulation investigation that led to his broker being sanctioned, temporarily losing his license and paying tens of thousands in fines.

*Though La Jolla had to shelve its most promising drug candidate, analysts haven’t revised price targets to reflect the massive decline in market opportunity.

*With La Jolla’s history of missed, terrible earnings, even bullish analysts anticipate horrible earnings into the foreseeable future.

*With little real institutional interest, anyway, more shares recently have been sold out than new positions added.

*Our calculations suggest the remaining market opportunity for La Jolla is a fraction of analysts’ projections.

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Kornit Digital Update: Top Competitor Acquisition Signals KRNT's Vast Risks, Overvaluation

TheStreetSweeper alerts investors on the very latest negative event subsequent to our Monday report on the massive risks facing Kornit Digital (KRNT) - an event that justifies a stock price decline to below $5 per share.

A top competitor, Italy-based Reggiani has been acquired by Electronics for Imaging for about $84.2 million, plus ~$56.2 million over 30 months of milestone achievements.  

The deal presents two big negative implications for Israeli inkjet printing company, Kornit. These are particularly worrisome just as the company tries to make the critical expansion from the T-shirt makers’ market into the roll-to-roll market. Roll-to-roll printers allow images to be printed on fabrics that are then sewn into garments, wallpaper, furniture coverings, etc.

First, Reggiani, already a top rival whose sales jumped 61 percent between 2012 and 2013 to ~$76 million, will likely become a roll-to-roll gorilla.

The acquisition by Electronics for Imaging (EFII) means the rebranded EFI Reggiani will be able to use the money and advanced distribution channels afforded by EFII. So it will negatively impact Kornit’s future potential – as Kornit tries to get its commercial roll-to-roll printer launched in about 18 months.

Second, this deal should have a downward effect on Kornit’s valuation today.

The deal means EFII is unwilling to pay an acquisition anything close to Kornit’s current ~6 times revenue and ~50 times EBITDA.

Indeed, EFII has shown that it’s willing to pony up only 1.8 times revenue and 7-12 times EBITDA. That means, it would pay no more than about $56 million to $127 million for Kornit, which equals $1.88 to $4.26 per share

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Kornit Digital: Inkjet Printer Company Attempting To Trade At 3-D Printer Valuation, Riddled With Risk

Israeli printer company Kornit Digital (KRNT), swung into the inkjet printing jungle as a $16 million acquisition that went public last April. In the shifting eyes of the market, it grew up almost overnight into a nearly half-a-billion dollar beast.

But, with fangs bared, a snarling threat lies in wait for Kornit shareholders. The market has been led to misunderstand Kornit’s true business.

Kornit is a small manufacturer of inkjet printers used to print images and designs directly onto T-shirts and other garments.

Yet the market has slapped a ~$400 million valuation on this small inkjet printer company that last quarter posted just $17.6 million revenue and a $200,000 net loss. Why?

“You wouldn’t be able to IPO a $16 million company at huge valuation if you didn’t throw out some nice buzz words,” an analyst told TheStreetSweeper.

The buzz word is 3-D printers. Some analysts have compared Kornit with 3-D printer companies, prompting widespread misunderstanding and baseless exuberance about Kornit’s potential.

So, while investors may find other viewpoints here, below is an executive summary of why we think Kornit is one of the worst creatures in the jungle. Then we’ll move on to our key points.

*Executive Summary

*Misunderstood Hype - Due to analyst hype, the market erroneously believes inkjet printer Kornit is a 3-D printing company and has assigned a correspondingly ridiculous valuation – a valuation we believe Kornit cannot possibly grow into.

*Not 3-D - Using a commercially available printer head and boasting just ~7 patents, Kornit printers lack the “specialness” to possibly justify any comparison to 3-D printers.

*Overvalued - Kornit trades at an outlandish 50 times EBITDA and ~68 times earnings; both are close to 10 times pricier than comparable companies.

*Killer Competitors - Gorilla rivals such as Aeoon, Brothers, Epson and many others are stomping Kornit in the direct-to-garment area that serves custom T-shirt companies. Kornit’s signature “Breeze” printer costs twice as much as a top rival’s and prints on about the same number of T-shirts per hour.

*Late To Market - Kornit wants to pursue roll-to-roll (R2R) printing on fabric, but four years after introducing its Allegro solution, the commercial launch may still be 18 months out. Worse, a sole supplier issue could threaten both direct-to-garment and roll-to-roll products. Meanwhile, Dover, Durst and Konica Minolta are dominating this area.

*Dilution Appears Imminent - Kornit will likely lose significant ground even before the September stock lockup expiration, potentially unleashing millions of shares onto the market. See “Final Bone-Crusher: Stock Overhang” below to get the overhang details. A controlling shareholder could cash in essentially a pennies-on-the-dollar transaction at current stock prices.

*$6 Target Price – At ~$13 a share, creating a $387 million market cap for a company with a pathetic $4.6 million in the bank, it only makes sense for Kornit to fill its money chest with capital raised now. So we wouldn’t be surprised to see the stock drop off the cliff to $6 a share. And even that is extremely generous.

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Uranium Energy Corporation: The Bad News Buried In The Recent Sale

Uranium mining company Uranium Energy Corp (UEC) is digging all the love it’s getting from the market right now. But after we mined into company documents, we couldn’t resist humming the cowboy song, “You Done Tore Out My Heart and Stomped That Sucker Flat.”

Uranium Energy looks ready to do just that to investors.

The company has not responded to TheStreetSweeper’s request for comment but investors may find other viewpoints here. Meanwhile, we’ve leaned on some ol’ country songs to help us croon out the risks.

*”If The Jukebox Took Teardrops,” Or Market’s Feeling The Pain

While UEC stock is up, the company’s peers are all down.

Yahoo Finance)

The reason the sector’s performance remains so terrible is because uranium spot prices of about $36 are at a five-year low, as shown below.

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TheStreetSweeper Quick Hit: Northwest Biotherapeutics (NWBO) Desperation

TheStreetSweeper issues an alert about a desperate situation occurring at Northwest Biotherapeutics (NWBO). The biotech’s recently hyped effort – early Phase 1 data for its experimental cancer tumor injectable shows 27 of 39 patients remain alive after up to 18 months after injection - comes at a heavy, perhaps even fatal cost.

NWBO retained the services of Cognate BioServices to conduct clinical trials and associated work. Now, Cognate has hit up NWBO for $8.2 million and the biotech is coming up short. It still owed Cognate $5.8 million as of March 31.

This is just the latest in a series of stunning negatives, including:

*1. Cash has plummeted to just $3.2 million.

*2. Cash burn hit ~$17 million.

*3. Working capital deficit soared to $86 million.

*4. CEO Linda F. Powers’ company bio doesn’t mention it, but Ms. Powers was Enron’s senior vice president for global operations, though she wasn’t implicated in the scandal. She controls NWBO’s major funding sources Toucan Capital and Toucan Partners, holders of ~4% of outstanding shares.

*5. Expensive lawsuits have gone in NWBO’s favor and against it, such as a class-action securities lawsuit alleging the company issued misleading press releases. NWBO agreed to settle for $1 million. NWBO also received demand letters from shareholders seeking access to books with the intention of investigating possible mismanagement and breaches of fiduciary duty.

*6. Market value is $760 million. With just 12 full-time employees, the company last year spent $85.6 million in R&D and $16.9 million in general and administrative.

*7. Extremely promising competing therapeutics are undergoing testing by Stanford and numerous companies.

*8. Serious doubts exist about NWBO’s survival, according to its SEC filings:

“Because of recurring operating losses, net operating cash flow deficits, and an accumulated deficit there is substantial doubt about the Company’s ability to continue as a going concern.

*9. NWBO’s 10-K filing warns: “We will need to raise substantial funds, on an ongoing basis…”

Indeed, it adds: “Any financing will involve issuance of equity and/or debt, and such issuances will be dilutive to existing shareholders.”

*10. Operating losses exceeded its abysmal revenue – a $194,000 research grant - by a factor of 117:

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eMagin: Imagine This Stock Collapsing Below $1

Looking for all the world like a virtual reality gamer, eMagin Corp. (EMAN) has been virtually running in place ever since the introduction of its first microdisplay 14 long years ago.

And now one of the OLED (organic light emitting diode) display maker’s greatest rivals has reached across and hit eMagin’s reverse button … stealing a Navy contract right out from under its nose.

This – and additional adversity – will likely squash the almost flat revenue anticipated for 2015. Though EMAN just turned a slight profit after seven straight quarters of losses, these challenges suggest it may have a tough time hanging onto that oh-so-tenuous profitability.

Investors may check out other viewpoints here, which include bullish points such as EMAN will gain government contracts, improve compared to rivals and find growth opportunities. 

Meanwhile, we’ll hit the top reasons EMAN’s virtual shoot-out will likely end badly. We’re looking for the stock price to drop below $1 because:

*1. Yowza! Trading At 100 Times Earnings?!?

The most bullish analyst estimates EMAN’s earnings will reach 3 cents per share for the year. So that means investors are paying an astronomical 100 times more than the earnings they expect to receive.  

That’s a lot considering the fact that EMAN is a little OLED microdisplay maker with declining revenue - not one of the highflying biotechs working on a cure for cancer.

We’ll save the multiple we’re generously projecting for EMAN for the conclusion of this article.

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Cracking The Code On DigiMarc (DMRC): Deteriorating Business Will Continue To Decline - Part 2

Barcode technology company Digimarc faces even more challenges beyond those detailed in TheStreetSweeper’s part 1, including:

*Digimarc’s Discover remains undiscovered

Digimarc hopes it can advance its Digimarc Discover – designed to combine “invisible” barcode technology and media experiences - sufficiently to fill in the gaps left by declining revenue from major customers such as Intellectual Ventures, whose license payments have ended and consulting fees will end this year. But that appears unlikely.

Why? There are three major reasons.

*Negative reviews

*First, most reviewers had problems with the quality of Digimarc Discover.

In fact, most of the 986 Appszoom reviews of the product were negative, giving Discover a measly ranking of 1 ½ stars:


(Source: AppsZoom)

Meanwhile, the majority of reviewers gave the product 1 star out of 5 stars at play.google.com, though it did make a total of 2.9 stars.  

Photographer, webmaster and gear reviewer Ken Rockwell is not impressed with Digimarc Discover, either. He said the product degrades images, requires larger compressed JPEG