The How To Find Big Stocks Newsletter We Turn Waves Into Wealth

Transcription

The How To Find Big Stocks Newsletter We Turn Waves Into Wealth
How To Find Big Stocks Newsletter
The How To Find Big Stocks Newsletter
We Turn Waves Into Wealth
April 2013
Cash is king, but with today’s interest rates, it’s being treated like a pawn.
Cash reserves are at record levels with many big tech companies to the tune of $1.4T. Apple
alone is sitting on $170B.
Oracle, considered one of the savviest acquirers just went on a buying spree. They acquired
Acme Packet for $1.7B and just announced they would acquire Tekelec. We think the M&A
activity will soon pick up. We are looking for companies that have disruptive technology that can
enable one of the biggies to either create a new industry or gain a competitive advantage in one.
Recommended Reading
Amazon link
We are voracious readers and occasionally come across a book that we recommend every
technology investor should read. In Flash Foresight, famous trend identifier Daniel Burrus, paints
a very clear picture of technologies and concepts that will transform many industries. He
identifies the concepts that will play a role in both Web 3.0 and Web 4.0.
One of the trends (3D Web) as he puts it..”will transform today’s Internet experience (which is
like looking at a flat piece of paper with a few photos, embedded video, and a few hyperlinks) to a
true 3D experience similar to today’s video games, where you can virtually walk into a
showroom, look around and both listen to and see the new car you are interested in.
There are two companies we have our eye on that could play a big role in this wave.
Infinity AR ALSO has the only platform that allows ALL operating systems to connect to ANY
hardware device. We see this as a way to invest in the upcoming Google Glasses launch (Fall
2013). Shares outstanding 92M current share price at .55 gives it an approximate market cap of
$51M. We are still doing work on it, but we wanted to at least give you a heads­up.
The second company that we think could play a big role in this wave is Worlds Inc WDDD
As the Internet has been the idea of going ONTO the Web, the next phase will be about going
INTO the Web. Consequently, websites will go from 2D screens to virtual environment. From the
book, “although of course it won't actually be you who walks through these 3D environments, but
your avatar, that is an online representative of you in the virtual environment.”
Worlds holds a huge and most importantly, the original patent portfolio of 3D Architecture.
WDDD’s patents cover technologies and methods relating to a highly scalable architecture for a
3D graphical, multi­user, interactive virtual world system. In certain situations, multiple users
interact within this virtual world environment, each viewing the virtual world from their own
perspective. The virtual world shows avatars representing the other users who are neighbors of
the user viewing the virtual world. Worlds’ patents include, but are not limited to, the various
aspects of the information transmission and processing in this virtual world. In essence, this
allows users to view in real time where other users and background objects are in relation to
their own position as they move about in the virtual space.
The patent claim construction hearing, also called a Markman hearing, is set for June 27, 2013.
At that time, the judge will be asked to issue rulings regarding the language and interpretation of
Worlds’ patents at issue in the case against ATVI. We could see a gradual rise in the share
price right up until the hearing date. A Markman Hearing is like rolling the dice. If the judge
“validates” the language in the patent, then WDDD could be a VERY nice way to play the 3D
wave, but if the judge tosses out or narrows the language (which we saw with CLYW), then the
“value” of the patent would need to be determined through court proceedings.
According to the 10K filed March 28, 2013 10K filing the company had 24.5M shares outstanding.
As stated, WDDD could be a great way to invest in the 3D wave but there is a CONSIDERABLE
risk in this company BEFORE the Markman Hearing. We will revisit this potential
recommendation AFTER the ruling.
In addition, a high level overview of another company’s technology which is under consideration
by HTFBSN can be read at this link to Daniel’s Top Twenty Tech Trends :
Top Twenty Tech Trends for 2013
BIO­key International
BKYI fits perfectly in number 11, Digital Identity Management and number 14, Mobile Banking.
As Mr. Burris states “increasingly, we’ll see biometrics being used on our phones and tablets,
and on all our computing devices as we make the switch from the leather wallet to the digital
wallet”.
Please see our new BKYI summary titled “Death of the Password”.
BKYI Death Of A Password
The Case For VSUL
The ability to identify, detect or diagnose ANY object, liquid or gas in seconds using a
mobile device will have a profound impact on numerous industries and will create endless
applications far exceeding “apps for the mobile phone”.
On February 11, 2013, Visualant announced they had won the prestigious Prism Award
at the SPIE Photonics West show! Moreover, this award is recognized as the Photonics
Oscar in the industry, and it created an extremely large interest from big verticals that could
lead to many applications for ChromaID.
Also, in the recent 8K on 3/21/13, we noticed that Ichiro Takesako was elected to
serve on VSUL's Board of Directors. Mr Takesako has held executive positions
with Sumitomo Precision Products.
As seasoned executive, and recent addition to the VSUL team Howard Nellor stated,
“Visualant has the most promising, disruptive technologies and keen strategy that I
have seen in many years”. We certainly agree.
Simply put, once identified and added to the ChromaID database, any object or condition
in the world (liquid, solid or in gaseous form) can be identified in seconds with a mobile
device. Let's call it a Physical World recognition device. This is also what we call Big!
When VSUL introduces the ChromaID business development kit, we expect to see both
revenues and applications that should lead to licensing opportunities. This situation is very
similar to the mobile phone operating system, with the resulting gigantic industry that was
created by app developers.
Just two examples:
Here’s an example of how we see a big vertical utilizing ChromaID. VSUL has mentioned
several times that they see the pharmaceutical industry being one of the first industries to
adopt their technology. We envision the technology being used to identify pills DURING the
manufacturing cycle (many drug companies use the same mechanism for manufacturing).
Imagine the liability if a white pill that is meant for treating cholesterol accidentally goes into
a batch of white pills meant to treat an irregular heart rhythm. That liability is much larger
than counterfeiting, but that can also be treated using ChromaID. From the actual pill, to
packaging, ChromaID can identify an authentic product for the pharmaceutical without
modifying either the pill or the packaging.
Here's another example and idea we came up with. Smoke alarm manufacturers could
add the ability to monitor carbon monoxide and radon gas using ChromaID.
At the recent shareholder meeting, the CEO was asked about the reverse split proposal
(which passed). His response was that he wished he hadn’t put it up for a vote, but he
wanted all options available for listing on a major exchange. Considering he and some of
management just purchased a sizeable amount of stock, we think a reverse split is a
non­issue.
VSUL recently announced that they received their fifth patent issued by the United States
Office of Patents and Trademarks and is US Patent No. 8,368,878 B2 entitled Method,
Apparatus and Article To Facilitate Evaluation of Object Using Electromagnetic Energy.
CEO Ron Erickson purchased more shares in the open market on March 28.
If/when VSUL announces their first licensing deal, we think the market valuation should
change drastically. It would definitely validate this disruptive technology.
Destiny Media Technologies
Several waves are starting to converge and DSNY sits in the middle of them all. Record labels
are looking to pull their content from 3rd party sites. This includes both songs and videos. Not
only do they lose out on advertising revenue to YouTube, but they have no way of maintaining a
relationship with their customer (iTunes has that information right now). Let’s not forget that the
record labels are also losing revenue from applications on the Web that strip the audio from
videos.
Google, Apple and Amazon are looking to introduce streaming music service. The shift from a
device holding your digital content (iPod), to the cloud storing this content is already underway.
The infrastructure and digital watermarking technology that DSNY is building and has, sets them
up to have a monopoly in securing and distributing content for the LARGEST content creator on
YouTube! That is the big picture that most don’t quite understand yet.
While everyone seems fixated on when DSNY will sign a customer like YouTube for a G2
licensing deal, Destiny is slowly and methodically creating a massive recurring licensing
opportunity with YouTube’s largest content contributor, namely the recording industry.
The timing for DSNY’s commercial Clipstream G2 launch seems to be coming at a very
opportune time. Nokia is using their patents to block Google’s WebM video standard.
Nokia blocks Google's WebM
Google, apparently dissatisfied with the now­ubiquitous and Flash­killing H.264 video codec, has
been pushing its own, allegedly more open, WebM video system which relies on the VP8 video
codec.
But Nokia has moved to block Google's plans because it says VP8 isn't a real open­source
system and that it's actually "proprietary" technology owned by Google. Nokia also claims
Google is "attempting to force the adoption of its proprietary technology" via WebM.
To counteract Google, Nokia is now saying VP8 infringes on its own patented IP and plans to
withhold licenses from Google.
Google of course, owns YouTube­­the world's most visited video website. Having YouTube and
other web video running on Google's own video code, even if that code is supposedly "open,"
would only place Google in a more commanding position in the online video market.
This industry infighting and lack of a standard is great news for DSNY. The uncertainty with
patents makes companies afraid to use these new technologies and offers a huge opportunity
for a “encode once, play anywhere” format like G2.
http://ibnlive.in.com/news/google­apple­amazon­test­music­streaming­waters/380454­11.html
Google, Apple, Amazon test music streaming waters...imagine the platform that enables
playing music on any device and knowing that the digital content is protected with
watermarking
The recent DailyPlayMPE site should generate additional revenue and be the catalyst for
OTHER revenue opportunities within the recording industry.
DSNY revenue is determined by the number of songs encoded in the MPE format and by the
number of recipients that receive the song. Currently, Destiny gets a new release (with
metadata already provided) from the major label before ANYONE, encoding it so the digital
watermark and the track/trace capability is included. They also format for the top 4 major record
labels and send those songs out to several hundred radio stations. It is a steady high margin
business.
DSNY’s digital art plumbing solves two very large problems for the recording industry.
Record labels are tired of YouTube generating advertising revenue from THEIR content and they
also hate the fact that they cannot maintain a relationship with THEIR customer. Apple gets all
the customer information when a song is purchased on iTunes.
In other words, record labels have never been able to control their digital content (distribute, play
and purchase) on the Net until now.
Meanwhile, there is a huge market for independent artists that want to get their song played on
the air. Of course, in order to do that, the programmer at the radio station needs to see it.
Destiny’s simple all­in­one solution will get these independent artists in front of the radio
stations!
DailyPlayMPE
The recently launched DailyPlayMPE site announces any newly released song and is tailored to
recording professionals (for now). The people in the record industry, mainly radio station
programmers, keep tabs on ANY newly released song. Billboard Magazine charts the highest
played songs (after the fact) and is a service mainly for consumers. On the other hand,
DailyPlayMPE charts the newest songs in real time! If you are a recording artist, especially an
independent, you want to make sure your song is listed on this site. Now, how does an artist
make sure that happens? They get DSNY to encode their song (and soon video) in the PlayMPE
format.
Currently, DSNY charges a fee each time one song goes to one recipient. Ten recipients makes
them ten times as much money as one recipient...so adding recipients directly makes them
money on a much larger scale.
We don’t know the pricing model for this yet with regards to independents, but we feel it will be
MUCH CHEAPER and much more effective for an independent to use DSNY to insure their song
is seen by thousands of record professionals around the world. This certainly beats guessing if
the hundreds of CD’s Fedexed were received by the right person, and will ever be played! If an
artist wants to get their song in front of thousands of recording professionals, then have DSNY
encode it in PlayMPE. Destiny will need to partner with an independent organization to
maximize this potential.
Destiny’s partnership with Clear Channel subsidiary RCS gives them access to 80% of the
radio stations in the world. As you can see, this represents a very compelling sales point to an
independent artist.
Yeah, this is all great, but why doesn't the share price reflect all this potential? Why is there
seemingly no interest in the stock if this technology is so disruptive? We hear you and we have
asked ourselves these same questions. This is what we think is playing out or has happened.
On November 8, 2011 DSNY announced disruptive technology, the next generation of
Clipstream® (G2) at the HTML 5 Summit at Streaming Media West in Los Angeles.
In the release it said: This next generation is disruptive technology as it is completely cross
platform to all recent devices and operating systems, including those that don't support Java.
Publishers can keep video in one single format, eliminating patent and licensing fees and
transcoding expenses (costs associated with converting, storing and streaming multiple video
formats). According to a 2007 report by Frost and Sullivan, transcoding costs are projected to
top $1.6 billion by 2014.
The company also said this: The product is expected to launch in the first calendar quarter of
2012.
Anticipating a launch of G2 in August 2012, the share price reached new highs, albeit still
undervalued in our opinion. When the product was announced, it was considered a prototype
and not a commercially available product. Accordingly, the investing community sighed again. It
was on the quarterly earnings conference call when the CEO said he anticipated that it would be
Spring 2013 before a commercial product would be ready. At this point, we at HTFBSN think the
market reacted with, “we’ve had enough.” We can’t blame them. A one­year delay at the earliest
would turn most investors off.
Regardless of the delay, we have always felt that the value of a “playerless” media application
that works on any device and with any OS, should be valued significantly higher than $50M
(highest mkt cap in 2012). When a product has the ability to solve a huge problem for several
industries and save billions, it deserves a much higher market cap on the potential alone.
However, there is something else in play here...
Something Rotten In Denmark...or perhaps Frankfurt?
There was also another force at work that has never given DSNY the appropriate market value it
deserves (working product or not). That force is, or we should say was, Noramco Capital and
Bruce McDonald. In DSNY’s 10K filing you will see a ongoing litigation between Destiny versus
Bruce McDonald and Noramco. Without going into all of the details, there was a very large
proposed financing being negotiated with individuals who were well known for death spiral
financing with a company that wasn’t profitable at that time (DSNY). Here is the story that was
posted on Stockwatch: (HTFBSN has highlighted points we think are key).
Destiny blames Noramco for lagging price
2011­12­15 13:13 ET ­ Street Wire
by Mike Caswell
Destiny Media Technologies Inc., in response to a lawsuit it faces from Richard Angus Bruce McDonald's
Noramco Capital Corp., blames Noramco for an 11­year campaign to aggressively manipulate its stock
downward. According to Destiny, Mr. McDonald took a naked short position in 2000 as he was
negotiating a private placement with Destiny, and in the ensuing 11 years has continued to exert
downward pressure on the stock. The company says his actions have prevented it from raising money and
developing its business.
The accusations come after Noramco sued Destiny in the Supreme Court of British Columbia on Nov. 8,
2011, over an 11­year­old private placement. In the brief suit, Mr. McDonald had asked for the return of
$100,000 (U.S.) that he provided the company in August, 2000. He said he had planned to subscribe to a
private placement, but the company failed to deliver a share certificate. He asked for the return of the
money, with interest and court costs.
Destiny's answer
Destiny's response to the claim, filed on Monday, Dec. 12, contends that Noramco used the private
placement agreement to obtain confidential information that it would not have otherwise been able to
receive. It then began an "aggressive and secret campaign" to push down the stock through naked shorting
and other unspecified methods. It continued to short the company as a means of keeping the price down
so it could defer or avoid having to cover its naked short positions at a loss, the response states.
The private placement, as described in the response, was first proposed in June, 2000. Destiny's officers
had recently met a man called Paul Louie who said he represented Mr. McDonald and others, including
now­defunct brokerage Thomson Kernaghan & Co. Ltd. and its chairman, Mark Valentine. (Thomson
Kernaghan, which was known for death spiral financings under Mr. Valentine, collapsed in scandal in
2002. Mr. Valentine later pleaded guilty to criminal charges in the United States for market manipulation
and received four years of probation.)
Mr. Louie told Destiny that he was interested in arranging a $35.6­million financing for the company
through Noramco and Thomson Kernaghan, the response states. The amount was substantial to Destiny,
as it had never had a financing larger than $1­million at the time. The company says that it agreed to some
initial terms, in which it provided confidential information to Noramco and did not pursue any other sources
of financing. In August, 2000, it received the now­disputed $100,000 (U.S.) from Noramco as part of that
arrangement.
Although Destiny understood that the $100,000 (U.S.) was provided for a share subscription, it says that it
did not execute any share purchase agreement. This was partly because it could not get Noramco to agree
to a price. The parties discussed $1.50 and 75 cents, but ultimately did not agree on anything. Destiny says
that Noramco intentionally avoided setting a price so it could depress the stock sufficiently to pressure the
company into accepting a lower subscription price.
Eventually, in January, 2001, Destiny received a letter from Noramco's lawyer which demanded the return
of the $100,000 (U.S.). Destiny, in response, offered either shares or the $100,000 (U.S.). The company
also agreed to a meeting with Mr. Louie to discuss the investment, but the meeting never happened.
According to the response, that was the last time the parties communicated.
After that, Noramco and Mr. McDonald ran an aggressive, secret short­selling campaign against the
company, the response claims. While Destiny provides no details of the 11­year campaign (it says that
information is well known to Noramco and Mr. McDonald) it claims that the campaign continues "to this
day." The result has been that Mr. McDonald has generated substantial profits while Destiny has been
forced to raise money at artificially depressed prices.
As the company tells it, the suit only came about after Mr. McDonald somehow learned that the company
had issued 133,333 shares in Noramco's name. Destiny says it did issue the stock, but only as a way to
account for the $100,000 (U.S.) that it received from Noramco. It did not send Mr. McDonald the
certificate.
The company says it has suffered substantial harm as a result of Noramco's conduct, and it claims a set
off in relation to such harm in defence to the suit. The company asks that the suit be dismissed.
Vancouver lawyer David Brown of Stikeman Elliott LLP filed the answer on the company's behalf.
Noramco filed suit against DSNY the very same week Destiny announced their disruptive
technology. Coincidence?... we think not!
For months we have seen DSNY start to show some life and every time some aggressive
buying comes in, large sell blocks are offered which deters any further buying. In fact, when
these large blocks are shown for sale (not necessarily sold), panicky investors sell thinking the
stock is due for major selling. Professional shorters know how to scare retail investors into
selling and DSNY is indeed mainly held by retail investors at present.
The difference between today and back in 2000? Destiny is no longer unprofitable, but a very
profitable company on the verge of drastically increasing their revenues!
Our take on the situation:
1. is that this entity thought DSNY would never make it (they almost did go bust).
2. they would never have to replace the shares they sold.
3. they have been constantly selling shares that they don't own.
4. Most importantly, they are in a huge pickle!
This endless amount of selling has stalled all price rallies. So what does that mean for a DSNY
investor?
Mr. McDonald passed away in March. Presently, we don't know how this affects the ongoing
lawsuit. Based on the dollar amount of the proposed financing ($35M) in 2000, we wouldn't be
surprised if the number of shares that could be short might possibly be in the millions.
It is our belief that when DSNY finally launches the commercial version of G2, including the
websites for it, the company should command a much higher valuation. The launch is expected
this quarter (March­May 30).
While we have never highlighted Destiny due to a potential short squeeze; however, if that is the
case here and the number of shares are in the millions, it appears as though that short squeeze
just may come into play benefitting DSNY investors.
22nd Century Group...Light The Fuse!
XXII from their 10K:
We continue to believe that our VLN cigarettes are effective as a smoking cessation aid.
However, we have suspended sponsoring further X­22 clinical trials pending a complete
analysis of results of two independent smoking­cessation trials that were completed in 2012
(ClinicalTrials.gov Identifiers NCT01050569 and NCT01250301), which utilized a different
version of our VLN cigarette with a nicotine content similar to those used in previous successful
smoking­cessation trials and higher than that used in our own sponsoredPhase II­B trial. A
portion of the results of these two trials has been disclosed at the annual meeting of the Society
for Research on Nicotine and Tobacco (“SRNT”) held in Boston on March 13 to 16, 2013.
Regarding the NCT01050569 clinical trial, results only in terms of gender differences in
abstinence rates were disclosed at the SRNT annual meeting. Dorothy Hatsukami, PhD, was
principal investigator of the study. Within the female population at the end of treatment (week
12), the group assigned our VLN cigarette had the highest continuous abstinence rate; the group
assigned concurrent use of our VLN cigarette with a 21mg nicotine patch had the next highest
continuous abstinence rate followed by the group assigned a 21mg nicotine patch. Within the
male population at the end of treatment (week 12), the group assigned a 21mg nicotine patch
had the highest continuous abstinence rate; the group assigned concurrent use of our VLN
cigarette with a 21mg nicotine patch had the next highest continuous abstinence rate followed by
the group assigned our VLN cigarette.
In the Dorothy Hatsukami follow­up study (she is a member of the F.D.A.’s Tobacco Products
Scientific Advisory Board known as TPSAC) XXII’s VLN cigarette, in the female population, had
higher statistically significant quit rates than the 21mg nicotine patch at ALL time points.
Regarding the NCT01250301 clinical trial, certain results were disclosed in a presentation
at the SRNT annual meeting given by Hayden McRobbie, Ph.D. of Queen Mary University of
London, Wolfson Institute of Preventative Medicine, who was the principal investigator of the
study. Pfizer Inc. was also a collaborator of the study. This clinical trial evaluated whether the
use of our VLN cigarette in combination with Chantix ® or in combination with nicotine
replacement therapy (“NRT”) increases abstinence rates over the use of Chantix® or the use of
NRT. The study included one hundred smokers who were prescribed varenicline (trademarked
Chantix, or Champix outside the U.S.) and one hundred smokers who were prescribed NRT.
Half the smokers of each of these groups were randomly selected to also use our VLN
cigarettes for the first 2 weeks of treatment. All smokers received 9 weekly behavioral support
sessions throughout the 12­week study period. The group that used our VLN cigarettes had a
70% quit rate one week after stopping VLN cigarette use compared to a 53% quit rate of the
group not using VLN cigarettes after week 1 (p=0.02). The group that used our VLN cigarettes
had a 64% four­week continuous abstinence rate during weeks 3 to 6 compared to a 50%
four­week continuous abstinence rate during weeks 1 to 4 (p=0.06). Quit rates at 12 weeks post
treatment were not reported in the presentation.
The gist of it all:
In the Pfizer-sponsored clinical trial, XXII’s VLN cigarette in combination with either
Pfizer’s Chantix (best-selling smoking cessation drug in the world) or nicotine replacement
therapy (NRT) had higher quit rates than use of either product alone at ALL measured time
points; half of these time points were statistically significant, which is impressive for a
relatively small trial aiming to improve an already approved $700M drug.
Also from their 10K:
Licensing
The Company has been in discussions with various parties in the tobacco and
pharmaceutical industries for licensing its technology and products since the first quarter
of 2012. Management is exploring licensing arrangements on a country­by­country
basis in the U.S., Europe and Asia. The Company expects to close at least one
licensing agreement for its technology and products before the end of the third quarter of
2013
until next month...
Scott P. Shaffer
(aka The Pondering Primate)
Michael Keaton
Associate Editor & Director of Research
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