Both Tradeshow Marketing (TSHO.OB) and its paid mouthpiece, Skymark Research, have issued press releases pissing and moaning about Melissa Davis's article.   They call it factually inaccurate.  They threaten legal action.  But neither refutes the core facts that Davis sets forth.  I guess they can't.  Good thing for Davis that the truth is always a defense.

Tradeshow CEO Luniel de Beer whined:

"It has come to our attention that there may be an intentional attempt to falsely discredit our company, including our recent corporate developments and our overall business plan, through a systematic smear campaign. We have also been made aware of the potential that there may be organized stock shorting activities behind this smear campaign, which may account for the sudden erratic trading in our company's stock."

The paid pumpers at Skymark Research now hope to take their promotion underground.  They threaten their own subscribers with lawsuit for even sharing the promotional emails with the press: 

This email is intended for our private subscribers only and is not to be redistributed or disseminated by any means, unless otherwise given written approval by Skymark Research. 
Any parties that disregard this message will be pursued legally.

Nice try at a cover up, but I think they miss the mark. TSHO stock isn't down because of any negative press, or a "smear campaign."  Its down for the same reason all pump-and-dumps eventually come to an end: despite frantic attempts to inflate the stock, there will always be a limited supply of investors willing pay an extraordinary price for a mediocre company.  Nothing more, nothing less.

"Its different this time"

DISCLOSURE:  No position.

1. Interleukin Genetics (Amex:ILI)

I have no idea what is going on with Interleukin Genetics, a $37M market cap. developer of genetic tests.  I know its cash-strapped, but its chart seems to be perking up.

2.  Insignia Systems (Nasdaq:ISIG)

In-store display provider Insignia Systems (ISIG) delivered a strong quarter even though retailers were hurt.  It also has an antitrust claim against a larger competitor set for trial in April.  Are investors pricing in a favorable settlement?

3.  Orthologic Corp.  (Nasdaq:CAPS)

Beautiful chart.  Who cares about fundamentals when every period of congestion is resolved to the upside?

4.  MicroFinancial (Amex:MFI)

Microticket leasing company MicroFinancial is both profitable and paying dividends.  Looks like it could break out from about 9 months of congestion at any time.

5.  Pamrapo Bancorp  (Nasdaq:PBCI)

If you believe, as I do, that the community banks are in a “sorting out” process, the charts may give us the best clues about which banks will be winners and which will be losers.  While Pamrapo’s fundamentals seem horrible, the chart is decent.  Could the pig be through the python?

DISCLOSURE:  No positions.

Today it has been brought to our attention that certain individual(s) have maliciously and fictitiously attacked Skymark Research; in addition they have attacked the Tradeshow Marketing Company Ltd. (TSHO) and other third-parties.

The individual(s) behind the article have not made any attempt to contact Skymark Research or its principals. We are in the process of starting an investigation into the reasoning behind the attacks. Our legal counsel is currently reviewing the matter and has suggested possible legal action against the involved parties.

Our position has not changed with Tradeshow Marketing Company Ltd. (TSHO).
This week Tradeshow Marketing Company Ltd. (TSHO) has launched its infomercial campaign. We anticipate continue success for Tradeshow Marketing Company Ltd. (TSHO): it is well-managed, maintains a tight share structure, and is delivering on its business plan.

————-

Melissa Davis's exposé of Tradeshow Marketing (Pink Sheets:TSHO) is a must-read, and not just because she quotes yours truly.  Melissa lays bare how promoters masterminded the inflation of this once-sleepy penny stock:

TSHO can thank SkyMark Research – a promotional firm operated by the apparent son of TSHO’s own founder – for reshaping its public image. For years, TSHO looked like a failed business with limited appeal to even speculative investors willing to place bets on high-risk penny stocks. After SkyMark launched favorable coverage of TSHO late last year, however, the company saw interest in its long-overlooked stock suddenly skyrocket.



Boosted by that tout, TSHO soared to a record high of $1.62 on massive volume earlier this month. Although TSHO has since fallen to $1.16 a share, the same stock fetched mere pennies – and, on some days, failed to trade at all – before SkyMark kicked off its aggressive publicity campaign.



TSHO is banking on infomercial sales of the “Ultimate Squeegee,” a window-cleaning tool that retails for $19.95, to reverse its poor track record. Although TSHO just began airing its first commercials this week, the company has already achieved a remarkable market value of $26 million – or 3,500 times last year’s sales – on paid forecasts of its future success.



Even before TSHO officially scheduled its TV infomercials, SkyMark had already predicted that the company’s stock could hit $30 a share based on future sales. Incredibly, the Microcap Speculator noted, SkyMark compared TSHO to SpongeTech (OTC: SPNG.PK) – a stock halted last year over questionable promotions – when making its bullish claims.

About Skymark, Davis writes:

Both John Kirk and Ben Kirk – identified by industry sources as brothers – have clear ties to SkyMark.



Indeed, John Kirk actually represented SkyMark at a special investor conference late last month. During his presentation, a conference program shows, he specifically highlighted “sizzle” – with its power to drive investors to act based on “pure emotion” – as a key ingredient in any successful penny stock campaign.



John Kirk failed to return a phone call from TheStreetSweeper on Tuesday afternoon.



Meanwhile, Ben Kirk promoted SkyMark’s presentation ahead of that investor conference. Listing himself as a writer for SkyMark, he personally touted TSHO itself as well.



SkyMark’s apparent ties to TSHO extend beyond the founding family, however. Wade Huettel, a partner at Carrillo Huettel in San Diego, has provided legal services for SkyMark and TSHO alike. He registered the trademark for SkyMark last October, Internet records show, and filed a legal opinion on behalf of TSHO – seeking to lift trade restrictions on the company’s stock – the very next month.



Since then, Carrillo Huettel has apparently expanded its reach in the penny stock arena. Although the law firm told TheStreetSweeper that it has never funded any stock promotions, website disclaimers specificallyname Carrillo Huettel as the financer behind recent publicity campaigns for two different microcap companies.

Full article: http://www.thestreetsweeper.org/undersurveillance.html?i=280

Well done, Melissa!  

DISCLOSURE:  No position, but only because I couldn't find shares to short.

Quepasa prices are starting to get caliente again.  Its not so impressive in the 10-year chart, but the 1-year is in a well-established uptrend and probing new highs.  The only thing this year's rally in QPSA shares lacks is volume.  

Quepasa runs "trilingual" websites (English, Spanish, Portuguese), aimed at Latinos in the United States and Latin America.  Quepasa's press releases  make it sound like a substantial company.  The linked release, for example, talks of offices in California, Arizona, Miami, Brazil, and Mexico, claims that  Quepasa is the largest Latino social network, and says that over 1.4 million users joined in January alone.  

But after a decade of operations, Quepasa's revenues remain pathetic.  For the 9 months ending September 30, 2009, Quepasa generated less than $200,000 in revenues.  At the same time, operating expenses exceeded $7.65 million.  Not a recipe for success.

Nor does the current low float hold promise for more than a temporary squeeze.  True, there are only 12M shares outstanding currently, but there are also over 6M options (many to CEO John Abbott and CFO Michael Matte that were repriced to $1) and 4M warrants (most repriced to $2.75).  

I took a small short position at $3.03.  Please note that this is a much smaller than normal position for me, because: (1) the trade is a bit early — the uptrend remains intact; and (2) I feel it could be squeezed further.

DISCLOSURE:  Short QPSA.OB

This isn't a screed against the bailouts.  While I think they just kicked the can down the road — at the cost of future generations –others have made the case more eloquently than I can.

Instead, I want to look at how different the environment is for the small banks.  As a result of the big bank bailouts, all banks face substantially higher FDIC fees.  But they also face a capital and regulatory environment that is worse than the big banks.  As a recent post on the Bank Lawyer's Blog explained:

Here’s the problem facing community banks:  they’re being force-fed a capital starvation diet; and, many of the community banks will die as a result if a solution isn’t found quickly. As best I can tell, there’s little “interest focusing,” but there’s a whole lot of “positioning,” going on in Washington – and that ain’t solving the problem.

It’s bad enough that the banks are suffering malnutrition under the burden of troubled commercial real estate (CRE) loan portfolios.  But, to make matters worse, “tales from the crypt” describe regulatory exams now being conducted from a newly staked-out “position” of “I need to prove I’m the toughest regulatory SOB on the block.”  The result is an almost Sherman-like march through local communities that is wiping out community banks’ capital based on the marking-to-market of illiquid CRE collateral.  Assumptions made in valuing any asset are critical and inherently are subject to human bias; and, overly conservative assumptions that may be used in these exams that shorten the time periods for loss history used as a guide and that also forecast an overly bleak future can make bank death seem pre-ordained – or at least a self-fulfilling prophecy – when current loss recognition is required.

I've heard the same story from nearly every banker I know.  Regulators who were asleep at the wheel when it mattered are now micromanaging lending activity.  Yet, even in this nightmare environment, many community bank stocks are thriving.  Over the last 6 months, the Community Bank ETF (Nasdaq:QABA) is not only up almost 8%, but it has outperformed the broad financial ETF (XLF).

It appears that the tough conditions are working just as Schumpeter would have predicted, fostering "creative destruction" that thins out the weaker banks, and opens the door for better-positioned community banks to grow both organically and by acquisition.  

Over the next few months I will be investigating this group more closely.  These are not sexy tech stocks, but I suspect that the winners in this group will produce mammoth gains over the next five years.  

DISCLOSURE: no position.

Not surprisingly, many recent books promise to reveal Toyota's management secrets.  Makes sense.  Until a few months ago, U.S. managers envied Toyota's marketing and supply-chain management.  Seems a little silly now, doesn't it?

Toyota's giant recall and PR snafus have created a big headache for this "Toyota Way" crowd.  But I don't think its insurmountable.  Just dive into b-school doublespeak and rebrand the books.  Here are my suggestions:

DISCLOSURE: no positions.

TCCO shares crept up on low volume throughout January, but really took off in the past 2 days on two positive fundamental developments. 

First, Technical Communications announced very strong earnings.  For the first quarter of fiscal 2010, TCCO reported net income of $2,356,000, or $1.62 per share, on revenue of $4,764,000, versus net income of $206,000, or $0.14 per share, on revenue of $1,844,000 for the prior year quarter.

CEO Carl Guild explained:

We are very pleased with the revenue and income performance for this quarter which has been driven by the sizable deliveries on orders from the U.S. Government Foreign Military Sales (FMS) Program received in fiscal 2008. As we have reported previously, TCC has been successful in expanding our presence in the military communications network markets through modification and adaptation of our products to meet emerging customer requirements. These requirements take a substantial amount of time to develop and market but, when successful, provide a path to long term sales. We expect the balance of deliveries on these orders, approximately $600,000, to continue into fiscal 2011. TCC continues to pursue additional equipment orders for newly developed product variants that will further expand the performance of the deployed systems.

Don’t expect sales to continue at this rate.  While TCCO has a strong backlog and will likely remain profitable, the company admits that sales will slow as the year progresses.

Shipments in the second quarter of fiscal 2010 are expected to remain strong although somewhat lower than our first quarter, and we expect that shipments over the remainder of the year will slow down as compared to the first half based on the current backlog and delivery requirements.

Second, TCCO.OB announced a $2 special dividend, liberating a good chunk of the cash on its balance sheet. The dividend is payable in cash on March 22, 2010 to all shareholders of record on March 8, 2010.

DISCLOSURE: No position (sold into ramp).

Tradeshow shares shot up this week after Skymark circulated a series of absurd projections.  The worst drew a comparison to Shamwow and suggested that similar sales would drive TSHO shares to $30, settling at a target price of $27.51.  This long-term target is over 20x current prices, and about 14x Skymark's short-term target of $1.93.

The accompanying text reads:

With (1) the Sham-Wow near $1 Billion Dollars in revenue since its launch late-2007 [click here to view entire article], (2) news today that Tradeshow Marketing Company Ltd. (TSHO)’s channel selection has been made:  further confirming the Ultimate Squeegee infomercial launch is imminent, and (3) with the Tradeshow Marketing Company Ltd. (TSHO)’s management now mirroring the Sham-Wow’s marketing strategy;  our analysts believe that Tradeshow Marketing Company Ltd. (TSHO)’s first product has the potential to see massive success. 

Below see a chart outlining Tradeshow Marketing Company Ltd. (TSHO) if the Sham-Wow were its product, with its tight share structure [23.2 Million Shares Outstanding], which potentially could be the performance of the Ultimate Squeegee in the coming years. Based on the fact that the Ultimate Squeegee has done comparable numbers at the tradeshows up until the Sham-Wow’s infomercial launch, the Ultimate Squeegee could perform as well as the Sham-Wow with the upcoming infomercial driving its market.

Skymark calls this blatant hype a "what if" scenario.  I have another "what if" to ask: what if Skymark wasn't being paid $5000/month to publish this crap?  I gave Skymark the benefit of the doubt, but their $30 projection is grossly misleading.  And they know it.

DISCLOSURE:  No position.

A few have asked for an update, which I'm happy to provide.  I'm still not a buyer, for these reasons: 

1.  I don't like to buy stocks moving from concept to commercialization:  A lot of money can be made buying stocks in development stage companies.  Every time a milestone is met, or the company affirms its goals, investor hopes are renewed.  News and analyst coverage can grow, and new investors are drawn to the story.   A lot of money can also be made by stocks in solid operating companies.  Investors can easily analyze these companies and find good prospects for either value or growth. 

Trade Show Marketing is neither a pure concept company or an operating company.  Instead, it straddles a very dangerous place between these two zones.  The hopes of true believers are reflected in the stock price, but TSHO is many months away from being able to report meaningful results — even if everything goes right.  Lets say they keep the Feb. 22 kickoff for the Ultimate Squeegee ads, and it is an overnight success.  Results won't show much until TSHO's fiscal fourth quarter, ending May 31.  When will those results be reported?  Mid-July?  That's a long time to wait for concrete results.  Tradeshow Marketing, the company, and TSHO, the stock, are both at "put up or shut up" points.  I remain skeptical on the company's ability to deliver, and want to see proof.

2.   Trade Show's financial information should be more transparent:  James correctly pointed me to an attorney letter incorporating interim financials.  That's a start, but let's be clear.  Tradeshow does not provide any audited numbers.  It does not attach the contract with Cesari Direct that is supposedly the centerpiece of its infomercial strategy (but as James points out note 8 of its August quarter filing gives a few sentence description of the relationship).  For that matter I don't even know how many shares are currently outstanding.  The financials say 23,202,809 as of August 31, 2009, but that was 4 months ago.  The Pink Sheets is littered with companies that burned shareholders through sudden and massive dilution.  I have no reason to believe that TSHO is going to be one of those, but until it becomes a true reporting company that is a very real risk that traders must consider.

3.  Trade Show Marketing is already richly valued:  At Friday's closing price of 0.78/share, Tradeshow Marketing is currently worth over 18 million.  That's an awful lot of money for a company that hasn't done anything yet.

4.  Investors place too much faith in the Cesari Direct contract:  Everything that James identified about Cesari Direct is true — they have a great track record in the infomercial space.  But digging a little deeper, it doesn't look like Cesari Direct has much skin in this game.  According to note 8 of the August 31 financials, Cesari will receive only $4,000 per month for 6 months.  That's not a core business relationship in my view.

5.  Is there really that big a market for squeegees?  All the fervor about Trade Show Marketing is centered on its first product launch, infomercials for "The Ultimate Squeegee."  I'll take the company at their word — this may be the world's best squeegee.  Will it really sell enough to support TSHO's market cap?  Stranger things have happened in the world of direct response advertising, but to me TSHO's sole product to date seems a bit uninspired.

6.  TSHO is a promotion.  Many of you have identified Skymark as a valuable subscription-based research company.  For TSHO though they are promoting it in return for compensation.  Skymark admits as much in the disclaimer:

 Skymark Research has not independently verified the information provided to it by third parties and has been paid five thousand dollars to conduct research on Trade Show Marketing Co.  by a third party to the company, Skymark Research expects to be paid a minimum of five thousand dollars per month for research and advertising purposes.  

 Who is this third party, and how many shares have they dumped? 

Bottom line:  For these six reasons, I am not buying TSHO.  I have not shorted any TSHO either.  A pop into the Feb. 22 product launch would not surprise me.  If TSHO shares are available to short around the product launch, I may take a small short position.

DISCLOSURE:  No position.

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