Call(s) to Action:

Stay tuned for our next short thesis report to be released later this morning.

Here are the stories that the GeoTeam is following today… (Please see full disclosures at bottom)

  • ChinaHybrids
    • VIMC ($3.50) – Reported strong Q2 2014 results:
      • Reported revenue of $24.0 million vs $11.1 in the prior year
      • Non-GAAP EPS of $0.10 vs a loss of $0.19 in the prior year and well ahead of analyst estimates of $0.04.
      • It seems the reported Non-GAAP net income includes 1) Gain on disposal of marketable equity securities and 2) equity profit of an equity investee, we will look into it further.
    • YGE ($3.56) – Missed top and bottom line analyst estimates for Q2 2014 and lowered full year 2014 shipment guidance.
    • HPJ ($5.84) – Announced that its 20Ah lithium-ion battery received the product approval issued by China’s National Quality Control & Inspection Center for Buses.  We have mentioned our bullish stance on HPJ in many previous emails and are still long.
    • YOKU ($19.03) – Announced that the board of the Company approved a new share repurchase program with an aggregate value of up to US$300 million.
    • AMCF ($2.58) – Announced that its recently acquired subsidiary, Qingdao Grand New Energy Co., Ltd., entered into an Energy Performance Contracting (EPC) agreement with Qinghai Sensheng Salt Mining Co., Ltd. This EPC project requires a total investment of approximately USD $330,000 and has an initial term of 10 years with an option to extend if the project goes well.
    • ZOOM ($2.71) – Failed to comply with the periodic filing requirements for continued listing on NASDAQ.
  • U.S. News
    • TUBE ($9.22; marked up near $12 in pre market) – Reported strong Q2 2014 results:
      • Reported revenue of $28.7 million vs $12.6 million in the prior year and ahead of analyst estimates of $24.7 million.
      • Reported Non-GAAP EPS of $0.02 vs a loss of $0.37 in the prior year and well ahead of analyst estimates of a loss of $0.15.
  • GeoBargains/GeoBargains on the Radar
    • GeoBargain MKRS ($0.16) – Announced major contract win from U.S. Navy.  The contract win of $5 million is 66% more than full year 2013 reported revenues and appears that it will be filled in the next 12 months.  Recall, a major contract win was one of the catalyst we discussed in our our bullish thesis on GeoBargain MKRS titled, “A Sea of Change on the Horizon For Mikros Systems” released on 5/13/2014.  Backlog now at an all time record of $8 million.
    • GeoBargain VRYAF ($3.12) – The previously announced acquisition by Verisae has been completed.  Shareholders will receive $3.19 per share.  At the time of the original announcement the company gave a range of $3.15 to $3.40 per share.  As we stated in our 6/11/2014 email, the price range did not accurately value VRYAF shares;  the low end of the deal values VRYAF at an EV/Sales of 1.2.

For more timely information, particularly during the daily trading session, we urge our members to read our message board posts daily.

Disclosure: Long MKRS, VRAYF, HPJ; Other Long Positions; Other Short Positions; Pump & Dump Positions (Password GEO2014)

Summary of general highlights:

On the Asian Front…

Select China Earnings…

Stock Price** EPS Estimate Reported EPS Prior Year Reported EPS
Vimicro Intl(NASDAQ:VIMC) $4.04 $0.04 -$0.01* -$0.18*
Yingli Green Energy(NYSE:YGE) $3.39 -$0.14 -$0.26* -$0.34*

* denotes non-GAAP; ** Pre-market

Please see our ChinaHybrid June 2014 quarter earnings screen (password GEO2014) for select companies that have reported earnings.

In Other News…

Highpower Intl (NASDAQ:HPJ) ($5.84) – a developer, manufacturer, and marketer of lithium and nickel-metal hydride (Ni-MH) rechargeable batteries, and a battery management systems and battery recycling provider, today announced

that its 20Ah lithium-ion battery (Model: IESPD201E) has received the product approval issued by China’s National Quality Control & Inspection Center for Buses. The battery model IESPD201E is designed for and best suited for Hybrid Electric Vehicles (HEVs) and Plug-in Hybrid Electric Vehicles (PHEVs). The product approval was based on comprehensive tests according to China’s automobile industry standard QC/T 743-2006 “Lithium-ion Batteries for Electric Vehicles”.

Mr. Wenliang Li, Chief Technology Officer of Highpower, commented,

“China has begun to emerge as a leading green transportation adopter. China will become the largest market for electric buses within the decade. This is another significant milestone for Highpower to get positioned for wider national adoption of our batteries in the HEV and PHEV market. We dedicate meaningful resources to developing the new generation lithium batteries to address the immense EV market in China. Receiving the approval from China’s National Quality Control & Inspection Center for Buses is one solid step in order to commercialize our high power density lithium batteries in the EV market at the national level. We expect further progress in the years ahead.”

Youku Tudou (NYSE:YOKU) ($19.03) – China’s leading Internet television company (“Youku Tudou” or the “Company”), today announced

that the board of the Company has approved a new share repurchase program whereby Youku Tudou may purchase its own American depositary shares (“ADSs”) with an aggregate value of up to US$300 million. The Company expects to fund the repurchase out of its existing cash balance, including cash generated from its operations. The proposed share repurchase may be effected on the open market at prevailing market prices and/or in negotiated transactions off the market from time to time as market conditions warrant in accordance with applicable requirements of Rule 10b5-1 and/or Rule 10b-18 under the U.S. Securities Exchange Act of 1934, as amended.

Andatee China Marine Fuel(NASDAQ:AMCF)($2.58) – a leading independent operator engaged in the production, storage, distribution, trading of blended marine fuel oil for cargo and fishing vessels, as well as research and development of clean energy solution in China, today announced

that its recently acquired subsidiary, Qingdao Grand New Energy Co., Ltd. (“Qingdao Grand”), a clean energy solution provider, entered into an Energy Performance Contracting (EPC) agreement with Qinghai Sensheng Salt Mining Co., Ltd. (“Qinghai Sensheng”). Qingdao Grand will provide a complete set of pneumatic water-pump system, developed by Qingdao Grand based on its patented clean energy technologies, to help with Qinghai Sensheng’s saline lake mine development. This is the first clean energy EPC project that AMCF signed since it acquired Qingdao Grand in May 2014.

Mr. Wang Hao, Chairman and CEO of AMCF, commented,

“We are delighted to sign this 10-year contract with Qinghai Sensheng after our recent acquisition of Qingdao Grand. It is a significant milestone for us in the exploration and development of the clean energy application segment. The self-developed pneumatic water-pump system is centered around our proprietary air compression and storage technology. Our technology not only provides safe and clean energy solution with zero emission, but also allows our customers to cut operation costs as well as improve efficiency. We believe that our technology can be used in many areas, such as pneumatic oil-pump system, farmland irrigation system and distributed electricity power generation system.” Mr. Wang concluded, “We hope this cooperation with Qinghai Sensheng is just the beginning of many more contracts of this nature with our potential clients. I also believe that the management’s decision to expand into clean technology space will generate consistent and long-term benefits for our shareholders.”

Zoom Technologies (NASDAQ:ZOOM) ($2.71)received a Nasdaq Staff Deficiency Letter indicating that, as a result of the Company not timely filing its Quarterly Report on Form 10-Q for the quarter ended June 30, 2014 (the “2014 Q2 Report”).

The Company failed to comply with the periodic filing requirements for continued listing set forth in Rule 5250(c)(1) of the Nasdaq Listing Rules. In accordance with Nasdaq Listing Rule 5101, Nasdaq has provided the Company until September 18, 2014 to submit a plan to regain compliance. The Company expects to file its 2014 Q2 Report in short order, and fully expects to be able to meet the September 18, 2014 deadline.

On the U.S. Front…

Notable U.S. Earnings…

Stock Price** EPS Estimate Reported EPS Prior Year Reported EPS
Tubemogul(Unknown:TUBE) $13.42 -$0.15 $0.02* -$0.37*

* denotes non-GAAP; ** Pre-market

GeoBargain/Specials…

Mikros Systems (OOTC:MKRS) ($0.16) – GeoBargain MKRS is an advanced technology company specializing in the research and development of electronic systems technology primarily for military applications. The company announced

that it is awarded a major new production contract valued at $5,000,000 for its ADEPT® equipment, used by the U.S. Navy to maintain advanced radar systems. According to the release, the Navy plans to purchase 54 ADEPT units over the next year for a total contract value of $5,000,000.  The contract will make the backlog of the company to an all-time high of approximately $8,000,000.

Quotes from management,

“We have been looking forward to this award for some time,” said Mikros President Tom Meaney. “It’s a major corporate milestone and validates all of the hard work we’ve done on ADEPT development.  We are delighted that the Navy has chosen to move forward with ADEPT production.”

The new contract is the first Full Rate Production contract for the third-generation ADEPT system.  A low rate initial production (LRIP) run of three units was recently completed to validate the new design.  The production systems will be assembled at the recently-expanded Mikros Manufacturing and Depot facility in Largo FL. Mark Laureigh, Mikros Director of Operations, who runs the Largo facility, said, “We are ready here in Florida to execute this contract. We are putting assembly and quality control systems in place to ensure on-time delivery of high-quality equipment to the Navy.”

Recall that a major contract win was one of the catalyst we discussed in our our bullish thesis on GeoBargain MKRS titled, “A Sea of Change on the Horizon For Mikros Systems” released on 5/13/2014 when the stock was trading at $0.10.

Viryanet (OOTC:VRYAF) ($3.12) – GeoBargain VRYAF provides integrated mobile and Web-based software applications for workforce management and the automation of field service delivery in North America, Europe, the Middle East, the Asia Pacific, and South America. The company announced

today that its previously announced acquisition by Verisae, Inc. is completed. Shareholders of VRYAF will receive $3.19 in cash for each ordinary share as of the effective time of the merger, less any applicable withholding taxes. The company will cease filing reports pursuant to the Exchange Act, and it expects no further trading in its ordinary shares after the close of business on August 26, 2014.

As we stated in our 6/11/2014 email, in our opinion the price range did not accurately value VRYAF shares. The low end of the deal values VRYAF at an EV/Sales of 1.2.   Please go here for our full note on VRYAF.

For more timely information, particularly during the daily trading session, we urge our members to read our message board posts daily.

Sincerely,

The GeoTeam