Email : info@otcjournal.com
URL : http://www.otcjournal.com
To
OTC Journal Members:
 |
NuTech Digital
(OTC BB: NTDL) Delivers Largest Order in Company History |
|
Recent problem child NuTech Digital
was
out with news just after the market closed today. The company announced
it has entered into a national distribution agreement with NASDAQ 100 index
member Dollar Tree Stores, Inc. (NASDAQ: DLTR).
The press release also disclosed
DLTR's
initial purchase order was for $1 million, to be shipped in the
2nd quarter. This is by far the largest single order in NTDL's history.
On the fundamental side, NuTech
Digital is performing beautifully. The company announced January and
February revenues were up about 30% over the same period the previous year.
This was before the company had enough capital to add 117 titles to its
DVD licensed product base. Top line growth for the full quarter will not
be known until the quarterly numbers come out in May.
Today's Dollar Tree announcement
is a surprise, and the revenues are not factored into previous projections.
The company achieved $4 million in 2003. Today's news, coupled with previous
announcements, puts the company on track for substantial growth this year.
 |
The
Technical Picture; A Mess |
 |
On Monday, April 12th, shares of
NuTech
Digital were crushed, and have yet to rebound. As I mentioned in a
previous edition, something changed which created a substantial excess
supply of stock.
NuTech completed a private
placement for a $2.2 million financing earlier in the year. Shares were
priced at $.40 at a time when the stock was trading in the $.60 range.
NuTech filed a registration
statement on March 29th with the intent of getting clearance for those
shares to become free trading. The registration went effective on Friday,
April 8th, less than two weeks after being filed with the SEC.
Most of the time, a registration
statement of this nature requires 60 to 90 days of review before going
effective. In this case, the registration statement went through with no
comment. This is an indication NuTech and its attorneys have been
doing a great job with its regulatory compliance, but it turned out to
be a major negative for the stock price.
As you can see from the chart, the
private placement investors decimated the value in a couple of days. To
be on the safe side, from here forward we must assume every single share
that can be for sale is for sale right now. The market will have to deal
with this overhang before this stock can trade up with any consistency.
My estimate is that there were about
6.5 million share for sale. I believe some were pre-sold by being shorted
before the registration statement went effective.
Since April 12th, NuTech has
traded about 4.4 million shares. Since the stock was cut by 1/3, we can
assume more of this volume was selling than was buying. I believe about
3.5 million shares have been sold, leaving about 3 million left for sale,
and 2 million probably is for sale.
Beyond the 2 million which are probably
for sale, the company issued another 13 million warrants with an exercise
price of $.75. The holders of the common stock are the holders of these
warrants. It is safe to assume supply from a warrant conversion could start
showing up for sale when the stock reaches the $.90 level.
|
Conclusion |
|
The fundamental picture for NuTech
Digital continues to improve rapidly. The company could achieve over
$10 million in sales of licensed DVD products alone, up 250% from last
year.
Fully diluted there would be about
29 million shares I&O if all the warrants get converted. If that were
to happen, it would give the company an additional $10 million in cash.
Therefore, on a fully diluted basis the market is saying this company is
only worth $16 million today.
While the valuation is absurd, the
potential supply is troubling for any significant upside movement on the
price with these volume levels. Therefore, unless or until volume picks
up substantially, I don't believe my former $2 price target has any validity,
even though I believe the stock could easily be worth that.
However, when stocks catch fire in
this kind of market, the volume required to clean up this overhang could
materialize in a couple of days. Catalysts for increased volume could include
major DVD concert signings; sign Beyonce and the stock will
rock like one of her performances. If NuTech licenses the DRM technology
for viewing movies on the internet, volume could be prolific.
In the current $.55 range volume
has dried up and sellers are on the sidelines. I expect them to reappear
at higher levels. At this time, I strongly recommend accumulating at $.60
or less. This company has exciting upside potential, but it won't trade
up much until higher volume levels eradicate overhead supply.
If you are wondering if you should
"average down" in this stock, here are my thoughts. I don't believe in
averaging down. If you have invested as much as you are comfortable risking,
just hang in there. If you have the risk tolerance to accumulate more,
now is the time to do so. If you have not established a position in this
stock, and you are thinking of doing so, now is the time.
Someone else's short sightedness
is your opportunity.
Here is the complete text of today's
news release for your review:
Press Release Source:
NuTech Digital, Inc.
NuTech Digital, Inc.
Enters Distribution Agreement with Dollar Tree Stores
Thursday April 22, 4:02
pm ET
VAN NUYS, Calif., April
22, 2004 (PRIMEZONE) -- NuTech Digital, Inc. (OTC BB:NTDL.OB - News), committed
to setting the next generation standard for the provision of secured high
resolution entertainment content over the Internet, today announced it
has entered into a national distribution agreement with Dollar Tree Stores,
Inc. (NasdaqNM:DLTR - News) (website: http://www.dollartree.com )
Commenting on the agreement,
CEO Lee Kasper stated, ``We are very pleased to begin distributing our
titles through Dollar Tree's national chain of retail stores. Dollar Tree's
first order with us is in excess of $1 million dollars, which we plan to
ship during the second quarter. With over 2500 locations nationally, we
expect sales of our DVD titles to increase significantly. This agreement
further demonstrates our commitment to our goal of expanding our business
by selling to national retailers, who generally buy in large quantities.''
About Dollar Tree Stores
Dollar Tree Stores Inc.
is the nation's leading operator of single-price point dollar stores. As
of January 31, 2004, Dollar Tree operated 2,513 stores in 47 states. Dollar
Tree also operates a coast-to-coast logistics network of nine distribution
centers. Dollar Tree is a member of the NASDAQ 100 index.
About NuTech Digital
NuTech Digital is a pioneer
in the home entertainment product market, with more than 600 exclusive
DVD titles and a growing library of high definition music concerts. NuTech
Digital offers original and licensed content via a worldwide network of
distributors, retailers and Internet entities. NuTech Digital also has
broadcast availability, DRM, and video on demand for many of its new products.
NuTech Digital recently introduced its DRM technology, which enables the
secure distribution of high-resolution digital content via the Internet.
(http://www.nutechdigital.tv) NuTech' Digital's DRM platform allows its
feature films, concerts, children's animated films, karaoke software, Japanese
animation and late night programming to be accessed via secure downloads,
and included in online subscription services. NuTech Digital also facilitates
authoring services to content providers in the entertainment industry.
Cautionary Statement
This press release contains
forward-looking statements that involve risks, uncertainties and assumptions
that if they never materialize or prove incorrect, could cause NuTech Digital,
Inc.'s results to differ materially from those expressed or implied by
such forward-looking statements. All statements other than statements of
historical fact are statements that could be deemed forward-looking statements,
including any projections of earnings, revenue, or other financial items,
any statements of the plans, strategies, and objectives of management for
future operations, any statements concerning proposed new products, services
or developments, any statements regarding future economic conditions or
performance, statements of belief and any statements of assumptions underlying
any of the foregoing. These statements are based on expectations as of
the date of this press release. Actual results may differ materially from
those projected because of a number of risks and uncertainties, including
those detailed from time to time in NuTech Digital, Inc.'s reports filed
with the Securities and Exchange Commission.
Contact:
NuTech Digital, Inc.
Joe Giarmo
818-994-3831, ext. 18
joe@nutechdvd.com
|
Charts Provided Courtesy
Of TradePortal.com |
