To OTC Journal Members:
 

eFoodSafety (OTC BB: EFSF): Just When You Least Expect It!!

So typical of this time of year. When the good news out of EFSF hit the tape this morning, I was traveling and couldn't get out my coverage until long after the market closed. This is the time of year I usually write editions musing about stocks falling out of bed and reviewing the fundamental reasons we liked them in the first place. It's much more fun to cover stocks headed north on positive developments.

EFSF rebounded big time today off the AM news, and I missed all the fun. However, it's never too late to share a couple of observations. Here's what happened just prior to this morning's open: EFSF announced it had retained Dr. Madon M. Joshi, Ph.D, the retired Worldwide Licensing Manager for New Technology at DuPont, to further develop and license EFSF's OraPhyte(TM).

The market loved this news, and responded by bidding the stock 24% back above the $.30 level to a $.339 closing price. Not bad for a day's rebound.

The potential impact on the company is obvious. It's no secret Dupont is evaluating OraPhyte(TM), EFSF's non toxic solution to the world wide Nematode problem that is estimated to cost the agricultural industry billions each year. Current solutions are considered environmentally unsafe and are being phased out. 

Should EFSF enter into a licensing agreement with Dupont to market OraPhyte(TM) , it's game over for the stock, and ka'ching for shareholders. There's the $1 plus so many of you have forecasted on this stock. Investors loved today's announcement, as a move of this nature surely maximizes the potential for a deal. After all, they just hired the guy who used to make decisions on behalf of Dupont to license products just like theirs. The market assumes 1- the guy wouldn't take the assignment unless he felt the product worked and could be licensed, and 2- the chances of a deal actually happening just improved quite dramatically.

Dupont is one of the two 1200lb gorillas in the agro-biotech space, and enjoys about $28 billion in annual revenues. If they enter into an agreement to market OraPhyte(TM) on a world wide basis, watch out above. 

There's a lesson to be learned from today's chart, and it's typical for this time of year. Here's the chart:

In the summer stocks tend to drift down on greatly reduced volume. When microcap stocks go through these low volume sell offs, it doesn't take an enormous amount of volume to bid them right back up.

Look at this chart of EFSF going back to early in the year. I want you to look at the volume levels. From January through March this stock made a beautiful nearly three fold move from about $.20 to a high of about $.50. Look at the high volume levels. It continued climbing the charts on very strong volume.

Over the last month the stock has traded atrociously in a news vacuum, but it hasn't sold off on huge volume. In fact, today's volume which took the stock up 24% was lower than the volume a couple of days ago when the stock made its multi month low. It traded 1.2 million shares on Tuesday when it hit $.22, and traded 1.1 million shares today and made it back to $.32.

Here's the point- these low volume summer sell offs can be reversed quite easily on moderate up volume days. This is not only true of EFSF- it is true of all the OTC Journal microcap ideas. 

Today's action bears up a couple of points I have been stressing about EFSF. First- the company has a very loyal shareholder base that believes in the long term future of the company and its products. They've been just dying for a reason to pounce on the stock.

Second, despite only having one commercially available product at this time, EFSF has a number of products which could be commercially huge down the road- all environmentally safe and health conscious. A great theme for today's social climate.

As I said in the last BLOG- the news vacuum this stock has labored in for the last month won't last forever. There's just too many irons in the fire. It wouldn't surprise me to see the stock back and fill a little, but I'll bet the summer low has been made, and higher levels are in store. Congratulations to those who had the courage to jump in down in the low $.20s.

Here is the complete text of today's news for your review:
 

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