07/30/2006
VOLUME 249
Companies featured in the current edition of the newsletter: ADSX, ASPN, CYTR, GNBT, GSHF, HMWM, HSOA, HYTM, IMMG, ISON, IVOI, NTRN, NTST, NVLT, PTCH, SCLL, UDTT, USAT, ZIOP
The stock market was kind to bulls this week as optimism about profit growth and possible easing of Fed tightening led the major indices higher. Also helping investors was the rally in the Treasury market that pushed the yield on the 10-year Treasury note below the psychologically significant 5%. The Dow gained 351 points for the week, increasing yearly gains to 4.7%. The Nasdaq recovered from last week’s decline and rose 74 points, reducing year-to-date losses to 5%. The S&P rose 38 points, raising annual gains to 2.4%. The Russell ended the week 28 points higher resulting in a 4% annual gain.
The Dow posted its largest weekly advance in more than a year and the S&P had its best weekly point gain in over three years. A very busy earnings calendar from the week gave investors something to smile about as strong earnings reports from Merck (NYSE: MRK), General Motors (NYSE: GM) and ConocoPhillips (NYSE: COP) helped offset a disappointing report from Amazon.com (NASDAQ: AMZN). Investors were enthusiastic about overall Q2 results which are on track to equal 13.6% as a result of already reported results and estimates. This trend should continue as analysts are estimating 15 percent profit growth in the third quarter and 14.2 percent profit growth in the fourth quarter for S&P companies. A handful of economic reports also helped drive stocks upward as sales of new homes in June fell 3.0% from May and 11% from a year ago lending support of taming inflation. Additionally, a government report issued by the Commerce Department indicated that growth in the U.S. economy was slower than anticipated in the second quarter, reducing the likelihood that the Fed will increase interest rates at its August meeting. Further fueling momentum was the further decline of oil prices which ended at $73.24 per barrel, down 1.6% for the week.
What should investors look for in the coming quarter? There are still many companies scheduled to report earnings, including Humana (NYSE: HUM) on Monday morning. Tuesday, before the open, International Paper (NYSE: IP) and Marathon Oil (NYSE: MRO) announce numbers followed by Computer Sciences (NYSE: CSC) after the close. Prior to the bell on Wednesday Devon Energy (NYSE: DVN) releases earnings along with Proctor & Gamble (NYSE: PG). Cardinal Health (NYSE: CAH) reports figures before the bell on Thursday. Investors should also get a closer look at the impact of higher energy prices on consumers as a number of retailers report sales releases with automotive giants General Motors (NYSE: GM) and Ford Motor Company (NYSE: F) announcing on Tuesday and Hot Topic (NASDAQ: HOTT), Aeropostale (NYSE: ARO), American Eagle (NASDAQ: AEOS), Men’s Wearhouse (NYSE: MW) and Starbucks (NASDAQ: SBUX) reporting results on Wednesday. Credit Suisse hosts its three-day Electrical Equipment & Multi-Industry Conference beginning Wednesday in Southampton. Robert W. Baird & Co. hosts its one day Oncology Conference in New York where ZIOPHARM Oncology, Inc. (OTCBB: ZIOP) will be presenting on Wednesday as well.
The economic calendar will be busy as well highlighted by Friday’s Employment Report, where expectations are that 140,000 new jobs were created in July above the 121,000 in June. The Unemployment Rate is expected to remain at 4.6%. Hourly Earnings and Average Workweek numbers will also be announced Friday morning, with wage increases scrutinized. Beginning the week will be the release of the July Chicago PMI Monday after the opening bell. Tuesday morning, June Personal Income and Spending numbers will be reported followed by June Construction Spending and the July ISM Index shortly after the bell. Weekly Crude Inventories will be announced on Wednesday after the opening bell. Thursday morning, Weekly Jobless Claims will be reported followed by June Factory Orders and July ISM Services. Much attention will be placed on various Fed speakers throughout the week with St. Louis Fed president Poole speaking at the southern Legislative Conference on Monday and San Francisco Fed president Yellen also speaking on the economy in San Francisco that same day. On Friday Minneapolis Fed president Stern will talk on banking issues in Minnesota.
Hythiam, Inc. (NASDAQ: HYTM), a healthcare services management company that licenses the PROMETA™ physiological protocols designed to treat substance dependence, has signed its first PROMETA licensing agreement with Canterbury Institute that will create an outpatient center to treat those suffering from addiction. Hythiam will receive a 10% equity ownership in Canterbury in addition to fees for services and technology licensing. Additional PROMETA centers under this agreement will be opened in Northern New Jersey and in Southern Florida where Canterbury will place $2 million is escrow for such openings. Further strengthening brand recognition, approximately $250,000 will be allocated towards annual marketing for each location. This strategy is expected to grow Hythiam’s top-line as early indications of this licensing model from a demonstration site are impressive which show profitability and high volume. One of the key benefits to this model is that it helps those who cannot afford to be away from work and family for weeks or months at a time by treating them on an out-patient basis. Hythiam is looking to build a strong network of licensees to complement each of Canterbury Institute’s PROMETA Centers. It plans to open another company managed PROMETA Center in San Francisco. Providing further validation of the protocols, the City Court of Gary, Indiana presented data on offenders treated with Hythiam’s PROMETA Protocols at the American Probation and Parole Association’s 31st Annual Training Institute. This presentation highlighted the durability of positive outcomes six months after the initiation of treatment. Such statistics, which showed 95% of aggregate urine samples screening negative for use 6 months after treatment and 80% of PROMETA participants maintaining drug court compliance and remain drug free, overwhelmingly surpassed the Court’s historical success rates. Additionally, the company appointed leading addiction treatment executive Chris Hassan as Senior Executive Vice President and will oversee the company’s licensing and marketing efforts. Most recently, Hassan was a founding member and vice president of sales of Reckitt Benckiser pharmaceuticals, where he was responsible for the initial commercial planning and launch of the highly successful new innovative treatment for opiate addiction – Suboxone™ (buprenorphine). Reckitt Benckiser is a $25 billion global enterprise. The stock ended the week at $4.99, up 2 cents.
The battle between the longs and shorts in Home Solutions of America (NASDAQ: HSOA), a provider of a provider of recovery, restoration and rebuilding/remodeling services, could heighten in the coming weeks as the company is expected to report second quarter results for the period ended June 30, 2006 during the week of August 7th. Shares have slipped to mid-February levels, in part due to a surge in short interest (nearly 40% of the float is short) and as a result of controversy surrounding insider sales, and an agreement with American Renaissance Homes, a recently formed provider of affordable housing. Ironically, while concerns surrounding that contract have contributed to the significant decline in the company’s shares (down more than 50% since late May), the opportunity could be even more significant than even the company anticipated. On Saturday, according to The New Orleans Times Picayune, the area’s leading newspaper, more than 1,000 people turned out for a St. Bernard Parish Modular Home Expo coordinated by members of the St. Bernard Parish Government suggesting strong interest in modular homes. Analysts expect the company to report Q2 revenue of $25 million and EPS of $0.07. If the company were to significantly exceed those estimates, it could help trigger a turn-around in beaten down shares of the company’s stock. Note that August brings the one-year anniversary of hurricanes Rita, Wilma and Katrina. Shares ended the week at $5.56, down 97 cents.
Netsmart Technologies, Inc. (NASDAQ: NTST), a leading provider of enterprise-wide software for health and human services organizations, along with its partner Saber Corporation will deliver an enterprise health system for the State of North Carolina Department of Health and Human Services (DHHS). The new Saber/Netsmart solution is expected to standardize and unify all health department clinical and financial transactions by providing an enterprise database and advanced data management and reporting capabilities. At the core of the Web-based solution is Netsmart’s Avatar software, a full-function, off-the-shelf software package designed to automate clinical, financial and management functions for community mental health, public health, and substance abuse providers and payers. Saber’s role will be to manage all aspects of this large-scale project and to integrate the customized Netsmart system among the state’s public health departments. The initial phase of the contract with North Carolina DHHS will replace several of the state’s aging public health information systems with a statewide solution serving all public health entities. It is valued in the amount of approximately $19.8 million over a 19-month period, and will be followed by 42 months of maintenance and support valued at approximately $4.7 million. Pursuant to the agreement, Netsmart will receive an estimated $10.5 million over the contract period for products and services provided by Netsmart. Shares were down 9 cents last week, closing at $12.80.
CytRx Corporation (NASDAQ: CYTR), a biopharmaceutical company focused on developing products primarily in the area of small molecules and ribonucleic acid interference (RNAi), achieved a significant milestone in the clinical development of arimoclomol after the final patients in its Phase IIa received final dosing and follow-up. Such progress moves the company one step closer to commercialization as the company can now begin the process of data analysis. Such data analysis of this Phase IIa trial is expected to be completed in the upcoming months where final results will be released early in the fourth quarter of this year. In March 2006, arimoclomol was cited as one of the “100 Great Investigational Drugs in Development” by the pharmaceutical industry magazine R&D Directions in its fifth annual report. The stock gained 3 cents last week, closing at $1.19.
Generex Biotechnology Corporation (NASDAQ: GNBT), a leader in the area of buccal drug delivery, expanded its patent coverage for its oral insulin product in a key commercial market and was awarded its first Japanese patents and a new United States patent. The Japanese patents each contain claims relating to an improved delivery system for the administration of large-molecule pharmaceuticals, which may be administered by means of an aerosol into the mouth, for buccal or pulmonary application. The United States patent contains claims relating to an improved delivery system for the administration of large-molecule pharmaceuticals which may be administered through the oral and nasal membranes. Generex has an impressive intellectual property portfolio and currently holds an aggregate of 76 patents worldwide (19 of which are United States patents) and has an aggregate of 51 patent applications pending in various jurisdictions. The stock ended the week at $1.42, up 11 cents.
Earnings Preview: Applied Digital (NASDAQ: ADSX), a leading provider of identification and security technology, is scheduled to report second quarter results for the period ended June 30, 2006 on Thursday before the market opens. Investors will better be able to assess the prospects for an IPO of VeriChip Corporation when the company announces sales of the unit that day. The company’s publicly held majority-owned by subsidiary Digital Angel Corporation will also announce results at the same time. Since its Q1 earnings releases, shares of ADSX have declined 42%, perhaps related to the delay in VeriChip going public. Last week, VeriChip Corporation reported a significant milestone for its VeriMed™ Patient Identification System as it was successfully utilized at the Hackensack University Medical Center. Emergency room medical staff had immediate, secure access to the patient’s identity and medical history after scanning his VeriChip microchip and linking it with the patient information file stored on the secure database. The patient was a Bergen County Police Officer who experienced head, neck and back injuries after a high speed chase that resulted in a car accident. This event represented the first time that a patient who had received a VeriChip was able to receive treatment from a hospital that also offered the system, highlighting the importance of the VeriChip system in critical situations. Lastly, InfoTech USA, Inc., a majority-owned subsidiary of Applied Digital entered into a partnership with SLPowers to deliver managed services solutions to its core market area in Northern New Jersey and Metropolitan New York City and beyond. Potential catalysts for the stock surrounding earnings could be news on the VeriChip IPO, solid results from that unit or strong results from Digital Angel. The stock ended the week at $1.53, down 5 cents.
Isonics Corporation (NASDAQ: ISON), a developer of innovative solutions for the homeland security and semiconductor markets, filed its annual report for its fiscal year ended April 30th showing 135% growth in sales to nearly $24 million. The company also made significant progress in all three of its operating divisions. The life sciences division has been stabilized with reduced operating costs and renegotiated contracts with suppliers and should begin to generate positive operating income in the near future. Similarly, the company’s semiconductor division has enjoyed steady growth after its entry into the 300mm silicon wafer market and currently has a robust order backlog which should lead to operating profitability for this division later this year according to management. Meanwhile, the security services division continues to exhibit strong growth and has accounted for $13 million in new revenues for ISON last year. Overall, it appears that such explosive growth, especially in the homeland security and semiconductor markets, should continue in the current fiscal year as well. Additionally, ISON has now regained compliance with Nasdaq Marketplace as a result of its Stockholders’ Equity being in excess of $2.5 million. The stock rose 9 cents for the week to close at $0.54.
Junior energy company Aspen Exploration Corporation (OTCBB: ASPN), is nearing completion of the first phase of operations in preparation to drill an underbalanced gas well in the West Grimes Gas Field, Colusa County, California. The WGU #15-12 well was conventionally drilled to a depth of 6,070 feet where the company will look to employ an underbalanced drilling technique in an attempt to find gas pay in the Forbes formation. Past results from this technique performed in this field have had excellent results where the company anticipates continued success. Aspen has a 5,000 plus acre lease position and a 21% operated working interest in this field. The stock ended the week at $5.00, up 50 cents.
Environmental business development company GreenShift Corporation (OTCBB: GSHF), announced that its majority-owned subsidiary GS CleanTech Corporation executed an agreement with ZeroPoint Clean Technology, Inc. for the exclusive rights to distribute and use ZeroPoint’s proprietary gasification, gas to liquids and fuel reforming technology in the Ethanol Production Industry. ZeroPoint’s Biomass Gasifier is designed to standardize variable biomass feeds and optimize high yields of high-quality syngas in real-time with greatly increased capital and operating cost efficiencies at smaller scales and adds significant additional capability to GS CleanTech’s clean fuel technology program. Additionally, the company’s majority-owned subsidiary Hugo International Telecom, Inc. was renamed to GS AgriFuels Corporation with the trading symbol for the company’s common stock on the OTC Bulletin Board being changed to “GSGF.” Shares ended the week unchanged at $0.16.
Diversified sports media company HumWare Media Corporation (OTC: HMWM), was selected to operate the Ultimate Fantasy Football Contest with the Denver Broncos providing VIP prizes which include $20,000 in cash and early entries have a chance to win a new Ford Ranger. The Denver Broncos will be contributing a VIP Experience package of various prizes, including on-field pre-game passes to a Denver Broncos 2007 regular season home game for two, tickets in the exclusive United Club Level at Invesco Field, access to the post game press conference, VIP passes to the Broncos Barn before the game, scoreboard acknowledgement and PA announcement of contest winner on game day, and inside the ropes access to Broncos 2007 Training Camp at Dove Valley. Such selection of Humware by the Major League Marketing and the Denver Newspaper Agency speaks volumes about its service and reputation in the community and is a significant opportunity to increase exposure to the fantasy sports market for HumWare. Additionally, the company has licensed JM Enterprises Group, Inc. as its sales representative for its Boondoggle Sports Network in the metropolitan New York City area. Shares ended the week unchanged at $0.11.
IMPART Media Group, Inc. (OTCBB: IMMG), an innovator in the creation of out-of-home digital advertising content and information network management, signed a non-exclusive distribution agreement with Visual Solutions Distributing, Inc. (VSDI) for the distribution of its revolutionary digital signage and interactive media platform called IQ Box(TM) through VSDI. Industry reaction following the May release of IQ Box has been very impressive since this product simplifies the deployment, management, and delivery of content to digital signage networks. Although terms of the distribution agreement were not disclosed, mutual expectations are for a minimum of 500 IQ Boxes to be sold by year-end 2007. Despite the news shares lost 19 cents last week to close at $0.81.
iVoice, Inc. (OTCBB: IVOI), a developer and licensor of proprietary technologies, reported that its subsidiary, iVoice Innovations, Inc., entered into an agreement to acquire four acres of land in Hanover County, Virginia, approximately 20 miles from Richmond, Virginia, together with all improvements, easements, water rights, mineral rights and other structures for a total cost of $800,000. The transaction is expected to close during the third quarter or fourth quarter 2006 where the company plans to use the location as the site of a proposed new biodiesel facility. A feasibility study is planned to start immediately where upon completion, engineering, design and permitting issues will be assessed in order to facilitate completion. Discussions are currently underway with potential partners, who could share in the development costs and provide additional expertise. Such news is significant for the company as this site is strategically located close to customers who could use its biodiesel. The stock ended last week unchanged at $0.07.
Volume Alert: Shares of Neutron Enterprises, Inc. (OTCBB: NTRN), a developer of digital media solutions, traded over 5 times average volume as investors showed enthusiasm regarding the appointment of Rory Olson as the new Chief Executive Officer late last month. Mr. Olson is a highly accomplished entrepreneur and public company executive with a proven track record of having founded, restructured and operated various companies from start-up stage to mature public company. Shares increased by 15 cents to close at $2.38 for the week.
Junior oil and gas producer, Patch International Inc. (OTCBB: PTCH), updated shareholders on its operating activities. Regarding its Rich/Rumsey, Alberta property, a test well was plugged back to a secondary formation after the primary target did not produce results. The company will review results and make a final analysis regarding the testing of this well or the drilling of a well at a new location. For its Halkirk, Alberta property, a test well was frac’d where the company is awaiting flow results from the operator. The seismic program for the Red Deer (Joffre), Alberta property has been completed and is currently being interpreted to determine the location of the first well which will commence drilling in mid-fall. Regarding the Atlee-Buffalo Area, Alberta property, Patch is awaiting advice from the operator as to the drill date of the well. The company is also awaiting advice from the operator as to the drill dates of wells located in the Lloydminster Area, Alberta property. The stock ended last week unchanged at $1.25.
Cell biology company Stem Cell Innovations (OTCBB: SCLL), commented on President Bush’s veto to further fund embryonic stem (ES) cell research last week stating that it supports expansion of the government’s role in stem cell biology and that its provides an alternative to ES cells with its patented, pluripotent stem cells. The company’s PluriCells™ are a type of pluripotent stem cell isolated from fetal tissue that has the ability to become all cell types of the body. Because they are developed from fetal germ cells, not viable embryos, they are eligible to be used in any NIH-funded laboratory. Management is excited about the opportunity presented by this product and has previously presented data demonstrating its ability to grow PluriCells™ efficiently and reproducibly without feeder layers. Shares ended the week at $0.25, down 11 cents.
USA Technologies, Inc. (OTCBB: USAT), a developer of cashless vending and energy management products, was issued another e-Port patent related to opening up the $44 billion vending market to cashless and Intelligent Vending. The company continues to expand its intellectual property which should greatly enhance shareholder value as major card companies are targeting vending as the next big cashless opportunity, making patents applicable to vending technology very critical. The latest e-Port patent, number 7,076,329 for Cashless Vending Transaction Management by a Vend Assist Mode of Operation, comes after USA Technologies signed an historic contract with MasterCard to deploy the first 1000 cashless vending machines equipped with the e-Port Generation Six transaction device. Additionally, the company announced that it filed a complaint against Transaction Network Services, Inc alleging that TNS has infringed its patent in connection with TNS’s cashless payment system for use with vending machines. The complaint requests that TNS be enjoined from further acts of infringement, an award of unspecified money damages against TNS, treble damages be assessed against TNS, and other relief. Shares were up 35 cents last week, closing at $7.85.
Universal Detection Technology (OTCBB: UDTT), a developer of early-warning monitoring technologies to protect people from bioterrorism and other infectious health threats, reported its listing on the Commercial Service’s list of Featured US Exporters (FUSE) in Israel. FUSE is a directory of US products featured on US Commercial Service websites around the world and gives US companies a valuable opportunity to target specific markets in the local language of business creating additional exposure to such companies. The stock closed at $0.02, unchanged for the week.
On the Wires: IMPART Media Group, Inc. (OTCBB: IMMG), an innovator in the creation of out-of-home digital advertising content and information network management, has hired industry veteran Stephen Wilson as its Vice President of Finance/ Corporate Controller where he will manage the financial planning and accounting practices of IMMG and help guide the company in its initiatives to rapidly expand in the out-of-home digital signage sector. Wilson brings 25 years of impressive experience and financial reporting acumen to the Impart team. Homeland security company. Novelos Therapeutics, Inc. (OTCBB: NVLT), a biotechnology company focused on oxidized glutathione for use in fighting cancer and hepatitis, announced that its company information has been made available via Standard & Poor’s Corporation Records Listing Program. Environmental business development company GreenShift Corporation (OTCBB: GSHF), announced that its majority-owned subsidiary GS CleanTech Corporation was featured in an interview by PoultryCast on July 21st which focused on GS CleanTech’s proprietary animal fat recycling technologies, including GS CleanTech’s dissolved air floatation sludge oil extraction system. PoultryCast is an audio program designed to meet the needs of today’s poultry professional and focuses on production practices, environmental stewardship, animal welfare and other relevant issues. Generex Biotechnology Corporation (NASDAQ: GNBT), a leader in the area of buccal drug delivery, continues its brand awareness campaign as it made two poster presentations of clinical data at the 33rd Annual Meeting & Exposition of the Controlled Release Society in Vienna, Austria last week. The data related to Generex Oral-lyn and Generex Metformin Gum. Such exposure is important as The Controlled Release Society represents an international organization which serves 3,000 members from more than 50 countries.
