11/12/2006
VOLUME 263
Companies featured in the current edition of the newsletter: ADSX, ARGA, CLRI, CPPT, EMIS, FMTI, FSN, GNBT, GSHF, HSOA, HYTM, IVOI, LANW, MBND, NTRN, NTST, POIG, QTXB, SFP, SLS, TAGS, TPPH, USAT
The Election came and went, and did little to disturb the bullish bias in the market. The Dow ended the week up 122 points increasing its year to date gain to 13%. The Nasdaq was up 58 points at the end of the week and increased its year to date gain to 8.4%. The S&P 500 picked up after last week’s loss and ended the week up 16 points, increasing its year to date gain to 10.6%, while the Russell 2000 finished the week up 16 points and increased its year to date gain to 14.2%.
While the outcome of the Election produced a Democratic-controlled Congress, the results did little to roil the markets, although healthcare was easily the worst performing sector this week with many stocks selling off over concerns related to increased regulation and Medicare pricing. The telecom sector also declined amid fears that the Democrats favor “Internet neutrality.” Overall, the elections did not affect the market in a considerable way. Note that every third year in a president’s term has been a positive year for the markets since 1960 (12 consecutive times), with only one failing to post double-digit gains.
What should investors look for in the upcoming week? As Earning Season comes to a close, announcements will slow considerably, with only a few big names left to report. Monday will be tame for earnings reports, but investors can expect to see announcements from Tyson Foods (NYSE: TSN) before the bell and Energy Transfer (NYSE: ETP) after the close. Tuesday announcement activity is slightly busier with morning announcements from DR Horton (NYSE: DHI), The Home Depot (NYSE: HD), Ross Stores (Nasdaq: ROS), Target (NYSE: TGT), and Wal Mart (NYSE: WMT). Look for, after the close, reports from ArvinMeritor (NYSE: ARM) and Jabil Circuit (NYSE: JBL). Wednesday, before the open, announcements include Tyco (NYSE: TYC) and Aramark Corporation (NYSE: RMK). Investors can expect to see earnings reports from Applied Materials (Nasdaq: AMAT), Limited Brands (NYSE: LTD), Longs Drugs (NYSE: LDG), and specialty pet retailer Petsmart (Nasdaq: PETM) after the close Wednesday. Sears Holdings Corporation (Nasdaq: SHLD), Big Lots (NYSE: BIG) and Barnes & Noble announce earnings Thursday before the market opens. Hewlett Packard (NYSE: HPQ), Dell (Nasdaq: DELL), Gap Inc. (NYSE: GPS), Starbucks (Nasdaq: SBUX), and Foot Locker (NYSE: FL) announce results after the market close on Thursday.
With earnings reports tapering down, the economic news for next week will assume added importance. The single announcement for Monday will be the October Treasury Budget after the market closes. Tuesday morning, October Retail Sales and the October Core PPI will be released. September Business Inventories will be announced mid-morning Tuesday. St. Louis Fed President William Poole speaks to the CFA society in Delaware, Boston Fed President Minehan speaking to a real estate group in New England and San Francisco Fed President Yellen speaks on community development in Fresno that day. Wednesday reports include the announcement of the NY Empire State Index before the bell with weekly Crude Inventories shortly following. Most notably will be the announcement of the FOMC minutes after the close on Wednesday. Thursday morning will be extremely busy with early morning reports on the October Core CPI and weekly Unemployment Claims. Investors can expect to see the September Net Foreign Purchases, October Industrial Production and Capacity Utilization reports shortly after the market opens. The Philadelphia Fed Index is released at noon. Expect to see Cleveland Fed President Pianalto speak in Cleveland on Thursday, as well a speech from Fed Gov Kroszner in Washington. Chicago Fed President Michael Moskow addresses the economic outlook on Thursday in Chicago. Friday announcements will be mild with the October Housing Starts and Building permits before the bell.
The conference schedule for next week kicks into high gear. Monday, Deutsche Bank Securities and Goldman Sachs host the two-day 2006 Gaming Investment Forum in Las Vegas. Monday also marks the start of the three-day JP Morgan Small Cap Conference at the Four Seasons Hotel in Boston, the two-day BB&T Capital Markets Consumer Conference at the Omni Berkshire in New York, the three-day Merrill Lynch Global Leveraged Finance Conference in San Juan, and the Ingalls & Snyder Specialty Chemical Conference in New York. Tuesday conferences include the three-day UBS Global Communications and Technology Conference in New York, the two-day Mid-Cap Conference in New York hosted by Bear Stearns, the three-day Merrill Lynch Banking and Financial Services Conference in New York, the three-day Morgan Stanley Global Consumers & Retail Conference in New York, and the two-day Citigroup 21st Annual Transportation Conference in New York. Goldman Sachs New York Investor Office Tour is on Wednesday. Other Wednesday conferences include the commencement of the three-day Credit Suisse Annual Health Care Conference in Phoenix and the three-day Lehman Brothers Third Annual Small Cap Conference in Dana Point, California. Thursday marks the close of the conference schedule for the week with the commencement of the single-day Credit Suisse Alternative Energy/Solar Power Conference in Boston and the single-day Oppenheimer 4th Annual Restaurant Conference in Las Vegas.
Hythiam, Inc. (NASDAQ: HYTM), a healthcare services management company that licenses the PROMETA™ physiological protocols designed to treat substance dependence, announced last week that Horizon Blue Cross Blue Shield of New Jersey will conduct a commercial evaluation of the PROMETA protocols as a central component for substance dependence disease management. Horizon BCBSNJ has a total membership in excess of 3.2 million lives. 50 patients will receive the PROMETA protocols for alcoholism, stimulants, and alcoholism and stimulants. Outcomes will be measured at 90 days, after which initial reimbursement may commence, with additional follow-up extending through 6 months. Reimbursement from a large organization like Blue Cross could drive significant revenue and spur adoption throughout the industry. Already, there have been 5 successful pilot studies completed. The company also said that leading researchers will conduct two additional double-blind placebo-controlled studies to assess PROMETA’s acute effects on reducing cravings and improving neurocognitive functioning, in addition to three current clinical evaluations of the PROMETA protocols. The company also announced financial results for its third quarter ended September 30, 2006 last week. Revenue was $1.1 million, compared to revenues of $361,000 in the third quarter of 2005, but was down sequentially from the second quarter, the company said, due to seasonality. While the stock was likely weak due to the focus on revenue growth, we believe that investors are looking at the wrong metric. While revenue is undoubtedly important, the company’s private pay business likely represents less than 10% of the market and is unlikely to grow significantly until the company launches a major marketing initiative. The healthcare payor market is much more substantial as it comes from a captive funding source. The stock ended the week down $0.82 from last week at $7.56.
Earnings Preview: Telecommunications company Fusion Telecommunications International (AMEX: FSN) will report third quarter results for the period ended September 30, 2006 on Tuesday morning. Since the company reported Q2 results, the stock has fallen 28.4%. While investors will focus on is whether the company can increase revenue from its carrier services business, what its financial condition is like, and how successful it has been in driving new customers to its efonica VoIP business. Recently, launched, the company said that it already had 750,000 subscribers from more than 100 countries and had begun converting them to paid subscribers. Comparisons to last year’s third quarter should be favorable, when the company had revenue of $9.1 million and posted a loss of $(2.3) million. Shares ended the week at $1.40, down 15 cents.
Applied Digital (NASDAQ: ADSX), a leading provider of identification and security technology, reported financial results for its third quarter ended September 30, 2006 last week, which were affected by weakness at its Digital Angel subsidiary. The company’s revenue was $29.0 million for the third quarter of 2006, an increase of 4.3% compared to the year-earlier period. The company’s wholly-owned subsidiary, VeriChip Corporation, generated revenue of approximately $6.8 million, an increase of approximately 11.5%. Gross profit increased to approximately $12.4 million in the third quarter of 2006 compared to approximately $11.4 million in the third quarter of 2005, with margins rising to 42.6%. from 41% a year-ago. The loss from continuing operations attributable to common stockholders for the third quarter of 2006 was approximately $3.6 million, or $(0.05) per share, compared to a loss from continuing operations attributable to common stockholders of approximately $2.7 million, or $(0.04) per share for the third quarter of 2005. The additional loss was primarily a result of increased sales and marketing costs related to the company’s investment in VeriChip’s VeriMed Patient Identification business. On its call, the company said that it was likely to continue to generate losses, reflecting increased marketing efforts to expand the adoption of VeriChip. So far, it appears to be working, as 167 additional healthcare facilities agreed to implement the VeriMed Patient Identification System bringing the total to 264. The stock ended the week at $1.97, down $0.34.
Earnings Preview: Home Solutions of America, Inc. (NASDAQ: HSOA), a provider of recovery, restoration and rebuilding/remodeling services, will report third quarter results for the period ended September 30, 2006 on Tuesday morning. Since the company announced second quarter results in mid-August, shares are up 2.2%. This quarter’s results are pivotal for the company, as HSOA is expected to report revenue of $50 million and EPS of 20 cents, a significant sequential increase when compared to Q2 revenue/EPS of $24.2 million/$0.11 per share. Last year, the company posted third quarter revenue of $20.4 million and net income of $0.08. The 2006 third quarter report will give investors a better understanding of the impact that the acquisition of Fireline Restoration will have on the company’s results. HSOA acquired the company in early August. Fireline is expected to provide HSOA with the skilled labor to pursue larger rebuilding projects in New Orleans and surrounding areas. Skilled labor continues to be in short supply in the Gulf region, generating strong margins for companies that have large pools of skilled employees. HSOA could benefit from this trend through improved margins. The recently announced acquisition of Associated Contractors, which has extensive relationships in the region, could drive business to HSOA. Ultimately, though, the stock is likely to react to investors’ perceptions about how quickly the company is growing on an organic basis, and views of whether the rebuilding of New Orleans is likely to occur over the next 2-3 years. Shares ended the week at $5.84, up 13 cents.
Earnings Preview: Tarrant Apparel Group, Inc. (NASDAQ: TAGS), a design and sourcing company for private label and private brand casual apparel, reports third quarter results for the period ended September 30, 2006 on Tuesday after the market closes. The company does not provide quarterly guidance, but it said after its second quarter results that It expected full-year sales to be in the range of approximately $220 million to $230 million, with gross margins anticipated to be comparable to, or higher, than the company has achieved over the past six quarters. Sales for the first six months were $120.3 million resulting in net income of $1.4 million, or $0.05 per share. The company has said little since its last release. Investors will likely focus on the company’s ability to replace business it generated in last year third quarter from sales of celebrity-branded jeans with sales from its Private Label brands. The stock is down 25% since the company reported Q2 results in mid-August. Shares ended the week at $1.29, down 5 cents.
Earnings Preview: Small appliance maker Salton, Inc. (NYSE: SFP) will report first quarter results for the period ended September 30, 2006 on Tuesday morning. Since it is less than one month since the company reported fourth quarter and year-end results, it is likely that little has changed in its business in such a short time. Perhaps investors will be more interested in the progress SFP has made in evaluating strategic alternatives. On October 16th, SFP said it would consider such a move, perhaps in reaction to the acquisition by an investor of Applica, a competition. The same investor is a large shareholder of Salton. The stock ended the week at $2.67, up 9 cents.
Multiband Corporation (NASDAQ: MBND), a leading provider of video, data, and voice systems and services to multiple dwelling units, announced that it had entered into an agreement with DIRECTV, Inc. to provide an integrated billing statement to Multiband customers subscribing to DIRECTV® services as well as Multiband’s voice and data applications. The billing solution, utilizing proprietary software that has been in development for more than a year, is scheduled to begin in the next 30 days. With this new billing solution, Multiband will now be able to provide DIRECTV Multiple Dwelling Unit customers a single bill for their voice, video and data services, providing the company with a significant marketing advantage. Multiband will initially test the service on select populations to insure quality control and then systematically roll out the service to additional subscribers each month. Multiband expects to offer the service to other operators outside its immediate network. The company expects to announce third quarter results for the period ended September 30, 2006 on Tuesday. Investors will look for signs that its Multiple Dwelling Unit segment, which includes services for DirecTV, continues to grow. Shares ended at $0.64, up $0.03 from last week.
There were two significant developments last week for investors in drug delivery company Emisphere Technologies, Inc. (NASDAQ: EMIS). The first was the release of additional data from its Phase II trial in oral insulin. Notably, In patients with HbA1c levels of 8.0% to 8.9%, a statistically significant decrease of 0.74% was observed in patients on oral insulin, while no change (0.00%) was observed in patients on placebo(n=17,p=0.03). The results demonstrated that the company was able to eliminate the key safety concerns associated with the administration of insulin and patient monitoring, and achieve statistical significance with a particular dose in a small Phase 2 trial. The company also said that Roche was terminating with EMIS a development and licensing agreement inked in 2004. The news pressured shares last week, as the stock fell as low as $4.59 intraday on Thursday. Was the sell-off overdone? ThinkEquity, which covers the stock, noted that “they believe this level of (investor) pessimism is unwarranted given the on-going progress of eight programs, three of which are partnered with Novartis..” The stock finished the week down $0.56 at $5.38.
Life sciences company Forbes-Medi-Tech Inc. (NASDAQ: FMTI), announced that the UK’s largest retailer, Tesco Stores Ltd. (Tesco), has added another contribution to its successful range of cholesterol reducing dairy products by launching a strawberry flavored yogurt drink incorporating Forbes Medi-Tech’s cholesterol-lowering ingredient, Reducol™. The strawberry flavored yogurt drink will be marketed under the Tesco private label brand and is the second Reducol™ based product listing for Tesco in the yogurt drink category. The strawberry flavored yogurt drink is officially the sixth different functional dairy product now available at UK based Tesco stores. This recent announcement follows the successful launch of Heartfelt Plus Natural Cheese containing Reducol™ at UK based Tesco stores in August. Anticipated revenue resulting from the launch of Reducol™based yogurt drinks is included in Forbes’ 2006 revenue guidance. Reducol™ is a unique ingredient containing plant sterols and stanols, commonly known as phytosterols, or “Sterols”. The combination of a prudent diet and consumption of products containing the recommended amount of Reducol™ may help consumers lower their cholesterol by up to 24%. Shares ended at $2.38, up $0.10.
Generex Biotechnology Corporation (NASDAQ: GNBT), a leader in the area of buccal drug delivery, announced last week that the company had entered into an agreement with the Lebanese-Canadian Hospital in Beirut, Lebanon to conduct a human clinical trial of the Antigen Express synthetic avian influenza vaccine, representing the first studies to be conducted in man. The study is being undertaken with the approval of the appropriate Lebanese governmental and regulatory bodies. The company also announced last week that it had been granted a new Australian Patent by IP Australia’s Patent Office titled “Pharmaceutical Compositions for Buccal and Pulmonary Application.” The patent covers claims to the composition, processes, and methodologies for the delivery of macromolecules via the buccal cavity of the mouth. The patent, an extant United States Patent held by the company, relates to an improved pharmaceutical composition comprising macromolecule pharmaceuticals in micellar form which are particularly effective in buccal and pulmonary applications. The stock ended the week at $2.05, down $0.09.
Netsmart Technologies, Inc. (NASDAQ: NTST), a leading provider of enterprise-wide software for health and human services organizations, announced that the company had signed contracts totaling nearly $1 million to provide public health-related software solutions to the DuPage County Health Dept. in Wheaton, Ill. and the Monroe County Public Health Dept. in Monroe, Mich. The contracts are expected to be performed over a 12-month period. The stock ended the week up $0.18 at $13.04.
Tapestry Pharmaceuticals, Inc. (NASDAQ: TPPH), a developer of proprietary therapies for the treatment of cancer, announced last week financial results for the third quarter ended September 27, 2006. The company reported a net loss for the third quarter of 2006 of $3.6 million, or $(0.24) per share as a result of expenses related to the clinical development of its lead compound, TPI 287, a third generation proprietary taxane. The company expects to report safety results from a Phase I study within the next few months. As of September 27, 2006, Tapestry had $28.2 million in cash, cash equivalents, and short-term investments. Shares ended the week at $1.98, up $0.10.
SLS International (AMEX: SLS), the leading provider of premium quality sound systems for professional, cinema and home entertainment markets, announced last week that the company had received notice from the Staff of the American Stock Exchange indicating that SLS does not comply with Amex’s continued listing standards due to insufficient shareholders’ equity and the stock would be delisted. SLS has a limited right to appeal Amex’s determination and request a hearing before a committee of the Exchange. Shares ended down $0.03 at $0.17.
Specialty pharmaceutical company Auriga Laboratories, Inc. (OTCBB: ARGA), reported second quarter results for the period ended September 30, 2006 last week. The company had revenue of $1.8 million, a 145% increase versus the same period last year. Revenue for the first six months of its fiscal year rose 206% to $2.3 million The increase in revenue was primarily attributable to higher sales of two of the company’s product lines, Extendryl® and Levall®, indicated for relief of symptoms associated with a range of acute respiratory diseases. Gross profit jumped 491% for the first six months of its fisal year to $1.4 million. Shares ended the week down $0.20 at $1.20.
GS AgriFuels, nearly 90% owned by environmental business development company GreenShift Corporation (OTCBB: GSHF), announced its plans to co-locate integrated corn oil-to-biodiesel production technologies on-site at ethanol production facilities. GS AgriFuels’ biodiesel production technologies, developed by recently acquired NextGen Fuel, Inc., are modular and can be integrated directly into existing and new ethanol production facilities in a plug-and-play manner. The technologies allow host ethanol facilities to quickly and cost-effectively participate in the benefits of corn oil biodiesel production. GS AgriFuels’ patent-pending NextGen biodiesel process technology leverages innovative process intensification techniques to accelerate and enhance traditional biodiesel reaction kinetics, thus decreasing process time, reducing energy and raw material needs, and increasing product quality. These benefits translate to increased capital and operating cost efficiencies at smaller scales as compared to traditional biodiesel process technologies, and much quicker lead times. Used in concert, both technologies increase the corn to fuel yield by roughly 7% and corresponding revenues by more than 6%. The stock ended the week up a penny at $0.13.
Clearant, Inc. (OTCBB: CLRI), the developer of the patent-protected CLEARANT PROCESS® for pathogen inactivation, announced that 26 Clearant Process® Sterile Implant cervical spinal and soft tissue allograft implants were distributed directly during the month of October. This is a significant increase, as direct distribution of implants grew 50 percent from the monthly average in the third quarter, reflecting early traction in the company’s direct sales initiaitve. In addition to the 26 implants distributed directly by Clearant to the orthopedic surgeon community, an estimated 400 to 500 additional implants were distributed by Clearant licensees during the month of October. Clearant’s implants are sterilized using the Clearant Process®, a sterilization technology that virtually eliminates the risk of infection in bone and soft-tissue allograft implants while preserving their functional viability. Shares ended unchanged at $0.35.
Language Access Network (OTC: LANW), a leader in video interpretation, announced a new services agreement with Corona Regional Medical Center, Corona, California to provide video interpretation services in 150 languages, including American Sign Language. The service, known as Martti™(My Accessible Real-Time Trusted Interpreter), will be free to patients in the medical center’s emergency department 24 hours a day, 365 days a year. In serving Corona Regional Medical Center, the company continues to build a strong reputation as the leading source for quick and accurate video interpretation services across the nation. Corona Regional Medical Center’s most requested languages include Spanish, Farsi, Laotian, Cantonese, and Taiwanese. CRMC is located in Riverside County, bordering Orange, Los Angeles and San Bernardino counties, offering healthcare to approximately 166,000 people. The stock ended down $0.15 at $3.65.
Neutron Enterprises, Inc. (OTCBB: NTRN), a developer of digital media solutions,announced the launch of its first Internet-based business; a fantasy stock market competition scheduled to commence during the first quarter of 2007. Contestants will have the opportunity to enter a competition where their stock-picking prowess will be tested against others who will manage a portfolio of stocks they select. The winners will receive significant cash prizes. The company is working with Stock-Trak, Inc., the North American leader in stock portfolio simulations for the educational and corporate markets to develop the site and competition. The company believes that the launch of this online portal will generate a great deal of interest as contestants seek to apply their stock choosing and investing skills in a thrilling and interactive community based format with the chance to win material prizes. The company intends to announce additional details on the contest in the coming months. The stock ended the week at $2.35, down a penny.
Junior energy company Petrol Oil and Gas, Inc. (OTCBB: POIG), reported third quarter operating results for the period ended September 30, 2006. For the quarter, revenue increased 30% to $1.9 million. POIGPetrol reported a net loss of $1.5 million, including $1 million in non-cash charges. The results included nominal production from the company’s Coal Creek Project, which is expected to drive 2007 results as the company resolves operational issues on the property. Shares ended up $0.12 at $0.71.
USA Technologies, Inc. (OTCBB: USAT), a developer of cashless vending and energy management products, unveiled the e-Port Generation Six (G6) cashless payment technology in Paris last week at CARTES 2006, the world’s biggest trade show for the smart card, identification and credit card industry. USA Technologies believes that CARTES will mark the company’s entry into the global market with its cashless payment technology for vending machines, kiosks and point of sale terminals. There are more than 30 million vending machines worldwide, representing a business in excess of $100 billion. CARTES 2006 will feature global exhibitors from 130 countries, with an expected 18,000 visitors, including government and industry leaders and decision makers. The unveiling in Paris follows the e-Port’s success at the recent NAMA Expo in Orlando, Florida, the U.S. vending industry’s biggest trade show. This also comes after the announcement that Bank of America was using the e-Port in vending machines to become the first bank to enter the cashless vending market. The stock ended the week up $0.30 at $6.30.
Thomas Pharmaceuticals Ltd, a wholly owned subsidiary iVoice, Inc. (OTCBB: IVOI), a developer and licensor of proprietary technologies, announced that its new upscale antacid tablet product line Acid + All™ was named one of the top 10 new products by editors of Drug Store News, a leading publication focused on the drug store industry. Currently, there are more than 20,000 drug stores chains carrying the product line. Acid + All™ is a calcium enriched, spearmint-flavored, sugar free tables that soothes heartburn, acid indigestion and gas and is available at independent pharmacies, major drug chains and online retailers. The company also announced that the antacid tablet product line Acid + All™ is featured in an editorial in Supermarket News, a leading magazine covering activities, news and issues impacting the supermarket industry. Shares ended down a penny at $0.02.
CompuPrint, Inc. (OTCBB:CPPT), an energy technology company that combines satellite-based technology with traditional exploration services, said last week that shareholders approved a name change to Terra Energy & Resource Technologies, Inc. CPPT also recently announced that Terra Insight Corporation (TIC) delivered its Stage 2 STeP technology report to the Congo exploration affiliate of a multi-billion dollar company. The STeP report identifies a number of potential diamond-bearing sites within the area of interest. The client has informed Terra Insight that it is dispatching geological field teams to survey the sites which STeP has indicated as showing potential. After such survey by the local geologists, Terra Insight and the client will select the most promising sites for Stage 3 analysis, the most detailed stage of STeP analysis. It is anticipated that the Stage 3 STeP report will be delivered in the first quarter of 2007. Shares ended the week at $0.24, up $0.04.
On the Wires: Fusion Telecommunications International, Inc. (AMEX: FSN), announced that it will showcase its innovative line of Efonica VoIP products and services at the 26th Annual GITEX Exhibition to be held in Dubai, UAE from November 18th – 22nd. QuantRx Biomedical Corporation (OTCBB: QTXB), announced that the company will participate in MEDICA 2006, the world’s leading medical trade fair, to be held November 15-18, 2006, at the Düsseldorf Trade Fair Centre in Germany.
