08/26/2007
VOLUME 314
Companies featured in the current edition of the newsletter: ACCP, ACTC, ARGA, BSGC, CGXP, CHIP, GNBT,GSHF, HSOA, ILNS, IWEB, MBNDD, OXIS, PLKH, POIG, USAT, VOIC
Volatility was still the name of the game last week, and when the smoke cleared, the bulls were the winners. All the major indices moved higher for the week, with the Dow closing up 299 points, bringing its yearly gains to 7.3%. Similarly, the Nasdaq closed up 71 points, raising its gains to 6.6% for the year. The S&P also moved higher, gaining 33 points, equating to a 4.3% yearly return, and the Russell 2000 added 12 points, moving back into positive territory for the year, up 1.4%.
Although the news pertaining to the subprime exposure has not gone away, investors were able to push stocks higher as positive economic data, earnings and a potential merger between TD Ameritradeand E*Trade Financial grabbed the interest of the market. Also seen in a positive light were the actions of Citigroup, Bank of America, JP Morgan and Wachovia tapping into the Fed’s discount window for $500 million each, seen by many to encourage other financial institutions to do the same. The week ended with a stronger than expected July Durables Orders report of 5.9% that easily surpassed estimates of 1.4%. Positive economic news combined with the widening of the yield curve between the 10-year note and the 2-year note, which is seen as a positive for interest-rate sensitive companies, may provide more steam to this upward move. That is, if the focus of the market decides to take the subprime woes in stride.
What should investors look for next week? The corporate calendar for the week is fairly light. Winn-Dixie Stores (NASDAQ: WINN) will report after the close of business on Monday. Borders Group (NYSE: BGP) will supply numbers after the close Tuesday. On Wednesday, Williams Sonoma (NYSE: WSM) will announce earnings before the opening bell, with DaimlerChrysler (NYSE: DAI) and Novell (NASDAQ: NOVL) expected at some point during the day. On Friday, look for earnings from H&R Block (NYSE: HRB) before the opening, followed by Dell Inc. (NASDAQ: DELL) after the close of business.
By contrast, the economic calendar for the week is packed. Existing Home Sales for July will be announced on Monday at10:00 AM. On Tuesday, look for the Consumer Confidence numbers for August at 10:00 a.m., and the FOMC minutes from the Aug. 7th meeting at 2:00 p.m. On Wednesday, Weekly Crude Inventories will be announced at 10:30 a.m. Thursday at 8:30 a.m., expect preliminary second quarter GDP data, preliminary Chain Deflator data, and Weekly Jobless Claims. Friday morning will be extremely active, with Personal Income and Personal Spending for July being released at 8:30 a.m., along with the Core PCE Inflation for the month. At 9:45 a.m., the Chicago PMI for August is expected, followed by Factory Orders for July, and the revised Michigan Sentiment Index for August at 10:00 AM. Lastly, all ears will be on Fed Chief Bernanke when he speaks in Jackson Hole, WY on Friday.
Home Solutions of America (NASDAQ: HSOA), a provider of restoration, construction and interior services to commercial and residential customers, last week provided a much anticipated update on its Tampa project, which its Fireline Restoration Inc. subsidiary previously said it expected to recognize approximately $100 million in revenue over the course of the project’s development, which is expected to take 30 to 48 months to complete. Fireline expects to begin to recognize revenue during the 2007 third quarter. The project, a 635,000 plus square foot retail center and corporate office site, is located at Highway 41, in Apollo Beach, Florida, approximately 20 minutes from downtown Tampa. Fireline was hired for the project by South Shore Ventures, a Tampa development company in which HSOA’s EVP has an interest. Home Solutions said it expects to provide an update on the New York projects within the next two weeks, and will hold a conference call during the third quarter to further discuss both the Tampa and New York projects. Note that Rodman & Renshaw reiterated its Outperform rating last week and $9 price target. The company also said that Fireline had entered into a teaming agreement for disaster and recovery services with AshBritt, a leading provider of environmental services based in Pompano Beach, Florida. Fireline is expected to support AshBritt’s “first responder” services by providing pre-positioned infrastructure restoration services while AshBritt will be responsible for debris removal, demolition operations and logistical support. AshBritt currently has pre-positioned “first responder” contracts throughout the U.S. with communities that are predisposed to disaster events, including those on the Gulf Coast. Note that short interest for the month of August increased again, to approximately 18.2 million shares, or 46% of the float. Shares ended the week at $3.10, unchanged.
Brokerage firm Jesup & Lamont, last week raised its rating on VeriChip Corporation (NASDAQ: CHIP), a leading provider of identification and security technology, upping its view on the company to a “Buy” from “Neutral”, and establishing a price target of $9.00, a potential upside of approximately 50%. The firm sees VeriChip’s VeriMed implantable RFID technology acceptance gaining momentum, with 2008 revenues expected to be less than $1.0 million, and jumping to $3-5 million in 2009. It is especially bullish on VeriChip’s Infant Protection and Wander Prevention divisions, which hold strong market positions, and provide solid cash flow. The analyst believes that mid-teen growth in these divisions should be expected to continue through 2008. On a sum-of-the-parts basis, he believes the company is worth $10-11 a share, and is moderately discounting his target price to reflect eventual funding needs. Shares ended the week at $5.99, up 24 cents.
Drug delivery company Generex Biotechnology Corporation (NASDAQ: GNBT), last week reported that the European Patent Office granted the Generex its fourth European patent titled, “Proteinic Drug Delivery System Using Membrane Mimetics”, and has been validated in nine European countries including the U.K., France and Italy. The company also announced that the Mexican Institute of Intellectual Property granted the company its ninth Mexican patent titled, “Mixed Micellar Delivery System and Method of Preparation”. Generex holds an aggregate of 113 patents worldwide (20 of which are United States Patents), and has an aggregate of 94 patent applications pending. The company also announced that Antigen Express, Inc., its wholly-owned immunotherapy subsidiary, has entered into a collaboration agreement with the University of Rochester to develop a novel vaccine against the potentially pandemic avian influenza. Earlier this year, Antigen Express began Phase I clinical studies of proprietary peptides derived from the hemagglutinin protein of the H5N1 avian influenza virus in healthy volunteers. Potentially, modified peptide vaccines for avian influenza can be manufactured by an entirely synthetic process which reduces cost and increases both the speed and quantity of production relative to the traditional egg-based or cell-culture based vaccines, and the peptides are derived from regions of the virus that are similar enough in all H5N1 virus strains that they would not have to be newly designed for the specific strain to emerge in a pandemic. Antigen recently initiated a Phase II breast cancer vaccine trial, using a peptide designed by similar proprietary means to those being used for avian influenza. Shares ended the week at $1.51, unchanged.
USA Technologies, Inc. (NASDAQ: USAT), a developer of cashless vending and energy management products, announced last week that Bed Bath and Beyond, America’s premier home furnishings retail chain, is installing VendingMiser devices to help lower energy consumption and C02 emissions. Refrigerated vending machines cost an estimated $300-$400 a year to operate. USA Tech’s VendingMiser has the capability of reducing the electricity needed to operate vending machines by up to 46 percent, thereby reducing C02 emissions associated with electricity production. The Sierra Club has been monitoring the performance of USA Technologies EnergyMiser product line. Dave Hamilton, Director of the Sierra Club’s Global Warming and Energy Program, complimented Bed Bath and Beyond, saying “Investing in more efficient vending machines, coolers, and other commercial appliances is a smart way to reduce energy waste, costs and global warming pollution.” Shares ended the week at $9.23, up 44 cents.
Access Pharmaceuticals, Inc. (OTCBB: ACCP), an emerging biopharmaceutical company that develops and commercializes propriety products for the treatment and supportive care of cancer patients, last week gave an update on the clinical development plan of ProLindac, its novel DACH platinum polymer prodrug, and announced plans for additional human clinical trials to be initiated in late 2007/ early 2008. The current Phase II clinical trial in recurrent ovarian cancer patients, designed to optimize single agent dosing through schedule diversification and dose escalation, is currently successfully completing the enrollment of its third dose cohort. The company notes that ProLindac’s excellent safety record, and lack of neuro- and nephrotoxicity after multiple treatment cycles, should allow Access to explore dosing and schedule optimization in a quicker manner. Access reported that ProLindac drug combination trials are expected to be initiated in the fourth quarter of 2007/early 2008, and the company believes that ProLindac’s antitumor effect could potentially eliminate some of the toxic side effects seen in Sanofi’s currently marketed DACH platinum, Eloxatin, as well as other reference anti-cancer agents. Eloxatin has sales in excess of $2 billion. Shares ended the week at $3.50, up fifteen cents.
IceWEB Inc. (OTCBB: IWEB), a software services provider, last week announced it has been awarded the designation of Microsoft Certified Gold Partner, the highest level of membership in the Microsoft Partner Program. This designation is only awarded to organizations who demonstrate the highest degree of expertise in working with Microsoft technologies, and will allow IceWEB to build the closest possible relationship with Microsoft and leverage that relationship to deliver world class services to its existing and prospective clients. IceWEB provides business class Microsoft applications to small and medium sized businesses via an affordable subscription based internet delivery model. The company also announced that September 30th, 2007 is the expected availability date for its new IceSECURE product suite, the first product offered worldwide to concentrate wholly on reducing an organizations exposure to threats which may originate from within their trusted internal networks, rather than outside entities, and should allow IceWEB to the offer lucrative hosted email security services into the Federal Government market space, which should significantly increase the company’s revenue-per-subscription. Shares ended the week at $0.64, down four cents.
New York-based brokerage firm Torc Investments and Research LLC initiated coverage last week of Auriga Laboratories, Inc. (OTCBB: ARGA), a specialty pharmaceutical company with products for the treatment of acute respiratory diseases and dermatological conditions, with a “Buy” rating and a 12-month price target of $2.00-$2.50. The report cites Auriga’s diversified product portfolio and impressive top-line growth, and notes that the company’s four divisions target very large and growing markets, which should help the company maintain its impressive growth to date. Shares ended the week at $0.78, up three cents.
Ceragenix Pharmaceuticals, Inc. (OTCBB: CGXP), a biopharmaceutical company focused on infectious disease and dermatology, last week reported that the expected out-licensing for EpiCeram, its prescription topical cream for the treatment of dry skin conditions and management of the burning and itching associated with various types of dermatoses, is taking longer than previously anticipated. Management and/or corporate changes at several of Ceragenix’s potential partners have delayed or eliminated the possibility of completing a transaction with them. The company is in continuing discussions with several other potential partners, and said it remains hopeful that it will complete an out-licensing agreement for EpiCeram in time to allow for commercialization during the first half of 2008. Shares ended the week at $1.30, up one cent.
GreenShift Corporation (OTCBB: GSHF), a company devoted to facilitating the efficient use of natural resources, last week reported its financial results for the second quarter of 2007. For the six months ended June 30, 2007 the activities of GreenShift’s subsidiaries generated $10.6 million in revenue, a 56% increase over the revenues of $6.8 million reported for the six months ended June 30, 2006. GreenShift recorded a net loss for the period of $(23.0) million, a decline from the $(9.5) million loss recorded in the same period of 2006. The two primary reasons for the magnitude of the six month loss were expenses attributable to the transition from technology development to market execution and expenses attributable to past financing activities. The net loss for GS Carbon, which the company disposed of July 1, 2007, was $(9.4) million, or 40% of GreenShift’s overall net loss. GreenShift currently expects third quarter sales to exceed $8 million, and expects the net loss for the quarter to be substantially lower than the losses incurred in prior quarters during 2007, primarily from cash flows from increased sales, from deposits and progress payments received under recently executed contracts, and from $1.6 million in cash proceeds received by the company from the sales of three minority investments. Shares ended the week at $0.03, unchanged.
Intellect Neurosciences, Inc. (OTCBB: ILNS), a biopharmaceutical company focused on development of disease-modifying therapeutic agents for the treatment and prevention of Alzheimer’s disease and related disorders, last week presented new data regarding the Company’s RECALL-VAX chimeric peptide vaccine technology at the 13th International Congress of Immunology in Rio de Janeiro, Brazil. The data demonstrate for the first time that a “free-end specific” polyclonal response to beta-amyloid can be achieved, potentially overcoming an important safety concern for active immunization of Alzheimer’s disease patients. The short fragments of beta-amyloid used in RECALL-VAX ensure that only the toxin, and not the protein from which it is derived, is targeted by the antibodies, and because of their short length, the fragments are incapable of provoking an autoimmune response. The company believes that RECALL-VAX could potentially be used prophylactically to prevent or delay the onset of Alzheimer’s disease in elderly people. It is estimated that over 12 million people suffer from Alzheimer’s disease in the major markets worldwide, and currently there are no drugs on the market today that slow or arrest the progression of the disease. Some currently marketed drugs affect some symptoms of the disease, and will generate approximately $4 billion in sales in 2008, indicating both the size of the market and the demand for effective treatment beyond symptomatic improvements. Shares ended the week at $0.95, unchanged.
ProLink Holdings Corp., (OTCBB: PLKH), the world’s largest provider of Global Positioning System golf course management systems and on-course advertising, announced results from its second quarter ended June 30, 2007. The company reported revenue of $5.5 million, compared to $6.2 million reported for the second quarter of 2006, and a net loss of $(0.05) per share, compared to income of $0.5 million, or $0.02 per share for the same period last year. The 2006 second quarter results were favorably impacted by a gain of $0.9 million for the early extinguishment of debt. For the six months ended June 30, 2007, ProLink had revenue of $12.2 million compared to $12.1 million in the six months ended July 1, 2006, with a net income (loss) applicable to common stockholders of $(7.7) million, or $(0.20) per share, compared to $0.9 million, or $0.03 per share in the same period one year ago. ProLink expects a strong sequential increase in advertising revenue during the third quarter, and anticipates entering into a major advertising distribution deal with a national media company in the quarter, which should expand the company’s reach substantially, and should provide improved operating and cash flow performance in the coming quarters. Shares ended the week at $1.04, down six cents.
VOIP, Inc. (OTCBB: VOIC), a leading provider of Voice over Internet Protocol (VOIP) communications solutions for service providers, resellers and consumers, last week announced results for the second quarter and six months ended June 30, 2007. Revenue for the second quarter was $1.9 million, as compared with $2.0 million for the same period in 2006. Net loss for the period, excluding discontinued operations, was $5.8 million, versus a net loss of $5.0 million for the second quarter of 2006. For the first six months of 2007, VoIP reported revenue of $3.6 million versus $4.2 million in the same period last year, with a net loss for the period, excluding discontinued operations, of $19.9 million, versus a net loss of $17.6 million for the first six months of 2006. With an eye on management’s recent restructuring initiatives, interest in the third quarter numbers should be significant, with the company recently reporting that July revenues increased 59% sequentially from June to approximately $852,000, and that the company was experiencing even greater traffic over its network, and expect revenues for August to climb well over $1 million. Shares ended the week at $0.60, down 20 cents.
Oxis International Inc. (OTCBB: OXIS), a biopharmaceutical company focused on commercializing predictive biomarkers, clinical assays and nutraceutical and therapeutic products, reported last week that it has received $500,000 in funding, the initial payment due under the license agreement with Synvista Therapeutics, Inc. (known formerly as Alteon, Inc.) for BXT- 51072 (ALT 2074). ALT-2074 (BXT 51072) is a glutathione peroxidase mimetic in clinical development for reducing the morbidity and mortality of patients with diabetes following a myocardial infarction. Synvista’s goal is to develop ALT-2074 in acute coronary syndrome as a targeted drug for high risk diabetic patients. It is currently being evaluated in a clinical trial for evidence of myocardial protection following angioplasty in high-risk diabetic patients. This Phase 2 clinical study was opened for enrollment in Israel, in May 2006, with interim results of this trial expected later this year. In June 2007, the company initiated a Phase 2 study using ALT-2074 in diabetic patients testing positive for a marker of increased cardiovascular risk (haptoglobin genotype testing). Results from this study are anticipated in the first quarter of 2008. Approximately 200,000 diabetics with the haptoglobin 2/2 genetic marker will experience a heart attack each year and there are more than 7 million diabetics who carry this marker in the United States alone. Estimates of the potential size of the market for the prevention of cardiovascular events in diabetics carrying this genetic biomarker range from $600 million to more than $2 billion. Synvista will also invest $500,000 in Oxis common stock, at a per share price equal to 125% of the quoted price of Oxis’ common stock immediately prior to the date of the investment, and no less than $0.24 per share. Oxis is also entitled to receive development milestones payments as well as royalties from the sales of products developed from the license. Shares ended the week at $0.13, unchanged.
BigString Corporation (OTCBB: BSGC), a provider of user-controllable email services, last week announced that it will be the back-end provider for the new email offering by podcastGO to its 2.4 million users. Beginning in September, podcastGO’s users will be able to sign-up for a free email account, offering all the functionalities that have made BigString a leader in the burgeoning video, recallable, erasable and self-destructing email industry. podcastGO private label email users will also be able to send an embedded video email (up to 10 minutes in length) without the need for the recipient to click on a link or download the video. Conversely, BigString users will be able to gain access and view the hottest podcasts from podcastGO, at BigString.com’s BigFun section. Shares ended the week at $0.17, up one cent.
Independent energy exploration and development company Petrol Oil and Gas, Inc. (OTCBB: POIG), last week announced its operating results for the second quarter and first half of 2007. Net revenue for the quarter declined to $1,336,821, compared with revenue of $1,824,907 in the second quarter of 2006. Net revenue for six months declined to $2,948,229, versus $3,040,932 in the first half of 2006. The decline in revenue was primarily a result of decreased production, together with lower average commodity prices. The company reported a net operating loss for the quarter of ($9,936,543), compared with a net operating loss of ($996,632) in the previous year’s period, due primarily to a non-cash impairment of oil/gas and pipeline properties totaling $8,812,027. Petrol Oil and Gas reported a second quarter net loss of ($11,003,978), or ($0.38) per share, versus a net loss of ($2,095,420), or ($0.07) per share. For the six-month period, revenue declined to $2,948,229, compared with revenue of $3,040,932 in the first half of 2006, with a net operating loss of ($10,635,498), compared with a net operating loss of ($2,141,509) a year earlier. Net loss for the six months was ($12,791,186), or ($0.44) per share, versus a net loss of ($3,930,617), or ($0.14) per share, in the corresponding period of the previous year. The company also announced that its Coal Creek coalbed methane project is uneconomical, and is evaluating whether there are exploration and development opportunities for oil or conventional natural gas from the leases acquired. The company also impaired the Burlington and Waverly pipelines by approximately $3.5 million to a fair market value of zero, after determining that these facilities will not be used and are not saleable. Petrol also announced that Steve Littell has joined the company as Chief Operating Officer. Mr. Littell has over 20 years experience in the oil & gas industry, and should be well suited to deal with the challenges, as well as opportunities, in Petrol Oil and Gas’s future. Shares ended the week at $0.07, down six cents.
On the Wires: Multiband Corporation (NASDAQ: MBNDD), a leading provider of video, data, and voice systems and services to multiple dwelling units, last week reported it has received notification from the Nasdaq that the company has regained compliance with Nasdaq Marketplace Rule 4310 (c)(4) as a result of the closing price of the Company’s common stock exceeding $1.00 per share for ten consecutive days.
SPECIAL SITUATION:
Advanced Cell Technology, Inc. (OTCBB: ACTC) $0.33
Any company that can offer a breakthrough product in its targeted market is worth grabbing the attention of investors. There is widespread controversy over stem cell research, pinning opponents of such research that argue this practice is a slippery slope to reproductive cloning, against medical researchers in the field, who argue that the resultant technologies could have significant medical potential. But suppose there was a way to produce a human embryonic stem cell (hESC) line without destroying or harming the embryo? This would seem to satisfy arguments on both sides of the controversy. And what if these stem cells were made available for research worldwide? The applications are virtually limitless. Advanced Cell Technology, Inc., a biotechnology company applying embryonic stem cell technology in the emerging field of regenerative medicine, has proven it can be done.
In June of this year, the company announced that it had successfully produced a human embryonic stem cell line without destroying an embryo at its lab in Worcester , MA . This was accomplished by using a technique derived from the well-established and widely used medical procedure known as pre-implantation genetic diagnosis. The technique involves removing a single cell blastomere from an eight cell human embryo, and using that cell to generate multiple hESCs. Dr. Robert Lanza, MD, Vice President of Research and Scientific Development of ACT led the research group. Dr. Lanza was recently recognized for his research and scientific contributions by being named to the “100 Most Inspiring People in the Life-Sciences Industry” by PharmaVOICE magazine and was one of only five scientists to be acknowledged for his work.
The company is focusing its efforts on three major applications, all with substantial markets. Retinal Pigment Epithelial (RPE) cells for diseases of the eye, Hemangioblast cells for the treatment of blood disorders and cardiac disease, and Dermal cells for skin damage such as burns, wound repair, etc. ACT has recently entered an agreement to acquire Mytogen Inc., a company focused on using myoblasts, stem cells that form muscle, to treat patients with congestive heart failure, using an optimized catheter system. This acquisition has the potential to significantly change the perception among the investment community as to the development stage that Advanced Cell is in, as Mytogen’s program has completed a Phase I clinical trial, putting it ahead of many companies in the sector that are still in pre-clinical development ACTC has also begun preclinical studies for its RPE program, in collaboration with the Casey Eye Institute at Oregon Health and Science University. In addition, the company has over 380 patents and patent applications. ACTC has said it expects to file two IND ’s during 2008.
Although President Bush recently vetoed a bill, which was passed by Congress, that would have given approximately $29 billion to the National Institutes of Health (NIH) for biomedical research, growing public support for stem cell research could bring change rather quickly. With the technology in place to allay the fears of many who feel threatened by this research, future legislation should enable companies to get the funding necessary to take stem cell research to the next level. The entire sector could receive a boost as the presidential election near, if Democrats maintain their current lead in the polls, since the Democratic Party has historically had a more favorable view on the stem cell industry than the Republican Party. Until that time, ACT has announced a proposed $10 million private placement of convertible debentures and warrants. The capital will be used to finance the Mytogen acquisition, as well as working capital to advance its technology.
With such great potential being driven by the company’s exciting technology that targets a large targeted market, Advanced Cell’s market capitalization of roughly $20.6 million reflects a significant discount to other comparable stem cell companies, such as Geron (NASDAQ: GERN), which has a market capitalization in excess of $500 million, Stem Cells (NASDAQ: STEM), which is currently valued at approximately $175 million or Cytori Therapeutics (NASDAQ: CYTX), trading at a valuation of around $125 million. The last time ACTC’s stock was at this level was in August, 2006 before the stock, within days, soared to more than $2. Will history repeat itself?
