12/24/2006
VOLUME 269
Companies featured in the current edition of the newsletter: ADSX, CYTR, CDSS, GNBT, HYTM, IRBO, ISON, IVOI, LANW, NTST, PTCH, USAT, VOII
Somebody forgot to tell Wall Street that the Santa Claus rally was supposedly underway. At a time when seasonal factors typically produce a favorable bias for stocks, all of the indexes display weakness, perhaps due to profit-taking from the recent rally. The Dow dropped 102 points and decreased its year to date gain to 15.2%. The Nasdaq lost 56 points decreasing its year to date gain to 8.9%, while the S&P 500 dipped 16 points lowering yearly gains to 13%. The Russell 2000 dropped 11 points and decreased its year to date gain to 16%.
Most of the market activity was limited to economic news, which produced mixed results on inflation. Early in the week, the November PPI reports showed a surge of 2.0% that followed a 1.6% gain from the previous month. This large spike represented a rebound in a variety of key categories and not specific underlying price pressure. However, a tame core PCE deflator for November would appear to support the belief that inflation is sinking back to the Fed’s comfort zone. Perhaps helping to offset inflation concerns was good news out of the real estate market regarding housing starts. Corporate news was more bullish with solid earning reports from Nike, General Mills, Walgreen, Research In Motion and Micron. Oracle’s stock took a hit after announcing earning numbers last Monday, but revenue and profit were in line with expectations. Oil prices ended the week at $62.41 a barrel, which is still in a acceptable range for stocks. The 10-year note yield ended at 4.62%, little changed from 4.60% a week prior.
What should investors look for in the upcoming week? The week will be shortened due to the Christmas holiday as the markets will be closed on Monday and there are no major market moving earnings announcements scheduled.
There will be limited economic news and data as well, but investors can expect to see some consumer related reports. The first announcements for the week will be mid-morning Wednesday and include November New Home Sales followed by the weekly Crude Inventories. Look for the weekly Unemployment Numbers to be announced Thursday before the bell followed by mid-morning announcements for December Consumer Confidence and November Existing Home Sales. Friday announcements include the December Chicago PMI and the November Help Wanted Index. Also on Friday, the Bond markets will close early in recognition of the New Year, but the equity markets will remain open.
There are no conferences scheduled for the holiday week.
Hythiam, Inc. (NASDAQ: HYTM), a healthcare services management company that licenses the PROMETA™ physiological protocols designed to treat substance dependence, said last week that the company was informed of decisions by both the Russian and the Ukrainian Patent Offices to grant Hythiam’s patents for the use of a composition of matter for the treatment of alcoholism. The patents will serve to enhance protection of the intellectual property underlying the company’s PROMETA Protocol for alcohol dependence. This development comes one month after the PROMETA Center Medical Director presented in Moscow, and follows closely the a Notice of Allowance for Hythiam’s U.S. Patent Application No. 10/622,068 which contains claims using a composition of matter for the treatment of cocaine dependency. Both Russia and the Ukraine suffer greatly from dependence on alcohol and drugs and the company said that these patent grants will advance marketing efforts in bringing access of PROMETA to the citizens of these countries. To date, Hythiam has received notifications of allowance or grants for patents underlying its PROMETA protocols from over 25 countries including the U.S. and 19 European Union member nations in which a European patent has been validated. Shares ended the week down $0.21 at $8.81.
Digital Angel Corporation, a majority-owned subsidiary of Applied Digital (NASDAQ: ADSX), a leading provider of identification and security technology, announced last week that the company was awarded a multi-year contract extension as the exclusive provider of Radio Frequency Identification technology and equipment to the Bonneville Power Administration. Bonneville is a federal agency under the U.S. Department of Energy. Digital Angel won the contract following the successful installation of the world’s largest RFID reader system designed to electronically track indigenous salmon population. Another contribution was the launch of its powerful second generation unitary core transponders. In addition to the expanded contract with Bonneville, Digital Angel recently announced new contracts with the Royal Malaysian Air Force and the Royal Netherlands Navy. Through its ground-breaking RFID and GPS location tracking technologies, Digital Angel remains focused on rapid growth, building a world-class organization and driving shareholder and market value in the global marketplace. ADSX shares ended the week down $0.18 at $1.88.
CytRx Corporation (NASDAQ: CYTR), a biopharmaceutical company focused on developing products primarily in the area of small molecules and ribonucleic acid interference (RNAi), announced plans to initiate additional animal stroke functional recovery studies with its lead oral drug candidate arimoclomol. The drug is currently being evaluated as a therapeutic for amyotrophic lateral sclerosis, or Lou Gehrig’s Disease. The animal studies are expected to begin in the first quarter of 2007, and CytRx anticipates results of the studies will be announced in the second quarter of 2007. CytRx presented data at the Rodman & Renshaw 8th Annual Healthcare Conference last month. The date demonstrated for the first time that arimoclomol improved the functional recovery of motor skills in an experimental rat model of stroke. In the recently completed rat study, stroke was induced by blocking blood flow to parts of the brain causing cerebral oxygen deprivation. A subgroup of the study rats were then dosed orally with arimoclomol daily for 28 days, one hour after stroke was induced. Recovery from stroke was measured by monitoring sensory motor skills and while motor skills declined dramatically in all study rats, those treated with arimoclomol recovered faster and more completely than those untreated. In one functional capacity test, arimoclomol treated animals were completely restored to normal non-stroke levels, indicating a complete recovery using this particular measurement of stroke. Shares ended the week at $1.72, down $0.15.
Torc Investments and Research LLC, a NASD-registered broker-dealer, reiterated its buy rating on Generex Biotechnology Corporation (NASDAQ: GNBT), a leader in the area of buccal drug delivery, last week and 12-month price target of $3-$3.50. Torc’s report noted the strength of the company’s balance sheet of nearly $49 million of cash that has the potential to provide Generex with sufficient working capital for the next three years if the burn rate remains the same. The report also noted that the company is well on its way toward creating brand awareness for its main product-line that is centered on diabetes. Education and promotion are crucial as diabetes is a chronic disease where Type 2 diabetics, almost 90% of all cases, shoulder much of the responsibility of treating their disease. The stock ended the week down $0.14 at $1.68.
Isonics Corporation (NASDAQ: ISON), a developer of innovative solutions for the homeland security and semiconductor markets, announced that it had secured a prototype aerosol bio-decontamination system that will be utilized at the U.S. Department of Energy’s Pacific Northwest National Laboratory to validate recent test results at the Russian State Scientific Center Research Institute of Highly Pure Biopreparations. Isonics expects that a successful validation of the prototype will lead to the design and testing of a beta prototype system for real-life applications. Isonics also announced that the parties have agreed to include testing on live H5N1 avian flu virus at a second Russian institute as part of the overall program. Almost one year ago, Isonics announced that it had entered into a multi-year Cooperative Research and Development Agreement in conjunction with the Department of Energy’s National Nuclear Security Administration’s Global Initiatives for Proliferation Prevention program for the development of this bio-decontamination technology. Isonics, Battelle Memorial Institute and IHPBP are collaborating to complete the development of an environmentally safe system comprised of a chemical agent and an aerosol-based delivery method that can decontaminate microbial and fungal cells, spores, and viruses. Commercialization of this system is also a goal. Along with current initial test results, IHPBP continues to demonstrate the potential efficacy of the proposed system and technology. The stock ended the week down $0.03 at $0.62.
Netsmart Technologies, Inc. (NASDAQ: NTST), a leading provider of enterprise-wide software for health and human services organizations, announced that it has signed a software and services contract totaling more than $500,000 over a one-year period with Rosencrane, Inc. Rosencrane substance abuse treatment centers will utilize Netsmart’s Avatar software technology including Practice Management, Clinician Workstation, RADplus, Order Entry and Mobile. The contract also includes licensed software, installation and support services, project management, training and development, and maintenance. Based in Rockford, Ill., Rosencrane provides a full continuum of substance abuse prevention, intervention and treatment services to more than 5,000 children, youth, adults and families. Shares ended the week down $0.02 at $16.23.
Language Access Network (OTC: LANW), a leader in video language interpretation services, announced last week that the company entered into a services agreement with Indian River Medical Center, Vero Beach, Florida. Indian River is the only community, not-for-profit hospital in Indian River County, with 335-beds and related facilities spanning over 80 acres. Under the terms of this contract, Language Access Network will provide live video interpretation services in 150 languages, including American Sign Language, to the medical center’s emergency department. The company’s proprietary technology service, known as Martti™ will be available free to patients 24 hours a day, 365 days a year. Florida ranks fourth nationally for the number of limited English proficient residents and over 23 percent of Florida’s residents speak a language other than English at home. The average Martti™ interpretation in the emergency department lasts approximately 10 minutes, and the hospital not the patient, is billed for only the minutes used. Shares ended the week up $0.10 at $3.50.
USA Technologies, Inc. (OTCBB: USAT), a developer of cashless vending and energy management products, in collaboration with Mastercard Worldwide, announced last week that Cadbury Schweppes Americas Beverages will equip vending machines in several U.S. markets with the e-Port® cashless transaction solution to begin accepting all major credit cards, including those enabled with MasterCard® PayPass™ contactless payment functionality. Cadbury Schweppes, whose brands include Dr Pepper, 7UP, Snapple, A&W Root Beer, Hawaiian Punch, Canada Dry, Mott’s and numerous others, is working with MasterCard and USA Technologies to enable as many as 1,000 Dr Pepper and Snapple vending machines in Dallas, New York and Chicago to accept credit card payments. USA Technologies reports that Dr Pepper and Snapple Bottlers and distributors are leading the vending industry by adopting the latest technology to enhance the consumer’s purchasing experience. The Cadbury Schweppes installations are the first of a total 5,000 self service point-of-sale terminals and vending machines MasterCard and USA Technologies are deploying in 12 cities across the United States, including Las Vegas, San Francisco, Los Angeles, Boston, Denver, Seattle, Miami, Orlando and Washington, D.C. The stock ended the week up $0.68 at $7.13.
VoIP, Inc. (OTCBB: VOII), a leading provider of Voice over Internet Protocol (VoIP) communications solutions for service providers, resellers and consumers, announced that the company has joined with VariTalk on a personalized voice marketing campaign for the hit television show 30 Rock. The launch of the campaign for the new hit show, which premiered Wednesday, Oct. 11 on NBC and features famous actor and Golden Globe nominee Alec Baldwin and Saturday Night Live cast members Tina Fey and Tracy Morgan gives fans the ability to send phone and e-mail messages from 30 Rock’s Alec Baldwin through the website. VariTalk is best known for the highly successful personalized phone message marketing campaigns for “Snakes On a Plane” featuring the voice of Samuel L. Jackson and for “Americas Next Top Model” featuring personalized voice messages from Tyra Banks. VoIP, Inc. is VariTalk’s preferred VoIP service provider for these campaigns. The demand for personalized services is growing rapidly and these campaigns underscore the success of this technology and the benefits it has to offer the entertainment world. In additional news last week, VoIP’s subsidiary, VoiceOne Communications, announced that it is providing the company’s patented Click-to-Call technology to power NationwideCash, Inc.’s online customer communications. Nationwidecash.com is a leading provider of payday loans and the company will now be able to increase inbound call traffic, enhance the customer experience through improved interaction with its clients and improve e-commerce results by allowing consumers to click on one of the icons placed on the nationwidecash.com web site and immediately receive a call from a customer service operator who will respond to their inquiry. Shares ended the week down $0.02 at $0.30.
Junior oil and gas producer, Patch International Inc. (OTCBB: PTCH), announced last week that the company has completed its acquisition of Damascus Energy Inc. Under the agreement, Damascus was acquired in consideration for an aggregate of 11,660,231 common shares in the capital of Patch at a deemed price of (U.S.) $0.90 per share for an aggregate deemed consideration of approximately $10,494,207. The company said that the completion of this agreement has created an exciting opportunity for it in the oil sands. The company will announce a new management team and directors in the coming weeks. Patch also announced that it has entered into a letter agreement dated December 21, 2006 for the acquisition of 1289307 Alberta Ltd., Holdco, a private corporation incorporated under the laws of Alberta. Patch intends to acquire, directly or indirectly, 100% of the shares of Holdco, such that Holdco would be a wholly-owned subsidiary. The stock ended the week up $0.49 at $1.75.
Citadel Security Software Inc. (OTCBB: CDSS), a leader in enterprise vulnerability management and policy compliance solutions, announced that it has set a record date of January 2, 2007 for the determination of stockholders entitled to receive the initial dividend from the proceeds of the sale of substantially all of the company’s assets to McAfee, Inc. As previously reported in the company’s Definitive Proxy Statement filed with the U.S. Securities and Exchange Commission on November 3, 2006, shareholders will receive two or more liquidating distributions. The first distribution is currently expected to be made January 5, 2007 following expiration of the 30 day indemnification period contemplated by the asset purchase agreement. The final cash distribution would be made when all liabilities of the company have been satisfied. The amount and timing of the above-described distributions are dependent upon a variety of factors, including the timing of closing the company’s business, the amount of any indemnification payments, and the costs, expenses and time involved in satisfying the company’s current liabilities and obligations, as well as those incurred by the company following the closing of the asset sale. The company will announce a record date for the remaining distributions at least 10 days prior to the distributions. The stock ended the week up a penny at $0.51.
iVoice, Inc. (OTCBB: IVOI), a developer and licensor of proprietary technologies, issued a letter last week to shareholders. The letter outlined recent questions by shareholders about management’s strategies to improve shareholder value. The letter stated that the company recognizes the lack of noteworthy developments, but emphasized that it was diligently pursuing transactions that will improve shareholder value. The letter also described plans to create new business opportunities by distributing shares of spin-offs to its shareholders. While results have been disappointing, the company said it was confident that investors who have been patient during the challenging period will be rewarded. The stock ended the week at $0.01.
SPECIAL SITUATION:
IR BioSciences Holdings, Inc. (OTCBB: IRBO) $0.17
Since September 11th, the world as we knew it has changed. Fears of “dirty bombs” have increased dramatically, and just last month a former Russian diplomat was reportedly killed by radiation, stoking widespread fears in Britain that many areas were contaminated and people exposed to potentially lethal radiation. But what if there were an antidote to an antidote to radiation contamination? Once unthinkable, this represents another risk that Western nations have to confront daily. IR BioSciences, and its wholly-owned subsidiary ImmuneRegen are developing a potential treatment for the problem.
The company’s platform is based upon Homspera™, an analog of the naturally occurring neuropeptide Substance P. Currently, IRBO is working on two possible therapeutic applications, called Radilex™ and Vipriovex™. Radilex is currently being developed as a formulation of Homspera to treat acute radiation exposure, the very type of toxin emitted by polonium 210 that reportedly killed Russian spy Alexander Litvinenko. The company is also focused on developing Viprovex(tm), for the treatment of illnesses caused by exposure to chemical and biological. While neither treatment is yet approved by the FDA, the company is conducting in depth studies guided by “Project Bioshield’s” Animal Efficacy Rule which had been adopted in 2004. This ruling is effectively a more expeditious pathway for the approval of medical countermeasures that address possible terrorist threats or Pandemic scenarios. This extensive work has been continued over the most recent months and the company has been diligently collecting their results and gathering a more concise understanding of the compounds mechanisms for action. A recent quiet period resulting from a raise of capital has kept the company from publishing activity. We anticipate that the company will discuss its progress for developmental programs that can meet the need of our nations Strategic National Stockpile as well as the potential commercialization for their compounds use in these and other applications.
Perhaps an even bigger opportunity is in the area of pandemic flu and seasonal influenza. The company has demonstrated through therapeutic models that its platform is effective in preventing the H3N2 strain (Hong Kong Influenza) of avian flu. Nearly four decades ago, this strain killed 3-4 million people World Wide. The company has been conducting extensive studies in this area and expects to share results once the data has been fully collected and the results have been formulated.
Substance P is a naturally occurring neuropeptide of 11 amino acids and is found throughout the body and localized to the nerves in the airways of humans and many other species. This is the most potent member of the tachykinin family of neuropeptides. These are widely distributed in the peripheral and central nervous systems and have direct, receptor-mediated actions on most tissues and organs. While Substance P was discovered in 1931, observations made during research conducted in collaboration with the Air Force Office of Scientific Research in early 1994 helped the company’s co-founder develop new applications. The research included observations of animals exposed to jet fuel which caused pathological changes in the lungs and immune systems of the exposed animals. The studies concluded that the exposed animals that were administered Sar 9, Met(O @) 11-Substance P showed the prevention and reversal of the effects of the jet fuel in the lungs. The studies also showed that the compound protected and regenerated the immune system. What ImmuneRegen is doing is continuing the exploration of Substance P in order to better comprehend the means by which the compound can provide apparent protection against gamma radiation and various biological and chemical agents.
The company has currently filed patent applications and provisional patent applications, where applicable, throughout several jurisdictions, inside and outside of the United States, for the use of the active ingredient Sar9, Met (O2)11-Substance P in its specific development applications. ImmuneRegen currently owns two issued U.S. and two issued foreign patents and two pending Patent Cooperation Treaty (PCT) applications, seven pending U.S. provisional patent applications and 16 pending foreign provisional patent applications.
Recently, the company completed a $5.5 million private placement of common stock, at a price which is approximately 10% above where the stock closed Friday. IRBO expects to use the net proceeds from this to fund its product development efforts. Perhaps not so coincidentally, the company just responded to a Request for Information issued by the Department of Health and Human Services for medical countermeasures to address chemical, biological, radiological and nuclear threats. With the recent Russian spy case in Britain suggesting the need to protect U.S. citizens from a similar event occurring in North America, the potential for government funding for programs such as one that could use IRBO’s therapeutic applications has grown.
While the potential uses for the company’s platform technologies have increased, its stock price has headed in the opposite direction. Friday, the stock closed just pennies above its 52-week low, giving the company a valuation of just approximately $15 million, just half of what it was at the beginning of the year. However, companies that had an Anthrax solution saw their shares soar after the Anthrax scare a few years ago, while bomb detection companies such as InVision rose more than 20-fold after September 11th created the need for more baggage screening. Could radiation fears and similar problems create comparable demand for companies like IR BioSciences? With the stock close to a low for the year, risk-oriented investors may view IRBO as an attractive speculation.
We would like to wish all of our readers a Happy Holiday Season.