05/20/2007
VOLUME 300
Companies featured in the current edition of the newsletter: ADSX, AVGO, AXMP, CHIP, CVM, EEEI, GNBT, GSHF, HSOA, HYTM, IRBO, JMAR, MBND, PBIO, POIG, SFP, USAT, VOII
Confidence in the economy continues to drive stocks higher. Despite rising prices at the pump, consumer sentiment remained strong, contributing to the Dow Jones and the S&P 500 achieving their seventh straight week of advances. The Dow gained 230 points for the week to close at a new all-time high of 13,556, up 8.7% for the year. The Nasdaq, although currently up 5.9% for the year, declined 3 points last week. The S&P 500 increased annual gains to 7.3% by rising 16 points for the week. The Russell fell 5 points, reflecting the recent tendency for investors to bid large-cap stocks higher, lowering its yearly gains to 4.5%.
Despite mixed economic data, investors have focused on the positive news. May preliminary consumer sentiment was a better than expected 88.7 reading. The consumer price index for April rose less than anticipated (0.4%). Investors shrugged off news of refiners shutting some units as summer approaches sending oil to close over $64/bbl, and continued weakness in the housing sector as building permits dropped 8.9% to a 10-year low. On the corporate side, more emphasis was placed on merger-related news pertaining to Microsoft’s agreement to buy aQuantive and General Electric’s proposed sale of its plastic unit, than on disappointing first quarter earnings reports from Home Depot and Wal-Mart that are considered as strong proxies for spending by consumers.
What should investors look for this week? Many retailers are reporting earnings which should provide more insight into the health of consumer spending. Prior to the opening on Monday, Lowe’s (NYSE: LOW) releases numbers. Tuesday morning, Children’s Place (NASDAQ: PLCE) reports earnings followed by Medtronic (NYSE: MDT) after the close. Target (NYSE: TGT) announces results Wednesday before the opening, with Hot Topic (NASDAQ: HOTT) releasing numbers later that day. Thursday morning, Ann Taylor (NYSE: ANN) and Toll Brothers report figures with Gap Inc. (NYSE: GPS) announcing earnings after the close. Anheuser-Busch (NYSE: BUD) holds its 2007 Conference on Tuesday. Boston Scientific (NYSE: BSX) hosts analysts on Thursday.
Notable conferences being held this week include the three-day JP Morgan 35th Annual Technology Conference that begins on Monday in Boston. Starting Tuesday, Citigroup hosts its three-day Healthcare Conference in New York and UBS sponsors its two-day Global Oil and Gas Conference in Austin, Texas. Goldman Sachs holds its Eighth Annual Internet Conference in Las Vegas beginning Wednesday.
The economic calendar is light but will feature several key reports. Shortly after the opening on Wednesday, Weekly Crude Inventories will be reported. Prior to the opening on Thursday, April Durable Orders and Weekly Jobless Claims will be announced, with April New Home Sales being released shortly afterwards at 10:00 a.m. Friday morning, April Existing Home Sales will be reported at 10:00 a.m. Richmond Fed President Lacker talks about inflation on Tuesday. On Friday there is an early close for financial futures and options pits at 1:00 p.m., ahead of the Memorial Day holiday weekend.
Volume Alert: Shares of Home Solutions of America (NASDAQ: HSOA), a provider of restoration, construction and interior services to commercial and residential customers, surged to their highest level since July, 2006 Friday on more than 6 times average volume, after the company said that its Fireline Restoration, Inc. subsidiary had entered into a joint venture agreement with Blue Diamond Construction, Inc., a New York-based construction management firm, to develop and construct 339 residential condominiums and 160,000 square feet of mixed use retail space located in the boroughs of Brooklyn, Manhattan and Queens, New York. The company said the value of the contracts exceeds $100 million over the next 31 months, with approximately $12 million in work expected to be completed this year. One project is reportedly located in the Williamsburg section of Brooklyn, another on Manhattan’s Upper East Side and the third in the Whitestone section of Queens. While Blue Diamond, founded in 2000, appears to be relatively small and has previously focused on construction management and consulting services, its principal Rick Holowchak has extensive experience in complex mix-used real estate, particularly for Samuel & Co., a major Miami-based real estate developer. This leads us to believe that as a developer, he has the ability to complete these projects. However, the opportunity for Home Solutions could far exceed the $100 million in contracts awarded Friday. According to a recent report titled “Parks for the New New Orleans,” published in The Trust for Public Land, a national, nonprofit, land conservation organization that conserves land for people to enjoy as parks, community gardens and historic sites, “Samuel & Company is far along in negotiations with Entergy, the New Orleans electric power company, to purchase an abandoned power plant next to the proposed (riverfront) park (in New Orleans). “I’m sure we’ll get it done,” said company principal Michael Samuel. “This project will be a mixed-use city within the city. It’s going to take a rundown area and make it beautiful.” Samuel, who has undertaken similar projects in Miami and Baltimore, said the renovated building will include residential units and retail and office space. It will also include a major music venue. He estimated the cost of renovating the power plant and building a bridge connector to the waterfront park at around $500 million.” To read the story click herehttp://www.tpl.org/tier3_cd.cfm?content_item_id=21413&folder_id=3368. Based upon the relationships between Samuel & Co., Blue Diamond and Home Solutions, the similarity of the project to the ones that HSOA/Blue Diamond are currently working on, and the deep, experienced labor pool that HSOA has in New Orleans, if Samuel secures this project it might lead to a contract for Home Solutions that far exceeds the one announced Friday. While margins on these construction services contracts will likely be below the company’s 49.4% gross margin reported in Q1, they provide a stable, predictable source of revenue and earnings. Additionally, Home Solutions also reported that its Home Solutions Restoration of Louisiana, Inc. subsidiary, and Fireline have been awarded approximately $19 million in new contracts, $11 million of which is scheduled to be completed this year. Technically, the stock has begun to show significant strength, as the MACD and RSI are the strongest in more than one year. Note that as of April, approximately 33% of the float was “short.”Editors of CEOcast increased their ownership position further on Friday after news of the contract. Shares ended the week at $6.56, up $1.02.
Healthcare services company Hythiam, Inc. (NASDAQ: HYTM) reported impressive top line data last week from the recently completed 30-patient open-label study of the PROMETA protocol for alcoholism by the Cedar Sinai Medical Center. The open-label study showed the drug significantly reduced cravings and alcohol use. The study involved 30 patients over a period of 16 weeks, receiving infusions of the drug for two consecutive days along with nutritional supplements and oral medications. The findings from the study show an 86% decrease in cravings by week 1, and a 94% reduction at the end of 30 days. There was also an 82% reduction in the mean percentage of drinking days and an 85% reduction in drinks per day at the end of the study. The full data and interpretation of the data will be presented by the lead investigators at the International Neuropsychological Society conference on July 6 and the Research Society on Alcoholism conference on July 8 and is expected to be published later this year by Dr. Jeffery Wilkins of the Department of Psychiatry and Behavioral Neurosciences, Cedars-Sinai Medical Center. Editors of CEOcast increased their position last week, as we believe this additional confirmation of the efficacy of PROMETA by a well-respected institution will serve as a catalyst for the company to generate additional revenue prior to the double-blind study results expected during the third quarter of this year. Despite the stock reaching its highest level since late February on Tuesday, shares ended the week at $7.49, down 27 cents.
Volume Alert: Shares of VeriChip Corporation (NASDAQ: CHIP), a leading provider of identification and security technology, and a majority-owned subsidiary of Applied Digital, rallied 33% on Friday on more than 10 times average volume after BusinessWeek ‘s most influential columnist Gene Marcial wrote favorably about the company and CHIP’s Chairman and CEO Scott R. Silverman appeared in a recorded interview on ABC’s Good Morning America on Friday, discussing VeriChip’s potential applications in the Alzheimer’s community. The company’s VeriMed Patient Identification System, can identify individuals, such as Alzheimer’s patients, and their medical records when they are unable to speak for themselves. VeriCHIP’s human-implantable passive RFID microchip, the VeriChip, was the first implantable microchip cleared by the FDA for medical use in United States. Lastly, VeriChip Corporation will present to institutional investors at the Thomas Weisel Partners GPS and RFID Conference in New York on May 23, 2007 at 12:15 p.m. EDT. Shares ended the week at $5.76, up 86 cents although still below the IPO price of $6.50 in February.
CEL-SCI Corporation (AMEX: CVM), developer of new immune system based treatments for cancer and infectious diseases, last week reported financial results for the three and six month periods ended March 31, 2007. Net loss from operations increased to $2 million from $1.3 million for the first quarter. For the six month period, net loss equaled $3.5 million versus a loss of $2.3 million last year. The company is well-positioned to proceed with the Phase III protocol for its lead product Multikine in head & neck cancer patients, as it has $20 million in cash and cash equivalents. Progress should be monitored going forward relating to the previously signed letter of intent for the acquisition and buildout of a turn-key drug manufacturing facility that will play an important role in the commercialization for Multikine. As the company continues to implement its business strategy, investors stand to benefit as CEL-SCI is the first biotech company ever to go for a first line standard of care indication in head & neck cancer, a market that promises blockbuster status to a successful drug. Shares ended the week at $0.89, up 6 cents.
USA Technologies, Inc. (NASDAQ: USAT), a developer of cashless vending and energy management products, announced record revenue for the fiscal third quarter ended March 31, 2007. Quarterly revenue grew 66% to $2.6 million from last year and nine-month revenue rose 35.8% to $6.7 million compared to the same nine month period in 2006. Gross profit declined 53% for the quarter and fell 32% for nine months as a result of the MasterCard initiative pursuant to which USA Technologies is funding the market for cashless vending. Growing adoption of the company’s e-Port technology with brand-name customers has helped drive e-Port revenue to impressive levels that totaled $1.8 million for the quarter representing growth of 511% from the prior year. For nine-months, e-Port sales rose 218% to $3.9 million, with management expecting this trend to continue as e-Port is deployed in multiple new markets. The MasterCard Worldwide relationship is a significant value-added as the company is able to expand its base of recurring revenue from servicing fees. The company’s strong financial health combined with an impressive customer-base, positions USAT for continued growth. Shares ended the week at $10.70, down 17 cents.
Electro Energy, Inc. (NASDAQ: EEEI), a developer and manufacturer of high-powered, rechargeable bipolar nickel-metal hydride batteries, reported last week first quarter results for the period ended March 31, 2007. Consolidated net revenue for the 2007 first quarter was $799,681 compared with $1,096,560 from the prior year. Service revenue was $721,703 in the first quarter of fiscal 2007 compared to $712,849 in the fiscal 2006 period. Product revenue of $77,978 declined 80% from the same period last year due to declining sales to EaglePicher as tightening fiscal spending is affecting orders given to Eagle Picher by the government. Sales declines were partially offset by an increase in sales of general aircraft products and Apache helicopter battery sales by Electro Energy. Management commented that internal samples for lithium-ion batteries being run at the Gainesville facility are on schedule, and sample products of 18650 cells are being sent out currently to customers with the anticipation of initial orders being placed in the third quarter of this year. The company has also aligned itself with powerhouse Lockheed Martin for a research product that is focused on the development of a high-altitude airship that will have characteristics of a satellite but much lighter and easier to navigate, that can be used initially by the military for surveillance purposes. Shares ended the week at $1.04, down 16 cents.
Multiband Corporation (NASDAQ: MBND), a leading provider of video, data, and voice systems and services to multiple dwelling units, reported the results of its first quarter 2007 operations. Revenues for the quarter totaled roughly $4.3 million which were in-line with sales from the same period from last year. Sales were impacted by the sale of certain video subscribers during the prior period to Consolidated Smart Systems of Los Angeles. Net loss improved to approximately $1.36 million compared to $2.2 million a year ago. The transition from moving away from owning customers to servicing them should significantly improve margins for the company going forward. Management is optimistic about the new sales growth related to proprietary operational systems that will happen as this process is finalized throughout the year. Shares ended the week at $0.51, down 7 cents.
Drug delivery company Generex Biotechnology Corporation (NASDAQ: GNBT) last week announced strong interest from leading national and regional retailers, drug stores and wholesalers for its OTC line of products, including Glucose RapidSpray, BaBOOM! and GlucoBreak. Generex now expects to expand Glucose RapidSpray nationwide, and launch BaBOOM! and GlucoBreak in several of the largest national and regional retailers and drug store chains, comprising of over 20,000 stores nationwide. The company also announced it has been granted a patent titled, “Orally Absorbed Pharmaceutical Formulation and Method of Administration” by the Ministry of Economy and Trade Intellectual Property Protection Office in Lebanon. The company received a patent for its oral transmucosal metformin composition in Lebanon last November. Generex now holds 85 patents worldwide (20 in the U.S.), and has another 57 applications pending. On a technical note, shares trading through $1.70, with volume, could signal a short-term breakout, perhaps with a run at the 52-week high ($2.70). Shares ended the week at $1.48, up 5 cents.
Pressure BioSciences, Inc. (NASDAQ: PBIO), a developer of enabling technology called Pressure Cycling Technology (PCT) for sample preparation and other life sciences applications, said on its conference call last week that there was strong interest in its new Barocycler NEP2320, which is a smaller, more compact version of its existing Barocycler instrument. In addition, the company said that by the end of the second quarter it would increase its sales force by 400%, which should help increase sales. The company believes that there may be a niche in genomics and proteomics research laboratories for a Barocycler instrument with a lower sample throughput and a lower price, but with many of the technical capabilities of the higher throughput Barocycler NEP3229. Shares ended the week at $4.86, down 58 cents.
Avicena Group, Inc. (OTCBB: AVGO), a biotechnology company focused on diseases of the central nervous system, announced last week the initiation of a Phase I study of AL-02 in subjects with ALS, or Lou Gehrig’s disease. During the seven-week study, six patients with sporadic ALS will receive escalating doses of AL-02 for three weeks. The company plans to release the dose-escalation results in mid-2007, and using the optimal dose identified, advance AL-02 into additional later-stage clinical trials. ALS affects roughly 30,000 Americans at any given time, with approximately 5,600 new cases reported annually. Additionally, the company will present a corporate overview and update on recent clinical developments at the Wall Street Analyst Forum 18th Annual Analyst Conference on Tuesday, May 22, 2007 at 2:40 p.m., at the Princeton Club in New York City. Shares ended the week at $5.48, down 10 cents.
VoIP, Inc. (OTCBB: VOII), a leading provider of Voice over Internet Protocol (VoIP) communications solutions for service providers, resellers and consumers, received $300,000 from options exercised last week. Additionally, the company hired two consultants that will assist its efforts regarding strategic planning, organizational and corporate structure as well as provide introductions to NASD member firms that will help raise funds to support VoIP Inc.’s future growth as it continues to build out its proprietary network. Separately, VOII reported the settlement of the litigation between MCI WorldCom and its subsidiary Volo Communications. Starting this month Volo and its parent corporation Caerus, Inc. will pay a total of $2.2 million to MCI WorldCom in monthly installments through November, 2009. VOII will also recognize a related gain of approximately $4 million in the second quarter of 2007, representing the excess of the liability previously accrued on the company’s balance sheet over the expected cash payments for this lawsuit. Shares ended the week at $0.14, down 3 cents.
JMAR Technologies, Inc. (OTCBB: JMAR), a leading developer of advanced laser, high resolution imaging and photonics technologies, last week announced the sale of a BriteLight laser master oscillator to the Japanese National Institute of Advanced Industrial Science and Technology. The AIST initially leased the unit from JMAR for use in their demonstration at SIGGRAPH2006, held in Boston last August, and subsequently received multiple offers from the graphics and entertainment industries, including Universal Studios and the Walt Disney Company, to participate in the next technology forum the “Best of SIGGRAPH.” The integration of JMAR’s technology with AIST’s 3D air-breakdown display allows images and text that seem to float in mid-air, and could prove to be a likely alternative to traditional billboard advertising. Delivery is scheduled for July 31, 2007. Shares remained unchanged for the week, to close at $0.17.
Independent energy exploration and development company Petrol Oil and Gas, Inc. (OTCBB: POIG), reported operating results last week for the quarter ended March 31, 2007. Net revenues for the quarter increased approximately 33% to $1.6 million, compared with net revenues of $1.2 million in the same quarter last year. The company’s operating loss for the quarter also decreased 39% to $698,954, compared with a net operating loss of $1.1 million in the first quarter of 2006. Net loss for the period was $1.7 million, or ($0.06) per share, versus a net loss of $1.8 million, or ($0.07) per share in the prior-year quarter. Revenues increased primarily due to increased production and improved pricing, while the operating loss was mostly due to Petrol’s higher capital investment in pipelines, gas processing systems and related equipment. The company also reiterated its commitment to the development of the Cold Creek Project, as well as enhancing production and revenues from its Petrol-Neodesha Project. Shares ended the week at $0.41, up 2 cents.
Salton, Inc. (NYSE: SFP), a leading designer, marketer and distributor of branded, high-quality small appliances, home decor and personal care products, last week announced results from its third quarter. The company reported net sales of $95.2 million for the third quarter versus $127.7 million in the third quarter of 2006. Salton recorded a net loss of $31.9 million, or $2.11 per share, compared to a net loss of $19.1 million or $1.40 per share for the same period in fiscal 2006. For the nine months ended March 31, 2007, Salton’s worldwide sales were $424.4 million versus $506.5 million in 2006. The company recorded a net loss of $48.3 million, or $3.30 per share, compared to a net loss of $17.2 million, or $1.31 per share for the period. These losses seem to reflect customer uncertainty regarding Salton’s pending merger with Applica, a move that should allow both small appliance companies to reduce operating costs and enhance sales of top brands through the entry into new markets. Shares ended the week at $1.49, down 46 cents.
Volume Alert: shares of AXM Pharma, Inc. (OTC: AXMP), a manufacturer of proprietary and generic pharmaceutical and nutraceutical products for the Chinese and other Asian markets, traded 5.9 times average volume as investors await progress updates regarding the 2007 sales objectives. Management is optimistic about achieving stated goals for 2007 after recently appointing four experienced Chinese pharmaceutical sales and marketing employees in late-March. Shares ended the week at $0.23, up 6 cents.
GreenShift Corporation (OTCBB: GSHF), a company devoted to facilitating the efficient use of natural resources, announced last week it has executed an agreement to sell its majority stake in GS Carbon Corporation to Seaway Capital, Inc. Seaway has agreed to assume up to $500,000 in GSCR’s legacy debt, and GreenShift shall retain its current assets by transferring GS Carbon’s current investments, intellectual properties and R&D operating subsidiaries to GS CleanTech Corporation. Seaway intends to merge into GSCR several of its holdings, including that of WiseBuys Stores, Inc.. This reverse acquisition, which is subject to completion of an audit of WiseBuys and is expected to close in June 2007, will result in both debt and expense reductions, and should help in the company’s stated streamlining by reducing overhead while simplifying the current corporate structure. Shares were unchanged for the week, to close at $0.03.
On the Wires:IR BioSciences Holdings, Inc. (OTCBB: IRBO), a development stage biotechnology company, last week announced the appointment of Lance K. Gordon, Ph.D. to its Board of Directors. Dr. Gordon has over twenty years experience in the development of biopharmaceuticals, most recently as President and CEO of VaxGen, Inc., which had over $250 million in income and $1 billion in contracts for biodefense vaccines during his tenure. With three promising products currently in the pipeline, Dr. Gordon’s expertise will be a welcome addition to IR BioSciences.