09/30/2007
VOLUME 319
Companies featured in this edition of the newsletter: ACTC, AVGO, CHIP, CLXS, CYTR, DOC, GNBT, HSOA, HYTM, ITUI, IWEB, NTRN, PBIO, PLKH, TKO, USAT
Stocks ended the most volatile quarter in recent history on a relatively mild note. The Dow gained 75 points for the week, raising its year-to-date gains to 11.4%. The Nasdaq posted a 30 point rise for the week, bringing its annual return to 11.8%. The S&P rose a single point for the week, and is up 7.6% this year. The Russell 2000 lost 7 points for the week, dropping its gains for the year to 2.2%, as large cap stocks continue to dramatically outperform smaller ones.
The Dow ended the month of September up 4%, with the S&P 500 up 3.6%, the Nasdaq up 4%, and the Russell 2000 up 1.6%. For the third quarter, the Dow gained 3.6% and has increased in eight of the past nine quarters. The S&P 500 added 1.6% while the Nasdaq jumped 3.8%, with both seeing their ninth gain in the past 10 quarters. The small-cap Russell 2000, however, snapped a four-quarter winning streak and fell 3.4%. Investors may have another reason to be bullish. The Dow Jones Industrial Average has gained in the fourth quarter for nine consecutive years, and in 24 of the past 27 years. The Standard & Poor’s 500 has moved higher in the fourth-quarter in 13 of the past 15 years gaining an average of 6.3% during the period.
Woes in the housing sector continue. Last week it was reported that existing home sales in August fell 4.3% with August new home sales declining by 8.3%. Many industry participants are feeling the effects of this weakness including homebuilder Lennar Corp. who reported sizeable losses last week of $3.25 per share versus a consensus estimate for losses of $0.55 per share. Although personal spending rose a surprising 0.6% in August, the decline in September consumer confidence to 99.8 could indicate that such positive spending trends may not continue. As investors welcomed news last week that economic growth in the second quarter totaled 3.8%, attention will be shifted toward the health of Corporate America as earnings season approaches.
What should investors look for this week? Walgreen (NYSE: WAG) will report earnings before the opening bell on Monday. Pepsi Bottling (NYSE: PBG) will announce earnings before the bell on Tuesday, and Micron Technology (NYSE: MU) will follow suit sometime later in the day. Research In Motion (NASDAQ: RIMM) releases results after the close on Thursday. Marriott International (NYSE: MAR) reports Friday morning before the opening.
The economic calendar this week will be more significant than the earnings calendar. The ISM Index for September will be released Monday at 10:00 a.m., with Auto/Truck Sales for September coming at 5:00 p.m. Pending Home Sales for August will be announced on Tuesday at 10:00 a.m. The ISM Services Index for September will be reported at 10:00 a.m. on Wednesday, followed by the Weekly Crude Inventories at 10:30 a.m. Initial Jobless Claims for the week will be released at 8:30 a.m. on Thursday, along with Factory Orders for August at 10:00 a.m. Friday morning at 8:30 a.m., the Unemployment Rate, Non-Farm Payrolls, Hourly Earnings, and the Average Workweek numbers for the month of September will be announced. Rounding out the week is the Consumer Credit for August being reported at 3:00 p.m. Also of interest will be comments from Fed honchos Mishkin and Fisher late in the week.
Hythiam, Inc. (NASDAQ: HYTM) will present at the William Blair & Co. Micro/Small-Cap Growth Conference on Wednesday in New York. Other notable conferences include the two-day inaugural Jefferies Technology Conference beginning Monday in New York, and the four-day BioProcess International Conference & Exhibition, also starting Monday in Boston. The three-day Deutsche Bank Leveraged Finance Conference kicks off Tuesday in Scottsdale, AZ. The two-day CIBC World Markets 2nd Annual Industrials Conference begins Tuesday, as does the Citigroup Ethanol on the Cob II Biofuels Conference, both in New York.
Volume Alert: Shares of Hythiam, Inc. (NASDAQ: HYTM), a provider of comprehensive behavioral health management services, traded over 3.1 times average volume last week after reporting, in a filing with the SEC, that the company had initiated a pilot program with an industry coalition of unions and employers to assess adoption of the PROMETA Treatment Programs for their approximately 100,000 members and dependents, across over 40 unions and affiliates. The majority of the medical and nutritional aspects of the pilot program will be conducted at the PROMETA Center in Santa Monica, CA. Expected to take six months, on a limited number of volunteers, wider-scale implementation may commence at any point during the program. Hythiam believes the results from this study, and other studies being conducted around the country, will lead to wide-scale adoption of the PROMETA treatment program by industries and municipalities throughout the country. Additionally, Brean Murray Securities initiated coverage of Hythiam, Inc. with a Buy rating and a twelve-month target price of $15.00. Brean Murray cited the future adoption of the company’s PROMETA protocols as the primary reason for its opinion. Brean Murray becomes the sixth Wall Street firm with a Buy or equivalent rating on the stock. We believe results from the first double-blind placebo-controlled studies, scheduled to be released by investigators in late October, could serve as a significant catalyst for the stock. Shares ended the week at $7.40, up 89 cents.
Telkonet, Inc. (AMEX: TKO), the leader in providing in-building broadband access over existing electrical wiring and innovative energy management systems, last week reported that it has completed the first installation of its Telkonet iWire System in Turkey, at the prestigious Saray Regency Hotel in the popular resort of Antalya. The 5-star 196-room hotel had the Telkonet solution, providing high-speed internet access using the hotel’s existing electrical wiring, and supplied and installed by Telkonet’s Turkish VAR, TuncNet, in just 6 hours, with zero disruption to either guests or to the hotel’s operation. Telkonet also announced several senior management changes. Steve Sadle, senior vice president, director and co-founder of Telkonet, retired on July 27, 2007, and chief marketing officer, Bob Crabb, retired September 21, 2007. Jason Tienor has been appointed chief operating officer, and Dottie Cleal has been named executive vice president. Shares ended the week at $1.61, down three cents.
Home Solutions of America, Inc. (Nasdaq: HSOA), a provider of restoration, construction and interior services to commercial and residential customers, held its eagerly anticipated conference call last week, which provided fodder for both the bulls and bears on the stock. Bulls cite the progress the company has made with FIGA, as HSOA said it has moved closer to collecting receivables that could be as much as $49 million. The company said early November was the likely time when it would receive the undisputed portion of the proceeds. The company also said it expects to get an expanded credit facility, likely debt-based, which could range from $60 million to $125 million. HSOA also said it was comfortable with full-year analyst EPS estimates of approximately 60 cents in earnings, although it declined to provide guidance for Q3. According to the Rodman & Renshaw analyst, who reiterated his Market Outperform rating after the call and $9 price target, shares likely sold off after the call as a result of expectations that there would be resolution on one or more of these items. Note that shares of HSOA continued to appear on the Reg SHO list, indicating a high level of fail to delivers. Effective October 15th, the SEC will change the rules of Reg SHO, requiring that all naked short positions must be closed out within 35 consecutive settlement days of October 15th. If a security becomes a Threshold Security after October 15th, all fails to deliver must be closed out within 13 consecutive settlement days. The rule change could help HSOA, which has more than 16 million shares short. Shares ended the week at $3.39, up 36 cents.
VeriChip Corporation (NASDAQ: CHIP), a leading provider of identification and security technology, and Digital Angel Corporation (AMEX: DOC), a technology company engaged in the development, manufacture, and marketing of visual and electronic identification tags and implantable radio frequency identification (RFID) microchips, last week announced that they have entered into an agreement with RECEPTORS LLC, an expert in the field of proteomics and the development of artificial receptors, to develop a prototype renewable glucose sensor to use in conjunction with an implantable RFID microchip to measure glucose levels in the human body. VeriChip will manage the partnership project, with the assistance of Digital Angel, owner of Patent No. 7,125,382 for an embedded bio-sensor system. RECEPTORS will be responsible for demonstrating a self-contained glucose-sensing system in Phase I of the project. VeriChip anticipates a functioning prototype within six to twelve months. A glucose-sensing microchip could vastly improve the quality of life for the approximately 230 million people worldwide living with diabetes, by eliminating the need for multiple daily blood tests. Separately, VeriChip Corporation’s wholly-owned subsidiary, Xmark Corporation, reported making its first sale in Switzerland, a notable step in the company’s expansion into European markets. Xmark’s ProtecPoint wander prevention system is being installed at Stiftung Schloss Turbenthal, a center for the deaf and elderly in Gehorlosendorf, near Zurich. Lastly, Digital Angel Corporation announced last week that its UK-based DAC McMurdo subsidiary, one of the world’s leading manufacturers of distress beacons and marine communications equipment, is to supply an order worth $800,000 for C1 S-VDR (Simplified Voyage Data Recorder) float free capsules. S-VDRs are similar to the black boxes found in aircraft. Marine electronics systems supplier ComAS has placed the order for integration into their Blue Ocean S-VDR systems. Shares of VeriChip ended the week at $4.02, down 28 cents. Shares of Digital Angel ended the week at $1.29, up two cents.
CytRx Corporation (NASDAQ: CYTR), a biopharmaceutical research and development company, last week provided updates on its current clinical programs. The company reported it is on track with its plans to initiate a Phase IIb trial for arimoclomol for ALS later this year, which is expected to include 390 ALS patients enrolled at 30 to 40 clinical sites in the U.S. and Canada. The company also plans to initiate a Phase II clinical trial with arimoclomol in recovering stroke volunteers in the first half of 2008, subject to FDA clearance. Additionally, CytRx intends to move into a Phase II clinical trial with its candidate iroxanadine for the treatment of diabetic foot ulcers in the first half of 2008, also subject to FDA approval. All three drugs have major implications for the company due to market size, with the $58 billion stroke market being the largest, and positive data from any of these trials could prove to be of major financial importance to the company. Arimoclomol has been given Fast Track designation by the FDA for the treatment of ALS, and has also been given Orphan Drug status by the FDA, and by the European Commission. Shares ended the week at $3.44, down 12 cents.
Drug delivery company Generex Biotechnology Corporation (NASDAQ: GNBT), last week reported entering into an exclusive licensing & distribution agreement with Adcock Ingram Ltd., and Adcock Ingram Healthcare (Pty) Ltd., for the distribution of the company’s proprietary Glucose RapidSpray product in South Africa and six other neighboring countries. Adcock Ingram is a leading South African pharmaceutical company with an 11.4% share of the private healthcare market, offering prescription, generic, and over-the-counter products as well as hospital equipment and diagnostic products and services. Generex believes this agreement will help build brand awareness in the region, perhaps leading to more significant opportunities. Glucose RapidSpray is currently being marketed in the United States and Canada and is available in a number of leading retail chains. Shares ended the week at $1.51, down two cents.
Pressure BioSciences, Inc. (NASDAQ: PBIO), a company focused on the development of a novel, enabling technology called Pressure Cycling Technology (PCT), last week provided an update on corporate developments. The company announced the hiring of four additional sales representatives within the last month, bringing the total to six. Pressure BioSciences also reported the listing of the company’s shares on the Frankfurt Stock Exchange, a move designed to provide more investor awareness and liquidity. Lastly, the company reiterated its expectation to install a minimum of twenty Barocycler units during fiscal 2007. Shares ended the week at $3.99, down 16 cents.
USA Technologies, Inc. (NASDAQ: USAT), a developer of cashless vending and energy management products, last week released its earnings statement for fiscal 2007, showing a 43% revenue gain over 2006. The company also reduced its per share loss from ($3.15) to ($2.13), an improvement of nearly 32%. Separately, Chairman and CEO George R. Jensen Jr. issued a letter to shareholders detailing the company’s current financial situation and future prospects. A full transcript of the letter can be found on the company’s website. Additionally, USA Technologies announced that Fantasy Entertainment, a leading supplier of photo and imaging kiosks, has equipped 1,000 of its self-service photo booths nationwide with e-Port cashless payment technology, and hopes to equip another 2,000 photo booths within the next 18 months. The multi-billion dollar kiosk market in North America is expected to grow 44 percent by 2009 to more than 1,150,000 self-service machines, bringing the worldwide total of kiosks to nearly 1.7 million. Photo booths currently account for approximately 20% of self-service kiosks. American consumers spent more than $475 billion at self-checkout lanes, ticketing kiosks and other self- service locations in 2006. Shares ended the week at $8.38, up seven cents.
ProLink Holdings Corp., (OTCBB: PLKH), the world’s largest provider of Global Positioning System golf course management systems and on-course advertising, last week reported in a filing with the SEC that it has signed an four-year agreement with ABC National Television Sales, Inc. (ABC), in which ABC will provide exclusive advertising sales representation for the video display monitors on golf carts using ProLink’s golf management systems located throughout the United States. ProLink believes ABC’s sales force and relationships will enable the company to reach a broader advertising base through ABC’s extensive relationships, which reportedly generate $9 billion in advertising revenue annually. Additionally, ProLink announced that the Championship Course at the Inn of the Mountain Gods Resort & Casino in Mescalero, NM, and both courses at Gold Canyon Golf Resort in Gold Canyon, AZ now feature the ProLink Solutions ProStar GPS system. The Inn at the Mountain Gods course recently hosted the 2007 New Mexico Open, and Gold Canyon’s Dinosaur course was recently named one of America’s “Ten Most Underrated Courses” by GOLF.com. Shares ended the week at $0.90, up 10 cents.
Advanced Cell Technology, Inc. (OTCBB: ACTC), a company applying stem cell technology in the emerging field of regenerative medicine, last week reported it had completed the acquisition of all of the outstanding capital stock of Mytogen, Inc., a transaction announced in May 2007, for $5 million in restricted stock and the assumption of certain liabilities. Advanced Cell also issued warrants to purchase additional shares of restricted common stock pursuant to certain milestones. Mytogen adds over ten years of clinical and FDA experience to Advanced Cell, having recently completed a Phase I trial of its Myoblast Program, a treatment for heart disease using stem cells. The company now has three programs in clinical or preclinical stages. The Myoblast Program, for which the company has already received FDA clearance and will begin Phase II trials shortly, the Hemangioblast Program, for the treatment of blood and cardiovascular disease, and the RPE Program for treating retinal degenerative disorders, both of which the company expects to file INDs for early next year. Significantly, ACTC becomes one of the few stem cell companies with a compound that is in the clinic, making its relative valuation attractive. Shares ended the week at $0.30, unchanged.
Volume Alert: Shares of i2Telecom International, Inc. (OTCBB: ITUI), a developer of ultra-portable high quality Voice-over-Internet Protocol products and services, traded over 4.9 times average volume last week after the company announced that it has received a Notice of Allowance from the U.S. Patent and Trademark Office regarding pending patents involving its Portable VoIP Service Access Module (VoiceStick) technology. The VoiceStick is a USB device that turns any computer into your own personal telephone, allowing the user to make calls anywhere in the world where you have access to a broadband Internet connection. The patent application was filed in October 2004, and the company believes this Notice of Allowance bolsters the company’s ability to protect and enforce its intellectual property rights, which it believes has been violated by dozens of companies in the VoIP and Universal Serial Bus (USB) industries. I2Telecom spent over $25 million developing its core technology, and stated it will “continue to evaluate opportunities to maximize and monetize the value of our intellectual property assets.” Shares ended the week at $0.14, up 5 cents.
IceWEB Inc. (OTCBB: IWEB), a software services provider, last week reported that the company has been awarded two contracts from the Department of Defense to provide Wide Area Network Optimization products and services for a total of $600,000 dollars. Wide Area Network Optimization is a relatively new networking discipline which leverages technologies like data compression algorithms, bi-directional network traffic control and flow control, to harness performance increases of up to 60%. The DoD, as well as other government agencies, continues to look for solutions ensuring maximum efficiency of transmission for both their application and their secure encrypted data, a niche in which IceWEB is clearly becoming the market leader. The company also announced a four-year $1.3 million contract with a government agency to supply security and compliance solutions, with the first delivery order totaling over $250,000. Shares ended the week at $0.60, down three cents.
Neutron Enterprises, Inc. (OTCBB: NTRN), a developer of digital media solutions, last week announced that its subsidiary Stock-Trak, Inc. has partnered with The Edcomm Group’s Banker’s Academy, the world’s leading provider of education to the financial services industry, to expand and enhance Edcomm’s stock market specific education programs through the use of Stock-Trak’s stock market simulation software and technology. Edcomm also plans to market Stock-Trak’s Global Portfolio Simulation platforms internationally, as a branded add-on, where Banker’s Academy has experienced significant growth. Neutron also announced that ScotiaMcLeod Direct Investing, the online brokerage unit of Scotiabank, will use Stock-Trak to develop and enhance its educational simulation offerings to customers and employees, and will also co-sponsor a college and university stock market simulation program, open to all college and university students in Canada. Shares ended the week at $0.45, down 5 cents.
Avicena Group, Inc. (OTCBB: AVGO), a biotechnology company focused on diseases of the central nervous system as well as dermaceutical products, last week reported the closing of a private placement of preferred stock and warrants, with gross proceeds of $3.1 million. Proceeds are expected to be used for ongoing clinical development, regulatory submissions, and potential commercialization of Avicena’s lead programs, and towards the launch of its proprietary skin care line, Nurigene. Shares ended the week at $1.80, down $1.30.
On the Wires: Avicena Group, Inc. (OTCBB: AVGO) reported that Dr. M. Flint Beal, M.D. has been elected to the company’s Board of Directors, effective October 30, 2007. Dr. Beal is a co-founder of Avicena and has served as a member of the Company’s Scientific Advisory Board since 2000. Collexis Holdings, Inc. (OTCBB: CLXS), a global knowledge discovery company, last week announced the appointment of Jon Lieberman as General Manager for Government and Strategic Accounts for the Americas. Mr. Lieberman brings over 20 years experience leading services, systems and software teams with federal government contract work.