09/10/2007
VOLUME 316
Companies featured in the current edition of the newsletter: ACCP, ACTC, ARGA, CBMC, CGXP, CHIP, CLXS, CYTR, DOC, ENZ, HJHO, HSOA, HYTM, ITUI, IWEB, NTRN, PBIO, PLKH, TKO, VOIC
Despite the holiday-shortened week, the markets remain very jittery and volatile as ever. The Dow ended the week down 244 points, trimming its yearly gains to 5.2%. The Nasdaq lost 30 points, lowering its annual return to 6.2%. The S&P lost 20 points for the week, and is now up 2.4% for the year. The Russell 2000 lost 17 points, pushing its annual losses to 1.5%.
To many, the question now becomes by how much will the Fed lower interest rates at its next meeting held on September 18th, instead of whether or not the FOMC would even act at all. After the release of the August payroll data on Friday that showed payrolls declining by 4,000 versus a consensus estimate of jobs rising by 110,000, Fed fund futures again priced in a significant probability of an interest rate reduction. This was the first decline in the payroll report in four years. The unexpected reading highlights the challenges facing the economy resulting from the weakening housing market, increasing mortgage defaults and tightening credit standards.
Unfortunately, such news was not the only report that weighed on the investors’ minds. Earlier in the week, pending homes sales sank 12.2% in July, representing the largest decline since 2001. For those looking for a bright spot in all of this negativity, second quarter productivity numbers were revised higher, coming in at 2.6% versus 2.4% estimated by analysts. Further, signs that business conditions are improving also helped as the ISM Services index rose unexpectedly to 55.9 versus an anticipate reading of 54.5 in August. Regardless, the market is preoccupied with policy makers and their actions pertaining to the overnight lending rate. Until then, it looks like a rocky few weeks ahead.
What should investors look for this week? The earnings schedule is light. Thursday’s report from Computer Sciences (NYSE: CSC) represents the only notable company reporting results. Texas Instruments (NYSE: TXN) provides a mid-quarter update on Tuesday afternoon. The conference schedule includes the Oppenheimer 4th Annual Consumer Conference, the two-day Bear, Stearns & Co. Healthcare Conference, and the two-day Jefferies Media & Communications Conference, all beginning Monday in New York. Also starting in New York on Monday is the three-day Lehman Brothers 5th Annual Financial Services Conference. The two-day Morgan Stanley Industrial CEOs Unplugged Conference begins Monday in Dana Point, California.
The economic calendar begins with Consumer Credit for July being announced on Monday at 10:00 a.m. Trade Balance for July will be reported at 8:30 a.m. on Tuesday. Wednesday morning at 10:30 Crude Inventories for the week will be released. Two important pieces of data will be announced on Thursday beginning with Initial Claims for the week at 8:30 a.m., and the Treasury Budget for August at 2:00 p.m. Friday’s schedule is full, starting with Import/Export Prices for August, and Retail Sales both coming at 8:30 a.m. Industrial Production and Capacity Utilization for August follow at 9:15 a.m., and Business Inventories for July, and the preliminary Michigan Sentiment for September both being reported at 10:00 a.m. Additionally, look for comments from Fed Presidents Lockhart, Yellin, and Fisher, and Fed Governor Mishkin on Monday, and comments from Fed Chief Bernanke when he speaks in Germany on Tuesday.
Enzo Biochem, Inc. (NYSE: ENZ), a company engaged in the research, development and manufacture of innovative health care products, last week announced that it has filed a Notice of Appeal with the Court of Appeals for the Federal Circuit, after a Federal court ruled in favor of Applera Corp. in a patent infringement case brought against it by Enzo Biochem and Yale University. The action sought recovery for past infringement of three pioneering patents, which expired in 2004. Although disappointing, it should be noted that this ruling has no effect on Enzo’s current operating business, and does not relate to the company’s intellectual property portfolio of over 200 patents, or its pending applications of over 180 more. Significantly, the court’s decision does not impact other litigation the company is involved with Applera on related to other IP that ENZ claims Applera has infringed upon. While not surprising that the stock was weak as a result of the court’s decision, the decline Friday reduced the company’s market capitalization by almost $200 million, suggesting an overreaction from the investment community, as it was unlikely that Enzo would have received a cash settlement near that level even if Applera had been found to have previously infringed on the three patents. Shares ended the week at $12.56, down $5.45.
Hythiam, Inc. (NASDAQ: HYTM), a provider of comprehensive behavioral health management services, last week reported that the Denton County, Texas, Community Supervision and Corrections Department (CSDS) had approved the implementation and funding of the PROMETA Treatment Program for substance dependent criminal offenders under its supervision. Denton County has a population of approximately 600,000 individuals in the rapidly growing Dallas-Fort Worth region, and the CSDS made the decision to implement PROMETA based entirely on third-party data. Hythiam believes that data from a soon-to-be released study in Collin County will result in further implementation and funding in Texas, as well as other counties nationwide, and that availability of near-term double-blind placebo controlled study data will greatly accelerate the rate of adoption for the PROMETA treatment program across all business segments. The Texas legislature approved $2 million for funding of PROMETA-based treatments in June. Additionally, Hythiam announced it had filed a shelf registration to periodically sell up to $50 million in preferred and common stock, debt securities, warrants and units, with the proceeds to be used for capital expenditures, working capital needs and other general corporate purposes. Shares ended the week at $6.91, down 29 cents.
Volume Alert: Shares of Access Pharmaceuticals, Inc. (OTCBB: ACCP), an emerging biopharmaceutical company that develops and commercializes propriety products for the treatment and supportive care of cancer patients, traded over 6.8 times average volume after noted BusinessWeek column Gene Marcial mentioned the company favorably in a column on Friday. The company also reported last week new data from a pre-clinical collaboration between Somanta Pharmaceuticals, Inc. and Imperial College London. Somanta’s Angiolix, a humanized monoclonal antibody that recognizes a migrating adhesion molecule called Lactadherin, was shown to have the ability to specifically localize to three different human ovarian cancer types, while sparing normal tissues, suggesting possible treatment applications for ovarian cancer. Somanta has previously reported the effectiveness of Angiolix in models of human breast cancer, raising the possibility of numerous other applications. Access Pharmaceuticals is in a definitive merger agreement to acquire Somanta for 1.5 million shares of common stock in exchange for all the outstanding capital stock of Somanta, subject to customary closing conditions. Shares ended the week at $4.35, up 90 cents.
Home Solutions of America (NASDAQ: HSOA), a provider of restoration, construction and interior services to commercial and residential customers, last week provided an update on the joint venture between its Fireline Restorations subsidiary and Blue Diamond Group, Corp., a New York-based construction management firm. The three New York-based projects the joint venture is working on are expected to generate revenue for HSOAof approximately $138 million over the life of the projects, scheduled to be completed in late 2009 or early 2010. Fireline expects to have revenues from these projects of approximately $12 million in 2007. The company also announced that the joint venture had received a $40 million bonding commitment letter for one of the projects. Investors seemed to have little reaction to the news, likely because they are waiting to see what the company says about its cash flow and collection of receivables. Home Solutions said it plans to hold a conference call to further update investors on Thursday, September 20th where that will likely be a key subject. Shares ended the week at $3.01, down four 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 the implementation of significant energy management projects with several major automation and control solutions companies for an energy efficiency program with a major utility in California. These programs are projected to save millions of kilowatt hours per year, and were specifically designed to help the utility meet its state energy conservation goals by reducing energy consumption in hotel and motel rooms throughout the utility’s service areas, by proving free retrofits designed to eliminate wasteful use of air-conditioning and heating units. The Telkonet SmartEnergy system typically reduces heating and cooling related energy consumption by approximately 30% using a “smart” thermostat that communicates with an unobtrusive occupancy sensor to automatically track room occupancy, relaxing the temperature when a room is empty and then recovering to guests’ temperature set-points within minutes upon their return. Telkonet expects these programs to generate at least $5 million in revenues for the company in 2007. Shares ended the week at $1.67, up 17 cents.
VeriChip Corporation (NASDAQ: CHIP), a leading provider of identification and security technology, last week announced the launch of its new PATIENT FIRST program, enabling patients to receive the VeriMed microchip at no up-front cost and a subscription to the VeriMed Patient Registry at a fee of only $9.95 per month. The program will first be launched in South Florida, northern New Jersey, Boston, Baltimore, Washington, D.C., Philadelphia and Atlanta, where it has an established presence of protocol-adopted hospitals. Such hospitals are trained on using the VeriMed reader and database and have adopted the VeriMed Patient Identification System as standard protocol in their emergency rooms in the event a patient presents unconscious or non-communicative. The company believes this program will enhance sales to patients by eliminating the $200 direct payment at the physician’s office, and will provide the company with a sooner-than-expected recurring revenue stream. VeriChip also reported that more than 90 Alzheimer’s patients and caregivers received the VeriMed RFID implantable microchip last week at the official launch of the VeriMed Patient Identification Project with Alzheimer’s Community Care, and the company expects to complete enrollment for the two-year, 200 patient study ahead of schedule. Dr. Joseph Feldman, Chairman of Emergency/Trauma at Hackensack University Medical Center, discussed the benefits of the VeriMed Patient Identification System in a pre-recorded segment featured in a recorded segment on CBS’ The Early Show on Wednesday, September 5, along with an interview with Molly Phillips of the MOLLY Foundation for Diabetes Research. Additionally, on Sunday, September 9, at 11:00 p.m. EDT, the MythBusters team debunks the myth that the VeriMed microchip is not safe to use with magnetic resonance imaging machines. One of the hosts of MythBusters, a Discovery Channel program that tests the validity of various rumors and urban legends in popular culture, also volunteers to get a VeriMed microchip on camera. Shares ended the week at $5.62, down 28 cents.
Pressure BioSciences, Inc. (NASDAQ: PBIO), a company focused on the development of a novel, enabling technology called Pressure Cycling Technology (PCT), reported last week it has received approval to CE Mark the Barocycler NEP2320, a patent-pending, lightweight, compressed air driven PCT instrument. Originally designed to be a to be a demonstration unit for the larger Barocycler NEP3229, the system weighs 75 pounds versus the NEP3229’s 375 pounds, and processes one sample at a time instead of three. The CE Mark is a mandatory European marking for certain products to indicate conformity with the essential health, safety, and environmental requirements detailed in European Directives, and means the product can be marketed to all countries in the E.U. The company also announced it has received a CB Scheme Test Certificate and Report indicating that the Barocycler NEP2320 has been found in compliance with the IEC 61010-1 international standards. Over the next six weeks, Pressure BioSciences plans to meet with its current distributors in France and Japan, and with potential distributors in Germany, Australia, and South Korea, all of whom have been anxiously awaiting the approvals. The company also plans to immediately seek other distributors, primarily in Europe and Asia. Shares ended the week at $4.10, up 15 cents.
RXi Pharmaceuticals Corporation, a subsidiary of CytRx Corporation (NASDAQ: CYTR), a biopharmaceutical research and development company, last week announced the grant of an Australian patent issued to the University of Massachusetts Medical School, covering production of small interfering RNA (siRNA) molecules and their use in methods for inducing RNA interference of a target gene in mammalian cells in vivo. RXi has an exclusive license to this patent for specific therapeutic fields and gene targets, which include indications for AIDS, ALS, diabetes, and obesity. This patent offers RXi Pharmaceutical offers broad coverage and leverage in the field of RNAi therapeutics, and strengthens the company’s intellectual property portfolio. Shares ended the week at $3.41, down 21 cents.
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 the United States Department of Agriculture (USDA) approved the company’s LifeChip equine RFID injectable transponder for use as part of the National Animal Identification System (NAIS). The LifeChip microchip is the first of its kind to receive USDA approval, and gives owners, breeders, trainers and veterinarians the ability to positively identify the horse as well as check its temperature. It can also be used to provide proof of ownership in the event that a horse is lost or stolen, as well as identify horses involved in breeding operations, competitive sports, and international and domestic travel, a potentially huge market. NAIS is a voluntary program designed to trace animals back to farms and ranches in the case of a disease outbreak or other animal emergencies, and is operated by states, industry producers and the USDA. Shares ended the week at $1.60, up six cents.
In a jittery market, where financings of all types have become increasingly difficult to complete, Advanced Cell Technology, Inc. (OTCBB: ACTC), a company applying stem cell technology in the emerging field of regenerative medicine, bucked the trend last week by completing a private placement with institutional and other accredited investors resulting in gross proceeds of $10 million. The company intends to use the proceeds of the offering towards the further development of the company’s clinical programs, including cardiovascular disease and regenerative retinal disorders. The funds will also be used to finance certain costs related to its recently announced plans to acquire Mytogen, Inc., and for general corporate purposes. The funding removes a significant near-term risk for investors, as the company now has the funding in place to take its promising clinical programs into the clinic. Shares ended the week at $0.29, down six cents.
Auriga Laboratories, Inc. (OTCBB: ARGA), a specialty pharmaceutical company with products for the treatment of acute respiratory diseases and dermatological conditions, announced last week the launch of Xyralid Cream, a convenience kit that also contains Clere, a soap free cleanser. Xyralid Cream, which is indicated for anti-inflammatory anesthetic relief of pruritus, eczema, abrasions, minor burns, insect bites, hemorrhoids, anal fissures and similar conditions of the skin, is the third product in the Xyralid franchise being marketed by Auriga’s ATS pharmaceutical division, joining Xyralid RC, and Xyralid LP Lotion. Auriga also reported last week that Andrew Shales, Auriga’s COO and Alan Roberts, Chief Scientific Officer, have terminated their pre-arranged stock trading plans effective immediately. Last week the company announced that its CEO, Philip S. Pesin, had also terminated his stock trading plan and will no longer be selling any stock after the planned third quarter sales. Shares ended the week at $0.70, down seven cents.
Calypte Biomedical Corporation (OTCBB: CBMC), medical diagnostic tests manufacturer for the rapid detection of antibodies to the human immunodeficiency virus (HIV), last week announced that it had established a branch office in Dubai, United Arab Emirates, as the company’s regional focal point for its Middle East and Northern Africa operations. As a gateway to over 1.5 billion people in the region, Calypte’s diagnostic products should have a substantial market in the region as more and more governments, and non-government organizations, allocate significant funds in the ever-continuing battle against the AIDS/HIV epidemic. The company believes that use of non-invasive diagnostic tests, such as its Aware HIV-1/2 OMT (oral fluid) rapid test, will encourage more testing, leading to more treatment. Calypte recently announced it has provided 10,000 Aware tests to the Kenyan National AIDS and STD Control Program of the Ministry of Health, to be made available for public use. Shares ended the week at $0.13, unchanged.
Volume Alert: Shares of Ceragenix Pharmaceuticals, Inc. (OTCBB: CGXP), a biopharmaceutical company focused on infectious disease and dermatology, traded over 4.4 times average volume last week as speculation continues to increase that the company could announce a licensing deal for Epiceram, a prescription only product intended for use to treat dry skin conditions and to manage and relieve the burning and itching associated with various types of dermatoses including atopic dermatitis (eczema), irritant contact dermatitis, and radiation dermatitis. In April 2006, Ceragenix received marketing clearance from the FDA to sell EpiCeram as a medical device pursuant to a 510(k) filing. Unlike steroids and immunomodulators, both of which have well recognized undesirable side effects and usage restrictions, EpiCeram’s non-steroidal formulation has a favorable safety profile and does not have the duration of use restrictions or pediatric patient age restrictions of these other classes of prescription products. Immunomodulator drugs used for treating atopic dermatitis recently received a black box safety warning from the FDA. Shares ended the week at $1.35, up 10 cents.
Volume Alert: Shares of VoIP, Inc. (OTCBB: VOIC), a provider of turnkey Voice over Internet Protocol communications solutions for service providers, traded over 3.5 times average volume last week after reporting that revenue for the month of August, 2007 from its continuing Caerus (VoiceOne network services) business, increased approximately 12% from July to over $1.0 million, primarily due to increased utilization of the company’s network, and improved margins. The company also expects improved operating results, continuing the trend of the last few months, and combined with the strong start the company sees for the month of September, reiterated its goal of being cash-flow positive by the fourth quarter. Shares ended the week at $1.28, up 12 cents.
Collexis Holdings, Inc. (OTCBB: CLXS), a global knowledge discovery company, last week reported that it has reached an agreement with Mayo Clinic Libraries to launch its Expert Profiles System as a pilot project. The Collexis software creates profiles of text, such as web pages, internal documents, and e-mails, and the key ideas or concepts in those texts is presented in a format known as the Collexis Fingerprint. This provides a level of data mining that is much deeper and far more robust than traditional keyword searching. For the first phase of the Expert Profiles System pilot, 10 years of publications authored by 250 of the more than 3,000 Mayo Clinic researchers and clinicians will be “fingerprinted.” The data extracted will help identify domain experts in specific biomedical disciplines, and will provide researchers with a tool that supports discovery and collaboration. The Mayo Clinic Libraries joins other Collexis clients such as Johns Hopkins University, Merck & Co., Inc., Bristol-Myers Squibb, Lockheed Martin, the World Health Organization, and the National Institutes of Health in utilizing this ingenious tool. Shares ended the week at $2.90, down 60 cents.
IceWEB Inc. (OTCBB: IWEB), a software services provider, last week reported that the company has received a $945,203 contract award from a Department of Defense agency to provide Network Anomaly Detection. This network behavior analysis system will allow the DoD to monitor the network for unusual activity, as well as network performance, and quickly pinpoint active security threats. This contract is indicative of IceWEB’s growing market share in the network infrastructure security solutions industry. Shares ended the week at $0.60, down four cents.
Volume Alert: Shares of Neutron Enterprises, Inc. (OTCBB: NTRN), a developer of digital media solutions, traded over 7.6 times average volume last week as the company announced the results of the second beta version of its contest site wallstreetsurvivor.com, an innovative stock market competition. Wall Street Survivor is Neutron’s first consumer-based game, offering contestants the opportunity to test their stock picking prowess, and features cash and other prizes. Total contest participants increased by 407%, the total number of trades executed increased 169%, indicating a high level of participation, and the total number of visitors to the contest site increased to approximately 187,000, up more than 2500% from the previous contest. The total number of page views rose by 461%, and minutes per user visit spent on the site increased by 12% to an average of 13.47. These impressive figures are even more significant considering the company’s limited marketing allowance. Neutron also said that overall performance and integrity of its trade execution platform has not suffered the irregularities experienced by other simulation environments. The company recently launched a third contest, which will run through to the end of September. Shares ended the week at $0.63, up three cents.
ProLink Holdings Corp. (OTCBB: PLKH), the world’s leading provider of GPS golf-course management systems and on-course advertising, last week announced The Golf Club of The Wharf (Gulf Shores, Ala.) now features the ProLink Solutions GPS system. The club underwent extensive renovation in 2005-06, lengthening the par-71 course by 300 yards and adding numerous water features, bunkers and enhanced fairways. The ProLink GPS system will help golfers quickly familiarize themselves with the changes to the course, as well as provide other features, like distance to the pin and hazards, pro tips, pace-of-play timer, and the ability to order from and beverages directly from their cart. The Golf Club at The Wharf now uses the same system found at other popular Arizona courses, such as Soldiers Creek at Woerner Preserve Resort in Elberta, Peninsula Golf Club in Gulf Shores and Ol’ Colony Golf Complex in Tuscaloosa. Shares ended the week at $0.68, down 17 cents.
On The Wires: i2Telecom International, Inc. (OTCBB: ITUI), a developer of ultra-portable high quality Voice-over-Internet Protocol products and services, announced that Monty Bannerman has joined the Company’s Board as an Independent Director. Mr. Bannerman has over 30 years experience in nearly all sectors of the telecommunications industry. CytRx Corporation (NASDAQ: CYTR), a biopharmaceutical research and development company, reported that the CFO of its RXi Pharmaceuticals subsidiary, James Warren, has left the company to pursue other opportunities, and will be replaced by Stephen J. DiPalma, most recently co-founder, president and chief executive of medical company Catalyst Oncology Inc.
SPECIAL SITUATIONS:
Halcyon Jets Holdings, Inc. (OTCBB: HJHO) $2.22
Anyone who travels by air regularly knows the frustration of traveling and will do most anything to avoid the many headaches that come with flying. Heavy traffic to and from busy metropolitan airports, long check-in and security checkpoint lines, flight delays, and missing baggage are just a few of the problems air travelers have become to know all too well. Adding to the stress of modern air travel is the inconvenience of having to schedule meetings, meals, taxis, and lodging around the existing, and often untimely flight schedules offered by the major airlines. Combine that with the recent computer glitches suffered by major airlines, which in some cases had passengers stuck on the ground, in the airplane, for as long as thirteen hours, while causing other flights to be cancelled completely, and you have a recipe for success for any company that can offer a solution to such a frustrating environment. Halcyon Jets Holdings, Inc. is providing the solution to all these worries, and more.
Headquartered in New York City, and with additional sales offices in Boca Raton, Florida, and Beverly Hills, California, Halcyon is an on-demand aircraft charter brokerage that offers its customers with convenient, comfortable, and safe private jet travel options. People pay top dollar for time. By giving customers the ability to choose the size of the aircraft, along with their flight times, offering no-hassle general aviation check-in, gourmet meals, concierge service and other amenities, Halcyon is poised to take advantage of the inconveniences and shortfalls of post-September 11 modern air traffic. The management team includes an executive from Blue Star, a leading provider of private jet services. The company’s Board of Directors includes film director “Spike” Lee.
Halcyon believes that the same factors that have fueled demand for fractional interests in aircraft and the growth of that business will continue to fuel demand for brokered air transportation services. Fractional shares of aircraft increased 62% from 2000 to 2003, primarily due to heightened security concerns. Aircraft manufacturer Rolls Royce predicts that fractional aircraft will account for 23% of its aircraft demand in 2012, and some experts believe that only a small portion of this business has been tapped. Improvements in technology, safety, and fuel consumption for business class aircraft in recent years has also helped drive the increase in passenger miles flown on private jets, as well as passenger contempt for the impersonal terminals and service at large commercial airports.
Halcyon has established rigorous criteria for suitability of aircraft owner/operators used by the company, including the ability to offer almost any type of top of the line aircraft, and the ability to reach thousands of airports beyond the large commercial ones. The company only partners with owner/operators who are Part 135 FAA Air Certificate compliant, signaling the highest levels of pilot training and credentials.
Although smaller and younger than most of its competitors, Halcyon Jets Holdings differentiates itself through the quality and completeness of its services, such as hospitality (on the ground and in the air), ground transportation, catering and concierge services. The company does offer Jet Card services, like some of its competition, but Halcyon Cards are sold by dollar amounts, not hours, giving the customer even greater flexibility.
While most investors don’t have the opportunity to participate in a hot IPO, Halcyon, which went public Thursday via a reverse merger, gives investors the ability to participate in a newly public company. With an expanding customer base and an experienced management team, Halcyon might not fly below the radar of Wall Street for much longer.
