09/10/2006
VOLUME 254
Companies featured in the current edition of the newsletter: ADSX, ARSC, CPPT, EMIS, FLWE, FMTI, HSOA, HYTM, ITRO, IVOI, NTRN, OXMI, POIG, QTXB, RTK, SWTS, UDTT, USAT
The markets spent most of the holiday-shortened week trading in sluggish fashion, as profit-taking after several weeks of outsized gains kept a lid on further gains. The Dow fell 72.04 points, decreasing its year to date gain to 6.3%, while the Nasdaq lost 27 points leaving it down just 1.8% on the year. The S&P 500 lost ground as well, finishing 12 points lower, reducing its year to date gain to 4.1%.The Russell also fell for the week, losing 13 points to pare its year-to-date gain to 5.2%.
While it is too early to determine whether the declines last week were a result of profit-taking, or renewed fears about inflation, both bulls and bears could find something to build arguments on. The release of the revised Q2 productivity report stoked concerns on Wednesday, while Intel’s announcement that it would cut 10,500 jobs and multiple earnings warnings from the home building industry raised concerns about an economic slowdown. Helping to offset these concerns was a retreat in oil prices, as crude oil fell 4.2% to end the week at $66.29.
What should investors look for in the coming week? A lot of early morning activity marks the week as Campbell’s (NYSE: CPB) issues earnings Monday morning before the bell. Before the bell action on Tuesday comes reports from Best Buy (NYSE: BBY), Goldman Sacs (NYSE: GS), and Kroger (NYSE: KR). Lehman Brothers (NYSE: LEH) will announce its earnings before the open on Wednesday and Bear Stearns (NYSE: BSC) makes its earnings announcement Thursday before the market opens. Friday, Carnival (NYSE: CCL) post results before trading.
The economic news for next week should give investors a better insight into inflation. At noon on Tuesday, the monthly Trade Balance is announced. Wednesday morning, the weekly Crude Inventory levels will be announced. That afternoon, the Treasury Budget will be released. Thursday before the bell, Import and Export prices excluding oil, as well as initial weekly unemployment claims and August retail sales will be reported, along with July Business Industries. Friday will include the most significant report on inflation, as the August CPI will be announced. The “core” rate is expected to increase by 0.2%. Also that morning, the September NY Empire State Index will be released. Later that day, Industrial Production, Capacity Utilization, and the Preliminary September Michigan Sentiment Index will be released.
The upcoming week is a busy one for conferences starting with Bear Stearns hosting its 19th annual, two day healthcare conference beginning Monday in New York. ThinkEquity Partners hosts its 4th Annual Growth Conference beginning on Monday in San Francisco. Companies presenting include Rentech, Inc. (AMEX: RTK) on Wednesday and USA Technologies, Inc (OTCBB: USAT) on Thursday. Tuesday will mark the beginning of Lehman Brothers 4th Annual two-day Financial Services Conference in New York as well as the commencement of the three-day Merrill Lynch Media and Entertainment Conference located in Pasadena, California. Credit Suisse First Boston will host an Under Followed Opportunities Conference on Tuesday in California. Home Solutions of America, Inc. (NASDAQ: HSOA) will present at the event. On Wednesday, Credit Suisse holds its Best Idea Conference in Philadelphia. Morgan Stanley begins a three-day CEO’s Unplugged Industrial Conference at Half Moon Bay, California.
Hythiam, Inc. (NASDAQ: HYTM), a healthcare services management company that licenses the PROMETA™ physiological protocols designed to treat substance dependence, announced last week that the European Patent Office had granted to Hythiam a patent for a use of a composition of matter for the treatment of alcohol dependence under European Patent Number 1374952. The patent will protect the intellectual property underlying the company’s PROMETA Protocol for alcohol dependence. With this formal grant, the European patent can be validated in 19 designated European countries. Earlier this year Hythiam announced that it had received allowances and grants for its core intellectual property for the treatment of alcohol and stimulant dependence in several other countries including Australia, New Zealand, Singapore, and South Africa. The receipt of patents for alcohol suggests that the company could be well positioned to be granted patents for methamphetamine, which could represent an even larger market for the company. The stock ended the week at $5.65, up 22 cents.
Drug delivery company Emisphere Technologies, Inc. (NASDAQ: EMIS) said last week that Novartis Pharma AG had notified it of new Phase I data indicating that recombinant human growth hormone can be absorbed when given to growth hormone-deficient (GHD) patients in a prototype oral formulation using Emisphere’s eligen® delivery technology. The study is the first to show that such a large and complex protein can be delivered orally in humans in an active form. 8 GHD patients were given oral rhGH. Novartis investigated pharmacokinetics as well as the pharmacodynamic properties of the orally-delivered rhGH. The study showed that growth hormone peaks were recorded in all patients at some time points, although with considerable variability and minor endogenous growth hormone interference. An increase in IGF-I was seen in some patients, leading to a statistically significant increase in mean serum IGF-I at day 7 compared with end of wash-out. Shares ended the week at $7.97, down 30 cents.
Forbes Medi-Tech Inc. (NASDAQ: FMTI) said last week hat Finland-based Kesko has expanded its Pirkka range of products containing FMTI’s cholesterol-lowering ingredient, Reducol™. The new products, sold under the ‘Pirkka’ premium brand name, includes a non-dairy margarine and additional yogurt flavors to complement the successful Buckthorn and Raspberry launch in May 2005. The new Pirkka Margarine will be in full distribution at all Kesko stores along with the Raspberry, Buckthorn, Natural (plain) and Cranberry flavor Pirkka yogurt products. Earlier this year, Reducol™ based margarines were launched at the UK’s Tesco and the Netherlands’ Albert Heijn stores, but this will be the first non-dairy Reducol™ margarine formulation. Interest among Europeans continues to increase in Reducol™, as products containing the ingredient can now be found in a number of different European countries including major retailers in Finland, the Netherlands and the United Kingdom. Shares ended the week at $1.95, down 6 cents.
VeriChip Corporation, a subsidiary of Applied Digital (NASDAQ: ADSX), a leading provider of identification and security technology, announced that its Implantable Division, consisting of the “VeriMed” patient ID and personal health information system, the “VeriGuard” security application and the emergency management system called “VeriTrace” achieved important milestones. VeriMed, the first and only FDA-approved microchip for access to medical information and patient identification has advanced adoption in key areas of hospital and physician acceptance. The VeriMed physician network expansion has increased nearly six-fold in 2006, indicating a rising acceptance of VeriMed by primary care and specialty physicians. Since early August, 26 new healthcare facilities have agreed to adopt the VeriMed system. This brings the total to approximately 140 emergency departments, of which 36 have fully implemented the technology and will use the VeriMed reader as standard protocol to scan patients that present unconscious, delirious or confused. The Stock ended the week at $1.70, down 13 cents.
Shares of Home Solutions of America, Inc. (NASDAQ: HSOA), a provider of recovery, restoration and rebuilding/remodeling services, remained in a tailspan last week as investors waited nervously for the company to provide information on what the prospects for the company’s third quarter look like. With the stock trading at just 8 times the bottom of the company’s 2006 EPS guidance, investors appear to have modest expectations on the company’s ability to deliver the results, excluding the acquisition of Fireline Restoration. The company’s prospects have not been helped by the lack of a hurricane making land so far this year, with Hurricane Season having another three weeks to run. Perhaps reflecting the pullback in the price of the stock, Matrix, one of the two brokerage firms covering the company, raised its rating on the stock to Strong Buy. Shares ended the week at $4.65, down 40 cents.
Volume Alert: Shares of CompuPrint, Inc. (OTCBB:CPPT), an energy technology company that combines satellite-based technology with traditional exploration services, which does business through Terra Insight Corporation (TIC), its wholly owned subsidiary, rose sharply on more than four times average volume after the company was awarded a $2.5 million contract by a subsidiary of one of the major international oil exploration companies in order to provide its proprietary satellite-based STeP® technology for an off-shore African oil and gas drilling project. Under the agreement, TIC will provide studies in a deep water area, including identification of prospective drilling sites and mapping of hydrocarbon anomalies using proprietary STeP® technology. TIC will receive an initial payment of $750,000, with three further payments over the next three months expected, the last of which will be a $1 million payment due upon delivery of the final report. The stock ended the week at 31 cents, up 9 cents.
Junior energy company Petrol Oil and Gas (OTCBB: POIG) provided an update last week on two of its key projects located in Southeastern Kansas. Petrol continues to enjoy a 100% success rate in the drilling and completion of gas production wells in its 10,000 gross-acre Neodesha project. Current Neodesha production approximates 2,860 Mcfd from 95 production wells. Two new wells have been fracture-stimulated and six more new wells will be stimulated during the next several weeks. POIG said that it had revised its drilling plan which now calls for 20 new wells to be drilled and completed in Neodesha before the end of the year, which will bring the number of new wells drilled during 2006 to 31. The increased activity should enhance revenue and cash flow from the property. POIG also said at its Coal Creek project that Initial water production has been higher than anticipated and has strained the injection capacities of the existing wells. To remedy this situation, the company has drilled, completed, and tested 2 additional wells that should approximately double the current disposal capacity and accommodate excess water production. Currently, 30 of the CBM production wells are flowing into gas gathering and/or water disposal systems, while others are in various stages of specialized testing to determine which coal beds produce more than anticipated volumes of water. The results of these tests, which should be available in the next several weeks, will allow field personnel to either shut off or avoid the highest water-producing intervals and target the remaining multiple gas-producing coal beds. As a result of excess water production and delays in connecting wells to the Enbridge interstate pipeline earlier this year, significant production and revenue from Coal Creek gas sales will not benefit the Company’s operating results until late in the fourth quarter of 2006 or early next year. Shares ended the week at $1.03, unchanged.
American Security Resources Corporation (OTCBB: ARSC), a holding company that acquires and develops technologies that will advance the development of alternative energies, announced that commercial production of its HydraStax(TM) fuel cells has begun . Hydra Fuel Cell Corp., a wholly owned subsidiary of ARSC, developed the proprietary technology of the HydraStax™ fuel cell that increases the useful life and the efficiency of electric generating hydrogen fuel cells. The HydraStax™ unit is designed for commercial mass production. Not a huge gain shown for the week as the stock finished the week at 11 cents, one cent above last week’s closing price.
Junior energy company Fellows Energy Ltd. (OTCBB: FLWE), announced that it has commenced the second phase of its workover operations to increase existing production on its Carbon County project, along with its joint venture partner, Thunderbird Resource Corp. Fellows’ preliminary work, beginning in early May through early July on the GCS 1A-18-14-8 and the GCS 1-19-14-8 wells, doubled production from approximately 20 million cubic feet per month at the time of the acquisition in March to 40 million cubic feet per month beginning in July. The second phase of workovers is expected to increase production to in excess of 60 million cubic feet per month by the end of September. Fellows plans to mobilize the recently-sourced drilling rig previously working on the Drunkards Wash project to drill and complete two new wells now being permitted on project acreage for a total of six producing wells, following the completion of the workovers. Shares rose 2 cents ending at $0.17.
iVoice, Inc. (OTCBB: IVOI), a developer and licensor of proprietary technologies, announced that iVoice Innovations, Inc., a wholly-owned subsidiary of iVoice, has executed a letter of intent to build and operate a biodiesel production facility in central Long Island, New York that will be initially designed to produce up to 10 million gallons per year of biodiesel from vegetable oils, animal fats and yellow grease. The letter of intent calls for the acquisition of a 10 million gallon per year biodiesel production facility that is based on innovative new biodiesel process technologies. The move represents the company’s initial entry into the alternative energy market. Shares ended the week at 0.07 cents, unchanged.
Neutron Enterprises, Inc. (OTCBB: NTRN), a developer of digital media solutions, announced last week that its Event & Screen Marketing division, Neutron Media, has secured a three- year contract for the rights to broadcast live feeds and sell advertising at the Los Angeles County Fair. This is the largest event in the Western United States and provides an excellent branding opportunity for advertisers who want to reach this huge demographic when they are out-of-home, boasting an impressive 81% in repeat attendees. The recent success of the company at high-profile events such as the CBS screen in Times Square New York for the World Cup of Soccer, the Detroit Auto Show and the McDonald’s Air & Sea Show builds on the strong demand for outdoor L.E.D. advertising from leading corporations seeking to benefit from the visibility created by the out of home advertising opportunity. The stock ended the week at $2.45, down 5 cents.
USA Technologies, Inc. (OTCBB: USAT), a developer of cashless vending and energy management products, announced today that the Pennsylvania Secretary for General Services, James Creedon, has asked his department to explore ways to utilize the company’s energy conservation technology throughout the Commonwealth. Secretary Creedon visited USAT to inspect the company’s EnergyMiser energy management technology and later reported the technology was of extreme importance to energy conservation in the State. The Department of General Services is responsible for energy management across the Commonwealth of Pennsylvania. USA Technologies executives demonstrated the technology to Secretary Creedon and showed how it could save the Commonwealth of Pennsylvania an estimated $56 million in energy costs and reduce energy consumption by approximately 642 million kilowatt hours if installed on vending machines and glass-front coolers in the State. Stocks ended the week at $7.00, down 40 cents.
Itronics, Inc. (OTCBB: ITRO), a “Creative Environmental Technology” company and a world technology leader in photochemical recycling, reported that GOLD’n GRO fertilizer sales by its subsidiary, Itronics Metallurgical, Inc., for the first two months of the third quarter in 2006 were up 89%compared to the same two months last year. Silver sales for this period in 2006 were up 200% compared to 2005. Itronics expects to report sales results for the third quarter in mid-October and full financial results for the third quarter on November 14 when it files its Form 10-QSB. Itronics Metallurgical is continuing geographic expansion of GOLD’n GRO fertilizer sales. Shares closed at $0.02 cents last week.
Universal Detection Technology (OTCBB: UDTT), a developer of early-warning monitoring technologies to protect people from bioterrorism and other infectious health threats, announced today that it is included in the Commercial Service’s list of Featured US Exporters (FUSE) in Singapore. The US Commercial Service, through its offices at the American Embassy in Singapore, is pleased to promote UDTT’s products. UDTT’s information has been posted on the local US Commercial Service website. FUSE is a directory of US products featured on US Commercial Service websites around the world. It gives US companies an opportunity to target specific markets in the local language of business. Currently, listings are offered to qualified US exporters seeking trade leads or representation in over 50 markets around the world. This service is offered for a fee. Buyers and importers interested in UDTT’s products will contact the US Commercial Service’s office for more information and the Company will also receive the prospects’ contact information. The stock was virtually stale, but dipped a fraction of the closing price of .01 cents last week, finishing at .011 this week.
On the Wires: Sweet Success Enterprises, Inc. (OTCBB: SWTS), which has relaunched a product line made popular by Nestlé’s, to tap into the rapidly growing demand for convenient and nutritious beverages, said last week that Dr. Chandrasekhara Mallangi, a former top product developer for food giant Nestle SA, had been named the company’s chief scientist, and is expected to play a top role in developing its growing product line. QuantRx Biomedical Corporation (OTCBB: QTXB), a medical technology company with leading edge products targeting worldwide health needs, elected Arthur Hull Hayes, Jr., M.D. to the Board of Directors, effective September 1, 2006. In connection with Mr. Hayes’ election, the Board increased its size to five directors.
SPECIAL SITUATIONS:
Oxford Media, Inc. (OTCBB: OXMI) $0.65
With companies increasingly focused on innovative ways to deliver digital media content, we thought we would take a closer look at Oxford Media, Inc., the parent company of OxfordSVI, a leading developer of scalable, turnkey hybrid digital Video on Demand (VOD) and Pay Per View entertainment systems. Have you ever been in a hotel and had the urge to watch a movie? If so, chances are good that you could be watching content provided by OxfordSVI, the third largest provider of VOD services to the hospitality industry in the United States, and the largest provider of VOD services to the under-served small and mid-sized hotels and motels having less than 300 rooms. While underserved, small and mid-sized hotel properties represent over 2.4 million hotel rooms in the U.S. and approximately 56% of the total hotel market and is the fastest growing segment in the hospitality industry.
How does the technology work? OxfordSVI installs its On Demand system in hotels for pay-per-view and video-on-demand. The system, known as Instant Entertainment, is a scalable digital file server that is loaded with entertainment features and informational programming. The system is economical and can generate profits for properties as small as 50 rooms, a value proposition unheard of in the industry. The system was designed to work with any TV, not just expensive “smart TVs” as required by the main competitors in the hospitality VOD industry. Additionally the Company expects to deliver a High Definition system in early 2007. The current system is scalable and can meet the demands of much larger properties with full service features.. The company has an installed base of over 2,400 hotels, of which 1,970 hotels (160,000 rooms) provide VOD services. The remaining properties receive high speed internet access and support as well as ancillary services from OxfordSVI.
The number of properties offering OxfordSVI’s services recently increased significantly, as a result of a $10 million acquisition the company just completed of SVI Hotel Corporation (SVI), a leading provider of VOD movie systems, satellite systems, high-speed Internet and information solutions to the hospitality industry. As a result of the acquisition, OxfordSVI is now positioned to sell its next-generation VOD systems to more than 1,500 hotels in the SVI installed base that are still using cumbersome analogue systems. For the first six months ended June 30, 2006, SVI had revenue of approximately $6.3 million, EBITDA of $0.9 million and positive cash flow was $0.5 million. Due to an enhanced offering, SVI, which has been in business for 18 years, should be able to increase the revenue in generates per room.
Prior to the acquisition of SVI, Oxford‘s VOD business had been growing rapidly. The company’s strategy was to sell through Value Added Resellers. These VARs have pre-existing business relationships, installing High Speed Internet Access and Free-to-Guest entertainment services, with more than 5,000 and an estimated 450,000 hotel rooms in the same segment of the hospitality industry that Oxford is targeting. The company has added approximately 35 dealers this year. Oxford expects the growth to accelerate with the SVI acquisition creating OxfordSVI. The new strategy of integrating Oxford’s dealer strategy with SVI’s direct approach gives Oxford significant reach into the hospitality market place.
Originally Oxford expected to book at least 220 new hotel VOD systems by the end of the year, not bad for a business that began in February. During the second quarter, OxfordSVI booked 65 new hotel VOD systems representing over 6,500 hotel rooms. Of those, 19 systems were shipped and 10 systems were installed. The remaining systems are expected to be shipped and installed over the coming weeks. In the hotels that are up and running, the average take rate exceeds the industry average of $22 per room per month in revenue.
In addition to offering VOD, the company is developing an exciting innovation for content delivery employing the disruptive wireless technology called WiMAX, or 802.16. WiMAX represents the “next generation” of 802.11 provides improved service quality, more efficient use of available spectrum (more than any other wireless technology), provides better security, authentication, and protection against theft of service, and the ability to use both licensed and unlicensed frequencies. This innovative technology has significant potential in a number of areas including, but not limited to, infill broadband coverage for areas that DSL cannot reach, such as rural areas, hotspot coverage similar to Wi-Fi but over a wider area, contiguous broadband cellular coverage and flexible backhaul, or targeted high bandwidth to large customers. Over $4 Billion have been invested in Wimax this year alone and the products and services that capitalize on this technology will start rolling out early next year. The company plans to utilize and market its content using WIMAX technology as the distribution method, partnering with companies that aggregate consumers who demand high quality VOD content. Initial WIMAX products are expected prior to the end of this year.
Despite the solid growth in its installed base, and recent acquisition of SVI, the stock trades near its 52-week low and well below its 52-week high of $3.27 established in October. Based upon nearly 23.5 million shares outstanding (55 million on a fully diluted basis), the company has a relatively nominal market capitalization of just $15.3 million. However, that could change quickly if investors begin to understand the synergies created by the combination of these two companies and the significant growth opportunities ahead. The company could say more about this when it holds a conference call for investors on Wednesday, September 13th. With the digital media revolution gaining momentum, it may not be long before investors recognize the opportunity for Oxford Media to benefit from its rapid expansion in the VOD sector.