09/17/2006
VOLUME 255
Companies featured in the current edition of the newsletter: ASPN, ALRX, CDSS, CLRI, CPPT, EMIS, GNBT, HMWM, HSOA, HYTM, ISON, ITUI, OXMI, RTK, SOG, SLS, SWTS, UDTT, USAT, VOII
More positive news on inflation, combined with falling crude oil prices have made it a September to Remember thus far. Many of the indexes are approaching multi-year highs, helped by strong earnings reports last week from the brokers, a $3 per barrel decline in crude oil prices and an August CPI report which suggests that the Fed will likely remain on the sidelines when it comes to increasing interest rates. The Dow jumped 168 points, increasing its year to date gain to 7.9%, while the Nasdaq was up 69 points, increasing its year to date to 1.8%. The S&P 500 made up some lost ground this week and ended up 20 points, increasing the year to date gain to 5.7%. The Russell also closed the week up 20 points and increased its year to date percentage to 8.3%.
What should investors look for in the coming week? Software giant Oracle (NASDAQ: ORCL) reports results Oracle Tuesday after the market closes. Wednesday morning Morgan Stanley (NYSE: MS), CarMax (NYSE: KMX) and Circuit City (NYSE: CC) post results. A slower end of the day on Wednesday has Bed Bath and Beyond (NASDAQ: BBBY) posting results. Earnings from Carnival (NYSE: CCL), ConAgra (NYSE: CAG), FedEx (NYSE: FDX), General Mills (NYSE: GIS) and Rite Aid (NYSE: RAD) will be released before the market opens on Thursday, while Nike (NYSE: NKE) posts results after the close.
The economic news will be far more significant next week, highlighted by the FOMC announcing its decision on interest rates on Wednesday afternoon. Most economists expect the Fed to leave rates unchanged due to reduced inflation pressures. On Monday morning, the Q2 Current Account will be released followed shortly after by the release of the July Net Foreign Purchases. It will be a busy Tuesday morning before the bell with the PPI announcement and Building Permits and Housing Starts release. Expect to see weekly Crude Oil inventories announced Wednesday morning. The August Weekly Initial Claims data will be released before the open on Thursday followed by a mid-morning announcement of the August Leading Indicators. The Philadelphia Fed Index will be announced at noon on Thursday.
The conference schedule will be especially active this week, beginning with Bank of America’s 36th Annual Investment Conference on Monday. The four-day event will be held at the San Francisco Ritz Carlton Hotel. Credit Suisse hosts its 19th Annual Chemical Conference as a two day event beginning Tuesday in New York. The UBS Global Paper and Forest conference also opens a two-day conference in New York on Tuesday. Credit Suisse also hosts the Small Cap Basics Day conference this week on Thursday in New York. Drug delivery company Emisphere Technologies, Inc. (NASDAQ: EMIS) will present at the ThinkEquity Partners LLC 4th Annual Growth Conference on Wednesday in San Francisco, while USA Technologies (OTCBB: USAT) will present on Thursday. Rentech Inc. (AMEX: RTK) will present on Monday at the three-day Merriman Curhan Ford Investor Summit in San Francisco, while USA Technologies (OTCBB: USAT) will present at the same event on Tuesday.
According to published reports in the Los Angeles Times, Syntroleum, “which is one of only two companies in the U.S. that produce the synthetic fuel” could benefit from the test of ultra-clean jet fuel that will be tested in a landmark B-52 flight demo on the morning of September 19, 2006 at Edwards Air Force Base, Calif. This event signifies the first time that FT jet fuel has been tested in a B-52 flight demo. We believe the other company that could benefit would be Rentech, Inc. (AMEX: RTK), which is a leading provider of Coal-To-Liquids technology and is furthest along among domestic companies deploying FT. Although nothing has been said publicly by either party about the role that the company’s technology could play, Rentech appears to be a likely candidate based upon the fact that it has four projects already in various stages of development. Shares ended the week at $4.64, down 23 cents.
Hythiam, Inc. (NASDAQ: HYTM), a healthcare services management company that licenses the PROMETA™ physiological protocols designed to treat substance dependence, recently announced that the Instituto Mexicano de la Propiedad Industrial has granted Hythiam a notice of allowance for a patent for the use of a composition of matter for the treatment of cocaine dependence. Last week, Hythiam received a patent grant from the European Patent Office for the use of a composition of matter for the treatment of alcohol dependence. 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 company’s growing portfolio of intellectual property addresses one of the key arguments of short sellers, and helps to increase its competitive advantage. Shares end up 70 cents and closed at $6.35.
Shares of Home Solutions of America, Inc. (NASDAQ: HSOA), a provider of recovery, restoration and rebuilding/remodeling services, spiked Thursday amid unconfirmed reports that there was a forced buy-in on one of the funds that is currently short the stock. The stock has regularly appeared on the Reg SHO list, indicating that there is a high level of fail to delivers. This suggests either that the stock has had trouble being delivered to new shareholders over the past three months, or stock was sold to investors without properly being borrowed. With approximately 36% of the shares sold short as of the last reporting date in mid-August, if the company finally says something positive about its business it could serve as a catalyst for an outsized move in the stock, as investors appear to have started to target companies with high short interest positions as the market has improved. The stock ended the week up 35 cents closing at $5.
SLS International (AMEX: SLS), the leading provider of premium quality sound systems for professional, cinema and home entertainment markets, announced that the company has been selected as a vendor for The Nationwide Group. As a result, the SLS Consumer product lines are now available and being sold to over 2,700 independent retailers in over 7,000 locations throughout the U.S. SLS introduced its Consumer products, including the Q Line Silver, the HT Series and the Design Series at the Nationwide Prime Time Convention August 21st and 22nd, 2006 in Las Vegas to strong interest, according to the company. The stock ended the week up 7 cents at 27 cents.
Isonics Corporation (NASDAQ: ISON), the developer of innovative solutions for the homeland security and semiconductor markets, announced that its semiconductor products and services segment (semiconductor segment) achieved operating profitability for the month of August based on continued revenue and EBITDA growth. The company’s first month of positive operating income was in excess of $75,000 for the month of August, along with revenue in excess of $1.1 million and EBITDA exceeding $200,000. August was also the third consecutive month this segment generated over $1 million in revenue and positive EBITDA. The August monthly EBITDA exceeded the approximate EBITDA of $170,000 for the entire three-month period that ended July 31, 2006. Isonics also announced results for the period ended July 31st, which reflected solid growth in a variety of areas. The company displayed growth in key business units such as semiconductors products and services leading, to overall total revenue growth of 46%. The 18.8% improvement in the gross margin, as opposed to last year’s negative gross margin of 2.8%, was almost entirely a result of the significantly improved performance from semiconductor products and services. Isonics ended the June, 2007 fiscal quarter with approximately $6.0 million in cash and cash equivalents compared to $2.1 million at the end of April, 2006. The shares ended the week unchanged at 89 cents.
Junior energy company Strategic Oil & Gas Ltd. (TSXV: SOG) said last week it had received approval from the Wyoming Oil and Gas Conservation Commission to increase the well density from one well per 40 acres to one well per 20 acres on the company’s land in the Pinedale/Jonah area of Wyoming. This approval will allow for up to 32 wells to be drilled on the company’s current land holdings in the area and is a bullish indicator of the company’s views on the probability of a successful exploration program. The company also finished drilling and obtained logs and technical data on its second well in the Pinedale area. The information on the second well is indicative of a successful gas producer in the area with multiple pay sections. Of significance, the gas detector on the second well indicated substantially higher readings than that of the first well. Two additional locations have been permitted and the installation of a pipeline to transport gas to market has been completed. Shares ended the week at $1.77, up 7 cents.
Junior energy company Aspen Exploration Corporation (OTCBB: ASPN), announced that it has successfully re-completed and (flow) tested multiple existing gas wells in the Sacramento Valley gas province of northern California. Aspen re-completed the Pope Bypass #1-5 well located in the Winters gas field, Yolo County, California, and the well is now capable of higher flow rates, but Aspen has restricted production in anticipation of higher gas prices this upcoming winter. The well was drilled in May 2003 and encountered approximately 70 feet of gas pay in the Winters formation. It has produced approximately 815,000 MCF of gas to date and it is believed that there are several behind-pipe zones still within the well. Aspen has a 25.4% operated working interest in the Pope Bypass well. The company continues to enjoy significant success in its drilling activities, as it has participated in the drilling of 45 operated wells, 38 of which were completed as gas wells, and 7 dry holes, a success rate of 84% over the past six years. The company also has non-operated interests in 20 additional wells in the Sacramento Valley of Northern California. Shares ended the week at $3.85, a penny below last week’s closing price.
Clearant, Inc. (OTCBB: CLRI), the developer of the patent-protected CLEARANT PROCESS® for pathogen inactivation, announced that information regarding clinical performance data on the Clearant Process® implants was presented at the American Association of Tissue Banks Annual Meeting last week in San Diego. This new study concluded that the allograft implants, sterilized by the Clearant Process, achieved full recovery of range of motion at one year. The study, which evaluated two groups of patients that underwent ACL reconstruction surgery, showed that the results were statistically equivalent despite the fact that the study examined the non-sterile implant group at 24 months post-op, offering further recovery time, as opposed to 12 months post-op for the sterile Clearant Process group. The Clearant Process implants protected the recipients from the risk of bacterial and viral transmission including HIV, Hepatitis B, Hepatitis C and West Nile Virus transmission. The stock ended the week down 7 cents, closing at 44 cents.
Volume Alert: Shares of Citadel Security Software (OTCBB: CDSS), a leader in enterprise vulnerability management and policy compliance solutions, rose 19% last week, including 4% on Friday on more than three times average volume. Merger and acquisition activity in the security software sector has been particularly active this year, with IBM’s announced $1.3 billion acquisition of Internet Security Systems the latest in a series of deals consolidating the sector. Shares of other companies in the sector that have rallied on takeover speculation have been McAfee and Symantec. Shares of CDSS rose 8 cents last week to close at $0.50.
CompuPrint, Inc. (OTCBB: CPPT), an energy technology company that combines satellite-based technology with traditional exploration services, which does business through Terra Insight Corporation, its wholly owned subsidiary, announced that it has filed with the SEC proxy materials for the November 3, 2006 shareholder meeting to approve and authorize the reincorporation of the Company as a Delaware corporation named Terra Energy & Resource Technologies, Inc. Upon receipt of shareholder approval, the Company also expects to change its ticker symbol. A company name that is more closely aligned with its business should have increase interest in CPPT. The company also announced that its Namibia subsidiary, Namterra Mineral Resources (Pty) Ltd., has been awarded by the Republic of Namibia its sixth exclusive license for the prospecting of precious stones. This license expires in July 2009 and covers approximately 247,000 acres of off-shore territory, bringing the total area to more than 1.2 million acres for all six licenses now granted to the Company’s Namibia subsidiary. Shares ended the week down 9 cents from last week at 22 cents.
IMPART Media Group, Inc. (OTCBB: IMMG), an innovator in the creation of out-of-home digital advertising content and information network management, announced that it has appointed Modern Telecommunication Technologies (MTT), a Smolensk based, value-added integrator and manufacturer of high tech display systems and telecommunication solutions for the popular, Impart IQ Box™ and Impart IQ Interactive™ products as a distributor. The terms of the Distributor Agreement were not disclosed, but both companies are forecasting a minimum of 750 digital signage or kiosk systems, comprised of either Impart IQ Box™ or Impart IQ Interactive™, to be sold by year-end 2007. The stock ended at $1.01, down 5 cents.
Oxford Media, Inc. (OTCBB: OXMI), a leading developer of scalable, turnkey hybrid digital VOD and PPV entertainment systems, announced last week that OxfordSVI, Inc., its wholly owned subsidiary signed agreements with Super 8 Motel, Days Inn, Motel 6, and Days Inn, covering properties in Texas through one of its Platinum Dealers, GoldStar Systems for digital Video-on-Demand and Pay-Per- View entertainment to its total of 195 rooms. Installation is scheduled to be completed in September 2006. As part of the Agreement, OxfordSVI was granted “rooftop rights” to install a WiMAX antenna or similar transmitting/receiving device on the rooftop of the Super 8 Motel. Last week, the company also completed the previously announced acquisition of SVI Hotel Corporation a leading provider of Video-On-Demand (VOD) movie systems, Free-to-Guest satellite systems, and high-speed Internet and information solutions to the hospitality industry. The new combined company is called OxfordSVI, Inc., which is now 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. For the first six months of 2006, SVI’s revenue was approximately $6.3 million, EBITDA was $0.9 million and positive cash flow was $0.5 million. The combined company has a customer base of over 2400 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 the Company. The stock ended the week down 10 cents at 55 cents.
USA Technologies, Inc. (OTCBB: USAT), a developer of cashless vending and energy management products, announced that Wisconsin Focus on Energy was the latest energy utility to take notice of the benefits of the company’s EnergyMiser conservation technology and announced that it would immediately begin offering rebates to customers who purchased the product. Wisconsin Focus on Energy is now the 24th State energy utility to join the USA Technologies National EnergyMiser Rebate Program and will offer rebates ranging up to $45 for VendingMisers and SnackMisers. The company also reported that the Silicon Valley Power utility, already participating in the program, had extended its rebate ranging up to $120 for VendingMisers and CoolerMisers for another 12 months. The rebates for USA Technologies VendingMiser, CoolerMiser, SnackMiser and PlugMiser range from $30 to $120 per unit. The stock ended down 15 cents closing at $6.85.
i2Telecom International, Inc. (OTCBB: ITUI), a pioneer in globally ultra-portable high quality Voice-over Internet Protocol (VoIP) products and services, announced a letter of intent with Wave Systems Corp. setting in motion plans to bring additional security and a more seamless calling experience to the increasing number of subscribers to its ultra-portable, high-quality Voice-over Internet Protocol (VoIP) service. The plans are subject to the negotiation of definitive documentation completion and integration and development work. The plan calls for i2Telecom to enable its product offerings for authentication via a Trusted Platform Module (TPM), a security chip installed on the motherboard of millions of PCs already shipping. Wave Systems would promote the hardened i2Telecom VoIP service as part of its third-party services program for the EMBASSY® Trust Suite software (ETS), which assists users in managing the Trusted Platform Modules on their PCs, and providing automatic storage and recall of passwords and logon information features. The stock ended down at 7 cents.
Universal Detection Technology (OTCBB: UDTT), a developer of early-warning monitoring technologies to protect people from bioterrorism and other infectious health threats, announced the commencement of work on developing a smart ticket assay for detection of Anthrax spores based on technology developed by NASA’s Jet Propulsion Laboratories. The intellectual property was licensed by UDTT from the California Institute of Technology in February of 2006. UDTT also announced that the company is listed in the Commercial Services list of Featured US Exporters in Canada. Shares ended the week lower than penny close last week. The company also said that it would continue to focus on buildings and their exposure to an anthrax threat five years after the anniversary of September 11th. Shares ended the week at approximately $0.01.
AlphaRx Inc. (OTCBB: ALRX), an emerging biopharmaceutical company utilizing proprietary drug delivery technology to develop novel formulations of drugs, announced that it has received a Notice of Allowance from the United States Patent and Trademark Office for its patent application entitled “Stabilization of Benzoyl Peroxide in Solution.” Benzoyl peroxide is one of the most widely used compounds for acne treatment as a result of its considerable antimicrobial activity and duct opening properties. Because of the compound’s insolubility in water, benzoyl peroxide causes local skin irritation due to contact with its crystalline form. This insolubility also markedly decreases benzoyl peroxide’s oxidative action. Benzoyl peroxide in solution is much more efficient than micronized BP suspensions for superficial treatment, but once dissolved, the BP in solution becomes extremely unstable. The company will continue work to stabilize the compound in solution. The stock ended the week at 9 cents, closing unchanged.
HumWare Media Corporation (OTC: HMWM) announced that it has been awarded the Fantasy Sports Trade Association’s 2006 Top Industry Award for the Top Unique Contest. The HumWare Fantasy Online Sports Division’s Loser Challenge received the prestigious award among several well-known finalists. HumWare’s Fantasy Online Sports division has created, and operated various online fantasy contests over the past decade and in that time, more than 250,000 people have actively participated. With multiple games in Football, Baseball, Basketball, Auto Racing, Hockey, Golf, and unique single-event contests, the Company has continued to capitalize on rapid expansion of the fantasy sports market. HumWare also announced the grand opening of first retail location of wholly owned subsidiary, Timeless Sports Inc., at the Flat Irons Mall in Broomfield, Colorado, just outside of Denver. The event will feature special signings and appearances by three of the Denver Broncos star players; Running Back Tatum Bell, Corner Back Darrent Williams, and Wide Receiver Brandon Marshall. These athletes provide premiere athlete marketing services for Timeless Sports. Stock ended the week at 8 cents, down 2 cents from last week.
On the Wires: Generex Biotechnology Corporation (NASDAQ: GNBT), a leader in the area of buccal drug delivery, announced that two poster presentations of recent Company clinical data will be made at the 42nd Annual Meeting of the European Association for the Study of Diabetes in Copenhagen, Denmark, last week. Sweet Success Enterprises, Inc. (OTCBB: SWTS), which has relaunched a product line made popular by Nestle’s to tap into the rapidly growing demand for convenient and nutritious beverages, named specialty foods sales veteran Michael Launer as the company’s new senior vice president of sales.
SPECIAL SITUATIONS:
VoIP, Inc. (OTCBB: VOII) $0.45
How many companies with market capitalizations below $50 million can say that they have a Master Service Agreement with Google Inc. to supply Voice-over-Internet Protocol (VoIP) services? One company that can make such a claim is VoIP, Inc., a leading provider of VoIP communications solutions for service providers, resellers and consumers, which last year entered into a series of purchase orders with Google for the interconnection of production of VOIP traffic, and has subsequently formed a direct peering relationship with Google for the transport of such services atmultiple locations.
With many forecasting that VoIP will continue its dramatic growth, new companies are entering the market continuously. VoIP, Inc. is dedicated to developing more efficient ways of delivering and supporting next-generation communication technologies and services for these future technologies. Its principal operating subsidiary is VoiceOne™ Communications, which operates a VoIP platform called Click4Me, which the company plans to shortly launch. Recently, Click4Me was favorably highlighted in the Chicago Sun Times in an article titled, “International calls free? Works for me.” According to the story, Click4Me compared favorably to other VoIP services the author tested.
Through Click4Me, Internet users can now, for the first time ever, send and receive Instant Messages between the four major IM services. All that’s required is for a user to sign up for a free Click4Me account, through which IM communication is made possible between any users of any of the four IM systems. For instance, gTalk IM users can send Instant Messages to MSN IM users, or AOL IM users, or Yahoo! IM users – using Click4Me.Net – without having to use separate Instant Messaging clients for each service. All major IM clients are supported by Click4Me.Net, including Windows/PC, Mac, Linux, and of course, cell phones. The company was also recognized and received the “Product of the Year’ Award from INTERNET TELEPHONY® Magazine. VoIP, Inc. has also applied for a patent for the company’s state of the art VoIP Multimedia Terminal Adaptor which supports the FCC Commission’s desire for VoIP providers to deliver Emergency 911 calling, disability access, and Law Enforcement Access capabilities to the marketplace.
This month, Google launched Click4Me in the United Kingdom, although VOII did not say anything publicly about the event and Google, which announced the event in the UK, did not specifically mention VOII in its news release. However, we have confirmed with the company that the launch is with VOII’s service, and the 8K that the company filed earlier this year on the Google deal said that it anticipates that “material revenues” will be generated this year.
The company, which went public through a reverse merger, had revenue for the six months ended June 30, 2006 of approximately $19 million, although it posted a significant operating loss. Last week, the company announced the appointment of a new CEO Tony Cataldo, who has had a strong record of turning emerging companies around. Investors who have been early participants in some of the companies he has run have experienced handsome returns.
The stock has been a poor performer this year, likely due to the negative sentiment surrounding VoIP companies, and VOII’s significant losses. However, prospects could turn quickly, as a result of the launch by Google of its VoIP service in the U.K. using Click4Me. The relationship, which is non-exclusive, could lead to other high-profile opportunities for VOII. After establishing a new 52-week low in early August, shares have recently begun to lift, but are still far off its 52-week high of $3.35 established after the 8K in February announced the Google relationship. With new management in place, and a promising agreement with one of the most widely-recognized technology companies in the world, opportunities are beginning to connect for VOII.